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Debt Ceiling Crisis

Aired July 29, 2011 - 21:00   ET


PIERS MORGAN, HOST: Good evening.

An extraordinary day on Capitol Hill today. The House passed the John Boehner bill, and the Senate promptly voted it down.

We're waiting for Senate Majority Leader Harry Reid to explain why that decision was taken.

I'm here with Wolf Blitzer, my colleague.

Wolf, what is about to happen here? What is the explanation? Is it as simple as, sorry, you are Republicans, we didn't like the bill -- we're Democrats, we're not having it?

WOLF BLITZER, CNN ANCHOR: It's not that simple because they have to come up, Piers, with some sort of compromise, they have to come up with come sort of plan that can pass the Senate and but then go back to the House of Representatives and pass there -- something that the president could sign that would allow the United States to raise the debt ceiling and avert some sort of financial disaster come Tuesday. It's not simple at all.

So, they need to work together -- the mainstream, main leadership, Democrats and Republicans, they need to find a way to come up with the bare minimum to get over this hump. It's a huge, huge obstacle, standing in the way of an economic recovery, if you will. So, the stakes really are enormous.

MORGAN: What we're waiting for here is Senate Majority Leader Harry Reid. He's about to explain why the Senate has rejected John Boehner's bill.

Let's go to Jessica Yellin while we wait here -- CNN's chief White House correspondent. Jessica, it's been a day of frantic arm twisting, but we've ended up really absolutely nowhere, haven't we?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: That's right. In a sense, it's a little bit of progress, because they had to get past this vote in order to get on to the Senate where there is a belief here in the White House at least that a compromise can be struck between Harry Reid, the Democrat who runs the Senate and Mitch McConnell, the Republican minority leader.

And there's a hope that the two can forge an economy that can get through the Senate and then in the parlance of Washington, be, "jammed" on the house at the very last minute. In essence, because the clock is ticking, because there'll be sense of responsibility among the leadership there, both sides will come together and decide we just have to get it done to avoid default at the very last minute.

Who knows if that would actually happen? That would be the best case scenario.

MORGAN: I think we now have Senator Harry Reid and we can go straight to what he has to say.

SEN. HARRY REID (D-NV), SENATE MAJORITY LEADER: Senator Murray asked to be excused because of a family situation. All good. Her husband is here.

Tonight, a bipartisan majority in the Senate rejected Boehner's short-term plan. Clearly we're seeing something we've seen a lot here in the Senate. But this time the country's attention is focused on it, a filibuster -- a filibuster to prevent us from moving forward on this legislation.

The proposal that I put forward is a compromise. We changed it even more today. We would have changed it even more. But as I indicated on the floor, we had no one to negotiate with. The Republican leader said he wouldn't negotiate with me.


REID: I don't know whose that is. Not mine.

SEN. DICK DURBIN (D), ILLINOIS: Your pizza's ready.


REID: It really is a worst possible time to be conducting a filibuster. They are forcing to us wait until tomorrow morning at -- let's see. Today is still Friday -- until Sunday morning at 1:00 a.m. to have this vote.

Our economy hangs on the balance. And for the first time in the history of our country, unless there is a compromise, or they accept my bill, we're headed for economic disaster. It's time for the Republicans to step forward. There's been some movement today. We've -- as indicated on the floor, I was supposed to have a meeting in my office this afternoon with some Republicans. That fell through.

But we're told that the press picked up as they were walking into a conference, they had three Republican senators said they were interested in my bill, they're interested in compromise. We hear a lot of happy talk, but they need to step forward. Republicans are blocking their ability to compromise.

They are refusing to negotiate with us, and all they do is talk and that isn't enough to get it done. The House will hold an up-or- down vote we're told on my proposal. We should be allowed to do the same. That's all we're asking.

It's time for us to be adults. That's what the American people want. It's time to come together in a compromise.

That's what the American people want, and that's what we need to do.

Senator Durbin?

DURBIN: I'm sure you recall the speech that was given to the American people on Monday night by Speaker Boehner. He talked about his bipartisan bill. And he talked about the fact that he was going to pass it in the House of Representatives. We waited for that on Tuesday, again on Wednesday, then on Thursday, and finally today, passed it, but it wasn't bipartisan.

All Republican votes, not a single Democratic vote, and a scant majority -- 218 out of 435-member house. When it came to the United States Senate, it was dead on arrival, on a bipartisan basis. A bipartisan majority of senators, 59, voted to table the Boehner proposal. And now we have a chance to reopen this conversation. And I can tell you, there is a growing sentiment among senators on both sides of the aisle to sit down and reach a reasonable compromise and to save our economy from the disaster that awaits us if we fail to extend this debt ceiling.

What these senators on the Republican side are waiting for is a permission slip from Senator McConnell. He told them to hold back until Boehner had his chance. Hold back until the Boehner bill came to the floor.

