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House Passes the Boehner Debt Bill

Aired July 29, 2011 - 19:00   ET


JOHN KING, HOST: Thanks Wolf and good evening everyone.

We're live from Capitol Hill tonight on a busy day and busy night of breaking news in the debt ceiling and government spending debate. For the Republican House, well, the third time was the charm. Planned votes Wednesday and Thursday were postponed but just moments ago the gavel signaled passage for the latest plan from the embattled House Speaker John Boehner.


UNIDENTIFIED MALE: Yays are 218, the nays are 210. The bill has passed. Without objection the motion to reconsider is laid upon the table.



KING: There it is, the Boehner bill got 218 motes, just two more than the 216 needed for passage. Significantly 22 Republicans voted against it as did all of the Democrats. Just before that dramatic vote, Speaker Boehner blamed President Obama for the collapse of talks aimed at a grand bipartisan deal.


REP. JOHN BOEHNER (R-OH), HOUSE SPEAKER: I stuck my neck out a mile and I put revenues on the table in order to try to come to an agreement to avert us being where we are. But a lot of people in this town can never say yes. A lot of people can never say yes. This House has acted and it is time for the administration and time for our colleagues across the aisle, put something on the table. Tell us where you are.


KING: But here is the thing. The changes the speaker made to win the votes of Tea Party and other conservatives resulted in a bill that has virtually no chance of passing that and zero odds of winning a signature from a very frustrated Democratic president.


BARACK OBAMA (D-IL), PRESIDENT OF THE UNITED STATES: It's a plan that would force us to relive this crisis in just a few short months, holding our economy captive to Washington politics once again. In other words, it does not solve the problem and it has no chance of becoming law.


KING: Here is why the president objects to the House GOP plan. It would give him a $900 billion increase in the debt ceiling now and force an equal amount in spending cuts immediately as a tradeoff. But to get a second increase in the debt ceiling, when the government needs it several months from now, both the House and the Senate would first have to pass and send to the states a constitutional amendment requiring a balanced federal budget every year. That requirement passing a balanced budget amendment, one the speaker, the final votes he needed for passage, but it's a nonstarter for the president and most Senate Democrats.


SEN CHUCK SCHUMER (D), NEW YORK: Speaker Boehner should just give it up. He throws piece after piece after piece of red meat to the right-wing lion that seems to dominate his caucus. Well it's time he tamed that lion for the good of the country.


KING: Now like the House GOP plan of not, the vote at least sent the debate to the Senate, which as you can see now here live is about to put its mark on the spending debate. Majority of Democrats promise first to defeat the House proposal to make it clear that it has no change, then the Senate expected to move to Majority Leader Harry Reid's proposal. It would raise the debt ceiling by $2.4 trillion, enough to get us through the 2012 presidential election and it aims to enact about $2 trillion in spending cuts.

The Republicans say they don't trust the Democrats math, again though a little fifth grade civics lesson here. Leader Reid likely can't get the 60 votes he needs to get his plan through the Senate, which raises tonight's defining question, at what point will the partisan rituals and the finger-pointing y give way to serious negotiations? An important question anyway, all the more so with the August 2nd deadline. The point at which the administration says it needs that additional credit line to pay the bills just a little more now than three days away.

Suffice to say with no end game in sight, clear sight anyway, financial markets more than a little nervous. Wall Street had its worst week in a year. The S&P fell every day this week. The Dow down 4.2 percent for the week meaning your 401(k) also took a hit because of Washington's messy way of doing business. Our congressional correspondent Kate Bolduan working her sources as the debate continues tonight and Kate, we are waiting now for Leader Reid to say, what next.

KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: What next and that is a very good question because I will be really honest with you, John. It doesn't seem like there is a clear path towards what is next. Senate Majority Leader Harry Reid, he has an array of legislative options before him. What we know with pretty much certainty because we have been hearing this from the Senate majority leader himself, is that the bill that just passed in the House is dead on arrival.

It does not have the support. Democrats have the majority in the Senate and they do not support it, so it will not be going anywhere. The question is then what is next? He has some options to be -- they themselves do not appear to know really what direction they're going to take and here is why. The real negotiations need to begin now and need to begin quickly.

They have not been negotiating per se in earnest because it would be really unseemly for the Republican leader of the Senate, Mitch McConnell, to be negotiating with Harry Reid in the Senate to try to reach some compromise towards an end game while at the same time his partner in the House of representatives, John Boehner, was pushing forth with his plan. So now that that step, if you will, has passed, it is then moving over to the Senate and now all eyes are on the Senate to find out really where they are going to go from here and we all are listening to hear from Senate Majority Leader Harry Reid on where he plans to go.

One option, as you probably mentioned already, John, is that he could in a very complex legislative way do a motion to table, part of this bill, which would then set it aside. It wouldn't necessarily kill it because it could be used later and could be brought back up, but it would set it aside and that would at least give Democrats in the Senate the opportunity to vote, to show that this bill, the Boehner bill, does not have the votes to pass in the Senate, again another counter-procedural move to allow them to have their say, but again the negotiations need to start in earnest if they're going to reach a compromise towards an end game, as we all watch the clock race closer -- John.

