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CNN LIVE EVENT/SPECIAL
President Obama to Address Nation
Aired July 25, 2011 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, CNN ANCHOR: Good evening. I'm Wolf Blitzer in Washington.
The stakes in Washington could not be higher right now. A deadlock between President Obama and Republicans has left the country facing what some believe could be an economic calamity.
This hour, we are no closer to a deal on the nation's debt limit and the clock is ticking. We're awaiting the president of the United States and the Republican House Speaker, John Boehner. Back to back remarks to the American people and to the world.
This is truly an extraordinary evening here in the nation's capital. Just to underline the peril facing the United States economy, and the American people, Democratic officials familiar with the president's speech expect him to say the country right now is, quote, "in imminent threat of default," with only about one week left for Democrats and Republicans to agree on a deal to raise the debt ceiling.
In a speech earlier today, the president alluded to the bitter political gridlock between both sides.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Are we a nation that asks only the middle class and the poor to bear the burden? After they've seen their jobs disappear and their incomes decline over a decade?
Are we a people who break the promises we've made to seniors or the disabled and leave them to fend for themselves?
That's not who we are. We are better than that. We're a people who look out for one another. We're a people who believe in shared sacrifice. Because we know that we rise or fall as one nation.
(END OF VIDEO CLIP)
BLITZER: Congressional leaders from both parties unveiled dueling last ditch plans that would raise the nation's debt ceiling. The Democratic Senate majority leader Harry Reid's plan calling for what he says would be $2.7 trillion in cuts with no entitlement or tax changes. The Republican House Speaker John Boehner's plan would require two separate votes -- one this year, one next year -- to raise the debt ceiling. Something Democrats including the president have flatly rejected.
We're monitoring all angles of this dramatic story. Let's to go Capitol Hill first where our congressional correspondent Kate Bolduan is standing by.
Set the scene, Kate. What is the very latest?
KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: Fascinating developments up on Capitol Hill here today, Wolf.
The top Republican in the House, the top Democrat in the Senate unveiling dueling plans. What they think will be a solution to this debt ceiling crisis. Pretty much within a half an hour of each other and this is really what it boils down to.
In order to raise the debt ceiling, House Speaker John Boehner's plan calls for two votes. First a vote on $1.2 trillion in cuts that would raise the debt ceiling through early next year. And then a second vote on $1.8 trillion in cuts that would raise the debt ceiling to 2013. But that's not guaranteed. That can only happen if Congress approves those additional cuts.
And that is where Democrats stand opposed. That's where they say no way. They don't want a second vote to happen early next year because they believe that it risks us returning right where -- back to right where we are right now which is deadlocked. And that's why Senate majority leader Harry Reid has put out his own plan and in that plan it calls for raising the debt ceiling in one vote.
$2.7 trillion in deficit reduction to raise the debt ceiling, all the way to 2013. That plan does not include cuts to entitlement benefits. It does not include new revenues and this plan could also have the possibility of new additional cuts to be part of that package coming out next year.
Now if you need any further evidence of just how far apart these two sides are, just listen to how they reacted to each other's proposals earlier today. First listen to John Boehner criticizing Harry Reid's plan.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R), HOUSE SPEAKER: I believe that the plan is full of gimmicks. We're not making any real changes in the spending structure of our government. And it doesn't deal with the biggest drivers of our deficit and our debt. And that would be entitlement programs.
SEN. HARRY REID (D), MAJORITY LEADER: Republicans' short-term plan is a nonstarter in the Senate and in the White House. And certainly the Democrats in the House agree wholeheartedly with us.
A short-term agreement risks many of the same dire consequences that would be triggered by the default itself.
(END OF VIDEO CLIP)
BOLDUAN: Now, as you very well know, the fact of the matter is part of this debt ceiling debate comes with a heavy dose of election year politics. Democrats accusing Republicans of only wanting to drag this debate, these votes, into the campaign season. And Republicans accusing Democrats in the White House of only wanting to get it out of the way so the president can focus only on his election campaign -- Wolf.
BLITZER: Stand by for a few moments. I want to bring in our chief White House correspondent, Jessica Yellin.
Jessica, this is obviously going to be one of the most important speeches the president of the United States delivers given the enormous economic stakes involved.
JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: You can't overstate the stakes for the economy. And the president will make that point in the speech tonight.
As you say, he is going to say that the -- there is an imminent threat of default that the nation faces. That the Congress is at a point of stalemate. And that he's not -- we're not expecting him to propose a compromise between the Reid and the Boehner plans. These two competing plans Kate laid out.
But beyond that I am also told from the White House that he is going to say that the consequences on the stability of our economy and on job creation are enormous. That he has done what he can to break this stalemate. To create compromise. And that essentially -- the options are clear. So sort of what's stopping us from taking one?
And that he is going to quote President Reagan, and they're saying this. In the words of former President Reagan, failure to do action will do, quote, "incalculable damage."
BLITZER: To the nation's economic health because if there is a collapse, if there is no deal, then the value of the dollar could go down, interest rates could go up, inflation could go up. There is a dire situation that would affect millions of people in America, almost everyone, and indeed it could affect people all over the world.
YELLIN: Absolutely right. And I'm talking to senior policymakers across this town who are increasingly worried today that a deal will not get done by next week which means that there is an increasing likelihood that we will get downgraded by these ratings agencies at one point or another and the sense of pessimism is growing in this town at this moment.