That's all history now. The American people want us to move forward. They want us to come up with a bipartisan approach that doesn't have us relive this scene that we've seen for the past week over and over and over and over again, like the old Groundhog Day movie.

We want to get this done in a way so we can say the economy is going to move forward with a certainty that we're going to have a debt ceiling extension and we are not going to jeopardize it with the problem of self-imposed political problems and wounds that can be avoided.

It's a shame. We waited all day, this morning, Senator Reid went up to Senator McConnell on floor and said let's talk. Let's work this out. Nothing, nothing all day long. Not all day long.

And later, at the end of the day, a call from Senator McConnell who said I'm not going to negotiate with you. That's unfortunate. The American people deserve better.

And let me say one last thing. If Senator McConnell would give us the same vote standard in the Senate that was given to Speaker Boehner in the House, we could pass Senator Reid's proposal -- a proposal which includes major elements suggested by Senator McConnell.

But, no, they insist on a filibuster. He said 60 votes have become routine -- routine because filibusters have become routine on the Republican side of the aisle. It isn't what's necessary to enact this law so critical to the future of America. We're going to fight this filibuster and I hope, in the end, some Republicans will cross over and join us and break the stalemate and come up with a bipartisan agreement. Thank you.

SEN. CHARLES SCHUMER (D), NEW YORK: You know, this morning at 10:00 a.m., on the floor of the Senate, Leader Reid asked Senator McConnell to come negotiate. The door was open all day, nobody knocked. Nobody walked in. And some said, well, Speaker McConnell wanted to wait until the House disposed Boehner. But after the Boehner amendment was defeated, in a telephone conversation with Leader Reid, I was sitting there, Senator McConnell still refused to negotiate.

We will not solve this problem by standing there and folding our arms and saying, I am not talking to anybody. And the nation's future is at risk.

Republican senators, I've talked to 10 today. They want to come to an agreement. But until Senator McConnell gives them the green light, nothing is going to happen.

And they get the vibes, and perhaps the direct word, I don't know, from the Republican leader, don't do anything.

We all know in the Senate we can't pass anything without a bipartisan agreement. We all know the Senate is the only way out of this mess. You've seen the huge difficulties in the house, their inability to even tie their own shoes, and so it's up to the Senate. And that means it's up to Senator McConnell to either negotiate himself or give permission to others to negotiate so that we can finally come to a bipartisan agreement.

The only game in town is the modified Reid bill. It's a bill that has elements proposed by Republicans, including Senator McConnell. It's a bill that has elements proposed by Democrats, but it meets the strictures that both parties have laid out, on our side, that it must extend the debt ceiling beyond 2012, no short-term extension, it too much roils the market.

On their side, no revenues and as many cuts as increases in the debt ceiling. If they don't like it, even though if it seems to be a prescription drawn from their needs, what do they want as an alternative? They are very good at saying no. They are not very good at laying out a plan that can actually pass.

And instead, what do they do? They just filibuster. They say you can't proceed to a bill and vote on it. They say they are going to force us to delay and delay and delay until we get up to the deadline.

The country's in crisis. This is not a time for politics as usual. I think we have shown that we are willing to give significantly in their direction.

We're still waiting for Speaker McConnell, Leader Boehner, sorry. We're still waiting for Leader McConnell and Speaker Boehner to move a little bit in our direction.

REID: We'll take a few questions. Not many tonight. We're all tired and had a long night and a longer tonight tomorrow.


REPORTER: Senator Reid, (INAUDIBLE) you had his bill, his own bill to your bill? Because cuts, he was willing to have his own bill with no cuts guaranteed. I'm wondering, if, you know -- one thing you didn't do, you didn't add any triggers. There's been a lot of talk about real triggers, having real significant weight that would force the deficit reduction committee to pursue real cuts. Why didn't you do --

REID: We've got a closet full of triggers that people have suggested, literally, dozens of them. But even though they are good ideas, earlier this week, a few days ago, I was sitting talking to Jack Lew, Office of Management Budget, and Rob Nabors, who we all know is such a good person. We talked for an hour and a half about different triggers.

I came to the solution we are negotiating with ourselves. We can't get Republicans to agree to any trigger that involves revenue. We cannot, the American people know this, because they agree with us. We're not going to have cuts to more programs, more programs and more programs without some revenue. It is -- it is -- that is a line that we've drawn in the sand and we're going to stick with it. I spoke a couple of times tonight to Leader Pelosi, she agrees with me 100 percent.

REPORTER: So, the House has passed two plans now, and what's -- Senator Schumer says this is the only game in town now. What is your contingency plan if this doesn't get through the Senate?

REID: Oh, I think Senator Schumer laid that out pretty clearly. The plan is to work off our bill. We have a message from the House. It's easy to -- if there's an agreement it comes up, it's easy to amend that, and send it back to the House. They only vote over there.

