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Talks Ongoing for Fiscal Cliff
Aired December 30, 2012 - 17:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MARTIN SAVIDGE, CNN ANCHOR: Hello, thanks for joining us, I'm Martin Savidge in for Fredricka Whitfield. It's a pleasure to be with you.
But the news is not so good. The U.S. is getting dangerously close to that fiscal cliff. Just 31 hours now before the deadline, Senate leaders have hit a rough patch in their negotiations. Let's go live now to Dana Bash, who's been monitoring developments on Capitol Hill.
And Dana, while the talks are at a standstill -- I can see she's trying to talk us, so I'm not sure how this is going to go. But let's try anyway
The vice president now is apparently a part of these negotiations. How did that happen?
And I can see right -- Dana, can you hear me all right?
DANA BASH, SR. CONGRESSIONAL CORRESPONDENT: Yes, I can. Sorry about that.
SAVIDGE: So I was just saying, the vice president now has been called in as part of these negotiations; is this inspiration or desperation at this point?
BASH: I would think it's an inspiration but we will have to see. You know, what's going on here appears to be that Senator Reid, the Democratic leader, is playing bad cop and Joe Biden is playing good cop. He certainly has a long history of talks and bipartisan negotiations with Mitch McConnell.
But I actually want to, you know, over the past hour, we have spoken to two Republican senators, I wanted to talk to a Democratic senator, Claire McCaskill, thanks very much for joining us because they just ended their almost two-hour meeting, Martin, two hours.
What was going on in there behind those doors?
SEN. CLAIRE MCCASKILL (D), Missouri: I know you will be shocked to hear that a lot of senators wanted to talk.
BASH: That is shocking.
MCCASKILL: Everyone wanted to have their same I think the consensus is that we all still want to try to get a deal, but some of us are very discouraged that what appears to be on the table now doesn't really do anything to reduce the deficit. And this was all supposed to be an exercise in bringing down our deficit and our long-term debt. And where we are right now, it doesn't appear that we are getting that done. And even more importantly, it appears that Republicans are still trying to protect the tippy top as opposed to looking after the greater good of the economy and middle class families.
BASH: And where, as far as you-all were told by the Democratic leader, where do you think stands - the things stand right now?
MCCASKILL: Well, I think that there is a difference in terms of what we think the rates should be for -- and at what point there should be a tax cut and at what point there should be a little revenue that we should collect. There is a difference there. There was a difference about whether or not we should be looking at the Social Security issue in this discussion. My understanding now the Republicans have backed off now.
BASH: Correct, yes.
MCCASKILL: So, now, we are still looking at whether or not we are going to end up with deficit and debt reduction and whether or not the changes the Republicans are insisting upon are going to comes on the backs of the middle class.
BASH: Senator, the clock is tick. And I'm sure you heard during your campaign, which you just won, a lot of people saying what is going on with Washington? We are so close now this deadline. You can't -- probably hard to put into words how frustrated people are a lot of talking going on and you can't come together with Republicans and they can't come together with you to stop taxes from going up for all Americans.
MCCASKILL: Well, the American people in their wisdom sent a divided government to Washington. You have the group of people in the House of Representatives that basically slapped around their own leader and said we won't even consider a tax increase for millionaires, multimillionaires, billionaires.
Meanwhile, you have got the majority of the senators elected in this body saying hey, we can do more at the top end. Those of us who have a lot can get more revenue to address this crisis, so you have got this stalemate that was created by two very different groups of people, all elected by the American people.
BASH: Now, walking out, I spoke to several of your colleagues, Democratic senators who said they were not optimistic, really kind of looking pretty glum. What camp are you in after what you just heard? Do you think -- I mean, as you said, the clock is ticking, do you think by tonight or tomorrow, something will get passed to deal with at least the tax cuts that are going up by most Americans?
MCCASKILL: Most successful businessmen and successful people I have talked to are willing to pay more and so it remains to be seen whether the Republicans, being driven by a very extreme group of house members, will allow our economy to hurt because of their desire to protect multimillionaires in this country. And I think that is what it is going to boil down to. BASH: But it is not just - I mean, taxes, obviously, are a big issue. The other issue is that we have $110 billion of mandatory, pretty draconian, spending cuts that are going to go into place starting on January 1st. Do you think that this -- is there any way to put that off or replace it, as far as you're hearing from the talks going on?
MCCASKILL: Well, let put this in perspective. $110 billion is a lot for one year and we have time to deal with after the first of the year, we don't get a deal in the next 24 hours, we can make adjustments there. But remember, the funding at the Pentagon, without the wars, has doubled in the last ten years and it's a, you know, over 600 billion right now, so, 50 billion out of 600 billion, that's, you know, not even 10 percent.
So, I really think we have is to keep perspective. These cuts aren't permanent, we can adjust them after the first of the year, I think we can make adjustments after the first of the year if we don't get a deal, still hopeful we get a deal. But if we don't, all of us know we can make adjustments.