KING: Kate Bolduan, we will stay in touch with Kate and we'll watch the Senate. When Leader Reid speaks we'll bring you his plan. We'll bring it to you live when he maps out what happens next.

So how did the speaker win those final votes for House passage? And are conservatives now ready to compromise, to strike a final deal before Tuesday? Jeff Flake is a sixth term fiscal conservative from Arizona. He voted yes today. South Carolina's Tim Scott, one of the 87 members of the House Republican freshman class -- Congressman Scott voted no on this plan. Let me ask you, yesterday, you were a no. It was -- pass the balanced budget amendment as part of the second installment. Is that what won you over?

REP. JEFF FLAKE (R), ARIZONA: Right. I was no until the plan changed and when it included the balanced budget amendment that was good enough for me. I mean it became a version of "Cut, Cap and Balance", it has cuts, caps and now a balance, so I don't begrudge those who voted against it. They had very good reasons, but I thought that it deserved a yes vote.

KING: Then why did it get a no vote? Why wasn't that not good enough for you?

REP. TIM SCOTT (R), SOUTH CAROLINA: I thought the speaker did a very good job of trying to find a way to bring the conference together. At the end of the day for me, it was all about moving that balanced budget amendment to the first tier of the debt ceiling increase.

KING: Now I understand and respect your position on that. However, you know in that building right there, you don't have the votes to get the balanced budget amendment through the Senate. Even if you could, the president of the United States says he doesn't want it. So the narrative playing out in town and I want you to listen here to one of your Democratic colleagues, Chris Van Hollen, what the Democrats are trying to say is if you would drop that, the insistence on amending the Constitution, we could probably get a deal. But you won't drop it because -- listen to Chris Van Hollen.


REP. CHRIS VAN HOLLEN (D), BUDGET CMTE. RANKING MEMBER: I think in the last 24 hours, we've confirmed what many people suspected, which is that the Tea Party Republicans may be a noisy and effective protest movement but they are unfit to govern. They are unfit to govern.


KING: Mr. Van Hollen there saying that because the Tea Party noisy, can cause a protest, but you are unfit to govern in his view. How could you prove him wrong?

SCOTT: Well I think ultimately the president has already done that for us. Actually there has been no leadership in government from the White House whatsoever. There has been no actual budget in the Senate in over 800 days. The only leadership that we've seen so far has come from the Republican conference. Speaker Boehner has given the Senate two opportunities, "Cut, Cap and Balance", an opportunity to have (INAUDIBLE) increase and tonight we are sending another opportunity over to the Senate to join the leadership team in Congress.

KING: You have been here for -- this is your sixth term. You are new to Washington but you served in a legislature back home, so you understand -- both of you understand how this works.


KING: One chamber, two chamber and then you have to figure out a deal. Let be put out a proposal for you and I want to see what you think about it. Let's assume in the end Leader Reid can't get enough votes for his. The Senate won't pass your plan. What if we had something along the lines of this? $2.5 trillion or so, increase in the debt ceiling, an equal amount of cuts from the Congress. No tax increases in there. There is not a balanced budget amendment. You get a vote on a balance budget amendment, a promise for that, but it's not in the deal. But the deal does include firm spending caps and even a trigger that if say you don't trust the Democrats savings when it comes to Iraq and Afghanistan. If those don't materialize there would be a trigger six or nine months down the road that forced additional cuts. You would get at least some mandatory mechanism to cut spending. You'd get a vote on your balanced budget amendment. It just wouldn't have to be passed to get this through. Is that good enough as a final deal?

SCOTT: Well I'd say that it is a step in the right direction, at least having the balanced budget --

KING: Would you vote for it if that came to the House --


SCOTT: -- seeing Senator Reid's plan, my understanding of Senate Reid's plan is it contains $1 trillion of military cuts because he assumes the ending of the war. I'm not sure that anyone would consider that actually cutting spending, so for me, I would like to see more.

FLAKE: How about if we just take the Reid plan, so it's their plan. Give the president (INAUDIBLE) I'm sorry -- the debt increase through the election as he wants, but then attach the balanced budget amendment to that. The Senate says they'll never vote for it. Put them in that position where their only objection -- their only objection is a balanced budget amendment that most of them have voiced support for. And many in the House including Steny Hoyer and others have voted for as well, the clean balanced budget, the one that passed in '95 out of the House with more than 300 votes.

KING: I'll ask you both gentlemen to stand by for just a second. The majority leader of the United States Senate, Harry Reid, has just come down to the floor. They're taking a roll call (INAUDIBLE) now so we'll go back to the floor of the Senate when it makes sense, but the Senate is beginning to lay out what it will do next. We'll go back.

Let's keep the conversation here. Again, in divided government, there has to be some give. Is it your position that if there is no balanced budget amendment in the final deal, not a vote on it, but passing the balanced budget amendment in the final deal, would your vote be no?

FLAKE: That's very difficult to get my vote without a balanced budget amendment. Just like the president says, it's difficult to get his support unless it takes it through the election. We'll give that to him. In my view, this is just me speaking, and (INAUDIBLE) to the Reid bill. In my view, I would do that. But attach the balanced budget amendment, so there is plenty of willingness to compromise on the House side. I just haven't seen it on the president or the Senate side.

KING: No balanced budget amendment, no vote from Congressman Tim Scott.