To think with a straight face -- to think with a straight face that they sent us something that the American people would accept, the Ryan budget, cap and cut, whatever that is, and then this thing? That's not legislation. That is a -- that was an extravaganza over there that made them look very foolish.


REPORTER: Everyone now is wondering, Friday night, going into the weekend, what is the endgame? How is this going to end up? I know you're calling for Leader McConnell to come to the table and negotiate, but what is the way forward from here?

REID: It's up to the Republicans. Right now, we have a fine proposal. Extends the debt ceiling until March of 2013, yet reduce the debt by 2$2.4 trillion. It's a fine piece of legislation. It sets up the joint committee to even make further cuts. It would be something that we believe and Senator McConnell will acknowledge this very strongly, as does Leader Pelosi, we could get something out of this.

So, we're waiting for them to do something, anything, move toward us. But if that fails, they should go for our bill, because it's basically -- and that is things that they already voted on, things they already agreed to.

Last question.

REPORTER: (INAUDIBLE) reduced your debt ceiling increase to $2.4 trillion and increased savings from $2.2 trillion to $2.4 trillion. But it doesn't lay out how you do it. And you mentioned in back there, that you used the January baseline.

Are all of the increased savings due to (INAUDIBLE)?

REID: CBO has come up with those numbers and I told you before, we have laid out all the numbers, you can dissect them, look at them. But this is what CBO has recommended, and we have followed their advice.

Thank you.

MORGAN: So that was Harry Reid explaining why the Senate has rejected John Boehner's bill, which went through the house.

And we go straight back to Wolf Blitzer.

Wolf, a couple of things struck me there from what Democratic senator was saying. One was it's not politics as usual, and the other was, it's time to behave like adults -- which seemed pretty ironic, which is it's exactly politics as usual and none of them are much behaving like adults.

BLITZER: And they don't have a lot of time, Piers, in order to get this done. It's got to be done by Tuesday and it looks like they're going to stretch it out until the bitter end. It's going to go Saturday, Sunday, the Asian markets will again open Sunday night East Coast time here in the United States, Monday in Asia already, the U.S. markets will reopen Monday morning.

So, this clock is ticking, and as you know, for six straight days the markets in the United States, Wall Street has gone down. The worst week in more than a year I hear in the United States. So, that could just be the tip of the iceberg if they don't get something resolved.

I suspect that as the clock keeps on ticking, tomorrow and Sunday, Harry Reid, Mitch McConnell, two leaders of the Senate, they will forge some sort of compromise, eventually when all is said and done, although it will be tough going until then send it back to the House -- I suspect they will send it back to the House and then there will be a coalition of a lot of Democrats and some moderate Republicans, probably not a majority of the Republicans. If it comes up for a vote, they'll pass it, and this crisis will be averted. But having said that, Piers, there is no guarantee that will happen. There are so many obstacles standing in the way, and more the rhetoric heats up -- and we've heard some heated rhetoric right there. The more it heats up, the less likely a deal will be struck.

So, it's going to be tough going. We're going to be working all weekend. I suspect the cots will be brought out of some warehouse, staffers on the Hill are going to be keeping all nighters getting this thing moving. It's going to be tough.

MORGAN: Yes, Jessica Yellin, let me turn to you. I mean, it is -- to most American people watching this, they are saying what the hell are you playing at? Are you playing with our future, with our finances, the nation's economy? We are now just hours, a few days, hours away, from a potentially catastrophic default and yet, we're hearing the detail from some of the press conference just then, the senior people aren't even talking to each other.

And I heard a report earlier and maybe you can confirm this, that Speaker Boehner and the president haven't actually exchanged a single word in five days?

YELLIN: That's right. Not since Sunday had they spoken, nor has the president spoken to Minority Leader Mitch McConnell all time, although McConnell did speak with Vice President Biden. And then there's this dual reality that while this drama is playing out on Capitol Hill, over in the Treasury Department, behind me, they are making decisions about which checks will be sent come Wednesday and which won't.

I mean, at some point, they have to decide, does grandma get her Social Security check or does the military family get their check if we go into default. I mean, these are real decisions that affect everybody in their pocketbook political games are being played out. Not games, you can call it what you want -- these are principles to some people. But it's very frustrating to regular Americans and hard to understand.

And meantime, there are these -- there is this lack of negotiation going on here. I can confirm for you that today, I am told that there is still no progress toward a compromise. Whatever hour it is East Coast time and they are no further along toward a deal than they were this morning, Piers.

MORGAN: That's quite extraordinary.

I'm going to turn to Representative Jason Chaffetz. He's one of the 22 Republicans who voted no to the Boehner bill. He joins me now.

Mr. Chaffetz, let me ask you directly, do you really have your country's interest at heart? Because you are rejecting anything to do with a bill by your own guy, and even that bill has been rejected by Democrats. I mean, you are so way out of step with public opinion, aren't you?