MCCASKILL: Senator, thank you very much. I appreciate it.
Still hopeful, what senator McCaskill just said, but Martin, I can tell you, as I said many of the colleagues coming out of the meeting that just wrapped up right in there did not have that same assessment, see what happens, back to you.
SAVIDGE: All right Dana Bash, thank you very much.
Let's turn now to Maine senator Olympia Snowe. She says it is time to talk about spending cuts and not limit the talk to just the tax hike question.
Senator Snowe joins us now. Let me start by asking, are you in favor, senator, of raising tax rates on anyone making more than $250,000 a year or are you more prone to the $400,000 figure that's been raised?
SEN. OLYMPIA SNOWE (R), MAINE: Well, you know, I could support that but on the other hand, we want to make sure as well not raising taxes on small businesses and there are some audits in the tax code currently between 250,000 and 400,000 that would disproportionately affect those people as opposed to those who make more than 400,000. They would end up -- paying more in taxes than those earning over 400,000.
But nevertheless, if the bottom line is that we have to do something to extend the tax cuts for those making 250,000 or less, then certainly, I would support that because we should mitigate and allay the fears of the average, you know, American who is worried about facing a major tax increase come the first of the year.
SAVIDGE: Do you think that this battle, if that's what you want to call it so far, has been focused too much on taxes? In other words, other avenues that needed to be explored here as far as saving money, reducing the deficit that Republicans aren't getting a fair shot at? SNOWE: Martin, it starts with the beginning of this Congress that has, you know, basically the last two years, seen historic failure after historic failure regrettably.
SAVIDGE: On both party sides?
SNOWE: On both parties, both branches of government. We are not engaged, wasted time, had recess upon recess, didn't have full workweeks. I mean, the list goes on. And unfortunately, we are in this position today that regrettably imposes a tremendous hardship and burden on the average American. I think there's a serious detachment between Washington and the rest of America, frankly. They deal so casually you we will deal with it next year or some other time, not realizing the affects it is having on that person who is worrying, are my taxes going to go up, enough money to pay for my food budget or gas budget, whether or not I will have a job or whether or not companies continue to invest and to create jobs, let alone laying off people because they -- of the uncertainty that's been created and created and perpetuated by congress. And all of this could have been avoided. We should have been a very different place, address the very questions that you raised.
SAVIDGE: You have been a part of congress, I believe, since is 1978 and as I understand it, this is your last term as senator. You have always been looked at as a voice of moderation here. And I'm wondering how do you look at these desperate hours knew we seem to be in and what does it say about our government?
SNOWE: It's travesty, to be honest with you, Martin. I believe in the maximum folks of the United States Senate and the founding you fathers designed it to be able to create a consensus and reach accommodation across the aisle to put the country's interest first. So, you know, it is a sad truth in terms of where we stand today in terms of our inability to get together and even the most routine let alone the magnitude of the issues that we are attempting to address today and will have to address tomorrow.
So, I'm saddened by it, because I see, you know, the possibilities of what we could accomplish if we were working together and across the political aisle that's what I have done throughout my 34 years. That was part of the decision I made in departing the United States Senate, not because I don't love it but because I do, I want to speak out on the outside and encourage people to do everything they can to make elected officials accountable in realtime to do their jobs.
We shouldn't be in this fiscal cliff today. We shouldn't have had sequestration and automatic cuts. We shouldn't have had the debt controlling debacle, all that was manufactured by the United States congress. And so I'm sanded by where we stand.
SAVIDGE: Can I ask you this is with all respect? Is there a concern that perhaps you're almost bailing at a time when your moderation is needed most?
SNOWE: Well, you know, I think it is important to have centrist voices in the United States sales in the but given the fact that I have spent 34 years in the United States congress, I thought that in looking over the next six years whether or not it would appreciably change, I didn't think so. I thought it was best to contribute my experience and insiders a voice to match the outsider's frustration. And to talk about how it can change and how it used to work. Because I don't see how it changing on the short term, given the partisanship, the polarization, putting the political parties first around not the country's interest first, the outside groups that you perpetuate division. And so therefore, I thought I could best contribute that way. Otherwise, if I thought that I could effect that change here, certainly would be here. I want to make a difference so in is the best way I can contribute.
SAVIDGE: Senator Snowe, thank you very much. It's been an honor, as I say, also troubling to hear. Thank you.
SNOWE: Thank you, Martin.
SAVIDGE: What going over the fiscal cliff means for you, for me, for all of us. We are monitoring the talks on Capitol Hill, the number two senator on the hill, Dick Durbin, joins us next.
SAVIDGE: Let's go back to Dana Bash monitoring developments on Capitol Hill - Dana.
BASH: That's right, Martin. We have been talking to Democrats now coming out of their nearly two-hour meeting talking about the talks are. And we now have the number two democrat in the Senate, Dick Durbin from Illinois. Thank you very much.
