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On the Edge of the Fiscal Cliff; Fiscal Cliff Talks at Standstill; Congress Will Meet again Tomorrow; Averting a Fiscal Cliff Scenario; Averting the Fiscal Cliff; Price of Milk could Shoot up

Aired December 30, 2012 - 19:00   ET

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


(COMMERCIAL BREAK)

DON LEMON, CNN ANCHOR: Hello, everyone. Don Lemon here, live at the CNN World Headquarters in Atlanta.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDET: And I'm Ali Velshi at CNN in New York.

LEMON: And tonight Ali and I it's a special with us. Our nation is perched on the edge of the fiscal cliff and we're keeping a close watch on negotiations to prevent economic disaster.

VELSHI: Now we're going to spell out what those talks could mean for you and if lawmakers fail to reach a deal what the fallout is going to be for you and your wallet.

There you're looking at some pretty pictures, Don, of Capitol Hill. I don't know if the scene is all that pretty but the pictures are.

LEMON: The lights are on, the question is Ali, anybody at home? Because despite what seems to be a bitter stalemate between Democrats and Republicans on the fiscal cliff, we have learned, you know, of a bit of a change this evening with the negotiations. For one, we have learned that the Senate will reconvene tomorrow at 11:00 a.m. That means no decision tonight.

But we've also learned that Senator Mitch McConnell, the Republican Minority Leader, has had conversations directly with Vice President Biden. McConnell had been working previously with Senate Majority Leader Harry Reid, but he and Biden have gotten things done when working together in the past. Can they do it now?

Let's go to our senior congressional correspondent Dana Bash. So Dana, what do you think? Is it promising? Can they go it now?

DANA BASH, CNN CONGRESSIONAL CORRESPONDENT: Well, let's start there. It certainly has happened before between these two men. And it's happened before when Democrats on Capitol Hill are either split or have gotten, frankly, just too frustrated with their Republican counterparts to have conversations to be able to find bipartisan agreement. These are the two men who negotiated an extension of the Bush era tax cuts for two years. That happened two years ago when Republicans had a lot of political capital because they just won the - won the House in a big way. Whether or not these two men are actually going to be the ones to strike a deal, we're not sure, but we are told, our Ted Barrett and Jessica Yellin and I are told by multiple sources, that it does seem that at this point, at this late hour, the talks are primarily centered around and between these two men, between Mitch McConnell, the Senate Republican leader and Joe Biden, the Vice President.

Harry Reid, the Senate Democratic leader is certainly very -- very well-informed. He's kept apprised of what's going on just as the House Speaker on the other side of the Capitol is as well but these two men are probably hopefully going to work late into the night, maybe early into the morning to see if they can come up with some way -- let's put this in real terms for Americans, some way to avert the taxes for every American going up in a big way starting tomorrow night.

LEMON: So it's no burning the midnight oil for the Senate because they're gone and Congress now, do we know?

BASH: The Senate has decided to formally -- the Senate Majority Leader Harry Reid said about an hour ago that effectively there won't be any votes tonight. So the hope for getting a deal today that the Senate can vote on which was the hope even going into the day, that's not going to happen. In fact, the House, they brought people back for a vote tonight just to have people here in case the Senate could vote on something that they could send over to the House.

None of that is going to happen right now. The Senate is not going to come in for any votes until 11:00 a.m. tomorrow. That is just 13 hours before the clock strikes midnight so they are certainly cutting it close.

Not a lot of -- certainly a lot of pessimism in the halls here, a lot of tension, a lot of anxiety. A lot of frustration and certainly that frustration is not just within the walls and halls of Congress. It's coming from outside in a big way.

LEMON: Dana Bash, stay tuned or we'll stay tuned to you. Thank you.

BASH: Thanks, Don.

VELSHI: All right Don. Congress has decided not to burn the midnight oil tonight. We've been seeing people leaving. Dana has been watching them leave. The question now is there's one more day, tomorrow. Is tomorrow going to bring any change?

By the way, this has got to get through the Senate, it's got to get to the House. Senator Mitch McConnell says interestingly, something must be done.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R), MINORITY LEADER: The consequences of this are too high for the American people to be engaged in a political messaging campaign. I'm interested in getting a result here. I was here all day yesterday. As I indicated, we submitted our latest proposal at 7:00 p.m. last night. We're willing to work with who ever, whoever can help. There's no single issue that remains an impossible sticking point.