REP. JASON CHAFFETZ (R), UTAH: Well, it's nice no chat with you, Piers. I would hope our first conversation would be a little more pleasant.

But, of course, I put my country first.


MORGAN: Let me -- let me respond to that the reason that I'm animated about this, is because I think the American public are absolutely sick and tired of this situation, and every minute goes by with political posturing, the American economy is getting worse and worse and actually by the time you guys all stop squabbling, it might be too late anyway.

CHAFFETZ: Well, I think the fact that I actually voted against my speaker's bill demonstrates that I'm more committed to my principles and my country than I am about going along to get along.

I want you to remember, I was the primary sponsor of cut, cap, and balance, a bill that passed with overwhelming Republican support and five Democrats. That bill passed with amazing numbers. It goes over to the Senate and it's so frustrating.

I hope if you look at it objectively, without partisan classes on, for the Senate to just table it, without a discussion, without a debate, is offensive to the American people. We are about to be in a crisis. They had this bill last year -- last week, and they should have at least debated it. It doesn't even get debated, don't you think, Piers, that's a little unreasonable?

MORGAN: No, I think what they think is unreasonable, is not a question of being partisan. It's a question of simple reality, is that when the Democrats have rejected a bill by Speaker Boehner that went through the House, but there are still 22 of you on the Republican side that wouldn't even go along with that one, they are saying, what are you thinking about? What is the matter with you?

You don't want to have a debt ceiling increase. You don't want any revenue. No taxation.

How exactly do you guys expect this country's economy to recover?

CHAFFETZ: Well, what you do is you look at House Republicans, twice, not once, but twice. We have passed bills that raised the debt ceiling. The Senate hasn't done anything. They just immediately table it. That's offensive.

So, you can't -- today, the president was out there talking about cafe standards. So, the House Republicans, I think, have a very good case, the best case. The numbers and statistics behind us say we've been working.

And you look at cut, cap and balance. It had five Democrats, it had overwhelming support of the Republicans. Why not debate the discussion of that bill? I think that's fair. That's not unreasonable.

MORGAN: Well, because as we saw from Senator Reid earlier, he was mocking you earlier, couldn't even remember the name of it.


CHAFFETZ: Right there, Piers. That -- he doesn't even know the name of the bill that we passed in the House of Representatives that would solve this crisis? That ought to be a flashing red light that we might need some personnel changes over in the Senate. That's an embarrassment.

MORGAN: Well, either that, or you need to have a Republican Party that at least has a united voice, because at the moment.

CHAFFETZ: We were very united.

MORGAN: It's clearly making --


MORGAN: Well, you're not united, though, are you? There's complete intransigence, you and your 22 colleagues.

CHAFFETZ: Look, I am willing to work with people on a very bipartisan basis. I have a story of doing that. I want to do what's right for the country. To have suggest that Harry Reid's bill which is coming up, which will only cut $3 billion in the first year, that's going to be very tough for a guy like me to vote when we have this huge massive debt and deficit problem in this country. That's just going to be difficult.

Now, I love having this discussion, but how come the Senate could not take cut, cap and balance, and even debate it? Not even for two minutes. They just voted to table it, and then he can't even pronounce the name of the bill, doesn't know the name of the bill. And then you got to wonder why the public is fed up, probably on both sides of the aisle.

But I can look you in the eye, Piers, and say we're doing our job, I'm willing to compromise. I was willing to give the president exactly what he wanted -- $2.4 trillion in debt ceiling increase. You know how difficult is it for a guy like that for me to do that? We're bending over backward here to solve that this problem.

MORGAN: Yes. I think what the American public is saying is not you bending over backward but being deliberately obstructive. And they want you to just get on with it, get united with your party and make this deal happen.

CHAFFETZ: They had no bill. We've had nothing. There's no plan from the president that's been sent to us and there's been nothing to the Senate presented to us. How -- I haven't rejected anything, other than Speaker Boehner's bill.

So, I have not rejected something from the Democrats. They haven't even presented us something.

MORGAN: Congressman, thank you very much. CHAFFETZ: Thanks, Piers.

MORGAN: Now, we're bringing in Representative Debbie Wasserman Schultz, who heads the Democratic National Committee.

You probably heard that interesting discussion I just had there.


MORGAN: Clearly, one of the big problems, whichever side of the argument you're on here is that the Republican Party is split, isn't it, between the likes of Mr. Chaffetz who are just completely irresolute to any concept to raising the debt ceiling or brining in new taxation in, for revenue earning that way, and then you have, on Speaker Boehner's corner who can't get their bill through the Senate.

Where are we with this?

WASSERMAN SCHULTZ: Well, there's clearly, Piers, an internal battle going on within the Republican Party right now.