Can you give us a reality check of where things stand and more importantly, if you really think that a deal can be done pie the clock striking midnight tonight or even tomorrow night?
SEN. DICK DURBIN (D), ILLINOIS: Well, I can tell you that the original contours that we talked about really present a problem in reaching an agreement. But I understand the conversation is going to continue, as it should, between the leaders in the Senate on both sides and the president. I understand the Republican senate caucus backed off of the including Social Security on this conversation. That is a positive step. I hope now that we can find other ways to find some common ground. We got to solve this problem.
BASH: Now, let's talk about some of that common ground. You have been talking with Republicans, obviously, about the big issue which appears to be tax rates. How far in these negotiations have Democrats been willing to go when it comes to the income thresh followed for tax increases?
DURBIN: I think President Obama is right, that those making less than $250,000 should be protected. The Republicans, of course, want to raise that level so there it will be some higher income categories that receive the same protection from tax increases. As part of a package, overall package, I'm willing t sit down and talk about that personally, only one element. The whole question mark tend is what's fair what will reduce the deficit, what's something we can live with as a nation?
BASH: And let's talk numbers. You are talking about $400,000 a year income level, maybe more. I know Republicans are trying to get more than that.
DURBIN: Of course, they are trying to create a larger class of people protected from increase in the income tax beyond the two percent that would have to pay for --
BASH: What but personally? What could you go for?
DURBIN: I don't want to bargain with myself here around you can't do it in isolation. What you need look at is the entirely litany of things, but got to be willing to give it you know? The nature of this whole process is compromise. There are some things which beyond, we can't go, period.
BASH: And when it comes to compromise, my understanding is that Democrats in these negotiations offered to extend part of the estate tax level is relatively low now you 35 percent, which is big deal to most Republicans and some of the Democrats in your own caucus.
DURBIN: Keep in mind that we are talking about estate tax, one-third of one percent of the people who pass away in America pay this tax, they are the wealthiest people. What we are basically saying is let's be reasonable about it but not really give a reward to the wealthiest again who managed to save up a lot of money and want to avoid paying a low tax on it or some tax on it when they pass away.
BASH: Jut gives me, quickly, your prediction. Do you think by the end of tonight you and your colleagues are going to be voting on the Senate floor on some kind of deal or do you think you're going to fall took what the Democrats' tax proposal is?
DURBIN: Well, it will be difficult to put it together this evening even if we reached an agreement t is more likely to come tomorrow, if we reach an agreement. I think we need to keep working at it the American people know what's at stake here. We have a tenuous recovery. We have more people going back to work now. Businesses are a little more confident. But this is really important. This fiscal cliff is an important element in economic recovery. I hope we can get it done.
BASH: I think everybody out there agrees that they hope you get this done, a lot of frustration out there as you can imagine, I'm sure you hear it as well. Thank you. Thank you for joining us. I appreciate it.
Martin, back to you.
SAVIDGE: Dana bash, thanks very much. As always, we appreciate that insight.
If the government does go over the fiscal cliff, you know what the rest of the world is going to feel it as well. We will tell you how and where, coming up. (COMMERCIAL BREAK)
SAVIDGE: All day I we have been following developments on the fiscal cliff talks.
Right now, Senate leaders at an impasse over tax hikes and they are running out of time. In just two days, those massive tax hikes and spending cuts will kick in.
So, let's go now to Jessica Yellin in Washington. Jessica has been monitoring events at the White House.
And you first reported to us that minority leader Mitch McConnell, vice president Biden, have been in talks and I'm wondering, with no disrespect to the vice president what can he do? What does he bring?
JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Hi, Martin.
Well, he brings more than 30 years of experience on Capitol Hill and an ability to make deals. And you know, Mitch McConnell, the Senate minority leader said he was looking for a dance partner. I guess sort of -- you can think when you get bored dancing with one person, you switch over for a little while and try someone else.
I have just been told that at this stage, it is senators McConnell and Biden and Senator Reid who are now again in the talks, sort of collectively so they are all in discussions broadly. And you know, I don't know, this thing has been dead and alive and dead and alive so many times it is hard to sense where the pulse really is. But the vibe I'm picking up from the e-mails I'm getting now, there is an uptick in enthusiasm ever so slightly at the moment. And some people seem to be a little bit more optimistic that something could come together.
So, the headline, if you can tease it out of me right now is that senator Reid is in the mix. His team is talking to the Biden and McConnell teams and they are all trying to work something out at this point.
SAVIDGE: I'm a little intrigued about the mechanics of how this all works.
YELLIN: Aren't we all?
SAVIDGE: I mean is it phone, fax, e-mail? Do they meet face to face? How does it actually go down?
