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JOHN KING, USA

House Voting on Debt Ceiling Deal

Aired August 1, 2011 - 19:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


JOHN KING, HOST: A dramatic night on Capitol Hill, you're watching it play out on the floor of the House of Representatives, dramatic breaking news, the government about to get approval from the House if this vote continues the way it's going to increase its lending limit. Coming with, $917 billion in spending cuts in the short term, then a new super committee to come up with more deficit reduction, this of course has been a weeks' long drama in Washington as this all plays out.

Speaker John Boehner's credibility on the line now as this compromise plan gets voted on in the House. The Senate is expected to take up this plan tomorrow, tomorrow of course being D-Day. The government runs out of the authority to borrow money at midnight tomorrow night, so the president waiting for this legislation to reach his desk. Let's look and show you full screen now the vote as it plays out, a few minutes remaining in the vote as it plays out.

You need 216 to get to final passage. As you can see right there, a bit of politics going on, 149 Republicans have voted yea, only 19 Democrats yea so far. More Democrats will come into that conversation, come into support this, but they want the Republicans to show they have most of the support here. A very dramatic night in Washington, again, this is the House floor, we're moments away from the conclusion of this vote.

The Senate -- the Democratic controlled Senate will take this plan up next. You see the vote right now, Republicans carrying it. Democrats wanted to watch this play out a little bit more. As we watch this vote, dramatic breaking news. More on the details in this plan in just a minute, but let's bring into the conversation our congressional correspondent Kate Bolduan. I want to go to first to her and Kate, when the speaker walked by you just moments ago you asked the right question, you didn't get a verbal answer, but he did give you a bit of a nod. He seems to think finally he's going to get a plan out of the House and a plan that can also pass the Senate.

KATE BOLDUAN, CNN CONGRESSIONAL CORRESPONDENT: I would say he's smiling more today than he was earlier when they were having such a hard time getting the votes for his original bill that he put forth on the House floor. I think there's definitely a more optimistic mood amongst all of the House leaders, House Republican leaders -- have the votes tonight -- I'm hearing myself right now, but John, while we -- while Speaker Boehner of course did not answer my question and he has not answered that question throughout the day Paul Ryan and he's the, as you know, the chair of the House Budget Committee. He seemed pretty confident today at a news conference with Speaker Boehner saying very clear that he thinks this bill is going to prevail, and going to prevail with a majority of Republicans. One thing that we've been tracking throughout the day is where do House Democratic leaders stand because they have absolutely refused to take a position throughout the day, but just a couple of hours ago, we finally heard from a top aide that the Democratic leader, Nancy Pelosi, she was a yes vote, she was going to support and shortly right after that we saw Steny Hoyer, the number two Democrat in the House take the House floor and throw his full support behind it.

Everyone up here, as you know, John, on both sides of the aisle saying it's not perfect, but this is what we have. There seems to be a bit in this deal for everyone to dislike and that seems to be part of the sales job that we've been hearing from Democratic and Republican leaders saying it's not perfect. This is what compromise is. And it's more important that we pass this rather than threaten default -- John.

KING: Kate Bolduan is going to stay with us throughout this hour as watch this drama play out. David Gergen our senior political analyst is also with us. And David, to Kate's point, people on the far left saying this opens the door to Social Security and Medicare cuts. People on the far right saying this new super committee that will be created opens the door to possible tax increases, possible deep defense cuts, so the question is does the fact that nobody likes this make it just right or make it just awful?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: I don't think it makes it just right, John. The country is not only frustrated with the process, to the point of disgust, but there's a lot of unhappiness about the content. It will save us from default; it will extend the debt ceiling for a considerable period of time, probably through the 2012 elections. You know but it does not do it with the tax increases the president promised that he really wanted.

It does not do it with entitlement reform. It does not do anything for the jobless. In fact it really let's help for the jobless expire. And then finally, you know, it proposes savage cuts in defense. When you add that all up, there's only one hand clapping tonight, John, not two. You can't find two hands clapping almost anywhere.

KING: An excellent way to put it, David Gergen. Let's also bring into the conversation my colleague, the CNN anchor Erin Burnett, and Erin, David just noted passing this deal, if it passes, and a big if given the events of the last couple of weeks here in Washington. But as we watch the final minutes of this House vote and if it passes, we move on to the Senate. If this passes, yes, the government will avoid default.

Yes, the government will get a bigger credit line. It'll be able to borrow more money. One of the other big questions that is much more relevant to people sitting at home in their kitchen tonight is what about a downgrade. Will this be enough to satisfy the ratings agencies so that the credit rating of the United States does not go down and if that happened everyone's interest rates could go up?

ERIN BURNETT, CNN ANCHOR: That's right and you know it's interesting John, they've put themselves in an incredibly difficult spot. I'm referring to the credit agencies themselves. You know a few months ago they put the U.S. on watch for a downgrade. Nothing has really changed. When you look at the numbers here, John, it's pretty amazing, $14.3 trillion, the debt ceiling. If we do nothing the debt goes up $14 trillion over the next 10 years. If we do this bill, it goes up $12 trillion. So it's hardly as if we're making much of a dent in the problem.

And for that reason to be consistent with what they've said so far, the credit rating agencies would have to go ahead and follow through with the downgrade. They've really put themselves in that situation. So it's unclear whether they'll actually do it, but if they do, it could mean that interest rates over the longer term would go up, as we've been saying, maybe a quarter percent, maybe more, it really depends, and of course the U.S. still remains the safest place to put money. So that will minimize the effect of an interest rate increase.

KING: All right, Erin Burnett, stay with us. I want to show again the floor here, it's 170 to 54, 224. That is enough to pass this bill. That is enough to pass this bill. Look -- 27 seconds left. There is time to change your vote, so this looks like this vote will pass tonight and it will go onto the Senate and the 27 seconds that are remaining in this vote I just want to remind you if you're watching at home and you're unfamiliar with exactly what is in this, we're watching some applause on the floor tonight. And there are unconfirmed reports of something, and I'm not going to say it on television until I can see it with my own two eyes.