You have you a group of what I would say are extremist Tea Party Republicans who basically have a stranglehold over the Republican Party. The tail seems to be wagging the dog. Mr. Chaffetz, who is a nice person, who I had some lovely conversations with on the House floor, really is clearly one of the obstructionists. He said they've bent over backward?

The problem here is that he actually believes that his version of compromise is just the vote to raise the debt ceiling. That's -- at a minimum what we should be doing. That's not a component of compromise. A component of compromise that the American people clearly want us to do is to pass a bill that isn't so skewed on one side, that doesn't include things like taking the safety net out from under our senior citizens, increasing the costs of Medicare which is what cut, cap and balance does. It had already been rejected once by the Senate.

MORGAN: Let's forget.


WASSERMAN SCHULTZ: -- dead one arrival and they passed it again. I mean, what is --

MORGAN: Let's forget that for a moment. That's clearly an issue for the Republican Party to sort out amongst each other. Let's turn to the fact that no single Democrat voted for -- let me just finish -- not a single Democrat voted for the Boehner bill.

So, where is the compromise from your side? I mean, again, I come back to the fact that the American public are sick and tired of this. Your president talks of compromise. Where is that compromise?

WASSERMAN SCHULTZ: OK. Piers, the bill that Speaker Boehner put out on the floor today increased costs of Medicare, was trying to force an amendment to pass -- an amendment to the Constitution to pass before a second fight would be had over increasing the debt ceiling in another couple of months.

So, what the Republicans proposed in this Boehner bill today was to actually have this fight again in a couple of months and jeopardize our economy once again. What Democrats want to do is sit down with Republicans. We're not that far apart on the cuts. We need to make sure we lift the boot off the neck of the economy. That we sit down together, figure out how we can raise the debt ceiling and not jeopardize our economy, and make sure that we pass some kind of a balanced plan that doesn't pile so much pain on the middle class and working families that they break under it.

I mean, Piers, I've had senior citizens calling my office today, crying -- who are living hand to mouth on Social Security and are worried that they are not going to be able to survive if their Social Security payments aren't made.

That is what this battle that is going on between the right and the extreme right in the Republican Party is causing. Reasonable people need to sit down to the table. We as Democrats have been at the compromise table for a long time and we have a cold chair across from us. It's time for the Republicans to come and warm it up and lift this risk that is -- that is on the economy now off so we can move on and focus on creating jobs and continuing to get this economy turned around.

That's the bottom line, what the American people want.

MORGAN: Congresswoman, thank you very much.


MORGAN: Coming up, Rudy Giuliani on today's vote and what happens next. Earlier today, the president was urging people to tweet their representatives in Congress. We'll show you some of those tweets tonight.


MORGAN: Freshman House Republican Allen West is one of those who voted yes for the Boehner bill tonight, and he joins me now. What's gone wrong today? Has Speaker Boehner lost all his power? What's been happening?

REP. ALLEN WEST (R), FLORIDA: No, I don't think Speaker Boehner has lost any of his power. And as a matter of fact, I'll commend the speaker for going toe to toe with the president during this issue, especially earlier this week when he did a rebuttal speech after the president's speech. I believe it was Monday night.

So I think he has truly stepped up to the plate. The speech that he gave tonight before we had the vote was a very strong speech and laid out his vision as far as the purpose for this bill and his way ahead. MORGAN: Yes, but the American public are watching and thinking you guys have just wasted another whole day with posturing, political games. And in the end, nothing has happened.

You ended up putting through a bill in the House that was never going to get through the Senate. Everybody knew that. Complete waste of time. Meanwhile, the clock is ticking on the American economy. And every second that goes by is more damage being done. Who is taking responsibility for this?

WEST: I'll tell you this, Piers. I think that you need to look over at the Senate. You're talking about a group of individuals that, under the leadership of Harry Reid, have not passed a budget, which is a constitutional responsibility, in 820 days. We have sent them over now two very viable and sensible plans, to include the Boehner plan, which was not 100 percent plan that I would have liked to have seen.

But I made a compromise, and one to see us take care of our responsibilities. For me, it was about a 70 or 75 percent solution. So I think the people that we really should be looking at are the Senate Democrats and Harry Reid, who continue to play the games while we're continuing to present viable alternatives and proposals.

MORGAN: Recent polls say that 64 or so percent of the American public are in favor of raising taxation to get us out of this incredible mess. Are you?

WEST: Well, it's kind of interesting that you say 64 percent are willing to raise taxes when we know that 47 percent of wage earning households in America don't even pay taxes. So I would kind of challenge you on that number.

And I've had several telephone town hall meetings, because I've been here in Washington, D.C. And never have we had anything less than about 72 percent that are not in favor of their taxes being raised.