YELLIN: I'm the blast place in earth, probably shouldn't say that on TV, where the blackberry rules. But there is a lot of E-mail, there is a lot of phone, and you know, our Capitol Hill team is up there and they can see when people are actually meeting face to face and trading paper. There is some of that. But it's a lot -- a lot less of the old-fashioned stuff and more of the phone and the e-mail.
Vice president Biden is at the White House, he is at work. And there have been phone calls between the two -- between McConnell and the vice president and Harry Reid spoke to the president as well. But you know, everything gets done electronically now, that is how it works, answer to your question.
SAVIDGE: All right. Well, Jessica, I appreciate it, blackberry probably does too. We will see.
YELLIN: When the blackberry actually works.
SAVIDGE: Well will see how this all -- how it all plays out and hopefully soon.
Jessica Yellin, thank you very much.
Next, more voices and they weigh in on where we stand in this negotiation process. Stay here.
SAVIDGE: It's crunch time. Welcome back. I'm sorry. CNN NEWSROOM, I'm Martin Savidge.
Its crunch time on Capitol Hill as lawmakers scramble to reach a deal on the fiscal cliff and avoid massive tax hikes from taking effect. Just 31 hours it is now before that deadline.
And here's what we know. Senate leaders have hate snag over tax hikes, specifically, who should get them. But lawmakers are still on the hill and they are ready to resume formal negotiations at any time we are told. Vice President Biden and senate minority leader, Mitch McConnell, are speaking and they trying to work through that impasse.
One topic, two words, dominated the Sunday talk shows today. I will give you one guess but fiscal cliff. Take a look at some of what was said.
SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: I'm interested in getting a result here.
SEN. HARRY REID (D-NY), MAJORITY LEADER: I remain hopeful, unrealistic about the prospects of reaching a bipartisan agreement.
CANDY CROWLEY, CNN CHIEF POLITICAL CORRESPONDENT: Beyond hope, do you think the chances are good?
UNIDENTIFIED MALE: We are not there yet, trying to line up Rubik's cube now, we are not there yet. So, we are going to be meeting later today. This is going to continue any moment until tomorrow.
UNIDENTIFIED MALE: There is certainly no breakthrough yet between Senator McConnell and Senator Reid. But there is a real possibility of the deal. I have been a legislator for 37 years. And have watched how this things work. That in on these big, big agreements they almost always happened at the minute.
UNIDENTIFIED MALE REPORTER: The next 48 hours do we have a deal?
UNIDENTIFIED MALE: No.
UNIDENTIFIED MALE REPORTER: No deal in the next 48 hours?
UNIDENTIFIED MALE: No, I don't think so
UNIDENTIFIED MALE REPORTER: What happens after that?
UNIDENTIFIED MALE REPORTER: Well, I think the American people get experience what the real cause their government is which is one of our problems.
UNIDENTIFIED FEMALE: I think we could put that deal together. I think the leadership is now working. It will probably be an immediate deal. In other words it is not going to solve all the problems forever, but it's going to solve certain problems.
UNIDENTIFIED MALE: What we are seeing here is monumental failure of presidential leadership. The president's the only person with a pen who can sign this and it is the president's responsibility to work on something the house will pass, the Senate will pass and that he will sing. But he is outsourcing this.
UNIDENTIFIED MALE: The president had put serious spending cuts on the table. He and speaker Boehner, a week and a half ago were this close. And then what happened, all of the sudden, speaker Boehner decided to do this plan B. It fell apart and it's leaving us to this last minute.
UNIDENTIFIED MALE: Automatic cuts, defense cuts, domestic cuts, what's going to happen to that with this -- are they going to address that, this deal?
UNIDENTIFIED MALE: I was called by Leon Panetta last night at 7:30 during dinner.
UNIDENTIFIED MALE: Secretary of Defense.
UNIDENTIFIED MALE: Yes. And he said, Lindsey, I have been told that there is not going to be anything in this deal to avoid sequestration going into effect. He says if we do this, it will be shooting the defense department in the head and we will have to send out 800,000 layoff notices the beginning of the year. He is worried to death we don't fix sequestration, we are going to destroy the finest military in the world at the time we need it the most.
SAVIDGE: And there you have it, the voice on Sunday. There is no deal yet on the fiscal cliff. So what does it all mean for you and your money? Well, we will have you back and we will talk about the cutbacks to spending and what it all means to you. We have got the experts to give you some advice. It's our exclusive fiscal cliff roundtable and it's coming up right now on CNN.
SAVIDGE: It is the one issue that affects just before he single one of us, the fiscal cliff. Think of it as, well this way, our economy is in a car headed toward that cliff and there's a lot of stake, including massive spending cuts and social programs and defense, expiration you the Bush era tax cut, increases in other taxes on families like the alternative minimum tax and the expiration of the payroll tax holiday. Plus, there's this to think of, for two million unemployed workers, the loss of unemployment benefits.