But as we watch the applauding on the floor tonight you see Debbie Wassermann Schultz there, (INAUDIBLE), Gabrielle Giffords, the Arizona congresswoman who was shot in January has returned for this vote. A dramatic moment, you see Congresswoman Jan Schakowsky, Congresswoman Debbie Wasserman Schultz, who is one of Gabby Giffords' closest friends, with the curly hair and her back to the camera right there. We have confirmed that for this dramatic vote tonight an additional piece of dramatic breaking news, the return of the Democratic congresswoman from Arizona, from the Tucson area, Gabrielle Giffords, to the floor of the House of Representatives. Let's just listen for a minute.

(APPLAUSE)

UNIDENTIFIED MALE: (INAUDIBLE)

KING: You can see her there with the short hair and the glasses. Colleagues hugging her, this is a remarkably moment. This is a remarkably important vote for the country. It's also a remarkably emotional moment for this Democratic congresswoman to return to the House floor for the first time as the House of Representatives now has well in excess of the votes needed to pass this plan and send it on to the Senate. There's the best shot you've seen right there of Gabrielle Giffords, the short hair and the glasses. She looks of course very different than when she served with the long flowing blonde hair, but again on a very important policy question, we'll get back to it, this is a remarkable human drama. Shot in January, bullet passing through her head, so many months of recovery. First in Arizona, then at a Houston rehab center, Gabby Giffords making an emotional appearance on the floor of the House of Representatives tonight. Let's listen in, the vote has concluded.

UNIDENTIFIED MALE: (INAUDIBLE)

KING: Two hundred and sixty-seven to 161 the tally there, not voting five, again we have to wait for the official count from the clerk of the House.

UNIDENTIFIED MALE: (INAUDIBLE)

KING: And the speaker of the House and the chair. See the Democratic vote on this bill split. I'll stop speaking when the gavel comes down. The Democratic vote split on this, 94 yeas, 95 nays, Republicans largely voting for this, but 66 defections, 66 defections, so conservative dissatisfaction with this plan. Some don't like the deep defense cuts immediately. Some don't like the prospect of deeper defense cuts down the line. Others don't like the fact that a new super committee will be created under this legislation that is supposed to come up -- let's listen.

UNIDENTIFIED MALE: Ayes (ph) are 269. The nays are 161. The bill has passed without objection. A motion to reconsider is laid on the table.

(APPLAUSE)

KING: With that gavel, the Speaker of the House John Boehner has just sent this legislation over to the United States Senate. The speaker rarely takes the chair. He gets the gavel. He controls the House, but only on the big votes do you see the speaker up there -- to gavel -- to passage -- this bill passing. It now goes to the Senate. If you're watching at home, let's just remind our viewers what's in this bill.

It is a two-tiered process. In step one, the debt ceiling the government's borrowing ability has increased by $900 billion. There then come $917 billion in cuts over the next 10 years, 350 billion of that would come from defense spending. About 400 billion would come from discretionary domestic spending. That's transportation funding, education funding and the like.

Another $20 billion in mandatory spending, that's Medicare, Social Security, Medicaid and about $156 billion in savings will be made, because as the deficit shrinks, the government's interest payments go down. Step two could be the hardest part and the most controversial part of this. It creates a new super committee to come up with $1.5 trillion in additional cuts for the president to get an additional 1.5 trillion in borrowing authority. Six Democrats and six Republicans on that committee and I want to bring Paul Begala into the conversation if he's available. Paul Begala, six Democrats and six Republicans on that committee due to report by Thanksgiving, likely to have a vote in December of an -- December before an election year, the big question is the president says I would love an additional deficit reduction to include some revenue increases, taxes on the rich, closing loopholes. The Republicans say no way, Mr. President. You won't get them. This fight is not over, is it?

PAUL BEGALA, CNN POLITICAL CONTRIBUTOR: It's not over at all, John. You're right and we'll know better when the members of that super committee are appointed. You know very often here in Washington personnel is policy and I think as a Democrat that the Republicans who are likely to be appointed -- are likely to be appointed on the pledge that no matter what they won't vote for a tax increase. Now I could be wrong, but here we have this enormous triumph by the Republican Party, a massive cut in future deficit in debts without a nickel, not a penny of taxes on anyone, even the wealthiest, even on corporations.

And so on the heels of that kind of victory for the Republicans I think it's very unlikely that they're going to want to go back and raise taxes in the next go around even though they have these theoretical -- not theoretical -- these triggered defense cuts should this become law and the president signs it, which looks likely. Even with defense cuts hanging over their head I think it's very unlikely that you're going to see tax increases in December going into an election year.

KING: If you're just joining us at home we'll continue this conversation, there's a fascinating political moment and a fascinating personal drama playing out on the House floor just movements ago. The House of Representatives has just passed the compromise plan negotiated between Republican congressional leaders and the Democratic president, Barack Obama. It has just passed the House.

The Senate will vote on this plan tomorrow we are told, still waiting for the formal agreement of that, but sources tell us that vote will not come tonight. It will come tomorrow and as this vote played out, as if the drama in Washington was not high enough. On to the House floor came the congresswoman from Arizona, Gabrielle Giffords. Remember, you see it just moments ago, let's listen in. Show it right here. I'm going to stop for a second.

(APPLAUSE)

KING: In the middle of that picture, with the short hair and the glasses, the Democratic congresswoman from Tucson, Arizona, Gabrielle Giffords, in January, shot outside of a supermarket in her district holding a town hall, questions in those early hours as to whether she would survive, and then questions for months. As to whether her recovery would ever allow her to return to Washington, Gabrielle Giffords returning to the House floor, an emotional drama, the Democratic congresswoman back on the House floor for the first time as this huge vote played out.