Let's understand something. Let's not talk about raising taxes in a very time when we see a fragile recovery, 1.3 percent GDP growth. We should be talking about how do we broaden our tax base as a means by which we raise revenues. And as you broaden your tax base, use a flat tax, then you can eliminate a lot of loopholes and subsidies, especially for the corporate business tax rate, which is 35 percent, second highest in the world.

MORGAN: Finally, Allen West, should we go to default here, an unprecedented catastrophe in the history of America, who has to resign?

WEST: Well, I'm not looking for anyone to resign. And having been a military officer, I don't look at failure. I don't think we're going to default. And that's why I continue to support proposals that will preclude us from defaulting on our debt obligations and making sure we don't see interest rates increase.

MORGAN: Yeah, but let me put it another way. WEST: The onus is squarely on the Senate Democrats.

MORGAN: Of course it is. And they say the exact opposite to you. And that's all the American public are hearing.

WEST: I haven't seen a piece of paper from them yet.

MORGAN: With respect, though, everyone is just listening to the same old political chatter. And as I say, meanwhile, the damage to America's economy and the global economy is getting worse by the second. I don't think any of you guys seem to realize this.

WEST: I think I do realize that. And I've been here seven months and I'm doing everything humanly possible to turn around a spending disease that has been 30 years in the making. I wish I could kind of wave a magic wand and make it all go away.

But I'm trying to do my best within the system we have her in the United States federal government.

MORGAN: Allen West, thank you very much.

WEST: Thank you for having me.

MORGAN: I now want to bring in former and perhaps future presidential candidate Rudy Giuliani. He said that a national default could damage Republicans for years to come.

Rudy, an interesting perspective there, because one of the big I guess thought processes on both sides is who loses most if America goes to default. Obviously, number one, the American people. But would it be a massive blow to the Democrats or more of a blow to Republicans?

RUDY GIULIANI (R), FORMER MAYOR OF NEW YOR: I think it will be a blow to both, probably roughly equal, depending on how you look at it. And I believe it would have to lay mostly at the feet of the president. He's chief executive officer of the United States. If you can't get a budget together and if you can't deal with debt as the chief executive officer of the country, then you're a pretty weak leader.

The reality is -- you have to put this in context, Piers. The problem here is not the crisis that we're going through right now. The problem is the totally unprecedented, out of control, totally irresponsible spending that we're doing. The president of the United States has come to Congress asking them to reduce -- to increase the debt ceiling more than any president has ever asked, ever.

I mean, this is way beyond any president has ever asked. So he wonders, well, why do they want to reduce spending? Because he's asking them for a bigger increase in debt than any president has ever asked.

MORGAN: But at the same time --


GIULIANI: The real problem for our economy, which existed long before this crisis, is we're spending incredibly, irresponsibly more money than we have. And we have to put a stop to it. And that's why you see these people fighting the way they are fighting because they have different views of it.

One side believes you should reduce spending. The other side believes you should increase taxes. And they truly believe it. And I know you have been calling it political posturing.

But I listen to both sides. I know them really well. These people really believe what they are saying. And they probably would be helped if they change their language a little. It wasn't particularly helpful for Harry Reid to say during his press conference that the only -- the only game in town was his bill, or for Chuck Schumer to reiterate the same thing. That doesn't lead to negotiations, they talk about --

MORGAN: But this is the problem, isn't it? This is the problem, isn't it? The American people I think just deserve better than they are getting right now. What they are seeing is the same old political posturing and games.

GIULIANI: Of course they are.

MORGAN: I totally accept, Rudy, that some of them may be principled. But a lot of others are just behaving like politicians in the worst kind of caricature. And the real issue is not necessarily just the default that's coming, but the damage to the credit rating of America.

GIULIANI: Absolutely.

MORGAN: The damage to the global economy. You've got countries all over the world watching, aghast, saying, for God sake, get a deal done.

GIULIANI: If they would let me put them in a room, I could settle it in a minute.

MORGAN: How would do you that?

GIULIANI: If I could have my way, cut, cap and balance would be law of the land. We would have a balanced budget amendment. And we would cut the budget about one or two percent every year in real cuts.

All Boehner does is cut the increase. Boehner isn't cutting spending. He's cutting the incredible increase in spending a little bit. That would be what I would want.

But here is what I would do because we're in a crisis. What I would do is say give the Republicans the cuts they want and give the Democrats the two years they want to get beyond the election. And then have some kind of trigger mechanism that means the cuts will be real. The reasons the Republicans want to revisit the cuts in a year is because they don't trust the president. They believe the president will not cut, because he's never done that and he's exaggerated the impact of this. So they don't trust him.

On the other hand, the Democrats want to stretch this out beyond the election. So I think you give the Republicans the cuts, which Boehner and Reid agreed on actually a week and a half ago, and you give the Democrats the two years that they want. And let's get the heck out of this and fight this out in the next election.