(END VIDEO CLIP)

VELSHI: Wow. Wow. John Avlon, Senator Mitch McConnell was here all day yesterday, all day yesterday. They worked to try and get a deal. Let me just tell you, there are two parts to this thing, there are two parts to the fiscal cliff. The two biggest parts are one, the -- the sequester, which only came into existence because of this stupid debt deal that they couldn't do in August of 2011.

So we have had 516 days notice on that. And the other part of it is the expiration of the Bush tax cuts which came into place at the beginning of the year 2001 with the understanding that they would go on for ten years and expire and then Joe Biden and Mitch McConnell extended them for this deal that extended them for two years.

Ok so half of this thing we've had 12 years' notice on and the other half we've had 516 days' notice on, but guess what? Mitch McConnell and his buddies worked on Saturday. Wow, wow, that's fantastic.

JOHN AVLON, CNN CONTRIBUTOR: Yes -- yes it really -- it's touching, isn't it?

VELSHI: Yes.

AVLON: Just a little working weekend at the end. A nice long Christmas break the House we -- you know disappeared for the holidays after Boehner's Plan B failed. Where is the sense of urgency? Everyone is home at night and hopefully we're all putting our hopes on McConnell and Joe Biden having a productive dinner, but by God, to your point, this has been going on for not just weeks or months, but years.

And the fact that they're trying to cobble together some kind of patch to avoid the political pain and the economic pain more importantly to the country that's set to kick in tomorrow night at midnight is frankly, pathetic and it's a political problem, but it's an economic problem and it's entirely self-created. When Marshall Blackburn was talking earlier Ali and she was trying to blame the Senate, I mean I just -- look at the mirror. I mean, don't look at the other guy right now. You've to own this --

(CROSSTALK)

VELSHI: Yes.

AVLON: And if your colleague -- particularly in the House of Representatives because it's the Republicans in the House that have been the biggest stumbling block. We got 98 percent agreement, both parties and the President agree that 98 percent of Americans shouldn't have their taxes raised day after for tomorrow and yet we are stalled. (inaudible) agreement this should be a no brainer.

VELSHI: Ok so let me -- let me talk about consumer confidence. You and I spent a lot of time before the election riding around the country talking to people about how they feel. Some people don't really like politics. They'd rather do without it. Some people don't really like the economy even though you got to live in it.

AVLON: Yes.

VELSHI: But everybody -- but what we feel and how we spend dictates how well this economy goes.

AVLON: Sure.

VELSHI: Consumer confidence is something that's been riding higher and higher. And I'm just going to ask our control room to put up a chart of consumer confidence going back about half of this year. It was going higher and higher and higher, and then right around October we started to see it soften a little bit and then go down lower and now people are starting to give up a little bit.

You'll have seen spending of the holiday season will come out a little weaker than expected. That's really what drives our economy. And -- and that's what people are feeling.

So -- so John, when people tell me how much am I going to pay more in taxes, that is important. There's no question. We don't have $2,500 or $3,500 extra in most households to give up. But that's less important than the fact that people are starting to not think things are as good as they were.

AVLON: That's right and you see that particularly over the last month in consumer confidence. You know what -- that S&P's decision to downgrade us where they specifically cited a year ago plus with the debt ceiling debacle, when they said -- cited an atmosphere of partisan brinksmanship making the decision-making process less predictable, less stable than previously thought -- that's what the American people are internalizing with those consumer confidence numbers.

They're looking at Washington play chicken with the fiscal cliff and they're saying, hold on, we have this economy seems to be gathering some steam but Washington, government, Congress in particular is the single greatest impediment. So they're pulling back. It's a rational reaction to this division and dysfunction in Washington D.C.

VELSHI: Yes. Get the act together. John Avlon, thank you, my friend.

AVLON: Yes you too my friend.

VELSHI: Don, there's a lot of intangibles here, Don. This is the -- this is the thing we have to think about. It's not just the tangibles of how much your taxes might go up or how much this might go down. It's the intangible of confidence. It's trust. You lose somebody's trust, how long does it take to get it back.

DOBBS: Yes.

VELSHI: It's not a light switch it doesn't just come back tomorrow because you vote on something.

LEMON: And here's I can't believe Mitch McConnell was there all day yesterday.

VELSHI: It's crazy.

LEMON: Can you believe that?

VELSHI: Yes.

LEMON: He's working on a Saturday. I never work on a Saturday. Oh wait a minute, I work every Saturday.