Now that it has passed the House, it goes on to the Senate. And Gloria Borger, I don't think there is any doubt this plan will pass the Senate. So the country has avoided what could be a watch plan. Maybe I shouldn't say there's no doubt, there's very little doubt in the events of recent days. This will not pass the Senate, so the country has avoided default or avoided getting to the point where it had to decide, do Social Security checks go out, or does Captain Jones get his pay in Iraq and Afghanistan. But this political drama, this political debate over the size, the scope of government, spending and taxes is not over.

GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: You know, now comes the hard part, right John? They've found a way to raise the debt ceiling effectively for two times, but they've also promised to do serious deficit reduction. And as you pointed out earlier, this committee is interesting. Lots of Democrats believe that it's a trap that they'll never get to any kind of balance or tax increases on it. Some member of the administration said to me today, let's just take a look at who's appointed to this committee and you know how it's going to turn out. But the administration is on the record saying they're going to veto these Bush tax -- the tax cuts. You know they want to make sure that they expire for the wealthy, and they think that will have an impact on the debate.

KING: Gloria, I want you to stand by. I want to look down at the House floor if I can --

BORGER: Wow.

KING: Live action on the House floor right now.

REP. NANCY PELOSI (D), CALIFORNIA: Obligations of our great country is important and symbolic. Her presence here in the chamber as well as her service throughout her entire service in Congress brings honor to this chamber. We are all privileged to call her colleague, some of us very privileged to call her friend --

KING: The Democratic leader, Nancy Pelosi paying tribute to Gabrielle Giffords who has made a dramatic return to the House of Representatives in the middle of this high stakes vote on the debt ceiling. Let's listen.

PELOSI: More respect, more wishing for our daughters to be like her than the name of Congresswoman Gabby Giffords. Thank you, Gabby --

(APPLAUSE)

KING: Congresswoman Gabrielle Giffords waving there and now taking a seat. Whether you're a Democrat or Republican, some where in the middle of American politics, it is hard not to just stop and say wow, wow, wow! Back in January, Gabrielle Giffords shot at point blank range outside of a town hall, outside of a supermarket in Tucson, Arizona, back on the floor of the House of Representatives today as this traumatic vote unfolds. The former speaker, now the Democratic leader of the House, Nancy Pelosi just moments ago there paying tribute as you heard.

We're also told the vice president of the United States, Joe Biden, who has been a key member of the negotiating team for the White House. And then rallying, trying to get some Democratic votes for this plan, also to stop by the House floor, we are told, to say hello. The question is now as we watch this emotional personal drama play out, the return of Gabby Giffords to the House, we also have a very important and consequential policy debate that continues here in Washington. This legislation will now go over to the Senate; I want to bring our conservative contributor Erick Erickson, the editor of the conservative RedState.com into the conversation.

Erick Erickson, the speaker just passed this. It was an important moment for him. You saw the number of Republican defections in the House in the 60's there. You think this is a bad deal. Why?

ERICK ERICKSON, CNN CONTRIBUTOR: Yes, I do think it's a bad deal. Well first of all, John, as Erin said earlier, if we go through with this deal, we're still going to raise the national debt $12 trillion. I mean this is going to be the first of what are probably going to become increasingly intense and awful ugly battles because of the national debt. Everyone uses the word serious and who is and isn't serious in Washington. I can't see this as a serious plan, considering what it's going to do.

And I do think that the joint committee probably will raise taxes and the Republicans and Democrats will be in a very interesting position to either take the committee plan or cut Medicare and cut defense. And they'll probably go with the tax increases. But that raises another issue, John that no one talks about. Even if you go back to 1998 which was the height of revenue into the federal government during the dot-com bubble, it was something like 21 percent of GDP tax revenue. The government is spending right now 25 to 26 percent GDP. There's no balance there, and there can't be, even on the best Democratic projections of what tax revenue could be, the numbers don't add up. The Republican numbers don't add up either for that matter.

KING: And so Erin Burnett, come back to the conversation because for people watching at home, some of this is Washington politics, but many of them are saying will this -- as the president says, we get this deal done, maybe the private sector will start hiring again. It's counter intuitive to some in the sense that if the government is spending less money -- now government spending will be slow.

Government spending still increases, but if the government is spending less money, the government being a pretty large entity, not pumping more money into the economy, does that certainty in Washington of some plan convince the private sector to start hiring or is what Washington's doing actually taking money out of the economy and maybe contributing to slower growth?

BURNETT: I think you have got the conundrum right there, John. It's a little bit of both, right? They need certainty, and obviously certainty on the debt ceiling was significant, so you would think that that would be good. In a certain way it is, having that overhang there certainly would have prevented companies from making big decisions on investment and hiring. But just because we have this debt ceiling now addressed, it's going to very quickly become something in the far rearview mirror. And it doesn't necessarily -- and in fact it really doesn't change the economic outlook at all.

That is a big question. As you know today, we got economic numbers that indicated we've fallen back in recession on key measures from manufacturing and that's a very big issue. And that it's very unclear what the government can do. Because now we're back to the big conversation and that of course is jobs.

KING: Well let me stay with you on that point, Erin, because if we're back to the big conversation, which is jobs, which is critical to the 16 percent of American people who are either un or underemployed, much more critical in that context than anything we talk about here in Washington. But it's also critical to a Democratic president who wants to get four more years at a time unemployment is at 9.2 percent.

A lot of the talk has been the private sector. The market needs certainty. Does the market get certainty until we know what this super committee reports around Thanksgiving? Or are we going to have the uncertainty whether it's a legitimate reason or an excuse for the next several months?

BURNETT: I think we're going to have it. It probably is an excuse. I mean I guess because there are some of those triggers built in people probably trust that we're going to get those cuts coming in November. But in a sense, this is a drop in the bucket. If you take a longer term view, John, as you have pointed out, this does not address the big issues with entitlements in this country. You have several million Americans who are coming on Medicare over the next few years. That number is growing. We're not dealing with that issue.