MORGAN: Final question, Rudy. Just a brief answer, please. Are you aware of the rising sentiment around the world that this is looking fairly shameful for the American political process?

GIULIANI: Look, we're a democracy. Maybe the rest of the world should grow up and realize we're a democracy. And we have people that have strongly different views. I disagree completely with the president of the United States, but I respect him. The president of the United States believes in Keynesian economics. He believes in priming the pump. He believes in putting in government spending. He believes in raising taxes.

I have a totally different view, as do a lot of the Republicans. So we're going to fight this out in election. What would really help -- and this is where I fault the president, because the chief executive is the one that has to be the adult in the room and bring everybody together. The president has to put a positive proposal on the table.

I can't imagine not putting a proposal on the table when I was mayor of the New York City, for a budget or a budget reduction. I wouldn't wait for the city council to do it. That's absurd. I can't imagine Reagan doing this, or Clinton.

MORGAN: Rudy Giuliani, as always, provocative. Thank you very much for joining me.

GIULIANI: Thank you, Piers. They are going to settle it, too, believe me.

MORGAN: Well, I think --

GIULIANI: -- settle it probably by Tuesday, pretty much along the lines that I just said, a cut, and an extension and a trigger.

MORGAN: I hope you're right. I hope you're right. Thanks a lot, Rudy.

GIULIANI: Bye-bye.

MORGAN: Coming up, the Republican rank and file versus the Tea Party. Why John McCain calls them hobbits and worse than foolish.

(COMMERCIAL BREAK) MORGAN: The partisan debt battle has already been bruising. And it's not over yet. But who will be the casualties? That's the question for Carly Fiorina, vice chairman of the National Republican Senatorial Committee, and former McCain campaign senior adviser, and Neera Tanden of the Center for American Progress Action Fund.

Let's start with you, Carly Fiorina. A pretty rough old day again up on the Hill. Nothing has happened. Meanwhile, we tick down to the default. What do you make of it?

CARLY FIORINA, CHAIRMAN, NRSC: Well, I actually think there are three things going on that make for high drama and a lot of frustration, as you have been describing on your program. But I would argue that this is politics unusual, not politics as usual.

Let me tell you what I mean by that. First, there is a genuine philosophic debate going on between people who have genuine differences and passionately held differences about how to grow the economy and what the proper role of government is. That discussion has gotten attached to a debt ceiling debate. And I think it got attached to that, what has in the past been very routine, because of the normal processes of government, appropriations and budgeting, which is where these discussions normally happen, haven't occurred.

The Democratic Senate hasn't passed a budget in almost three years. And so the appropriations process has ground to a halt. And the third thing I would just say is --

MORGAN: Let me just interrupt through. Let me interrupt you.

FIORINA: Yeah, sure.

MORGAN: This is all very nice and proper and decent, but the reality is America is heading into a catastrophic default and the blame lies with the Republicans of eight years of allowing the economy to tank and then President Obama and his Democrats making it slightly worse.

FIORINA: Look, I think there is plenty of blame to go around. I would argue your statistics just a bit. President Obama and the Democrats have spent more in the last two years --

MORGAN: But they inherited one of the worst -- in financial history.

FIORINA: No question. Second, I would tell you that I'm quite confident, still, as I have been virtually every night that I have talked on CNN, that there are enough men and women of good will on both sides of the aisle, that this will get done.

But I would just say one final thing. I think the other thing we're seeing -- we're seeing a real philosophical debate which will continue through this year and through the election. We're seeing a problem, because the normal budgeting process has ground to a halt.

The other thing I think we're seeing is an experience gap. You have freshmen Republicans who are having to learn in real time that sometimes you have to decide, wow, I've won a major victory here. I need to take my progress and move on. But you also have an experience gap from President Obama, who has proven himself to be, in my opinion, incapable of the leadership that is necessary to get this done.

He's never put a plan on the table. And in fact, you're hearing from lots of Democrats on the Hill that President Obama cannot get us out of this mess, so they better solve it on the Hill. So I think lack of experience is a problem, for sure.

MORGAN: Let me go to Neera Tanden and put that to her, because today, I thought Jack Welch, the business tycoon, raised an interesting point, fairly inarguable, I would have thought. He said why does any form of balanced budget make Democrats go crazy? Every family works to get into this position every day. He has a point, doesn't he?

NEERA TANDEN, CENTER FOR AMERICAN PROGRESS ACTION FUND: Well, I think there are many Republicans who oppose balanced budget. And I think the one thing we should be aware of is there has been one bipartisan vote so far this week. And that bipartisan vote is a rejection of the Boehner plan by the Senate.

You had Republicans crossing lines. You had Senator Kirk, Senator Graham, conservative senators as well, crossing lines with Democrats to reject that. And that incorporated an extreme form of a balanced budget amendment.