VELSHI: You work every -- you get your job done. You don't get to tell your bosses, I'm going to do this another time. I'll get down to it in 516 days.

LEMON: But one day, Ali, one day I will be able to do that, at least I'd like to think that.

Ok moving on, at the edge of the fiscal cliff, will the economy get sucked back into a recession or is a compromise possible? Words of wisdom from a "Wall Street Journal" senior writer right after this break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We hear plenty of chatter from pundits that Democrats and Republicans need to come together. Let's get real. President Obama has already given a lot more ground than the Republicans have. So my advice to Senator Reid and President Obama would be to stop trying to negotiate with Republicans who, like spoiled children, have no interest in compromise. Remember who won the election?

(END VIDEO CLIP)

VELSHI: No vote tonight on the fiscal cliff. What are the chances of lawmakers cobbling together a compromise tomorrow? Would real pain start to hit everyone in the form of tax hikes and spending cuts? What other options do lawmakers have as a last resort?

Stephen Moore joins us from Washington. Stephen is a senior economics writer with the "Wall Street Journal." He writes op-eds. He's involved in the opinion pages. He's also a co-founder of the organization called "Club for Growth", which has really been at the forefront of fighting tax increases across the board.

So, you know, sometimes, Stephen, on TV we talk about Grover Norquist and a lot of people really don't like him. They think he's responsible for this. You actually think that Grover has got the right idea. You've got colleagues in the Senate who you worked with in the -- in the House of Representatives.

STEPHEN MOORE, SENIOR ECONOMICS WRITER, "WALL STREET JOURNAL": Yes.

VELSHI: So now we're at this place where you and I have talked about this endlessly for many, many, many months.

MOORE: Right.

VELSHI: And we both sort of went into the last few days thinking they're going to get a deal, they'll do it. It will increase some taxes on the rich and we'll -- we'll figure out probably a number. I think both of us put forward that it probably about $500,000, the threshold. Were we wrong or what?

MOORE: Well, you know, Ali, I love you, but I don't want to spend New Year's Eve with you and we may be doing that. You know I don't know. I mean I -- look, I still think -- I have been saying this you know for the last three weeks, there's going to be a deal at the 11th hour.

Now I'm not quite as confident as I was 24 hours ago, but, you know, I mean, as you and I have talked about many times, there are some deep philosophical disagreements here about taxes, about how much the government should be spending. I listened to that you know the gentleman who said President Obama won the election so he should get his way, but the Republicans say, look, we won the House. I do want to see a deal done. Partly -- and by the way, I don't want to see taxes go up, Ali. You know that. I think it's bad for the economy --

VELSHI: Yes but you also generally agree -- they are -- I mean, if there was going to be a deal, they're going to go up on some people.

MOORE: Yes. Look, taxes are probably going to go up on the rich because President Obama did -- you know, he went around the country saying if he was re-elected, that's what he would do. But you know, as I told you many times, even if we don't get a deal here in the next 24 hours, this is not Thelma and Louise. This is not -- this is a slope, it's not a cliff --

(CROSSTALK)

VELSHI: Right.

MOORE: -- that's going to cause a crash in the economy. I do think though, it looks bad for the country. I mean, it looks -- it's beneath us to go into this New Year not knowing what the tax code is going to look like, what kind of spending cuts are going to go in. I mean, this is politics at its very lowest.

VELSHI: Yes all right. So let's talk about a week ago one of the things that you and I both thought look I thought it was a bit cynical that -- that John Boehner would put forward this Plan B. It sort of showed a lack of faith in his negotiations with the President but he did put forward a plan that would increase taxes on those earning a $1 million or more per year and Grover Norquist to whom everybody has signed this pledge, this "never increase taxes" pledge, actually looked it over and said, that's all right. I can live with that.

So he gave these Republicans cover to vote in favor of this thing, and they didn't. What on earth is going to make these hard line conservatives happy?

MOORE: A lot of them just don't want to in good conscience vote for a tax increase on anybody, and I respect that. I think if you get a deal, Ali, you're probably going to get a deal where Nancy Pelosi and the house is going to have to produce a hundred or so votes from her caucus because, you know, you probably got at least 50 House Republicans who just don't want to vote for any tax increase.

But look, you could cobble that kind of deal together and I think that's, you know, if there's any chance of this getting done by this time tomorrow, it will be that kind of deal where you maybe get 70 votes in the Senate, you know, Democrats and Republicans alike, and then you get maybe 100 Republicans and a few more Democrats than that that put it together in the House.