And that's just one of many issues we need to deal with, with Social Security as well as Medicaid as well, so these are big questions and if you look at the long term uncertainty none of that is being dealt with. But I guess, John, in a sense this paints a really negative picture and that's fair. But it's also important to note that America still remains the strongest country in the world with the best rules, the most clear rules, the most transparent rules, the deepest capital markets and all of those things are in our favor in terms of other people around the world choosing to invest in American companies.

KING: And so David Gergen, following up on that, we're in a moment of divided government, one of the big challenges we have faced since the Republicans have taken over the House of Representatives. What have we learned that gives us clues as to what might happen, the pressures on this super committee? How the speaker will negotiate with the president when the next thing comes up. Whether it's something we see on the calendar a few months down the road or whether it's one of the surprises that we so often get in our lives and in our government.

GERGEN: Well a lot depends on what the president has learned from this, John. I don't think there's any question the Republicans will come out of this feeling they've got momentum. They drove these arguments. Paul Begala just said it was a major, major Republican victory. And they'll continue going for broke. They'll continue -- they'll believe that intransigence works, that they can get the upper hand and they think they've outmaneuvered the president. You know I think from the president's point of view, if he sees that leaning from behind as one of his admirers called his leadership from within the White House it didn't work very well in this situation and he really must change his leadership style, then you could have a very different set of negotiations going in.

He does have some things at his disposal. He does -- he can threaten the Republicans and he's in pretty good shape to end the tax breaks for the affluent. Those expire in 2013. He's got the veto pen. He -- I think if he sort of stringers (ph) himself and sort of draws clear lines and leads from the front about this is what we must do. I think that would help him some. But I have to say, John, overall, I think we're entering a period of ever deeper uncertainty for the business community. What if you're in the defense industry now? How can you possibly know or be confident about what your future is in terms of investments?

KING: Well, let's continue the conversation, two key players involved here; I have with me Democratic Senator Sherrod Brown of Ohio. He's going to have to vote when this plan moves over to the Senate now. And over on the House side of the Capitol, freshman Republican Allen West is with us. Mr. West came to Washington as a part of this Tea Party movement. OK, Mr. West I want to ask you first because you voted yes in favor of this legislation. You are a military veteran. I believe you're a member of the Armed Services Committee.

REP. ALLEN WEST (R-FL), ARMED SERVICES COMMITTEE: Yes.

KING: One of the concerns many of the conservatives who voted no tonight, many of the concerns they have was that in their view it cut defense too much now and raise the prospect of cutting defense even more later. Why were you comfortable saying aye?

WEST: Well I think one of the things we have to look at, unfortunately is having this Draconian measure held over our heads to make sure we do the right things. We had a meeting with the Armed Services Committee, Republicans with the speaker, I made myself very clear in hoping that we can get one of the senior members, the subcommittee chairman from the Armed Services Committee to be a part of this congressional committee to make sure that we do the right things so this sequestration never comes to fruition.

KING: Another question, I know we've spoken in the past concerning you and that is taxation. You ran on an election, in which you said you weren't going to come to Washington to raise taxes. You were going to come to Washington to cut spending. There are those who look at this deal and say the super committee has every right and they would argue every reason, whether it's raising the Bush tax cuts on the rich, wiping them out when the deadline comes, whether it's maybe some sort of tax reform that brings up revenues here in Washington. A lot of people look at this as opening the door and a lot of conservative groups look at it this way. That's why they didn't like it, opening the door to tax increases. Why were you convinced it will not? WEST: Well because when you look at the baseline, first of all, it takes into account an expiration of the Bush tax cuts, a raising of the AMT, and also the tax increase of Obama care. So I don't think that we'll see more tax increases. What I think that we'll see is true tax reform, where we get to maybe change in the progressive tax code system that we have, so that we can broaden that tax base. Perhaps we will lower the corporate business tax rate that we have of 35 percent. Bring it down to 20 to 22 percent and get rid of subsidies and loopholes. Those are the types of things that I hope to be seeing come out of that committee.

KING: A Republican perspective there from the freshman Republican from Florida, Allen West. Congressman West, appreciate your insights tonight.

Now let's get some Democratic perspective from a man who not only has to vote on this plan as early as tomorrow, but also is on the ballot in 2012, Democratic Sherrod Brown of Ohio. Are you an aye or a nay?

SEN. SHERROD BROWN (D), OHIO: I'm voting yes.

KING: You're voting yes. Why?

BROWN: I'm voting yes because first of all we successfully paid back some of the attempts coming from some fairly radical proposals in the House of Representatives to dismantle Medicare and turn it over to the insurance industry. We also knew that there were efforts -- going to be efforts in the House to turn -- to privatize Social Security and turn much of it over to Wall Street, and we're successful in beating back those.

And second we can't let the United States government, the United States of America default on its obligations. It would frankly hurt far too many families in my state, small businesses, Social Security beneficiaries, veterans, soldiers in Iraq and Afghanistan. Interest rates going up, what that does to homeowners, everything, so we simply couldn't do that.

KING: You simply couldn't do that. I want you to listen here to a montage of your friends on the left in the House who looked at this deal and said absolutely no way. In fact the former speaker borrowing a line from I think Emmanuel Cleaver (ph), the head of the Black Caucus. He called it a Satan sandwich. She said it's probably a Satan sandwich with a side order of Satan fries. Listen to some progressive criticism.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: We cannot allow the extreme Tea Party Republicans to advance their agenda to dismantle our government while rewarding the extreme tactics with this bad deal.

REP. JIM MORAN (D), VIRGINIA: I understand that this train is leaving the station. But it's going in the wrong direction.

REP. CHARLES RANGEL (D), NEW YORK: And then on the other side I have to pause because I don't see any sacrifice.