SCOTT: The necessity of changing the way Washington does business is embedded in the balanced budget amendment, so I need that first.

KING: You need that first. And so should Speaker Boehner, if there is a compromised plan like that, but it doesn't have the balanced budget amendment, should he refuse to bring it to the floor or should he bring it to the floor and maybe it passes with moderate Republicans and some Democratic votes, but not the votes of the two gentlemen I'm standing with tonight or should he say no, this is so important to my caucus I'm not going to bring it to the floor.

FLAKE: I think that when people say they won't vote for something like Senator Reid saying he won't vote for a balanced budget amendment. I was here for the TARP. I saw when people -- what people voted for when they said they never would when the stock market dropped 700 points. So I think that them saying that they won't vote for the balanced budget amendment, they haven't been put in the right position yet.

KING: Let me ask each of you lastly, has your speaker been minimized at all, has his leverage been minimized at all by the fact that he had to delay the vote plan for Wednesday. He had a very public -- I'm sorry gentlemen -- I need to stop -- the majority leader of the Senate, Harry Reid, laying out what comes next in this debate on the floor right now.

UNIDENTIFIED MALE: Is there is a sufficient second?

UNIDENTIFIED FEMALE: There appears to be.

UNIDENTIFIED MALE: There appears to be. The clerk will call the roll.

UNIDENTIFIED FEMALE: (INAUDIBLE) Mr. Alexander, (INAUDIBLE), Mr. Barrasso, Mr. Baucus --

KING: Another roll call there in the United States Senate. We thought Leader Reid was about to speak. My apologies -- we'll go there as soon as we can. Come back to that closing question. The House vote was planned for Wednesday. It had to be delayed. It was planned for last night. Not only was it planned for last night, the speaker publicly said zippidy do da day (ph), had a public event to say it would pass and then approaching midnight, had to pull it from the floor.

That is pretty embarrassing when you are the speaker of the House of Representatives. Do you believe he has been undermined at all here and do you believe -- is there a weakness in the leadership team? Did the Whip not count the votes right? Did they just get overly optimistic? What happened?

SCOTT: I'll tell you that I think the speaker's finest hour has been in the last 24 hours. Our speaker has shown very strong leadership. He has been willing to listen to the conference, making what was very difficult come together and come together in time for the Senate to act. I think Speaker Boehner is stronger than he has ever been with a better team. FLAKE: I have been around for a lot of negotiations kind of like this, prescription drug benefits and other things and the tools that the speakers have had in the past, the ability to hand out pork and earmarks this kind of negotiation would have cost billions in years past. The president -- the speaker didn't that ability and still through gentle persuasion and working with people he was able to do it. I think all of us have more respect for the speaker than we had before.

KING: Congressman Flake, Congressman Scott, appreciate your insights on this important night. We are going to take a quick break. When we come back we are waiting for the Senate debate to begin, the majority leader, Harry Reid to speak momentarily and standing by for us, Senator John Kerry, Democrat of Massachusetts, who I will bet you right now has a very different view than these two conservative Republicans. Stay with us. We'll be right back.


KING: Live pictures there of the floor of the United States Senate. Just in the last hour the House of Representatives passing its plan, a Republican plan to deal with the debt ceiling and to cut some spending. We know it is unacceptable to Senate Democrats. As we wait for the leader, Harry Reid, to outline how he will approach this debate, let's bring in the chairman of the Senate Foreign Relations Committee, the former Democratic presidential nominee, Senator John Kerry, Democrat of Massachusetts. So the House plan is coming over, Senator. Speaker Boehner says here is a plan. It's on paper. Pass it. This is all over with. Send it to the president and we're done.

SEN. JOHN KERRY (D), MASSACHUSETTS: Well, the speaker knows that is not the way it's going to work. The House knows that's not the way it's going to work, because his plan is fundamentally flawed. He was put on notice yesterday with a letter with 53 senators signing it saying, we are not voting for this. But nevertheless, they took the whole day, wasted a day to make a political posturing position.

Now, the reason it's not going to pass is because it's not in the interest of the country. It has a short term debt ceiling. And that could result in a downgrading of our credit and it doesn't provide the certainty to our marketplace that Republicans have been saying we need to give the marketplace. So for that and other reasons, it requires the actual passage of a constitutional amendment. It's not going to pass. So you're going to be into a forced gridlock within a matter of months.


KING: Let's stop on that point. Leader Reid's plan would be about $2.4 trillion --


KING: -- would raise the debt ceiling through the presidential election so we wouldn't have to go through this again. We could have an election debate about it. Jeff Flake just standing here, six-term Republican, fiscal conservative says he would take the Reid plan if you would just add the balanced budget amendment to the Constitution --


KING: Why is -- why is it a bad thing to pass a balanced budget amendment to the Constitution?

KERRY: I think it's -- personally I think it's not necessary because we've known and shown how we can balance the budget without it. I don't know where Jeff Flake has been, but in the 1990's, I was here when we passed a balanced budget. We didn't have a balanced budget amendment. We just had the courage of our convictions and the common sense of bipartisanship and we sat down and passed a balanced budget amendment --

KING: And that was done under divided government --


KING: You had a Democratic president. You had a Republican speaker --

KERRY: Correct.