BLITZER: All right, Jessica, hold on for a moment.
I want to welcome CNN's newest anchor, Erin Burnett. She is joining us from New York right now. Erin, you've covered the markets for a long time. So far, and it is an important phrase, so far, the markets here in the United States, around the world, really haven't moved too quickly on this. Is it your sense, Erin, that all of us should be bracing for some sort of -- some sort of market collapse, if you will, if they don't get this deal done soon?
ERIN BURNETT, CNN ANCHOR: I mean, it is interesting, Wolf. You have to -- it is clear. The markets around the world expect there to be a deal. And talking to a lot of investors today, including the biggest bond managers in the world, they to a T think that this will be resolved.
There is no one around the world who's looking at this with glee. Three quarters, Wolf, and I mean literally, 75 percent of -- sorry -- top rated debt in the world is linked to the U.S. government. So this is not insignificant for anyone. But in terms of a catastrophic drop, I don't think you're going to get a huge surge in interest rates, if this -- if we don't get a deal.
And the reason for that is that it takes a little bit of time. We've got seven to 10 days where the government could issue IOUs and things like that. There will be some long-term damage. Bill Gross from PIMCO, the biggest bond fund manager in the country, was telling me today he thinks we could get a quarter of a percentage point to a half a percentage point increase in long-term interest rates, and that's significant because taxpayers have to pay those interest costs down the line, and of course it trickles all the way down to mortgages, credit cards, and things like that.
BLITZER: You know, Erin, there have been a lot of plans out there. We've heard $2 trillion, $4 trillion, $3 trillion in cuts over the next 10 years. Does it really make much difference which plan eventually gets worked out as far as market reaction is concerned?
BURNETT: Interesting answer to that, Wolf. I was thinking about it today. In one sense, no, it doesn't matter which plan. Big investors think that both plans from the Democrats and the Republicans are really Band-Aid plans and that none of them deal significantly with what I like to call the big three -- Medicare, Medicaid and Social Security.
In the short term, either deal probably will be enough, although really interesting this afternoon, Wolf, when I was talking to an investor who had met with the ratings agencies at Standard & Poor's talking about the potential of a downgrade -- which, by the way, could raise interest rates just the same way a potential default could -- and they said the Boehner plan probably wouldn't hit the hurdle to prevent a downgrade. So that even if that deal was reached, you could still get a downgrade. It is unclear whether that would happen for sure, but that would be a real possibility.
Whereas the Reid plan, even though a lot of the parts of that are seen by many as gimmicks, probably would pass that hurdle and you wouldn't get that immediate downgrade. So that's actually an interesting distinction to watch. BLITZER: Yes, very important. Stand by, Erin, for a moment. I want to bring back Kate Bolduan and Jessica Yellin as well.
Kate, you know, there is a Harry Reid plan and there's a John Boehner plan. I think, you know, there are similarities but there are differences.
Given the enormous stakes involved, Kate, what are they saying on the Hill? Why not have these two gentlemen sit down together and sort of reach a compromise? You know I'll meet you halfway here, you meet me halfway there. Let's get it resolved. We'll post the legislation. Get it passed in the Senate and the House and the president will sign it. And this crisis, at least for now, will be averted.
BOLDUAN: Sounds like a novel idea, doesn't it? Well, that's really what they were trying to work towards this weekend. All weekend long we were here, Wolf. Negotiations were happening behind closed doors, between the key negotiators, the congressional leaders.
And there was some indication that they had -- there was some agreement toward a framework. We were hearing about hints of progress. But then come Sunday there was a stalemate as it was -- as it was described to me. And it was over this second vote in the Boehner proposal that would happen early next year. They could not come to an agreement.
Democrats could not get comfortable that there would be any certainty that they would be able to raise the debt ceiling without reaching this deadlock once again.
But I will tell you, very interesting to note at the same time, they're clearly not agreeing right now. And they're coming out with these dueling plans.
My colleague Ted Barrett, he's roaming the halls right now talking to senators. And he's hearing from Democratic and Republican senators, they stay that the conversations are still happening behind closed doors to try to reach some kind of a compromise. To try to gap the differences that are happening.
So there seems to be an acknowledgement that while these plans probably aren't going to get very far in the opposing chamber if you will, there is also some acknowledgement that they do need to find some way to reach a compromise. And it looks like they're still trying to keep the lines of communication open this evening.
BLITZER: Yes. They've got to -- they've got to resolve this.
Jessica Yellin, you know, it's interesting that the president will deliver his speech from the East Room of the White House. And exactly two minutes after the president is done, the Speaker John Boehner will deliver his speech to the American people from Capitol Hill.
You know it's sort of unusual. The State of the Union, they have, you know, the opposition party response. But this is pretty extraordinary on the way this is unfolding right now.
I wonder if the White House was fully sensitive to the fact that Boehner would ask for the television networks for a time immediately following the president.
YELLIN: It's been a tricky relationship. And yet I'm constantly assured that they have a good communication between the two of them when they do speak. The problem is that they, right now, have very differing interests at the moment. Because John Boehner is having this challenge getting votes for any kind of plan that the president can sign on to. And the challenge remain how to raise the debt ceiling next year in a way that does not create a fight a second time.
It is my understanding that Democrats would be fine with a second vote next year as long as it does not have to come this confrontation. If it could just be a vote of disapproval on the debt ceiling, they can go for a second vote.