So, we have asked some experts to join us for a fiscal cliff roundtable discussion, if you will. Ron Brownstein is a senior -- CNN senior political analyst and editorial director of "the National Journal." He is in L.A. And Stephen Moore, senior economics writer at the "Wall Street Journal" and is in Washington, D.C.
First up, Ron, will, do you think, these politicians reached a deal or not, why or why not?
RON BROWNSTEIN, CNN SENIOR POLITICAL ANALYST: Well, you know, the fiscal cliff was created, really, as a doomsday machine to try to give them more will power to do what they can't do on their own, which was to reach a deal. That is the only reason all of this is here or much of this is here is this is the way they got out the last confrontation on the debt ceiling in the summer of 2011. So, there is every incentive for them to reach a deal.
But you know, as some of your guests have pointed out during the day, a lot can go wrong when you leave is it to this late. And I do not think it is inconceivable that we in fact go over the cliff. It is a little surprising to me that the Republicans don't feel more urgency because we talk about this in a minute, maybe, I fell in most ways, the world on the other side of the cliff, although it difficult for both sides and for the country is worse for the Republicans than it is for the Democrats. So, it's possible they make a deal. It is also possible they go over.
SAVIDGE: All right.
BROWNSTEIN: Stephen has more precision than that.
SAVIDGE: Well, Stephen, I mean, what is your take on this? Are we Thelma and Luis, rocketing towards that canyon?
STEPHEN MOORE, WALL STREET JOURNAL EDITORIAL BOARD: No, you know. You actually just took the words out of my mouth. This is not Thelma and Luis, even if we don't get a deal, Martin, by the stroke of midnight tonight before the ball comes down on Times Square. It is not the end of the world. They will reach an agreement some time in my opinion, in the next two, three weeks. I mean, it will be much better, I think, if it happens in the next 48 hours thank in the next three or four weeks. But it is not like the world's going to come to an end. So, I want the CNN audience to know that.
And I kind of agree with Ron Brownstein, I mean, from a political point of view, I think Republicans may be in a little bit worse shape than the Democrats are if we go past January 1st because then every day, the people are going to be paying higher taxes, the president can blame it on the Republicans. And a lot of this is the reason we don't have a deal is both sides are calculating who, which side they can blame the other on for this cliff.
SAVIDGE: Well, speaking of the president, and Friday, the president spoke from the White House. Of course, using the bully pulpit, and he was pretty firm about senators getting a deal done. Let's listen.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The American people are watching what we do here. Obviously, their patience is already thin. This is deja vu all over again. America wonders why it is that in this town for some reason, you can't get stuff done in an organized timetable. Why everything always has to wait to the last minute. The American people aren't going to have any patience for a politically self-inflicted wound to our economy, not right now. The economy is growing but sustaining that trend is going to require elected officials to do their jobs.
(END VIDEO CLIP)
SAVIDGE: Stephen, let ask you this, this particular moment, who are the members of Congress listening to more, the people, the constituents or the leadership of the respective parties?
MOORE: Well, look. The reason the bill has not been able to pass the house, and as you New York the big hang up here is the president wants to raise taxes on people that make over 250,000 and the Republicans say that is really lousy for the economy and it could cause a double- dip recession if we increase taxes on small businesses and investment.
And so, I do think this isn't small ball. This is about, you know, the ideology of the two parties. The Democrats say they want to soak the rich with higher taxes, Republicans say we don't want to do that and that really is the big hang up right now.
And I do think look, at the end of the day, they probably, we don't know, maybe the end of this day, but the end of the next couple of weeks, going to reach a deal, probably $400,000 cutoff for the higher tax rates and those spending cuts, by the way. Other point we should emphasize is that there's two cliffs here. There are the tax increases that are going to go up on January 1st. But there are also these significant reductions in government spending.
SAVIDGE: Right. And that is exactly my point. We will pick up this discussion after the break. Thank you.
SAVIDGE: OK. There is now, I think you're going to know it three of us, four including me, part of this roundtable as we talk about the fiscal cliff. Joining us is Todd Schoenberger, I let him catch his breath and get seated. But let me get back what Stephen was talking about before we went to break which was the fact that it is not just the fiscal cliff, there are other big issues Congress has to deal with, including a debt ceiling in a matter of weeks. And if we can't get past the cliff, I guess what I'm going to ask you, Ron, is how much hope do we have that Congress can tackle these other huge issues?
BROWNSTEIN: Well, look, I think that's the big story here. I mean, the context with fiscal cliff and all of this has to be seen. It is whether red America and blue America are following mediate their differences and find reasonable compromises to move forward. We know Democrats have won the popular vote five of the last six times for the presidency. They have kind of a structural advantage, I believe, and demographic change. We know Republicans have an advantage in the house because of the way the population distributed. We know for at least the next two years, probably the next four years, we are going to have divide government. None of us are going away. And really, you know, watching the inability to make this deal is ominous for the next two years because it suggests that neither side, but I think probably more of the Republicans, but neither side entirely is fully facing up to the reality of divided government and what that means for having to not get everything you want.