KING: -- but since then and this is -- I'm going to show a graphic to our viewers.


KING: I understand your position, but people watching at home -- and about 70 percent of the American people want a balanced budget amendment --


KERRY: But here's what we should do then. Let's have a vote on it. You can't guarantee the passage of something ahead of time. But I think Harry Reid and all of us are happy to have a vote. That's the constitutional process. So put in, have a vote on a constitutional amendment. I don't think any -- I think people would accept that. But there is a bigger problem here. Speaker Boehner's amendment that they passed today prohibits -- doesn't contemplate any revenue being part of the solution. He knows, everybody knows you cannot balance the budget, John, without some revenue --

KING: We're going to have to have a presidential election and a congressional election --

KERRY: Well we may have to --

KING: -- to fight that one out, right?

KERRY: Well not necessarily --

KING: Do you see any evidence the House of Representatives would accept any plan that had any revenue in it --

KERRY: I think it depends on your definition of revenue. I think if -- some members have indicated in the Republican Party that they would contemplate closing loopholes and that that would not necessarily amount to revenue --

KING: Can do you that by Monday night though?

KERRY: No, but what you can do by Monday night is set up a structure, which is what we want to do, so going forward in the next few months we force a guaranteed vote process that we're dealing with America's problem over the next few months. And I believe if we have this joint committee and then we have ability to bring up say the Simpson-Bowles Commission or the "Gang of Six" effort and we have some kind of a trigger, some way in which we are forcing that vote, I think we could have a process that Americans would say, these guys are really going to be forced to deal with this. We're not kicking it down the road and it will be -- no matter what happens it will be a centerpiece of the 2012 election.

KING: A couple of other quick points -- to the point about the balanced budget amendment -- you made your case, and you made the reference to the 1990's when Washington was for more than a year, actually taking in more than it was spending, God forbid, it was an amazing thing, right. But since then answer the person sitting out there -- yes you were here then. You were a part of that. But you have also been here later days in the Clinton administration still added $1.4 trillion to the long term debt during the Clinton administration, 6.1 trillion added during the George W. Bush administration.

It was a Republican president; it was a Republican Congress for much of that. Then a Democratic Congress came in and then the Obama administration where you first had a Democratic Congress, now you have divided government, 2.4 trillion added. So answer the American who says all right, yes you did that, but that was 11 years ago. Are you part of the problem since?

KERRY: I will answer. I don't believe so. In fact I think the Democrats have offered and the president has offered -- I keep hearing the Republicans say where is your plan? The president very clearly put a plan on the table with Speaker Boehner and the rest of his negotiators and he said, I'm willing to do 4.7 trillion in reductions over the next 10 years, and I'm willing he said to put Medicare, Social Security and Medicaid on the table as part of that equation.

Now, many people on our side didn't like that. But we swallowed and we said, OK, you have to compromise. John, show me their compromise. There is no compromise on their side. No president could have negotiated with people successfully who say we are not going to negotiate, it's just our way.


KERRY: And I just finish the thought -- that right now we've just spent a day where Speaker Boehner is negotiating with Republicans. This is a civil war within the Republican Party. He's not negotiating with Democrats. Harry Reid on the other hand has a completely unified caucus waiting to find the compromise from the Republicans. And the Republican Party has been held hostage by this narrow little group in the House that doesn't negotiate.

So what we need are people of common sense, goodwill who will put the country ahead of party, who will come to the table in the next hours and negotiate for the good of the country. That's what Americans want to see us do. And that is what we've already done. We don't have any revenues in the proposal Harry Reid has put forward. That is a concession. Where is their concession? That's the nature of compromise.

KING: Given your take of the situation then, yes or no, does Senator John Kerry think by Monday night, giving the deep divide between the Democrats and the House Republicans that we will have an agreement that can get through the Congress and get to the president's desk before the deadline that he will accept?

KERRY: I believe people of goodwill are going to come together. I think common sense is going to prevail. The consequences of the default, John, are beyond disastrous. You know Ireland, Greece, Italy, Spain, European countries are watching what we are doing. Hugely dependent on the outcome of this because of their relationship to the IMF, to our treasuries, to our paper, businesses all over the world, we saw the numbers today with respect to job creation. This is vital for us.

So I am confident that we will come together. We will come up with a way to work this process over the next months. Force the Congress to deal with what is a national crisis. We have to reduce the debt. We have to reduce the deficit. Everything has to be on the table. What we haven't seen yet is the willingness of the Republicans, particularly that narrow group in the House, to put everything on the table. The Simpson-Bowles Commission did that. Why can't they?

KING: We'll see that --

KERRY: We've done that. Why can't they?

KING: Chairman Kerry appreciate your time tonight.

KERRY: Thank you.

KING: When we come back, we are waiting to see the debate begin on the Senate floor. We also have the Republican perspective, Senator John Thune of South Dakota, his views when we continue our special live coverage from Capitol Hill in just a moment.


KING: Live pictures of the floor of the United States Senate. We are waiting just an hour or so after the House passed its plan to give the president the authority to raise the debt ceiling, also force some spending cuts. The president says he doesn't like it. The Senate action about to begin -- we are waiting for the majority leader, Harry Reid, to lay out where he will take this debate next -- in a moment the Republican perspective from Senator John Thune of South Dakota. Let's go first quickly to the White House though where the president of the United States is reacting now to the dramatic House vote just a short time ago. Our chief White House correspondent Jessica Yellin is standing by -- Jess.