So that's the kind of compromised solutions folks might be looking for later in this week.
BLITZER: Yes, those three votes of resolutions with disapproval were envisaged in the Harry Reid-Mitch McConnell proposal that obviously is not going anywhere right now.
YELLIN: Allegedly dead now but --
BLITZER: Allegedly, but we'll see if it's got any life. But don't go too far away. Kate Bolduan, don't go too far away as well. Erin Burnett is staying with us. We're happy that she is part of the CNN team right now.
We're awaiting the president of the United States. The speaker of the House. You will hear and see their speeches live here on CNN and CNN International.
We're also taking a closer look at the choices about what to cut in spending. What would you cut? What would you keep? It's shaping up to be the historic evening here in Washington, D.C.
Our coverage is only just beginning.
BLITZER: You're looking at live pictures of the White House. The president getting ready to deliver a major speech to the nation as I often say to the world as well. So many people will be watching. The stakes are critical. The president will make the case to try to avert a default, a crisis. He wants the nation's debt ceiling raised and there's only a week left to do so. There's a stalemate right now.
Two minutes after the president finishes his speech, Capitol Hill will be the scene of action. That where the House Speaker John Boehner will deliver his remarks to the nation and indeed to the world. The stakes could not be higher when it come to the U.S. economy right now because one week from today if there is no deal, the government will have to decide who can be paid some of those bills and who won't be getting paid as a result of the nation's debt ceiling, having reached its maximum limit.
Let's to go CNN's Tom Foreman. He's at the magic wall for us.
So, Tom, explain how this could work if there is no deal, and who would get paid and who wouldn't get paid.
TOM FOREMAN, CNN ANCHOR: Well, Wolf, you know, that's the big question for everybody out there. But you're hitting the nail on the head. This is about hard numbers and how you make hard decisions.
Imagine you have a credit card. You're paying for everything at your house. You have all your plans and suddenly the bank says, you have hit the limit and we're not raising it. And you've already planned the next month.
Last year, 2010, August, this is how much we had incoming. This is how much we spent. So that was our excess amount that we spent above it. We had to borrow. This year, same thing. $134 billion.
So if we get into this month, and we do not have any additional, we only can operate on what we have. So what you have to do is make your choices. Look at this. If we pay the interest because we said that's important. Let's say that this is the Republican plan. Let's say they want to pay the interest. They have to pay Social Security and Medicare. These are huge because they have to watch the number rising over here.
Let's play the defense -- vendors. We'd like to do that. Veterans Affairs. We cover that. Maybe we're going to add military active duty pay and how about federal salaries? And right there, already, we're over the line. That's above what we have if we can't borrow anymore. And look at all the things that are unpaid.
Same thing happens on the other part of the equation for the Democrats. If they were to say that they wanted to pay certain things, interests. They have to pay Social Security, they have to pay Medicaid and Medicare, they go to food and nutrition services. They go to HUD programs, they go to unemployment insurance, they go to education funding and they're over. And they haven't covered military active duty pay or federal salaries.
There are only so many ways you can chop up all this money, Wolf, and this is precisely how this problem can wind up at your doorstep at home, beyond all of the debating going on here -- Wolf.
BLITZER: Yes. And as we've been saying, it would have real, real consequences on the American people.
Tom, thanks very much.
Let's assess further what's going on with our chief political analyst Gloria Borger, who's here also, our senior political analyst David Gergen.
You know I never thought I would hear Democratic officials, David, say, and the president is expected to say this tonight. We'll see if he actually does say it. That the country, the United States of America, is in imminent threat of default right now unless a deal is reached very soon.
Did you ever think you would hear that from a president?
DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: No. Wolf, and you're right. Every time a president in the past that I can remember has gone on the air in an emergency situation, it's because somebody else is doing something to us. And that this situation is a self- inflicted wound. It's something we're doing to ourselves.
And I think that's one of the reasons why so many American are disgusted looking at this. You know basically, I think people were less interested in speeches than they are in solutions. Let's get this done.
BLITZER: The American people are frustrated. They're angry. But if you believe the polls, they're angrier, I guess, a little bit at the -- more at the Republicans than the Democrats. More at the Republicans than the president.
Is that what you've seen?
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, and that -- right. I don't think it looks good for President Obama but it certainly looks better than it does for the Republicans.
We did some polls at CNN this week, Wolf. We asked whether the president has acted responsibly in these talks on the debt ceiling. And you see the numbers here. Yes, 52. No, 46. OK. So majority think he's acted responsibly but not by a wide margin.
When we asked the same question about Republicans, have Republicans acted responsibly in these talks on the debt ceiling? The answer is yes, 33 percent, no, 63 percent.
So it's very clear, the president has made his argument. Made use of the bully pulpit. That's why we're seeing him tonight putting the pressure on Republicans. Talking about how important this is to the country.
But in the end, Wolf, if we default, I think you could have, and David and I were talking about this earlier. You could have a very large anti-incumbent election.
BLITZER: You could have -- you can have a very large group of people who'd say, you know, I don't like the Democrats, I don't like the Republicans.
BLITZER: I'd like a third party to come in and talk some common sense to these people.
GERGEN: That's right. But I don't think that's the first reaction. The first reaction is, how am I going to get hurt?
GERGEN: And there are a lot of people who are worried that somehow they will get hurt.