But here is the point. I mean we got these big fiscal problems, and this is -- Ali, we're going to be talking about this for a year no matter what happens with the short-term deal because we still have the debt ceiling, we still have to have a budget deal on the spending. So we've got a big financial crisis on our hands, and this is, unfortunately, just act one.

VELSHI: The sad part is we don't have to have anything that looks like a financial crisis. We could actually have a good economy.

(CROSSTALK)

MOORE: All right. Now let me say one thing --

VELSHI: That's the problem.

MOORE: Let me say one thing about this issue of the debt downgrade. I don't put any credence in the S&P and the other bond rating agencies. I mean look what happened -- when was it, about a year and a half Ali that --

(CROSSTALK)

VELSHI: A year and a half ago, yes.

MOORE: Yes. What has happened to the bond interest rates? They've gone down. All right.

(CROSSTALK)

VELSHI: Ok. So here's an interesting thought. The lowering of the borrowing cost for America has come down. Absolutely right.

MOORE: It's gone down. Right.

VELSHI: But you know why? Because everybody else is worse off than we are.

MOORE: Well, that is true, but I'm saying if there was a huge crisis and people thought that the federal government was not going to repay its debt -- I will say this loud and clear to your listeners and your viewers, I do not believe there's any scenario in the next 10 or 20 years that the United States government does not repay its debt.

VELSHI: Right.

MOORE: I mean we are good for our debt and I think this idea that this kind of fear-mongering that the U.S. is not going to repay its debt obligations and the full faith and the credit of the United States government, we're not going to give that up. We are not.

VELSHI: That's a very valid point. You believe we need to get spending under control. We don't need to raise taxes --

MOORE: Yes, absolutely.

VELSHI: -- but you don't want to do it on the back of fear-mongering that is responsible and I appreciate that.

And Stephen, I love you, too, and I really do hope that you and I do not ring in the New Year together.

MOORE: Me, too, but have a happy one anyway.

VELSHI: Thank you, sir. Good to be with you.

(CROSSTALK)

VELSHI: Don, you and I might.

LEMON: What is wrong with Stephen, Ali --

VELSHI: Yes.

LEMON: -- you're a cool guy. Why wouldn't Stephen want to spend New Year's with you? I don't understand that.

VELSHI: I agree. And you know what, the three of us might just be spending New Year's together so let's not speak too soon.

LEMON: You're alas, right. Stephen, I have seen you everywhere. I turned around you were on two networks at once and then you're on the third network after you were off the other one.

MOORE: You know, I was supposed to be skiing today. I actually skied this morning and rushed back, but I know one casualty of the fiscal cliff and that's me.

VELSHI: There you go.

MOORE: Nice to be with you guys.

LEMON: And a lot of people. Thank you, thank you.

So the Senate won't vote tonight. House Speaker John Boehner says his side of the Capitol can't solve this crisis. Starting to look pretty hopeless in Washington, maybe a member of the House can give us a reason to be optimistic. Chris van Hollen is a Maryland Democrat, a member of the party's leadership. There he is, Congressman, do you believe that we're going to go over this cliff, yes or no?

REP. CHRIS VAN HOLLEN (D), MARYLAND: I still think we have a 50/50 chance of averting the cliff. I thought the odds were a little higher this morning, but, look, obviously the clock is winding down. What we do know is negotiations are ongoing. There was a big road block earlier today with the so-called chain CPI issue, but that seems to have been put aside.

So we'll have to see, but, again, the fundamental issue has been the same throughout this process which is that our Republican colleagues are trying to do everything they can to prevent higher income individuals to pay a little bit more to reduce our deficit, and that's what's been going on for the last six months. That's what the conversation in the election was all about, but here we are.

LEMON: Can you walk us through this? Because you said the chain CPI -- now I was told that that was off the table. Is it still on the table?

VAN HOLLEN: No. What I'm saying is a little earlier today I would have said that the odds of an agreement are very low because Mitch McConnell, the Republican leader, had put that into the talks. That apparently is no longer part of it as you say.

LEMON: Ok. Walk us through this, what's happening right now. Are we at 250, are we at 400? What are we doing with unemployment? What's going on?

VAN HOLLEN: Well, again, there's -- no one has agreed to any particular threshold, whether it's 250, whether it's 400. Unemployment insurance is something that is an absolute requirement. The President has said and I totally agree that it's important that folks who are out of work through no fault of their own continue to get help. It's not just good for their families but for the whole neighborhood and the local economy.