And while Republicans may believe, as Steve said that raising taxes on people over 250 is a mistake, President Obama ran very clearly on doing exactly that, won 51 percent of the vote, 332 electoral college votes, we are probably going to get there the question how much crockery do we break along the way?
MOORE: OK, Ron that's fine. But let's be fair here. You know, we have been negotiating this six weeks, since the election. The president, and when I talk to my Republican sources say, look, the president hasn't put anything serious on the table still on spending cuts, Ron. And I think that's, you're right, both sides have to give a little bit here. But as far as I'm concern, I haven't seen much give on the Democrats' side of the aisle either.
SAVIDGE: But it is the inability to compromise which is the key stone, of course, to democracy.
And Todd, why don't you weigh in on this. What are your feelings when you look forward to with what has to be dealt with by not just this Congress but of course, the 113th congress, which is if you are in numerology, could worry you a little bit.
TODD SCHOENBERGER, MANAGING PARTNER, LANDCOLT CAPITAL: Right. Right. Well, Stephen hit the nail on the head. I mean, when you talk about the spending cuts that actually not even in existence right now. Because right now, it is the top line issue has been about tax revenues and increasing those tax and who it is going to him. Realistically though, those spending are critical because, like you said I Martin, you are looking at a debt ceiling of $16.3 trillion right now and you have to cut back. The big issue though, and what makes all of this so complicated, is that if you do start cutting back because right now, 25 percent of gross domestic product comes from government spending. So, if you do have spending cuts, you have to, therefore, suggests that that is going to reduce GDP, so where is the lift going to come from? So, Wall Street economists are saying, look, we need the spending cuts, but realistically, the economy can't handle itself anyway, and the Democrats are actually using that in their negotiating ploys.
SAVIDGE: So, if you are Wall Street, what would you say the perfect formula to try to resolve this fiscal cliff issue, Todd again?
SCHOENBERGBER: Let me tell you can the tax issue is such a critical thing on Wall Street right now, only because the high nets were set. Everybody knows once you start taxing the rich, anybody that is making 250,000, yes that might seem like rich and middle America. But let me tell you something. A small business owner right now, the guy that has that corner grocery store, the corner gasoline station that is hiring, he is the one passing on that income as ordinary income. So if you hit him, he has more taxes that's less than he can go out and hire.
BROWNSTEIN: Todd, but that's just ludicrous, right? We raise taxes, we raised the rates in 1939 to 39.6.
BROWNSTEIN: We created 23 million jobs the next ten years, cut the rates under Reagan.
SCHOENBERGBER: Different circumstances.
BROWNSTEIN: We cut the rates -- hold on, Todd.
BROWNSTEIN: We cut the rates under Bush, and ten years on today after the tax cuts were passed, there are fewer people working on the day they were passed. The idea that marginal rates the past 30 years is the decisive factor in shaping how the economy grows or doesn't grow is not, simply is not supported by the evidence.
SCHOENBERGBER: Ron, Ron, Ron --
BROWNSTEIN: Circumstances -
SAVIDGE: One at a time here so we can get everybody in.
Todd, respond to what Ron was saying.
SCHOENBERGBER: Look, different circumstances. During the Clinton era, we had great growth going on. You had peace in the world that was taking place. Look, we have to enter two world wars two wars, nobody asks for 9/11, obviously in this country, but we had to go out and you go out and talk about Bush and everything else that happened and the slow growth that occurred and the lower interest rates and everything else. But realistically, we also had to raise our defense budget and everything else that took place. It was a completely different circumstance in the 1990s as it is now.
SAVIDGE: OK, look.
SAVIDGE: Hold on, Stephen. Look. We will take a break. We are going to come back after that and we continue the conversation in a civil way. Thank you.
SAVIDGE: Back with our roundtable discussion on the fiscal cliff and your money. Ron Brownstein is CNN's political analyst and editorial director of "the National Journal." Stephen Moore is senior economics writer at the "Wall Street Journal" and he is in Washington. And joining us I New York is Todd Schoenberger. He is from LandColt capital.
Stephen, earlier, we aired a poll showing that most Americans want both sides to compromise, probably not a big surprise there. More than 60 percent say, compromise. So, why can't Republicans and Democrats get their act together and compromise?
MOORE: Well, I think this previous discussion we were just having is kind of an example of what's happening in Congress is, you know, Democrats, liberal Democrats really believe that taxes don't matter around they can continue to raise them as high as they want. I happen to think they are critically important. I think it is insane to be raising taxes on investment and businesses right now I think. It will make America less competitive and destroy jobs in this country.