BLITZER: They will get hurt.
GERGEN: And they will get hurt in the case of a default. And even if they lift the debt ceiling now, this situation has been so prolonged, it's been so messy, seemed so paralyzed, there is a good chance our credit rating will go down even if we get --
BLITZER: So explain what that means. The viewers here. That our credit -- the United States has a AAA credit rate for 70 years, the highest in the world. If it goes down, what would that mean?
GERGEN: Well, the AAA credit rating tells the world if you -- if you buy a bond from the United States, if you lend money to the United States.
BLITZER: Treasury bills or --
GERGEN: The treasury bill. That that's just like cash. And a lot of banks hold treasury bills as reserves against currency. It's like -- it's passed around like cash. And if suddenly that goes from AAA to AA, that means it's not as valuable as it once was.
And that means that people are not going to be willing to pay for bonds so readily. And that drives up interest rates. It costs more to get people to --
BLITZER: It's the same -- it's the same for a country, Gloria, as it is for an individual.
BLITZER: If you have a good credit rating and you go -- you go to the bank and say, I want a mortgage, I want a loan.
BORGER: Right. Exactly.
BLITZER: You'll get a better rate.
BLITZER: Than if you're -- you know, have a bad credit rating. BORGER: Right. Then, you know, technically, Wolf, the first auction of these treasuries is August 4th after --
BLITZER: Two days after the deadline.
BORGER: Two day s-- $87 billion. And so it would begin almost immediately. And you would -- you would really see the impact. Now what's interesting about the American public is, a couple of months ago, most Americans when you asked them about raising the debt ceiling, they say, well -- about 40 percent said maybe you have to do it.
Now that's completely flipped. And people understand the importance of raising the debt ceiling. And -- so there are some Republican who believe -- in the House in particular, who believe that it's not a real date.
BLITZER: Yes. You heard from that Michele Bachmann.
BORGER: You want to take that chance? Yes.
BLITZER: And some other Republicans especially in the House.
But here's what I don't understand. If the polls and Gloria's polls and our CNN polls are accurate reflection of the mood out there, why would the Speaker John Boehner want a second vote next year in this whole issue to come up once again just as the election -- everyone is getting ready for a congressional elections and a presidential election?
GERGEN: Because fundamentally they think that the first down payment, the first phase of the Boehner plan is very much in size and they need a second phase and a big chunk of money to be saved in that second phase.
And from the Republican point of view, the only leverage they have is tied to the debt ceiling. It forces the action as we're seeing here. You know the president didn't want any of this. He wanted -- what we call a clean debt ceiling. No, nothing attached to it. Just pass it the way you did for George W. Bush, the way you did for Bill Clinton, Ronald Reagan and the like.
But here it's -- you know, from the -- you know if you really care about the presidency, there is a potential shift in power here. Future Congresses continue to use the debt ceiling every time it comes as a way to force issues, that puts a lot more power in the hands of Congress.
BORGER: And there are some people who have suggested to me that maybe we shouldn't have to have these votes.
BORGER: To raise the debt ceiling.
GERGEN: Exactly. BORGER: That maybe there ought to be another process where in fact you don't have to take it to Congress. But that's exactly why --
BLITZER: A lot of Republicans like it because it's going to result in --
BORGER: It gives them leverage.
BLITZER: It's going to result in some reduction in the size of government which is what they got elected to do.
BORGER: And they were -- exactly. That's what they believe they were elected to do. They want to do it and they want to have this added leverage.
BLITZER: Hold on, don't go away. This is an historic night here in Washington, D.C. The president of the United States will be speaking from the East Room of the White House followed by the speaker of the House, John Boehner. They'll make their respective cases.
Only one week to go before the nation's debt ceiling is reached. We're going to have continuing coverage leading up to the president's speech and the speaker's speech. Among others, we'll be joining by two United States senators who are right in the middle of all of these negotiations. Stand by.
Our coverage continues after this.
BLITZER: All right. You're looking at the White House right now. About a half an hour or so we expect the president of the United States will be addressing the nation. He will walk into the East Room of the White House with prepared marks, very carefully prepared remarks.
We expect about 15 or 20 minutes or so to hear what the president -- in the course of that, to hear what the president has to say. He will immediately be followed by the House Speaker John Boehner. We don't know how long he will speak but he'll make his -- a very different case to the American people as well.
We'll have live coverage of all of this. Stand by. Don't go too far away.
I want to bring in right now the former labor secretary under President Bill Clinton, Robert Reich. He's the author of the book "Aftershock: The Next Economy in America's Future." He's now a professor of public policy out in California, at Berkeley.
Is that right, Mr. Secretary?
ROBERT REICH, FORMER LABOR SECRETARY: Yes, I am. Good evening, Wolf.
BLITZER: All right. Thanks so much for joining us. What would happen -- and it's really possible, I'm afraid to say, if there is no deal raising the debt limit, what would happen next Monday, Tuesday and Wednesday?
REICH: Interest rates would shoot up. Not only for federal -- on the federal debt and on treasury bills but because so many interest rates around the country in so many transactions, including variable rate mortgages, are pegged to the interest rates on the treasury bill.
Interest rates are going to -- are going to go up. And if there is widespread belief that there is going to be no immediate increase in the debt limits past Tuesday, if this is going to drag on, then everybody who lends money to the federal government is going to demand a higher and higher interest rate to compensate for that risk.