JESSICA YELLIN, CNN NATIONAL CORRESPONDENT: Hi, John. The president has not himself put out a statement. It came through his press secretary, Jay Carney, who has said that the House vote passed with exclusively Republican votes. It would face another crisis, forces into (INAUDIBLE) crisis in a few months. They say in essence that it is "dead on arrival". That is a quote. And that pushes -- it pushes forward to Senator Reid's bill, which it calls a compromise and it calls on the Democrats and Republicans in the Senate to quote, "find common ground" by Tuesday.

No secret here that they want action, to move onto the Senate where it is now headed and that they want it to happen as quickly as possible. The question is, is there enough time for it to get done in the remaining hours? As far as we know, John, there is no meeting planned for this weekend. Officials have made it -- I mean at the White House with congressional leaders -- officials have made it clear that if that would be productive, it could happen. It's just not so clear would that be productive.

KING: Jessica Yellin live at the White House with an excellent question there -- would it be productive? Let's get the perspective from Republican Senator John Thune of South Dakota. As Jess just lays out, you know the president has a stake in this too, and part of that statement is a political statement from the president, but if you are an average American watching at home, why does the House have to pass its plan and plant the flag -- the House Republicans -- knowing it won't be accepted to the Democratic Senate and now the Democratic Senate majority will plant its flag and say no we're right. When everybody knows in the end neither plan can pass two chambers and get to the president, so when can people sit around the table and figure it out?

SEN. JOHN THUNE (R), SOUTH DAKOTA: Right. I think if you go back to last weekend, they were very close. They had a frame work in place. In fact, I think Leader Reid and the Senate and Speaker Boehner had come to an agreement for all intents and purposes and then the White House turned thumbs down on that.

And so, they went back to the drawing board and Boehner went back to the House and put his plan together. And Reid got his in the Senate. And the votes are going to happen.

I think that both sides needed to have their votes. That we are going to vote in a few minutes when the paper work comes over from the House on the Boehner plan of the Senate. It will go down, the Reid plan will down in the House tomorrow which will trigger a negotiation that hopefully will yield a result.

KING: Everybody knows that's going to happen. Why do we have to go through a ritual? Just important politically so you can tell the people back home you tried?

THUNE: Well, I think that there are a lot of people who have an expectation, particularly the House Republicans, they want to demonstrate to the country, one, that they can govern, two, that they're going to stand up for their principles.

And so, enacting a plan, putting a plan forward that passes the House of Representatives and submitting it to the Senate for a vote I think is an important part of the process for them.

KING: I get a lot of angry tweets and emails from Democrats when I say this. But I don't think anyone should be surprised that the votes of the new House Republicans so far, this is exactly what they campaigned on in the midterm elections and guess what? They won. And they won pretty big.

The question is: will they compromise going forward.

I just had Jeff Flake and Tim Scott, two Republicans, one is freshman, one on his sixth term, saying they don't want to vote for anything in the end that doesn't want to have a pass the balanced budget amendment in it. Not just vote on the balanced budget amendment, but to get the debt ceiling increased, you'd actually have to pass a balanced budget.

It's not going to happen. You know it's not going to happen, whether you want it to or not.

How you can you convince the fellow conservative on the House side you can't get that in the end and this is too important of an issue to take it to the brink.

THUNE: They want at least to vote on a balance budget amendment. And we need to have that. And I think any plan is going to require, is going to require, is going to get any kind of Republican support, especially in the House of Representatives, at least an opportunity to vote on a balanced budget amendment.

But I think the key right now for most Republicans is, one, getting something that has some immediate spending cuts, and that would mean the Reid plan is not adequate on that because it's got $1 trillion in these phony cuts and so, there's going to have to be a more of a commitment to spending in the near term and then at least a path way to get some entitlement reform with triggers that force action on that issue to get some additional savings.

Those are two things that are going to have to be in there. And I think a vote on the balanced budget amendment is going to be important, too, John, in order to get any kind of Republican support for it either the House or the Senate.

KING: As this plays out, one of the political arguments and one of the serious financial arguments for anybody watching at home has been: even if you get a deal in the end, there is some talk that the ratings agencies may downgrade the credit rating of the United States because it's to messy, because maybe it will be a smaller deal that they want.

I want you to listen to the president, part of his argument saying, hey, get together and make a deal, is that -- even if, let's say you're a conservative, you don't want taxes as part of this deal. If the credit rating gets downgraded, Americans are going to pay.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: And make no mistake: for those who say they oppose tax increases on anyone, a lower credit rating would result potentially in a tax increase on everyone in the form of higher interests on their mortgages, their car loans, their credit cards. And that's inexcusable.


KING: The president making that case there. Take the politics out of it, if that were to happen. I think that would hurt everybody at home. Are you confident that we'll figure this out by Monday night? Even though the House guy dug pretty firm? Democrats seem dug in firm. There won't be a passed balanced budget amendment as part of this.

Are we going to have Monday night looking at the brink of default, negotiating up until midnight?