REP. MAXINE WATERS (D), CALIFORNIA: If this bill passes, it may be the single worst piece of public policy to ever come out of this institution.

(END VIDEO CLIP)

KING: Do you agree that it's the single worst piece of public policy?

BROWN: I wish the deal had been better. I wish that President Obama had stuck to his guns, talking about everything from corporate private jets to oil country -- to oil company subsidies to hedge fund managers and dug in there, he wasn't able to --

KING: What happened --

(CROSSTALK)

KING: A lot of Democrats say he's not tough enough. Some say sold us out. Some say put his own reelection interests ahead of the party.

BROWN: Well I think the -- I mean the president needed to go around the country and really educate people about whose side are you on? This isn't liberal, conservative, left or right. It's whose side are you on and it's clear --

KING: So why didn't he do that?

BROWN: I don't know why he didn't do it, but the radical elements in the House that want to privatize Medicare and turn over the insurance companies, they want to protect oil companies and protect Wall Street hedge fund managers simply were not -- you know they -- it's pretty clear that's what the battles ahead are. But what we've got to do is focus on jobs. And one of the first things we ought to do is take away tax breaks for companies that outsource jobs. If you close down a plan in Toledo, Ohio and move to Shanghai, you can get -- you can deduct the moving expenses against your federal taxes.

I mean the Republicans dug in, and wouldn't even let us change that. Those are the battles ahead because we've got to focus on China currency, focus on job training, focus on the creation of jobs. I mean you know what happened in the 1990's. We had seven years of regular economic growth. That's what gets you to a balanced budget. So it's tax -- it's cuts in spending. It's bringing tax rates up to what it was for the wealthy in the Clinton era and it's laser (ph) focus on job creation.

KING: Are you confident now with the disappointment you have in this deal, the disappointment you have in how the president handled himself in this deal, didn't get some of what you would have liked, some of what he said he would fight for? Are you confident now that you will get a better deal in round two when the super committee has to come up with 1.5 trillion? That's a big number in deficit reduction and the Republicans say the only way they're going to support it is if there's no revenues.

BROWN: Well I think -- I think two things have happened. One I think the president -- vice president spoke to us today. I think the president and vice president learned some lessons from this about being more aggressive when you're dealing with --

KING: Do you think he's going to campaign in 2012 saying I want to raise your taxes?

BROWN: No, I think he's going to campaign on closing tax loopholes and focusing on a more balanced approach. And second I think that clearly in the public arena, the conservatives, they're kind of radicals in the House really did see that the public wasn't really on their side (INAUDIBLE) they dug in but it's pretty clear from polling numbers, it's pretty clear that their extremism and they're willing to shut the government down and see the country go into default turned a lot of the public against them, so I think those two factors, the president learning lessons, and the public beginning to turn away from this kind of radical Republicanism will service (INAUDIBLE) in the fall.

KING: Let me ask you lastly, you're going to vote yes tomorrow. I assume this plan gets to the president and he signs it before the deadline. Given what happened in your state in 2010, a Republican governor, Republican senator, do you have any choice here? Did you have to vote --

BROWN: No, absolutely I had a choice, because I -- there are things about it I didn't like. Of course -- what happened in Ohio was more about job loss than anything else. We lost several hundred thousand jobs from the last two years of the Bush administration, a year and a half into the Obama administration, and that's clearly what caused I think our major losses in Ohio in 2010.

KING: Senator Sherrod Brown we appreciate your time tonight.

(CROSSTALK)

KING: We'll watch your vote tomorrow. Also with us from the House side is Representative Keith Ellison of Minnesota. He is part of the progressive caucus and Congressman Ellison, the caucus said no, no, no. Why?

REP. KEITH ELLISON (D), MINNESOTA: Well, because this deal basically violates core progressive and American values. This deal calls for spending cuts on things, which could aversely impact things that can really get our economy started again like transportation and like Stafford loans, interest subsidies for those things. These young people who take advantage of these loans are the scientists and innovators of tomorrow. People who can help create jobs. So this thing was in the wrong direction. It was retractionary (ph) on the foot of a recession, in which we still have 10 percent unemployment, exactly the wrong way to go, so we voted no because it violated our core principles.

(CROSSTALK) KING: And so if it's exactly the wrong way to go and your leader, Nancy Pelosi borrowing a line from Emanuel Cleaver, the head of the Black Caucus, he called it a Satan sandwich. She said it's probably a Satan sandwich with a side order of Satan fries. Why didn't she vote no?

ELLISON: Well, because she wanted to make sure that we -- she was concerned about the default issue and I think that when you are in leadership, as she is, there might be certain responsibilities, but the fact is she didn't whip it. She didn't come in and ask any of us to vote for it. She told us this was a conscience vote.

And my conscience told me to vote no -- and so did about 95 other Democrats in our caucus, say that this is not the right thing for America.

KING: When all this started several months or several weeks ago, anyway, the president of the United States said he wanted a big deal, he wanted to take this off the table through 2013, and that he would insist on a balanced approach. And by balanced he meant that if you're going to get a lot of spending cuts and a lot of pain, Democrats, progressive like yourself, felt like he wanted revenue increases.

This deal doesn't have that, no guarantee of that, are you disappointed in the president?

ELLISON: Well, you know, the president wanted all the right things, and even fought for the right things. At the end of the day, he didn't get the deal he wanted. So I'm not here to be upset with the president.

It was the Tea Party and the radical Republicans who caused this --

KING: Congressman, I don't mean to interrupt you, but you call them -- the Tea Party you're right, you called them radical Republicans. I'll leave that judgment to you and to the American people. That's not my job. But the Republicans control one chamber.

ELLISON: Right.

KING: The House of Representatives. There's a Democratic Senate and there's a presidency and the president gets, whether it's a Democrat or Republican what we call the bully pulpit.

So, you can't say just the Republicans did this, they don't have enough power.