BLITZER: Because we've been hearing from Democratic officials that the president may go as far as to say tonight, Professor Reich, that the United States right now is an imminent threat of default. I never expected a president to hear or president say that. Did you?
REICH: No, I didn't, Wolf. This is far, far more serious than shutting government down. This has to do with that phrase that you hear over and over again, the full faith and credit of the United States. This means that everybody, I mean foreigners, Americans, everybody who buys treasury bills, effectively lending money to the United States, may not be paid back. Or if they're paid back, the payments may be delayed somewhat.
That raises the risk to everyone. Not only interest rates as I said right -- a moment ago, but remember, the United States dollar is the reserve currency for the entire world. And so the repercussions are likely to be global.
BLITZER: Because the Republicans make the point and they strongly make this point, that if you -- if you're going to start cutting spending, which they say you've got to do, and the Democrats say that as well, you've got to deal with the biggest chunk of federal expenditures, entitlements, namely Social Security, Medicare and Medicaid.
The president is willing to deal with that in certain ways. Are you?
REICH: The president has said clearly over the next 10 years that he does want to modify, change, reform Social Security and Medicare. My position on this for what it's worth, Wolf, is that Medicare is not the problem. The problem really is rising health care costs that underlie Medicare that everybody in this country is facing.
That's the real problem and that has to be tackled in a very, very big way. Social Security is not a problem at all. In fact Social Security payments to -- into Social Security by people who are about to retire have been a surplus. They have been making the federal budget deficit look less than it actually is. Social Security has been a big plus for the federal government.
BLITZER: So basically, if the threat of default is so great to the United States, why shouldn't the president and the Democrats basically say, you know what? We'll work out a deal with the Republicans. We'll accept what you want. They were relatively close. They weren't all that far apart.
The consequences of that clearly would not be as disastrous as the consequences of default.
REICH: I think they will. I would be very surprised, Wolf, if the United States actually went into default. But the clock is ticking. You know given the congressional calendar, you need several days just to post new bills and to get it understood. To get it voted on in the House and then the Senate.
The other piece of this that Washington hands know all to well is that any 10-year commitment, well, that can be changed. I mean no Congress can bind the next Congress. That's why many Republican freshmen, the Tea Partiers are saying, no, we want budget deficits to start right now, fiscal year 2011. But that could have very negative effects on the economy that is already suffering from huge unemployment.
BLITZER: Professor Robert Reich, thanks very much for your insight.
REICH: Thanks very much, Wolf.
BLITZER: All right. Let's get a different perspective now from Senator Jeff Sessions, Republican of Alabama. He's the ranking member of the Senate Budget Committee.
The plan that Harry Reid put out, Senator Sessions, does not call for any increased revenue or any increased revenue from tax changes, from tax hikes. Anything along those lines.
Are you ready to accept what Harry Reid had a put on the table as a way to avoid seeing the nation get into default?
SEN. JEFF SESSIONS (R), BUDGET COMMITTEE: Well, we do need to avoid a default. But I want to apply a little bit to my friend here, Mr. Reich, in citing that absolutely the Constitution requires that the debts of the United States be honored.
No official or former official of the United States should suggest that we will not pay the debts that we owe. They are required by law and the Constitution to be paid. But this agreement that he -- this proposal he's made is gimmick to make it look much more --
BLITZER: The Harry Reid proposal? Is that what you're saying?
SESSIONS: Yes. Yes.
BLITZER: Because he says it would -- over the next 10 years cut $2.7 trillion without raising or changing any tax laws. SESSIONS: He basically -- when you look at that carefully, it's about $1.2, $1.3 trillion in cuts. We'll be spending $46 trillion, increasing our debt over the next 10 years from $9 to $13 trillion. So this $1 or $1.5 trillion reduction in spending is not enough really to change the debt trajectory we're on. And I am worried about that.
The problem we've got is not the debt ceiling. The problem we have is the surging deficits that are putting this nation at risk. And we've got to change it. And the president needs tonight -- he needs to say just how critical it is that we reduce our spending and bring our nation in fiscal control.
BLITZER: But --
SESSIONS: And we're not there.
BLITZER: But Senator Sessions, you've been in Washington for a long time. You fully understand the need for compromise when there is divided government. A Republican majority in the House. A Democratic majority in the Senate. A Democratic president controlling the executive branch of the U.S. government.
Were you ready to go along with a deal that Speaker Boehner said they were close to achieving that would have included $800 billion in increased taxes? Boehner was ready for that. Were you willing to go along with that?
SESSIONS: Well, I have been complaining and pointing out all year that we are heading to this very last minute. And that our leaders were going to produce a complex series of proposals that we were expected to vote on at the 11th hour. And I was very much opposed to that.
And said I -- and I will not vote for anything. I haven't had a chance to study. However, I would point out that there was a bipartisan agreement between Senator Reid and Mr. Boehner. It went to the president and he said no. He rejected a recent bipartisan agreement which I thought was pretty stunning, actually.
He asked them to work on it. They worked on it and brought it to him. And he turned that down. So that is frightening, actually, as to where we are tonight.
BLITZER: Well, when was that agreement presented to the president? Which agreement are you referring to?
SESSIONS: I believe it was Sunday night. It was in the "Washington Post." Jennifer Rubin's article said they -- a bipartisan agreement was reached. And quote, "The president said no," close quote.