THUNE: Well, we have to. We don't have an option here. We need to get this thing resolved before Tuesday, obviously.

And -- but I don't think that, you know, taxes -- raising taxes needs to be a part of the equation. I don't know what the rating agencies are going to do, none of those do. But the one thing we all know as certainty is, that you raising taxes in a middle of an economic downturn is really bad economy policy.

But I think that we can work on something that doesn't have tax increases that has spending cuts in a near term, a pathway to entitlement reform, a vote on a balance the budget amendment and we ought to be able to get that together because we're not that far apart. I mean, if you look at -- like I said, last week, there was a frame work in place that everybody had pretty much agreed to and then it kind of fell apart. But it can be put back together.

KING: How would you describe what's going on in the Republican Party right now? You know, critics say it's an open civil warfare. The Tea Party guys are at war with the establishment guys? That's probably an exaggeration. But you do see a generational divide. You do see a lot of guys that have not served in Washington very long. When somebody like Senator McCain gets up and says, you're not going to get your balanced budget amendment, they say, why should we listen to you? You're part of the problem.

You've been here all this time. How do you describe what is going on now in the party with the fresher faces? Maybe they are Tea Party guys. Maybe they're just new. And the guys that have been here a while. THUNE: You know, I think it's healthy. I really do. You know, it's --

KING: But it's real.

THUNE: Well, it's tough. It's really hard right now to get things enacted here because like you said, you had 87 people who came in here who ran on very principled platforms of doing certain things. I don't think anybody should be surprised by how they're voting or what they're trying to accomplish here.

And I think, in the end, that's going to be a good thing for the party because it's going to force us to adhere to our principles. But, you know, when it comes to legislating, it makes it a little bit more complicated. But we're working through it.

KING: I just think for secretary of state, a little bit more complicated.

Senator John Thune of South Dakota, appreciate your time.

When we come back, we're going to keep on this debate. It matters to you at home. A big debate about the debt ceiling and spending cuts to come with it. We're waiting for the Senate majority leader to lay out his plan. Live to the Senate floor when we come back.

Much more also of our special coverage live from Capitol Hill tonight.


KING: Live pictures here of the United States Senate. They are getting ready to act on the Boehner bill. The House passed the Boehner bill just a short a time ago. It's about the debt and the debt ceiling, 218 votes, just two more than the 216 needed to passage. A dramatic win for the speaker, but significantly, 22 Republicans voted against it. All of the Democrats voted against it.

The bill, it would give the president authority to raise the debt ceiling. But he'd have to come back in several months to ask for another increase. That's what the White House objects to, along with some other provisions of the Republican plan.

The Senate Democratic Leader Harry Reid., the majority leader, about to outlines his plan for moving this debate forward. One of the things that he wants to do is defeat the Republican plan in the Senate, a dramatic night here on Capitol Hill.

Let's discuss what has happened and where we are going.

CNN contributor, Erick Erickson, he's the editor in chief of the conservative blog,; our chief political analyst, Gloria Borger, and our senior analyst, David Gergen, who has advised for U.S. president.

To David Gergen, because of that experience, I want to go to you first.

The American people are watching something that's kind of messy. And if you are a conservative Republican, you probably like much of what happened in the House today. If you are a liberal Democratic, you are waiting for the Senate to take its turn. If you are in the middle, you are saying, why can't these people figure this without all the posturing first?

Where are we going, David?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Well, John, I think the House vote at least begins to unlock the stalemate that was there and allows the Senate to act and the Boehner bill will go down and the Reid bill will fail. And then we'll be left with the question of whether compromise can be fashion.

I think that the makings of a compromise are clearly there. The big question that arises to me tonight is can they find a compromise that will actually pass the House? If they got to compromise, it's favorable. If the Democrats like in the Senate, presumably Pelosi can round up a lot of her Democrats. But Speaker Boehner still then going to have to deliver a significant portions of Republicans.

Can he do that? Will the compromise satisfy those Republicans? It's not clear, given how far the Republicans push the bill to the right, how much deeper they went. And then people expect it that it's not clear that they can do it.

KING: And, Gloria Borger, on that point, if you're the speaker, what are the things you always want in any vote you bring to the floor, is to keep a majority of your guys. We saw how hard that was for Speaker Boehner today. If there's ultimate compromise, say, gives them promises a vote on the balanced budget amendment but does not guarantee passage of the balance budget amendment, before you increase the debt limit, which is the part in the House Republican planning to pass today, Democrats don't like. They only get a vote, and it doesn't have to pass, first, can Speaker Boehner keep a majority of his members?

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: I think he is going to lose the freshman. He is going to lose an awful lot of those freshmen because they were the ones who were pushing for the guaranteed passage of the balanced budget amendment before you can raise the debt limit. I don't think that a vote alone would satisfy them.

But in the end, will Nancy Pelosi be able to deliver enough votes. So, maybe he only needs a third of his caucus instead of half of his caucus. He's going to lose an awful lot of members. But he did for them today is allowed those members to vote on something that they can go home and say, you know, I really want to tie it to the passage of the balanced budget amendment.