ELLISON: Well, yes, they do have quite a bit of power. They're the majority in the House and they have a cloture-proof number in the Senate. So they are wielding a big stick.

At the end of the day, the president has to sign or not sign what's in front of him. His choices were allow default or what I prefer, use the constitutional and executive function to safeguard the public debt. But he had very few options at the end of the day.

Look, I wish the president would have been able to get a better result. But I'm not going to join those who want to criticize the president here. I think he had the right values, fought for 'em, didn't get 'em, but he wanted those right things.

And that's why I still call myself an Obama supporter.

KING: And this is round one of what is a two-act play. And the sense of going-forward in the super committee. You're being very gracious in saying the president fought what he called and your math about the Republicans in Washington is dead right, sir.

What are you expecting? I won't use term demand. But what are you expecting to see of the president when we get into round two, and the super committee? And they start talking about, well, we may have to go into Social Security and Medicare, $1.5 trillion is a big number.

We may have to -- if the Republicans will push back when the president says I want some revenues.

Where are your red lines in round two?

ELLISON: Our red lines are what our red lines have always been -- Social Security, Medicare, Medicaid, but also job creation.

I'm hoping the president starts this fight early. He shouldn't wait until he has very few options. He should get after this thing early and enlist the power of the American people as he did only a few days ago.

I think it's the right thing for him to do to not wait and wait and wait until the options have run out, and he can either sign something or not. But I think that the thing is for him to get after it early, demand that we get some revenue, demand that the wealthiest and most privileged among us help our country out, it's the patriotic thing to do, but not wait and bring the offensive now.

KING: Congressman Keith Ellison, Democrat of Minnesota -- some advice for President Obama as we head into round two.

In round one, a dramatic vote tonight in the House of Representatives, 269 to 161. Congressman Ellison, one of the 95 Democrats who voted no, 66 Republicans also voted no. But 269 to 161 means this -- the compromise plan to raise the debt ceiling of the United States, to let the government borrow more money and along with it, to enact the fact that there's spending cuts. That legislation now moves from the House to the Senate.

The Senate plans to vote tomorrow. It's at midnight tomorrow that the United States government runs out of the authority to borrow more money.

So, still, a second act of the legislative process to play out here on Capitol Hill. When we come back, more on tonight's dramatic breaking news, including this wrinkle, as this hugely important vote was playing out on the floor of the House of Representatives -- a dramatic surprise: the return of the Democratic Congresswoman Gabrielle Giffords who was shot at point blank range just a few months ago.

(COMMERCIAL BREAK)

KING: A live picture there from the floor of the United States Senate. Tomorrow at noon, the Senate plans to vote on the compromise debt ceiling and deficit reduction package that tonight cleared the House of Representatives. You see the vote there, 269-161 was the vote on the House side.

This package calls for $900 billion increase in the debt limit immediately -- $917 billion in spending cuts to be implemented immediately. They take effect over the next 10 years. Then there's a second round, $1.5 trillion in deficit reduction and increasing the debt ceiling of an equal amount if a super committee of the Congress comes up with a plan that is acceptable to both the House and Senate to do those additional spending cuts.

Or perhaps possibly tax increases, what we have tonight is this House vote, and with it, proof of how the conservative House majority has changed the debate in Washington. A Democratic president? Yes. A Democratic Senate? Yes.

But the Tea Party led Republican Congress that now holds the speaker's gavel in the hands of John Boehner started the year saying spending and deficit reduction would be a top priority. One of their heroes, the chairman of the House Budget Committee, Paul Ryan, saying today, no, this compromise plan is not perfect, but it makes, in his view, a very important statement.

(BEGIN VIDEO CLIP)

REP. PAUL RYAN (R-WI), BUDGET CHAIRMAN: We are spending less money next year on this treasury spending than we spent last year. You haven't heard that kind of a statement before around this town.

We have a long ways to go. This does not fix our problems. But we really do believe that the value of this Republican majority has been to change this culture.

(END VIDEO CLIP)

KING: Change this culture, Paul Ryan said in the there.

Gloria Borger is among the many talents we have with us tonight.

Gloria Borger, Paul Ryan is right. The Republicans did not get everything they want here. We have another act of this drama to play out. But the tone of the conversation, the substance of the conversation in Washington is very, very different.

GLORIA BORGER, CNN CHIEF POLITICAL ANALYST: It's very different. And I think you would have to say that the Tea Party has had the impact that it wanted to have.

You know, these members came to Congress wanting to be transformational. I think in much the same way that Barack Obama wanted to be a transformational president. They've had an awful lot of success because they have changed the debate.

I mean, don't forget when the issue of the debt ceiling first came up, the president said, I want a clean debt ceiling, I don't want anything attached to it.

And guess what? He got a lot attached to it. He got a lot attached to it that he didn't like.

And they managed to take their Republican leadership and say, this is what we want.

Now, John Boehner, I would argue, was trying to do a bigger deal but the deal that he was trying to do, the $4 trillion deal he was trying to work out with the president had almost a trillion dollars in revenues, and in the end, he had to pull the plug on it because that wasn't going to fly with his conservative Republicans.

KING: And yet, Erick Erickson, there is on the right, some grumbling, you among those saying we can get a better deal, we should have gotten a better deal. And there are those who would say, you know, why can't you say yes? You're getting at least a down payment on what you want here, are you not?

ERICK ERICKSON, CNN POLITICAL CONTRIBUTOR: Yes, I think we are to a degree. I just think the possible outcomes of this joint committee far outweigh any good that will come out of it, given what the join committee could do.

At the same time, John, I've got to say that if Tea Party activists had said yes earlier, they wouldn't have gotten what they got. The role of the Tea Party movement all along has been to push as hard as they could, to get as much as they think they can out of Republicans, not out of Democrats.