One of the big issues in the Senate has been a Republican demand to try and get a very sweetheart estate tax break, an inheritance tax break for the very wealthiest. We're not even talking about the top one percent. We're talking about a fraction of one percent.

We're talking about providing 7,200 estates next year, these are couples with estates of over $10 million -- there are about 7,200 estates in the country in 2013 that would fall into this category, providing them with this windfall tax break of an average of $1.2 million. So it's part of this continuing effort to hold the country and hold middle class taxpayers hostage to try to extract these extra tax breaks for the very wealthiest.

LEMON: Congressman, listen, I understand what you're saying. For the average person who is sitting at home watching this, they're saying, you know, these people are coming on, these guys are coming on at the last minute from both parties and they're spinning. They're spinning, they're doing their thing, and that's what you do. But everyone wants to know regardless of where you are right now and what you know, the CPI and the unemployment and all of that, that that should have been resolved a long time ago. Why is it that we're at the final hour, and you're saying it's the Republicans' fault? The Republicans are saying it's the Democrats' fault. Why are we at the final hour and we're -- I'm sitting here on television talking to you about this? It doesn't have to be that way.

VAN HOLLEN: No, it doesn't have to, and it shouldn't be, and I think the American people are actually following the facts of this conversation very closely and I hope they will because I know it's easy to take the line. Look, it's a pox on all their houses. I just encourage people to look at the facts.

I mean it's a fact that as we speak, Republicans in the senate are trying to get this $1.2 million average tax break for 7,200 estates in the country next year. That's a fact. That's not spin.

So the President said it best this morning. We had a national conversation about this. It was called the election. The President couldn't have been clearer, and the reality is that there are lots of people in the Congress, especially in the house, the Republican caucus, who just don't accept the fact that the President won talking about these very issues, saying that we needed to take a balanced approach as a country, that we need to country with the cuts, and we've done over a trillion cuts already.

The president has said he'll do another $1.2 trillion in cuts but he also believes that higher income individuals should pay a little bit more so we don't ask folks who are on Medicare with a median income of $22,000 to see a big increase in their burden. So it's about shared responsibility. So I would just encourage you and everybody in the media, too, because it is easy to point fingers -- just look at the facts.

LEMON: I'm not pointing fingers here. I think we're trying to just get to some (inaudible) and some answers here. And I understand what you're saying about, you know, people won't accept the outcome of the election. I get that. But the people in Washington who the President is fighting against did not vote him -- the American people did it.

This is something that the American people were doing and we were deciding on what should happen in a voting booth, that would be different but you cannot really use this argument because these are the people who did not actually elect the President of the United States and they happen to be lawmakers who he has to come to some sort of compromise with.

VAN HOLLEN: In the House we're not even asking for their votes in support of the President's plan. We're simply asking for the House of Representatives to have a vote on the President's plan. After all, in the Senate, which is Democratic controlled, they had a vote on the Republican plan to extend tax breaks for everybody, including the wealthiest. It was voted down.

All we're asking for in the House, we're not asking Speaker Boehner to agree with our position. We're asking him to have a vote on it here in the house, and we believe that there are enough Republicans, and many of them have been public about it, who would join with Democrats for a majority vote. So we're not trying to, you know, insist that they see the world a particular way.

We're just saying allow the democratic process to work its will. After all, Speaker Boehner had been engaged in these conversations with the President. He decided to abandon that process. He came to the House and he asked his Republican colleagues for a vote on his plan, and his own colleagues said no. So what we're asking for is just a vote on the President's plan. If it goes down, we'll have to live with that, but why not have a vote?

LEMON: All right. Thank you, Congressman. I have to get to break and thank you very much for coming on.

VAN HOLLEN: Thank you.

LEMON: Appreciate it. We'll be right back.

(COMMERCIAL BREAK)

LEMON: Fiscal cliff, not the only deadline pressing on Congress today. A five-year farm subsidies bill that expired in September was never renewed. House and Senate members did develop an extension designed to prevent some food prices from going through the roof in January. The Secretary of Agriculture tells CNN lack of a farm bill could hit you right in the refrigerator.