So, you know, this is really now up to Nancy Pelosi to see if she can deliver her Democrats and if he can deliver, I don't know, a third of his caucus or so. KING: But part of the equation, Erick Erickson will be what is the reaction the right to what happens next as we get into the compromise negotiations. You heard Tim Scott here earlier, Jeff Flake here earlier. They want passing the balanced budget to be in the compromise. Jeff Flake seemed to be -- could be persuaded if at least they get guaranteed votes on it.

Should Speaker Boehner bring a compromise to the floor that does not include passage of the balanced budget amendment? Or that rile up you and your friends on the right?

ERICK ERICKSON, CNN CONTRIBUTOR: Yes, I think it would. You know, the funny thing is -- I talked to a number of people and a lot of them, they're not even joking when they say, we would give the president a clean increase in the debt ceiling, meaning nothing else, no cuts, no gimmicks, just a clean increase if they would just send SJR-10, which is their version of balanced budget amendment out to the states. The states don't even have to guarantee a passage, just give it out to Congress to the states and we'll fight them there. We give them an increase.

KING: You'd give him an increase.

I want to you a question. The speaker won today but he is scheduled to vote on Wednesday and had to postpone it. He scheduled a vote yesterday and he showed up, he sounded like he was in a great mood, even at one point mimicking a Disney song. Let's listen.


REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: It's a zipidy- do-dah day.


KING: A zipidy do dah day. And then he had a big public event, walked in with his leadership team, took the podium, and said, without a doubt in his view, and this was yesterday, the House was going to pass his plan on the debt ceiling.


BOEHNER: Today, the House was going to vote on a bill that meets that test. It's been certified by the nonpartisan Congressional Budget Office. There are no gimmicks. There are no smoke screens.


KING: But the speaker then had to pull that bill from the floor just before midnight when he realized he did not have the votes to pass it. So, what would have been a public humiliation. It was at least a highly embarrassing day. Still, the speaker showed up this morning and listen here, he's in pretty good spirits.


PRESS: Mr. Speaker, is the woodshed down the hall there?

BOEHNER: No, no.

PRESS: Got a deal?

BOEHNER: I'm smiling.


KING: Politics is messy, David Gergen, and this is a new Republican majority. A lot of freshmen who are not politicians, are not long time politicians. Has the speaker been under mined? Or by winning today, even though he had to make compromises and make revisions, has he essentially keep his credibility or has he taken a dent here?

GERGEN: He's got near death experience, John. And he came very, very close to being destroyed as speaker. I think he did squeak it through. I think he put it together. He had to change his plan obviously to do that.

I must say, I found him a sympathetic figure tonight as he spoke, and that was -- as the man in the middle. I mean, he really did want to cut a deal with the president. He was the person who was willing to meet the Democrats part way and say, OK, I'm willing to find $800 million in new revenue from American taxpayers as part of the deal, as part of the grand bargain. And, of course, he feels he has had his legs cut off by the White House.

But he was actually -- you know, John Kerry was just saying the Republicans never willing to put any new revenues on the table. John Boehner was ready to do that. But with his legs cut off by the White House on one side and he had this rebellion going on on his right flank, you know? So, he really got caught.

And as he said today, he put his neck way out there. He risked a lot in doing this. But I do think he survived.

BORGER: You know, John this is where it helps to be one of a dozen children as he. He is an immensely patient man. I give him an awful lot of credit because not only is he been dealing with the White House at one point, he said the White House, it's like dealing with Jell-O. But he's also been dealing with these freshmen Republicans who won't take yes for an answer a lot of the time, right? He gets the credit there.

KING: David, Gloria, and Erick are going to stay with us. We'll take a quick break.

When we come back, just remind you, the House has passed its deficit reduction plan, includes an increase in the debt ceiling plan today, the White House said it's unacceptable. So do Senate Democrats.

We are waiting for Majority Leader Harry Reid to outline his plan. This matters to you at home. Remember, Tuesday, the deadline for the United States. The administration says if it can't borrow, it will run out of money to pay some of the bills.

Stay with us. Special coverage live from Capitol Hill continues in just a moment.


KING: Live pictures of the United States Senate. They are in session late on Friday night. A dramatic night of breaking news here on Capitol Hill. The Senate is about to outline its path forward on a big question: raising the government's ability to borrow money, raising the government's debt ceiling. The Senate to outline its plan hours after the House Republicans passed their latest plan.

Let's compare the two for you at home just so understand. The House passed with a two-vote margin, the Boehner plan. It would raise the debt ceiling by about a total of $2.5 trillion. It would do it significantly and this is important in two installments, $900 billion up front. The president could come back and ask for a second installment of $1.6 trillion down the road when the government needed more money.

Here's the key point. There would be cuts of $970 billion right away a deficit committee would come up with additional cuts. But the Republican plan to get that second installment would require not just a vote, but for both chambers of Congress to pass and send to the states a constitutional amendment requiring a federal balanced budget. That's the Republican plan. That balanced budget amendment is the big sticking point.

On the Senate, we're waiting for action tonight. Harry Reid first wants to vote down the House Republican plan. He has a plan of his own. It would be, one, increase in the debt ceiling would allow the president to borrow another $2.4 trillion. It would have about $2.2 trillion in cuts to offset the new borrowing. Some of that would come from saving in Afghanistan and Iraq. The Republicans say they don't trust that math. There would also be committee that would have to be formed for additional deficit reduction steps.