BLITZER: And the explanation that you've heard from, at least from your sources from the White House? Why would the president reject something that Harry Reid and John Boehner supposedly accepted?
SESSIONS: Well, the reason that was suggested and has been suggested is that it required the -- it extended the debt ceiling only long enough to get into next year. And it would come back up again before the election. And he didn't want to have to face that problem before the election.
But he's asking for the largest increase in the debt ceiling in our history. And he -- I don't see what's wrong with the -- having it come up again soon. Because we need to stay on top of this issue.
BLITZER: Yes. The president has repeatedly said he will veto anything that requires another vote next year leading up to congressional elections and presidential elections. He doesn't want the country to have to go through this ordeal once again in the middle of an election campaign.
SESSIONS: He doesn't want. He doesn't want. He doesn't want.
BLITZER: Because what he says he doesn't want the country --
SESSIONS: He's talking about his election. He's talking about --
BLITZER: Right. He doesn't want the country to go through it.
SESSIONS: He doesn't want to have to do it again.
BLITZER: He wants any deal that is reached to go through the election in November, 2012. And maybe in early 2013. You guys can start fighting once again about spending and taxes and Medicare and --
SESSIONS: Well, he wants the largest increase in history. And I don't think he is entitled to that and neither did Senator Reid, apparently.
BLITZER: All right, Senator Sessions, appreciate your joining us tonight. Thank you very much, Jeff Sessions of Alabama. The ranking member of the Budget Committee.
Getting ready to hear from the president. We'll hear what he has to say about all of these issues fairly soon. We'll also hear from John Boehner, the speaker of the House.
As I've been saying the stakes are enormous right now. One week to go before the nation, the country has to make major decisions, which bills to pay, which bills won't be paid.
BLITZER: We're awaiting the president of the United States and the speaker of the House. On the left you see the White House, the president will be in the East Room. On the right you see Capitol Hill. The speaker of the House will be addressing the nation right after the president. In fact, exactly two minutes after the president stops speaking, we will hear from John Boehner.
Senator Chris Coons of Delaware standing by, but I want to bring in our political contributors Roland Martin and Alex Castellanos to assess what's going on.
You know, Alex, the American public is sick of this already. They know the stakes are enormous. They're going to pay a huge price if the nation goes into default. And Democratic official say the president may actually utter those words that that the nation right now is in imminent threat of default. They just want this done with so they can move on with their lives.
ALEX CASTELLANOS, REPUBLICAN STRATEGIST: Yes. They do. And I think everyone understands that. So why haven't we had an agreement?
I've been talking to Republicans on the Hill this week and I think we've even heard the same thing tonight. There are just two very different points of view. Secretary Reich, for example, looked at Social Security and says, hey, it's in great shape. You know? It's taking in more money today than it's putting out.
Republicans look at Social Security and see that over the lifetime, an average American like Roland or like me or you, we may pay in $100,000 but take out $300,000, and it is going broke.
The problem we have is not just the debt ceiling. The problem is do we pass this huge debt on to our kids? And Republicans right now are determined to do something about it. That's why they don't want gimmicks.
The Reid plan, for example, says we're not going to be in Iraq and Afghanistan. Well, that's $1 trillion. We're going to have a commission. That's going to save us $400 million.
You know those kinds of things aren't real.
BLITZER: All right. Roland, because it is a critical moment right now, you agree.
ROLAND MARTIN, CNN POLITICAL CONTRIBUTOR: Of course. The problem you have is ideological purity. I mean when you sit here and look at the Congressional Budget Office, made it clear that if the Bush tax cuts were not extended, all of them, deficit goes down. If you extend all of them, $3.3 trillion increase over 10 years.
That's fact. We're not going to sit here and debate a fact. It's a fact. And so when -- and so on Democratic side, it's crazy to sit here and say we have no issue with Medicare and Medicaid, no issue with Social Security, you definitely have rising costs. But at some point you cannot have people on the Democratic side and the Republican side say absolutely not. I'm not giving up anything. You have to be able to give up something.
BLITZER: But the Republicans were willing, at least until recently. You heard John Boehner, the speaker of the House saying he was willing for $800 billion in tax revenue. Increases in taxes in effect. That's not ideological purity, Roland.
MARTIN: Right. But could he sell that to his party? And at the end of the day, he had to get 218 votes. And could he get it? And it's clear he couldn't get the votes.
BLITZER: Could he get --
CASTELLANOS: We could sell -- we could sell more revenue, not only to Republicans but to the American people. But there are two different ways to do it. Roland's way, the Democrats' way is we're going to create more taxes. The Republicans' --
CASTELLANOS: Excuse me. What the Republicans -- excuse me. What Republicans want to do is not create more taxes. Create more new taxpayers and more successful taxpayers. That's growth. And limit spending. And that's the way to do it.
MARTIN: Is it a fact, Alex, that the Bush tax cuts --
MARTIN: Is it a fact?
CASTELLANOS: No. Ideological purity, though --
MARTIN: OK. All right. That ship is down --
CASTELLANOS: Roland is just right about one thing. Ideological purity is a problem. The Democrats won't budge from raising taxes and shrinking the economy. That's a real problem.
MARTIN: Real quick. Factcheck.org and Politifact both have the information from the CBO. That's a fact.
CASTELLANOS: And the trillion-dollars Obama is taking out of economy --
MARTIN: OK. All right. Alex, it's a fact.