And it was a ridiculous idea. The idea that we'd have a majority vote to pass a balanced budget amendment down the road, when they couldn't even garner the two thirds for a balanced budget amendment now. So we've entered extreme, extreme gamesmanship, where these votes are utterly meaningless.

And I believe that Senate Republicans are frustrated. And that's why you saw a number of Senate Republicans join with Democrats to vote against the Boehner bill.

MORGAN: The most frustrated people are not the politicians. It's the general public.

TANDEN: I agree with that 100 percent.

MORGAN: I think what I would say is why doesn't the president -- at the moment, I would say he's not emerging as a particularly strong leader. Nor is Speaker Boehner. No one is getting a grip of this situation. And all this talk of filibusters on Sunday morning and so on, it just sounds preposterous, giving the devastating impact of this default if it happens.

Why doesn't the president utilize real power, the 14th Amendment, and say, OK, we can't do a deal, you're being intransigent, I'm going it alone? He can do that.

TANDEN: Look, I think this -- let me just address one issue -- I think the president should explore the 14th Amendment. I think the American people think this Congress has been unable to demonstrate leadership and that he should explore options, because it's incredible to the American people that we would face anything that hurts our economy at a time when so many millions of Americans are struggling.

So I think the president should explore the 14th Amendment. I would say this one idea that the president hasn't put forward a plan. The president put forward a plan in his speech in April. And he put forward a plan with Speaker Boehner that they were on the cusp of agreeing with.

The fact is that Speaker Boehner was unable to come to the table and deliver votes because his -- because he is beholden to a Tea Party. Let's just realize what happened this week. You've had a proposal, an extreme far right proposal. And then he had to move to the right in order to get the votes for his bill.

So obviously he needs to demonstrate that he needs to actually put partisanship aside and come to the table and put forward a bill that he can rely on Democratic votes for.

MORGAN: We're going to have leave it there. Thank you both very much.

It took a lot of arm twisting to deliver the votes in the House tonight. But another delivery was a lot easier. I'll talk to the guy who made it happen.



MORGAN: Let's try to end on a happy note here, because last night working into the wee small hours, the pizza deliveries were coming fast and furious. We finally found a man who's actually doing well out of this farce in Washington. He's Jeff Williams. He's Papa John's franchise director for the very store that delivered pizzas to Speaker Boehner's office.

Jeff Williams, you seem the only guy in America with a smile on his face right now. Business booming, right?

JEFF WILLIAMS, PAPA JOHNS FRANCHISE OWNER: Absolutely. Business is doing just well, just well. We've been shipping tons and tons of pizzas up to the Hill. One thing's for certain. Congress may not exactly know how to go one way or the other on this bill. But frankly, they know where to eat pizza. Papa John's, better ingredients, better pizza company.

MORGAN: Well, I'm delighted they're having good pizza. Let's be serious for a moment. What is your personal view as the official pizza supplier to these politicians who as they try and resolve this crisis? What do you think the answer is?

WILLIAMS: Well, you know, we're a pizza company. And frankly we don't know how to resolve this debt crisis. The one thing we focus on is just making a better pizza. And regardless if you are a Democrat or Republican, the one thing that you can agree on is our new bipartisan pizza, where we put equal toppings for both sides.

MORGAN: You're a bipartisan operation, are you?

WILLIAMS: Yes, sir. Absolutely.

MORGAN: How many pizzas did you actually deliver last night?

WILLIAMS: Last night was a relatively good-sized order, 20 pizzas up to Representative Boehner. And -- enough to keep folks moving. But our founder and CEO, John Snyder, has said if it takes more pizzas to get those folks moving on the Hill, we'll be more than happy to provide what's needed, whether it's 50 pizzas or 100 pizzas.

Piers, you're more than welcome to pass that message along to our member at the legislature and President Obama as well.

MORGAN: And what kind of pizza does Speaker Boehner like? Is he on the spicy side of life?

WILLIAMS: You know, that's a good question. They ordered a good variety last night, so we really don't know what went to Boehner himself. But we'd like to think that he's enjoying some of the top- quality ingredients we serve. So regardless of whether it's spicy or not, I'm sure he had a good time.

MORGAN: And did they pay cash or credit?

WILLIAMS: I believe it was credit.

MORGAN: Credit. So at least there was some credit left in the country.

WILLIAMS: Yes, sir, absolutely. Big part of our business, actually.

MORGAN: Well, Jeff, I think we're all thrilled for you you're doing well. The irony is not lost that Capitol Hill's pizza guy is doing a roaring business. Thank you for joining me.

WILLIAMS: My pleasure. I appreciate the fact you had us.

MORGAN: And I'll have a spicy pepperoni when you get an sec, please.

And we'll be right back.


MORGAN: That's all for us tonight. I'm going to Anderson Cooper who I would imagine has a rather extended ridiculous tonight. Over to you, Anderson.