That is where we stand. The House Republicans have their plan. The Senate Democrats have theirs. The big question: can they work out a compromise before what the administration says is a hard deadline, Monday night midnight, August 2nd. The government then would have less money coming in than it needs to pay out in bills.

Let's continue our conversation.

Erick Erickson, David Gergen, Gloria Borger are still with us.

Erick Erickson, as a conservative, what is the line? Do you want any deal? Don't go to the point where we might have a default? Or is it a balanced budget amendment? Is it size of the spending cuts?

What is, of you had to pick one thing that should b the red line for conservatives in a compromise negotiation -- what should it be?

ERICKSON: You know, I tend to agree with Jeff Flake, send SJ-10, the balanced budget amendment, that guarantees a supermajority on tax increases, send it out to the states and Democrats can have what they want if they send it out to the states.

I hear a lot of conservatives saying that. And there's a real desperation among conservatives that they can fight and win that at the states and they think that's why the Democrats are scared to do it. But they can get a lot.

You know, John, I got a question actually for you and Gloria and David. I can't remember even going back to 1981, '82, the last time we have a divided Congress. Any time the Senate or House has so rapidly killed the other House's piece of legislation. We may be about to see history in that respect.

KING: Gloria, if you want to comment on that.


BORGER: Well, you got a hammer right on your head. So, you know, this is kind of unprecedented in so many ways. I mean, even worse than a government shutdown, right? I mean, I think the debt ceiling is certainly more catastrophic, if you don't raise it.

KING: And, David, this is not necessarily -- I want to ask a question. It's not necessarily apples and apples because we're asking Eric's version of the balanced budget amendment would require a supermajority to raise taxes. But on a basic threshold question of you do support a constitutional amendment to balance the budget, in our CNN/ORC poll, 74 percent of Americans favor, 24 percent opposed it.

So, why don't the Democrats pass it, let it go to the states and hope the legislatures -- if they don't like it so much -- hope the legislatures kill it?

GERGEN: Because, John, the Democrats feel very strongly it puts the United States government in a straitjacket and will forever and we really can't move adeptly. If you got a balanced budget amendment in example for example, it might have been very hard to deal with the last financial recession.

But I'll guarantee you this -- there is no way that the president nor the Democrats are going to accept making an extension of the debt ceiling dependent upon the Congress actually passing the balanced budget amendment. They might well put it to a vote, allow it to come to a vote, but they're not going to allow that.

The real question Gloria has been making this point all week is: how do they come up with an enforcement mechanism, which allows assurance that there's going to be reduction in the deficit in the second round, but is not tied to the debt ceiling.

KING: The president has said he would accept spending caps. He has said he would accept some trigger if promised savings don't materialize down the road. Everybody stand by. We'll take one more quick break. When we come back, David, Gloria, Erick, still with us, we'll also check in with our congressional correspondent, Kate Bolduan, who's been tracking -- her sources, excuse me, as to why the Senate hasn't quite acted yet -- a bit of a delay on Capitol Hill. Despite that, there's some urgency to try to get this done by August 2nd, coming up early next week.

Our special coverage live from Capitol Hill continues, after this.


KING: Live to the floor of the United States Senate. The majority leader and Republican leader talking about how to go forward, hours after the House passed its deficit reduction debt ceiling increase plan. Let's listen.

SEN. HARRY REID (D-NV), MAJORITY LEADER: That's a supermajority. That isn't the way it should be. So, we're happy to have a vote any time, but it should be a majority vote, just like the House had. House had a majority vote today and they had an overwhelming extra vote of none.

So, we'd be happy to have a simple majority vote on our -- the Democratic proposal we're putting forward.


REID: That's a consent. We will be happy to have a vote if it's simple majority.

MCCONNELL: Mr. President, reserving the right to reject. Let me just say this is almost an out-of-body experience to have someone suggests that we have a 50-vote threshold on a matter of this magnitude here in the United States Senate. I'm perplexed, Mr. President, genuinely perplexed that my friend, the majority, doesn't want to vote on his proposal as soon as possible. I object.

REID: Mr. President, please, have order.

UNIDENTIED MALE: The Senate will be in order. The majority leader --

REID: (INAUDIBLE) be heard.

UNIDENTIFIED MALE: The Republican leader.

MCCONNELL: I object.

REID: Mr. President. So, it's obvious to the world, the United States Senate, that there is now another filibuster. That's what this is. It's a filibuster to stop us from moving forward on legislation. This is a filibuster in any name that you want. It's a filibuster.

So, I'm disappointed. I'm disappointed and I ask now -- we've had the -- we've asked for a roll call vote on the tabling motion and I ask we move forward on that.

UNIDENTIFIED MALE: The question is on the -- the question is on the motion to table the motion concur. The ayes and in as have been ordered. The clerk will call the roll.

SENATE CLERK: Mr. Akaka. Mr. Alexander. Ms. Ayotte.

KING: The United States Senate voting now. The goal to kill the House Republican plan that passed just hours ago. This debate will continue throughout the weekend and about raising the debt ceiling, getting deficit cuts.

We'll continue our live coverage on CNN throughout the weekend, including "IN THE ARENA" which begins right now.