CASTELLANOS: -- for his health care plan.
MARTIN: It's a fact, Alex.
BLITZER: All right. Stand by. I want to bring someone who's involved in all of this. Senator Chris Coons, a Democrat of Delaware. He's a member of the Budget Committee.
Is there any way out of this mess at this late moment, you think, Senator?
SEN. CHRIS COONS (D), DELAWARE: Well, frankly, the Republicans need to hear us saying yes. I'm struck that Leader Reid has presented to our caucus and is willing to move forward on a plan that frankly gives the Republicans in the House and the Senate everything they have been asking for.
BLITZER: Not everything.
COONS: I wish that we had come to a different place --
BLITZER: He's not including any entitlement cuts, Medicare and Medicaid, Social Security. He didn't include any cuts in spending in entitlements which is what the Republicans want.
COONS: Let's be clear. Leader Reid's plan does not gut Medicare, doesn't re-make it into a voucher program as the Ryan budget would have us do. But he has no new revenue. $2.7 trillion in cuts. Using cuts that were already adopted in the House plan or agreed to in the negotiations led by Vice President Biden. And does it with one vote.
I frankly think that is more than reasonable. We've come more than halfway. And it is my hope that the Republican who are having trouble hearing us because of a tax pledge they've got stuck in their ear, are going to open their ears, open their hearts, and recognize that we have very little runway left.
And it's time for us to land the plane. Quit scaring the markets and get back to focusing on helping the private sector create jobs and grow federal revenue that way.
BLITZER: Because, Senator Coons, you're absolutely right. The Reid plan does not include any additional taxes, no tax increases, no elimination of tax loopholes, tax deductions. The revenue as far as taxes remains the same.
But it does include a proposed cut they say would reduce spending by about $1 trillion as a result of the U.S. winding down the wars in Iraq and Afghanistan, but the U.S. is doing that anyway. And as a result, the Republicans accused Senator Reid and the Democrats of doing fuzzy math.
COONS: Well, if that's fuzzy math, then the Republicans shouldn't have put it in their proposal that came over from the House. In my view, deeming part of the savings that are on the table, the reduction in future debt service that comes from the reduction in our expenditures on n wars overseas and the caps on domestic discretionary spending that are part of the Reid proposal and the savings on future debt service.
Those are real reductions in federal spending. I had hoped for, the president had hoped for, Leader Reid and many Democrats in the Senate caucus had hoped for a bigger deal that tackled the very real problems that you and the panel have been talking about.
We need to get serious about growing federal revenue and reducing federal spending. And we are going to need to tackle entitlement reform. But right now we have a politically generated short-term default crisis. And I think we all agree, we cannot afford to have America default.
BLITZER: I don't know if --
COONS: It is my hope that after we get past the default issue this coming week, we'll get back to the very serious question of how do we get America's economy back on track. And the best thing we can do for the markets and for our future to make our country competitive and not risk becoming a junk bond nation, is to really deal with our deficit and revenue problem.
BLITZER: So I don't know if you heard Senator Jeff Sessions who was here just a little while ago, but he made the point that as recently as last night, there was a deal between Harry Reid and John Boehner, but the president rejected it because it would have required another vote next year in the period leading up to congressional and presidential elections. And the president didn't want to go through this again next year.
Is that your understanding as well?
COONS: Well, let's be clear. What we've gotten is warnings from the market, from the bond rating agencies and from folks in the equity markets who say that we are creating a huge amount of uncertainty. And that a short-term deal that is not simply to work out the implementation of a bigger deal is going to repeat and repeat the uncertainty that's been coming from this high-stakes games of poker.
I fully expected that we are going to have a very difficult negotiation between the House and the Senate, Republicans and Democrats. But the Republicans have changed this from a high-stakes game of poker into Russian roulette.
And the message we got from several of the bond rating agencies this week is that a short-term deal such as Speaker Boehner was proposing would simply expose the markets and our economy to the uncertainty of not having this resolved.
I have heard other senators such as Sessions suggest that this is really only motivated by the president's short-term electoral concerns. But I just wanted to reiterate that we've heard from rating agencies in the markets that this uncertainty is wreaking havoc. It's keeping corporate dollar on the sidelines that might otherwise be invested in new employment or in new infrastructure.
And it's preventing us in the Congress from focusing on creating jobs which should be job one for all of us here in the Capitol.
BLITZER: Senator Coons, thanks very much for coming in. Good luck to you, good luck to everyone in the Senate and the House. We hope there's some sort of a deal, otherwise the consequences could be tragic for so many people.
Appreciate your joining us.
COONS: Thank you, Wolf.
BLITZER: Let me bring back Alex Castellanos, our Republican strategist to get some reaction. He makes a fair point, Alex. That it's not necessarily politics that's causing the president of the United States to want to avoid another vote next year. If you go through this again, it just opens up the United States to the credit ratings and the undermining of confidence in the U.S. economy. Why put the country through that again next year?
CASTELLANOS: I agree with the president. It should be a longer term solution. But if that's what he wanted, he should have said it. But he didn't. He said only through the next election. Somebody is talking politics here.
BLITZER: At least he said through the next election.
CASTELLANOS: I mean that's as far as he got.
MARTIN: First of all --
CASTELLANOS: What I would like Senator -- the Democrats like the senator to answer is, would they support something that had no new taxes? Or have they taken a mandatory tax pledge to get us out of this situation?