(BEGIN VIDEO CLIP)

TOM VILSACK, U.S. SECRETARY OF AGRICULTURE: Well, if you like anything made with milk, you're going to be impacted by the fact that there's no farm bill. Because if there's not an extension of the existing bill or a new bill basically on January 1st or shortly thereafter, permanent agriculture law goes back into place, 1949 law, which basically means that the government, the federal government, will go back in the business of strongly supporting -- and I mean strongly supporting -- the dairy industry by raising the price support if you will, or support for dairy products to $38 a hundred weight that's almost double what the price of milk is today.

(END VIDEO CLIP)

LEMON: If the House decides to take up the bill today, the full Congress could vote on it tonight.

President Barack Obama said he was optimistic a deal on the fiscal cliff could be reached -- that might have been a mistake. Ahead, more on the fiscal cliff and the dwindling hope that a deal can be reached. It's all part of our special coverage of the fiscal cliff crisis with me and Ali Velshi.

(COMMERCIAL BREAK)

LEMON: There he is, Mr. Ali Velshi. Are you done with your slippery chicken?

VELSHI: I've cleaned the plate.

(LAUGHTER)

LEMON: Ali, have you no shame, young man?

VELSHI: No. I'm sticking with this thing until it is done.

LEMON: Yes.

Well, I just got my big glass of ice water here and I may have to get some dinner.

VELSHI: You're a healthier eater than I am.

LEMON: No. If you knew what I ate this holiday, I'm surprised I can even fit on the screen.

Let's get our viewers up to speed on the talks that prevent the looming fiscal cliff, Ali.

VELSHI: All right. With the financial fate of the nation in the balance, the Senate is going home.

That's right. No vote tonight on the Senate side. The chamber will reconvene tomorrow at the bright and early hour of 11:00 am Eastern.

LEMON: Oh, my gosh.

VELSHI: Yes, 11:00 am. I would have thought they might have gone home for a few hours, had a shower, and come back to work. With just 13 hours until the deadline they will reconvene. The House, of course, is waiting on the Senate. So nothing is getting done there. If you bet that this would come down to the wire, you were right.

LEMON: Gosh, they have to get up before the crack of noon. I can't believe it.

VELSHI: I know.

LEMON: Of course, not everyone on Capitol Hill will have an early bedtime. Republican Senate leader Mitch McConnell already working with Vice President Joe Biden on a deal, Ali. Talks between the two parties could continue late into the night, I guess, but with each minute that passes, our chances of avoiding this fiscal cliff, well, they become slimmer and slimmer and slimmer.

VELSHI: Well, except they better get something done. Because if they don't get something done, just about everybody will have a tax increase and see spending cut in -- starting January 1st. Now what is preventing lawmakers from reaching a deal?

Representative Jack Kingston is a Republican from Georgia. He joins us now from D.C.

Congressman, good to see you. Thank you for being with us. Let's just discuss this for a minute.

You know, taxes, whether taxes should go up or not is an interesting concept, because some people are just religious about it, right? We talked to Steven Moore, we talked to Grover Norquist, we talked to Pat Toomey. Some people just think taxes should never go up on people. Others think that if you increase taxes it will hurt the economy. And that may actually have some truth to it.

But there's a tone deafness out there that has now superseded all of this, Congressman, and it is -- you know, we just heard Mitch McConnell -- I don't know why people say things like this, but they make people wonder about legislators -- saying on the floor of the Senate, "You know, I worked all day Saturday to get this thing done."

There's been -- -- there's been -- I can't say this enough times. You have had 516 days to get this done and you have had 12 years to deal with the Bush era tax cuts.

What's the problem?

REP. JACK KINGSTON (R), GA.: You know, Ali, I can't agree with you more. We actually passed a budget in the House back in the springtime, passed it to the Senate. The Senate was unable to pass a budget at all. They actually voted down the president's budget 97-0.

So while the Democrats are talking so much about the president's leadership, they did not support him back in the spring.

In August the House passed a continuation of the current tax rates, a bill which the Senate could have taken up in August, amended, changed whatever level they wanted, sent it back to the House. We could have started back then.

And then as late as a week ago we passed another bill dealing with sequestration, and the Senate hasn't taken that up.

So the fact they're working Saturday, it's a good thing. Maybe they should have worked Christmas Day as well. But, you know, we're here right now on the floor of the loanme (ph) in the Capitol, the Republican House members are meeting to talk even more (inaudible) --

VELSHI: Congressman Kingston --

KINGSTON: -- see what else we could do.

VELSHI: -- you paint such a -- you paint a picture that's going to make my viewers want to come out and hug all you congressmen for all the hard work you're doing and the solutions you're trying to find.