But I would say as well as -- you know, a majority of the Tea Party caucus in the House voted for Boehner's plan. We're not conflating Tea Party activist and small government conservatives in general and we're also not giving credit to Americans in November of 2010 who sent them overwhelmingly to the House of Representatives because they really thought Washington spending had gotten out of control.

KING: And, David Gergen, I believe you're still with us. One of the questions last week when the speaker was having trouble was his leadership is somehow undermined, is his credibility taken a dink or two here. Is that the case or would this vote tonight, does John Boehner prove that he's in control of his caucus and control of the House?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: John, he had a near death experience over the last couple weeks, but I think he survived it and he strengthened now that he did get his plan through and now, he's got this compromise. While Erick and a lot of other conservatives are not really happy, there are going to be a great number of conservatives around the country who are going to think, absent John Boehner, this wouldn't have happened.

I think the tragedy may well be -- we'll look back and wonder, why -- if the president and John Boehner had just not been able to cut that deal that they were talking about, a $4 trillion deal, it would have included some revenues, tax revenues, frankly I thought were fair.

But more than that, it would have been $4 trillion in one fell swoop, we wouldn't have this uncertainty now surrounding a congressional committee and what's still coming, which I believe is going to cause containment on the certainty on the investment community and contribute to a consumer uncertainty at a time -- at a very time we need to light a fire into this economy.

KING: And so, Erin Burnett, to that point, how much of this in the economy is uncertainty in Washington? You mentioned earlier, new manufacturing data this morning that is just downright depressing. GDP on Friday that shows the economy is anemic at best. We're going to get another jobs report this Friday that most people think will look a lot like the June report and we'll have an anemic economy there.

How much of that is uncertainty about the tax environment, the spending environment in Washington, or how much is that just in India and China and the global factors that are changing so fast and rapidly, the U.S. economy is having trouble getting back on its feet?

ERIN BURNETT, CNN ANCHOR: It's a little of both. I mean, and it's hard to say exactly, you know, to break it down by percent, John. But I think you're right in that part of it is regulatory uncertainty in Washington.

But that goes beyond this debt ceiling. I think it's important to note that the CEOs in this country, the business people, the investors, they didn't think this should be an issue. They had plenty of uncertainty when it came to financial reform, what that would mean for ATM cards and mortgages and all these other questions that they had out there.

The debt ceiling was something that, well, they frankly thought would just get increased and we could move along. So, this was an unexpected piece of opportunity on top of all the other issues that were already out there.

So, I think we have a long way to go before we get the clarity that the investment and the business community needs.

But creating jobs, John, goes beyond that. And I think that's the problem. No one knows how to do it. People agree government isn't great at doing it, and they don't know how to get to that job creation number. That's the big problem. Obviously, that's going to face the president in the election season as well. KING: Huge problem there. Erin Burnett hit on the head right there.

The president says this plan will help at least. We'll see as that plays out.

We're live on Capitol Hill tonight. Our special coverage will continue in a just moment.

Still to come: more details on the big Senate vote. The House dramatically passed the plan tonight. The Senate will vote on it tomorrow. More on that.

And the liberal angst, the rumblings, the grumblings we heard on the left about the president and about this plan. How will that play out heading forward? That when we return.

(COMMERCIAL BREAK)

KING: Back live on Capitol Hill.

Our breaking news tonight: the House has passed a compromise plan to raise the debt ceiling, the government's credit line, essentially, and also to enact some spending cuts over the next 10 years, 269 to 161, the vote in the House. The Senate will vote noon tomorrow on that plan. The president of the United States expects to sign it by the time the sun sets tomorrow, ahead of a midnight deadline when the government would run out of its ability to borrow more money.

As this played out, the former speaker of the House, now the Democratic leader, Nancy Pelosi, in a very difficult position -- liberals in her caucus do not like this plan. They think down the road, it could lead to Social Security cuts and Medicare cuts. However, she's a partner with the Democratic president who very much wanted this compromise.

So, listen here to Nancy Pelosi as she outlined what she didn't like. As she headed into a very important meeting with her caucus this morning.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D-CA), MINORITY LEADER: On the other side of the grid, we have problems with no revenue in the bill when we are having severe cuts. And we need to make some cuts -- severe cuts, and initiatives that impede the education of our children, clean air, clean water, food safety, you name it, from that one red cent from the wealthiest people in our country. We have to weigh this separately (ph). That's what they're doing right now.

(END VIDEO CLIP)

KING: Our Democratic contributor Paul Begala is with us.

Paul, I want to focus on this former speaker, the Democratic leader, they're raising their hand, not one red cent. That is what has many liberals angry. They're saying the president was not tough enough.

We're watching a live picture there of the House speaker as we have this conversation. He's not talking at the moment. But he is a happy man tonight after getting this plan through the House, 269 to 161.

Paul, back to the woman who once was speaker, who had to hand that gavel to John Boehner back in January. She says not one red cent. That's what the liberals are mad. They don't think the president was tough enough. They don't think he fought enough on the revenue side.

You hear some people grumbling, we should have a liberal challenge to the president. I assume that's just sour grapes.

But what is the president's state of play with this own base? And I ask for this reason -- in a 2012 election, which will be much more competitive than 2008, if liberal downturn is down just a bit, we know his support among independents is down, we know his support among white is down -- if liberal turnout is down just a little bit, can you say, adios, Virginia, bye-bye North Carolina, let's see what happens in Colorado.

PAUL BEGALA, DEMOCRATIC STRATEGIST: Or Ohio. I saw you interviewing Sherrod Brown from Ohio there.

You're right, the notion of not a penny of revenue, not even what looked obvious a few weeks ago, these silly little -- not pretty much money, but these loopholes of the corporations get for corporate jets or for oil companies and so forth, even that was off of the table. Not a penny in revenue, enormous win for the Republicans, enormous defeat for President Obama. And Democrats are very angry about it.

Frankly, I think, independents will be as well.