MARTIN: Fact. When the president says extend it through all of 2012, through January 2013, that is also after the election. So don't sit here and act like it's going to end after the first Tuesday in November. So he's saying, and look, you're going to have the same drama so you shouldn't go through this nonsense in an election year.
BLITZER: Stand by, guys, because we're awaiting the president of the United States. He is getting ready to address the nation from the White House. We'll also be hearing from the speaker of the House, John Boehner. He'll be addressing the nation as well.
We'll check in with our correspondents and our analysts as we get ready for this historic night in Washington, D.C. to unfold.
BLITZER: All right. We're only moments away from the president of the United States. You're looking at live pictures of the White House right now. The president getting ready to address the nation on the economic crisis facing this country. He'll be followed by the speaker of the House, John Boehner. He'll be addressing the nation from Capitol Hill.
Everyone knows -- everyone agrees that the nation cannot go into default but there is, according to the Democratic Party officials, an imminent threat of that unless there is an agreement that is reached very, very soon.
One week from today the government will have to decide which bills it pays, which bills it won't pay because there simply won't be enough money. Let's go to the White House. Jessica Yellin, our chief White House correspondent, is standing by.
Jessica, the president was doing this from the East Room of the White House. Explain to our viewers what you're hearing from your sources. Why he decided to address the nation tonight.
YELLIN: Wolf, with just eight days to go until this vote has to happen and the debt ceiling must be raised I believe the goal tonight is to isolate in essence Speaker John Boehner and to put his plan and Republicans on notice at a time when he is already starting to lose Republican support for that plan.
I believe in his speech, he will outline and walk through elements of that plan and why he believes it's not good for the country. And look at the other alternative and talk about a way forward.
The goal is, in essence, to force some kind of action to the extent he can using his bully pulpit and talk about the fact that he believes the options for compromise are clear and must start now.
BLITZER: Stand by.
Erin Burnett is joining us as well, our newest CNN anchor.
Erin, earlier this hour we spoke and you said something that got a lot of buzz out there on Twitter, some of the other social networking sites. You suggested that one investor who was actually briefed by some of the ratings agencies like Standard & Poor's suggested that if Speaker Boehner's plan is approved, it might still result in some sort of ratings reduction for the United States. Whereas if Harry Reid's plan is approved, the U.S. AAA rating might not necessarily go down. I want you to explain why -- what that means.
BURNETT: Yes, it is interesting, and I'm glad I have the chance to do so.
So I spoke to an investor who -- a very influential investor who had a chance to sit down with S&P. And what he was saying was, the reason for S&P -- and as you're suggesting this -- and it's unclear what they would actually do -- but suggesting to him that they felt this way, was really about the size of the plan, not what is in them. I think it is important to emphasize that most people think that both of the plans are really Band-Aids and don't deal in any significant way with the spending and cost issues in the country.
But the issue was that Speaker Boehner's plan does not cut enough spending right away. Harry Reid's plan, of course, would cut about $2.7 trillion. So just because it is bigger than Speaker Boehner's plan is really the reason that the Boehner plan may still trigger a downgrade.
And as we had indicated, Wolf, some investors -- and this is a very subjective view among investors of what would happen with interest rates -- think you could see an increase of rates of a quarter of a percent to half a percent. And if you look at California, Wolf, I don't know if you remember, a year, year and a half ago, when California had to issue all those IOUs. If that's what happens to the federal government, California's rates have gone up half a percent to a percent. That is a big increase, and that happened even when they stopped paying IOUs and were able to pay cash again. So the long-term implications stay with you even if the default or the downgrade is very short.
BLITZER: Yes, and that translates into real money when all is said and done, even a small interest rate increase.
Glory Borger is here. You're getting some more information on what we might be hearing from the president as well.
BORGER: Right. Right. I am. One of the interesting things coming from the administration, to Erin's point, is that they believe that there is a possibility of a downgrade. Not only because Boehner's plan doesn't have as much deficit reduction but it means that you have to come back again to this same debate six months down the line to have the question of whether you raise the debt ceiling. And that of course cause as lot of uncertainty.
But what I'm hearing from senior administration officials is that tonight, the president really wanted a larger audience. I was told that he wanted to frame the week. We know he spoke, for example, last Friday. It wasn't primetime. It wasn't this kind of an address and I was told that they believe that it will raise the bar for all of the members of Congress to get something done.
BLITZER: The pressure -- he's trying to put pressure --
BORGER: On everyone.
BLITZER: -- on the Republicans, David Gergen, right now.
GERGEN: He is. He's trying to -- and I think what may be a little discouraging about tonight is that it appears now the president wants to score points against Boehner and that Boehner wants to score points against the president.
And I think most American are looking for, what are you guys going to do to solve the problem together? Because they realized it's going to take both sides to get there.
But I have to say, Gloria, the administration -- administration officials, I know some who think that we face a real threat from the Standard & Poor's on the credit rating in question regardless which plan is embraced. That there are no plan that may meet the bar. And you know it is a serious problem.
One thing that's quite hard for people to understand, I have a hard time understanding it, is even if we raise the debt ceiling, we could still have a downgrading of our --
BLITZER: Yes. And you know you haven't heard of that. The AAA rating in, what, 70 years could be downgraded.
Stand by for a moment. Stand by, guys.