A week ago -- a week ago your caucus couldn't even agree on putting your leader's bill to a vote, the so-called plan B that would increase taxes on the top -- I don't know, puny percentage of a percent of earners, people earning more than $1 million a year.

Does that trouble you that much, that people earning more than $1 million a year would see 4.6 percentage points higher on their tax rate on that part that is over $1 million? Does that trouble you a great deal?

KINGSTON: Ali, as you know we fell short of Republican votes but one reason we did is we could not get one single Democrat, not one single Democrat would stand with the businesses, the small businesses, the family farms across the country and permanent death tax release (ph).

I thought it was a decent package. I thought that the Senate would probably amend it. They could not live with that million-dollar level.

As you know, the president said $400,000. The Senate right now is at $250,000. But, you know, until we get a bill back from the Senate, we can't act on it. But the House, as I have said, has moved three times and passed legislation and moved it on to the Senate and the Senate has not done anything yet under Harry Reid's leadership, and, you know --

VELSHI: What's your best bet?

KINGSTON: (Inaudible). You know, Ali --

VELSHI: What's your best bet what that number is going to be?

KINGSTON: Ali, I think they're probably going to come back closer to the president at the $400,000 range, maybe the House will counter in the $600,000 range. That's just one little guy speaking from his spot.

So also, I don't really know, but my suspicion is they will pass some sort of bill tomorrow afternoon. The House will look it over. We will probably not be able to vote on it tomorrow -- maybe tomorrow night. We'll probably have a lot of amendments.

As you know, we have 435 type A personalities in the House. Lots of people are going to want to put their stamp on it, but this thing is, as you're saying, it's going down to the wire and it will go down to the wire even more. And perhaps we even have to make it retroactive if we go past the deadline.

VELSHI: Congressman, thanks for taking your time. I hope you guys all stay there. You tell your folks at the Senate keep on working. Tell your folks in the House to keep on working. We'll all stay working. Let's get this done. All right, Congressman, good to see you.

Congressman Kingston --

KINGSTON: We're here, Ali.

VELSHI: -- from Georgia.

Don?

LEMON: You know what, Ali? I'm just making this (inaudible) watching your interview, it sounded a lot like the interview I did with Chris Van Hollen. Hey, he said the Republicans, they're not budging; they need to vote. And he says, no, the Democrats, they're not -- they're not voting.

VELSHI: Too bad we don't have phones and BlackBerries and too bad all those senators and congressmen don't work in the same building. Otherwise they could all probably work it out, right?

LEMON: And computers and offices with monitors on the wall.

VELSHI: (Inaudible). They all -- every --

(CROSSTALK)

LEMON: And look at CNN and --

VELSHI: -- all of these politicians, they're all making good points. It's not that these are not valid points. Right? People don't want taxes increased.

LEMON: (Inaudible).

VELSHI: It's OK. It's OK to disagree. It's not OK to not negotiate. It's not OK to not compromise. It's not OK to get a deal.

LEMON: Yes. Maybe we need to get like a mediator, like a congressional and a Senate mediator.

VELSHI: That's it. That's it.

LEMON: Yes. Maybe that's the idea.

VELSHI: Don't we elect these people to do this?

LEMON: (Inaudible).

VELSHI: Isn't that the point? That's what you go and do.

LEMON: Yes. Yes.

Producers are like, OK, let's move on.

You should hear them in our ears, guys.

Lawmakers' failure to find a solution would mean a big impact for small businesses in America. But one of my next guests -- a CNN iReporter and business owner, well, he thinks going off the cliff could be the solution here.

(COMMERCIAL BREAK)

LEMON: We're back with our continuing coverage of the fiscal cliff negotiations in Washington as the nation approaches the called fiscal cliff. People are taking steps to cushion their families from the plunge, and this includes small businesses who are already feeling the pinch.

Joining me now from Chicago, CNN iReporter and small business owner, Valerie Stayskal. Did I say that right, Valerie?

VALERIE STAYSKAL, IREPORTER: You did. Hi, Don.

LEMON: Hi.

And in Dallas, John Arensmeyer -- I think I said that -- founder and CEO of Small Businesses Majority.

So thank you both for joining us here. It's good to talk to people who this is actually affecting instead of talking heads to get your perspective on this.

I'm going to start with you, John. What are the real impacts for small business owners here?