But the point is you've got a big philosophical difference of opinion on these things and they are not small matters, they are big matters about the direction of our country for the next 10, 20 years. And that is why, the outcome of this - look. It's one thing to get a compromise and an agreement. But if it is an agreement that laid the country in the wrong direction, that doesn't benefit anyone.
SAVIDGE: So, Ron, what do we make of this thing? If we are so passionate in our position and unwilling to give, where do we go from here?
MOORE: Look. There is a structural, you know, structural point you can add to what Steve said, which is exactly right. It is not small ball. It is a big difference. And in the House, you have Democrats, by enlarge elected from districts that also voted for President Obama, Republicans, almost of them elected in districts voted against President Obama. In the house, more sorting, you have fewer legislators, in either chamber who are elected from places that usually voted for the other party for president. So basically, you have a consistent line of kind of political direction. You have Republicans from constituent says that really aren't looking for them to compromise overwhelmingly, looking for them to compromise, the Democrats the same is. The problem is that while that make senses for any individual legislator, it is no way to run a country divided. And I would just say that in the end, both sides do have to give. I mean, Democrats have to look at more entitlement changes the long run because if there are no other reason it will squeeze all out the discretionary spending, which is the investment in the future that they prefer.
So, Republicans, I think, also have to kind of understand that we did have an election focus very heavily on this issue of whether we were going to tax people at the top more. President Obama did win 51 percent of the vote. That is almost certainly going to happen. But as I say, the problem is for each individual politician, there is less incentive to compromise because their constituency leans more heavily toward one side or the other. When you add all that up though, it does produce dysfunction in a country that still structurally closely divided.
SAVIDGE: And also, still trying to climb its way out of a horrible recession.
And Todd, so, what do you think the reaction on Wall Street tomorrow morning, the last trading day of the year is going to be? What do we brace ourselves for? Because that's what I worry about, the economy and the many people whose jobs are really hanging in the balance.
SCHOENBERGBER: That's right. And we have the all raw jobs report coming out just this Friday as well. But Wall Street, right now, short term it is going to be chaotic. I mean, we saw it in the final hour of trading on Friday, when you had a number of "headline news" stories coming out of the White House based on a meeting that took place as well as the president's comments starting around 3:30.
Wall Street does not like this. They clearly don't like the idea of jumping off the cliff. But when you start incorporating higher taxes and even though spending cuts that I mentioned before that will take a hit on GDP, none of this is good right now for Wall Street. So, expect rough sledding going ahead tomorrow.
SAVIDGE: Stephen, what do you think is going to be the final deal that the Republicans will accept?
MOORE: You know, I think what's going to happen, the likely outcome have some kind of income threshold, you know, for these higher tax rates because Ron is right. Look. The president won the election, and therefore, he has got the upper hand right now in this. And I think you might see a deal, 400 or $500,000 cutoff in terms of who is quote, "rich in this country." There might be some deal on -- don't forget, I almost forgot to mention this. We also have the alternative minimum tax. That's a tax that is going to hit 26 million people. So, I expect a deal on that.
But I also think that the Republicans want to go forward now with these spending cuts. And I don't think that the automatic spending cuts will go through until we reach this, you know, broader deal that Ron was talking about that is going to come later in the year.
SAVIDGE: And Ron, do you think that we will get the deal done?
BROWNSTEIN: I think in the end they will find a way for taxes not to go up on everybody. But you know, as I say, when you get this close to the end, things can go wrong. The other point though is, it is very clear in the last 24 hours, Republicans are gearing up for another big fight for the debt ceiling increase in terms of trying to use that leveraging it further and the spending reductions and the president says he will not play. So, as difficult as this is, we could be back in two months.
MOORE: This is act I, right?
SAVIDGE: That is what I do see in a couple of weeks that we think that we have dodged a bullet here and got it over with, but it is only going to return and maybe come back fervently.
MOORE: That is right.
SAVIDGE: Because there could be some anger that now transitioning into the next topic.
Todd, real quick here, if there was a temporary fix, what would wall street think of that? Is that worse?
SCHOENBERGBER: That is, actually, that is much worse because one thing, it elevates the level of uncertainty that Wall Street hates.
SCHOENBERGBER: And second of all, it really just for long speaking, also expects probably ratings downgrade immediately and talking about Wednesday or Thursday from a company like S&P. We already had that before. So realistically, S&P is not going to be happy about anything like this, and that is the last thing that the country really needs.
But also, another thing is that Wall Street definitely wants some type of a complete deal. And realistically, guys, I mean, we are at the last hour here. For them to actually have something that is done and then negotiated it and debate it more; I just don't see it happening. And I don't think that anybody on Wall Street is either.
SAVIDGE: OK. We have to call it there. I want to say thank you so much to Todd Schoenberger, Stephen Moore and Ron Brownstein. It was a great discussion and we greatly appreciate it. The time is testy, but it show we will see what it does to us. Thank you.
SCHOENBERGBER: Happy New Year.