My old boss, Bill Clinton, he helped balanced the budget and when he put his economic plan together, it was 50 percent revenue, 50 percent spending cuts and that was seen by independents who Bill Clinton was focused on like a laser beam as you will recall, John, independents like that sense of shared fairness, of shared sacrifice.

And I think the president has gotten a pretty difficult hand dealt to him frankly, but I don't know that he played it very well. I think -- if you look at the last eight months, John, it's been extraordinary. Back in December -- in December 10th, if the memory serves, the president agreed to a bipartisan deal to cut the taxes, enormously, $858 billion, that went straight to that debt -- $858 billion that we didn't have, we added to the debt, so we could pass a tax cut generally seen as Republican priority.

And then in April, spending cuts were passed as a deal to continue the operations of the government and the continuing resolution. And now, up to $2.5 trillion perhaps all in spending cuts.

If you ask me who is winning this thing, it seems to me that the party that wants lower taxes and less government spending is winning in a rout -- that maybe not be my party, but just as an analyst, I got to tell you -- this looks like a rout to me.

KING: And, so, Erin Burnett, if the Republicans are winning in a rout at the moment, how does that affect -- it's not just the super committee but the reform and tax changes and possible revenue increases, but some say a sweeping reform -- lowers rates for everybody, gets rid of the loopholes. Others say, no, they will tinker around the edges, because this is just Washington.

The climate for tax reform after this exercise in divided government we have seen in recent days is what?

BURNETT: Not very good. I mean, John, if we don't get past the point we're getting rid of a loophole is seen by some as an increase in taxes, we have a long way to go. Most of the CEOs that I have spoken to are in favor of eliminating the loopholes. You know, some would hope it leads to overall lower tax rates and many acknowledge that it may not for everybody.

But loopholes is a big issue and that's something we have to get beyond. But I don't think that there's any expectation for overwhelming tax reform as long as there is intransigence in terms of raising the taxes at all or eliminating the loopholes.

KING: And as that conversation plays out here in Washington, it also plays out in the 2012 presidential election.

Erick Erickson, back into the conversation. You know, the Republican candidates for president were asked how they would view this deal. Would they support this deal?

You're not running -- we know Erick Erickson is against it.

Mitt Romney said no. Michele Bachmann, no. Newt Gingrich effectively no, he said he would have his own plan, so that means he does not like this plan.

Governor Jon Huntsman said yes. Tim Pawlenty, the former governor of Minnesota, no. Congressman Ron Paul, no. Texas Governor Rick Perry who may yet get into this race said he supported the first plan, which means he's against this plan. Governor Gary Johnson of New Mexico, no.

So, pretty resounding expression of Governor Huntsman, no. Democrats say that is a lack of presidential leadership. You say what?

ERICKSON: I say the Republicans are looking at this and they see this that they will be boxed in with this deal come 2013 should they win, the Bush tax cuts will expire on January 1, 2013, and the spending cuts and the sequestration goes into effect January 1, 2013. They see the Republicans in Congress boxing them in.

Although, John, I got to disagree with at lot of the statements that the Republicans and Democrats, and including Paul are making. I see this as a win for Barack Obama -- maybe not on policy, but on politics. He is now managed to get the debt ceiling fight gone. He's managed to get probably tax reform taken up before January, and if the Republicans were to block it through this committee, he could go out to say they are willing to cut defense and senior citizen's Medicare and not do tax reform -- in effect, he can push it off.

And then if he does get re-election, he's managed to secure locked in funding for his health care plan. He's managed to lock in getting rid of the Bush tax cuts. If he wins in 2012, he's got a huge liberal policy win there and for right now, it looks like he's playing politics I think better than most people are giving him credit.

KING: Talking about changes in Washington, Erick Erickson saying this is a win for President Obama. Paul Begala saying not so much.

Gentlemen, we need to take a quick break. When we come back, as this dramatic played out on the floor of the House of Representatives tonight, there was a huge personal drama and surprise as well. More on that in just a moment.

(COMMERCIAL BREAK)

KING: Around noon today, the Democratic leader of the House of Representatives Nancy Pelosi received a call that there would be a special visitor on the floor tonight for the big vote on the debt ceiling compromise. A short time after that, about an hour before the vote, Speaker John Boehner, the Republican speaker, was also notified.

Take a look at this.

(VIDEO CLIP PLAYS)

KING: That is Congresswoman Gabrielle Giffords. Six months ago, she was shot in the head at point blank range. There were questions as to whether she would survive, and questions as to whether she would ever recover to the point where she could return here at the House of Representatives.

Look at here right there, smiling and hugging with her colleagues. Gloria Borger, an important big vote, but a personal moment.

BORGER: You know, I kept thinking after such a rancorous few weeks and such an uncertain outcome, it was so good to sort of celebrate something, the triumph of the spirit of Gabby Giffords and seeing all the members standing there to applaud their friend and welcoming her back. It was just a wonderful, wonderful moment.

KING: And to that point, David Gergen, you know, the D's have been arguing with the R's. There's been a lot of back-and-forth. But to see the entire House just as this dramatic vote was finishing up, it was a giant surprise to most of them and pretty remarkable.

GERGEN: Oh, Gabrielle Giffords provided the most heartwarming moment we have had in months in Washington. She lifted our spirits just when we need it and reminded us that despite all of these deep differences, there are times when we can come together and celebrate human triumph.

KING: David Gergen and Gloria Borger, appreciate you being with us tonight. Also appreciate Paul Begala, Erick Erickson, Erin Burnett, for helping us through. Kate Bolduan as well through this dramatic night.

Just to reset for you, the House of Representatives has passed that debt ceiling compromise. It now goes to the United States Senate. That vote at noon tomorrow. A lot of the pieces of this still to analyze and discuss.

We'll see you right here tomorrow night after that dramatic Senate vote.

Our coverage continues "IN THE ARENA," which starts right now.