SAVIDGE: Thank you.
MOORE: See you soon. Happy New Year.
SAVIDGE: What message is this last-minute battle over the fiscal cliff sending to the nation? Young people and college student says it might change her career path. She and some of the others sound next.
SAVIDGE: Regarding the impending fiscal cliff, we heard a lot of voices coming in a Washington. Now, it is time to get for the boss. What I mean by that is essentially the American people and they are pretty angry.
Josh Levs is covering that part of the story and he joins us now - Josh.
JOSH LEVS, CNN CORRESPONDENT: Yes, we are seeing a lot of that, a lot of frustration, a lot of that is anger, and honestly, that is a big part of the story in the country right now. We are following closely, every development and reading the tea leaves as best we can at a Washington. But the fact is that around the country, mounting frustration, mounting concern, about what could happen to you and your taxes and a lot of people are sounding off. We have been getting a lot of videos today and iReport. Take a look at this one.
(BEGIN VIDEO CLIP)
VALERIE STAYSKAL, CNN IREPORTER: My message to all of Washington for the New Year is partisanship aside and working handicap of 100 percent of the voters, fixing this mess that you have gotten us into. And bring a balanced budget to the table to grow this economy for the long term and not the short term.
(END VIDEO CLIP)
LEVS: And if all the videos, this one struck me today because he got me thinking about young people in this country and what message are Congress is sending to the young people today. This is an 18-year-old that is going to George Washington University who really wanted to work in government some day and is now thinking of giving up on that dream, because she is so frustrated, and this is a little piece of what she says.
(BEGIN VIDEO CLIP)
SHANNEN BAZZI, IREPORTER: My new year's message to Washington is that the entire fiscal cliff problem is not just an isolated incident. It represented of how partisanship and polarization has taken over congress.
(END VIDEO CLIP)
LEVS: That is just the beginning of it. Now, throughout the day, I want to let you know, we have also been reining you so close from people who say they would like us to go over the cliff. I brought you some of those in the last hour, but by and large, very, very few of those.
I want to show now, I haven't gotten to Twitter yet today through all the - as we have been doing about this. Take a look at the tweets here.
This is from Dorothy Schoenberger: "I will never vote Republican again. She is holding Republicans responsible in my view."
Take a look at this next one her. "Even my kitty cat could solve this fiscal cliff. But your problem is better than congressman." There is kind of anger and frustration that people are venting towards today.
Let's go to a few more of these tweets up.
From Randy Christian Lee: "Our founding fathers are turning over in their graves. Come 2013, things will never be the same in this country."
Now, I do want to let you know, that if we are to go over the cliff, it will not be overnight or massive and drastic, so don't worry about some of those nightmares there. That is it. These are serious fiscal concerns that we breakdown for you.
Couple of more here. "Stop blaming the politicians, blame the voters who put them all back in and expected a different result than the last four years." That is from Marc on Twitter.
We got time for one more before we go here. This is from Lou. "Congress, big bunch of babies, wait for the last minute to look like a hero and continual joke."
I will tell you that we are hearing from a lot of people, and there is no doubt, Martin, that what people are saying today is resonating all over this country. A lot of people are sharing the frustration. So go ahead and tell us what you think. Send us your iReports to iReport.com. Join the discussions on Facebook and Twitter to josh levs@CNN.
And if you think among the people out there in this country who think that maybe we should go over the fiscal cliff, that it will be good for the country, its deal with necessary cuts, then we want to hear from you as well. All sides are welcomed.
But Martin, there are so far very, very few voices who think that what is happening is OK. A vast majority of the people say we have absolutely got to bring this to an end and have a resolution by the end of the New Year's.
SAVIDGE: Well, it is very nice of you Josh to have this sort of America's venting point and they can speak to you about how they fell. Thanks very much. We appreciate it. It really is good to hear.
LEVS: Yes, you got it.
SAVIDGE: Well, let's take a look at some other news and what is ahead for the coming week.
Monday, playboy father Hugh Hefner is slated to ready to get married again. The New Year's nuptials are to his girlfriend who is 60 years younger than him. Crystal Harris, you remember called off their first wedding at June 2011, just days before the ceremony. But now, she say, she's is ready to settle down with her 86-year-old boyfriend. Tuesday marks the end of the end, and with that 400, yes 400 new laws take effect. Many of them deal with social media, health care, education, gay rights and child safety.
On Thursday, it is time to make up your mind on the gift that you are not in love with. That is right, it is national returns day. More than half a million gifts are expected to be returned by the U.S. postal service alone and others are bound to be re-gifted it ends up. You know who you are.
And on Friday, the December jobs report comes out, the all-important number will have an effect on Wall Street and could have an impact on the president's job approval rating.
That'll do it for me. I'm Martin Savidge. Remember, you can find me on Facebook. CNN NEWSROOM continues right now with Don Lemon. Have a great weekend.