JOHN ARENSMEYER, FOUNDER & CEO, SMALL BUSINESS MAJORITY: Well, Don, we don't want to go over the cliff. I mean, it's going to have too big an impact on an economy that's really starting to recover right now.

And, look, we're not going to get -- it's -- realistically we're not going to get a comprehensive tax and spending deal in the next 24 hours. So what we need to do is pretty simple. It's what the president has requested that the Congress do.

We need to pass the -- maintain the tax cuts for the middle class, which will benefit 97 percent of small businesses. We need to keep pegging the alternative minimum tax to inflation.

We need to pass the -- continue with the unemployment insurance.

We'd love to see a continuation of the payroll tax cuts; I don't think that's going to happen.

And then we need to just put on hold all of the draconian spending cuts that are slated to happen in the next day or two. With that, we would be able to keep money in the hands of America's small business owners and their customers.

LEMON: Yes. You -- so small business owners, as you're saying, they -- you need specifics and you'd like to see them get into this particular -- whatever negotiations are happening now initially, you want all of what you said in that?

ARENSMEYER: Everything that I just listed is supported by the vast majority of people in Congress actually, and it's really unfortunate that the deal is being held up by sort of an ideological obsession with tax cuts on the -- on millionaires and on the upper 2 percent bracket.

We've done expensive polling of small businesses across the country on these issues. They don't want to see the fiscal cliff happen. They want to see the tax cuts for middle class maintained and they want to see all the other things I suggested. These are relatively simple things. We don't have to get into the complexities of major spending cuts, entitlements. We can just do these things that the president suggested and put ourselves in a position to tackle these more broad fiscal issues next year.

LEMON: Valerie, I promise I'm going to get you in.

The way you're sounding, are you a Democrat?

Not Valerie, John?

ARENSMEYER: Well, we're a nonpartisan organization --

LEMON: Because you're saying these things that the president wants to get in. It seems to you -- is this ideological for you because I'm reading between the lines of what you're saying. You're saying it appears that this is being held up and it appears that you're saying the Republicans are holding it up.

ARENSMEYER: Well, the president has put forth some very pragmatic sort of temporary solutions to get us to the point where we don't go over the fiscal cliff, and he said he's willing to sit down and talk with Republicans about a broader deal next year. So that's really what we -- we have 24 hours here and that's what we need to be focused on right now.

LEMON: Got you.

ARENSMEYER: You know, again, the polling that we do is -- across the country is scientific and everything I just cited is supported by small business owners across the board, which, I might add, are plurality Republican. So these are not Democratic points of view. These are pragmatic points of view that most small business owners and most Americans support.

LEMON: I just want to make it clear, because when people are watching, they don't -- you know, sometimes they hear things and they say, well, that guy must be a Democrat or whatever said is that you are a non -- or a bipartisan organization, that the viewer may not get that and they may think you're coming on and speaking from a Democratic point of view. And you're coming on speaking from a bipartisan point of view.

So, Valerie, what do you think about --

Yes?

LEMON: -- what do you need to hear from Congress, from Washington right now?

STAYSKAL: Well, frankly, I don't mind if we go over the cliff. I'm all about balancing a budget and gaining a healthy economy. And I would like to see everybody start working in a bipartisan way coming together, coming up with a solution, eliminating the politics, and just bring a solution to the table that's long-term, not short-term. Short-term is what we've had. I heard Ali say earlier today that others are afraid of kicking the can down the road. I am afraid of that. I think we're all tired of it, and 500-plus days to work on this is a long time. I'm more concerned that if we don't get this together now, if we don't look for a long-term solution, that we'll never get to the spending issue, which I truly believe is our problem.

LEMON: That's your biggest issue as a small business owner? You think it's spending?

STAYSKAL: Well, as a small business owner, I'm more concerned about a healthy economy. I think tax rate increase, tax rate hikes are not going to be the solution because we have tax code reform that needs to be done. And without that, it's not going to make a bit of difference.

So we need to take a look at the whole package, and we can't do it with a Band-Aid constantly. That's what's been happening.

So, yes, I'm all for going over the cliff, taking the pain now because down the road it's only going to be worse, and I'm more interested in the burden this is going to put on our children and their children down the road with the deficit.

LEMON: Yes, you're right. Take the pain now, otherwise we'll have to do it further down the road.

STAYSKAL: Exactly.

LEMON: Just putting it off.

Valerie Stayskal, thank you very much.

John Arensmeyer, we appreciate you as well.

As the fiscal cliff looms, there's another problem facing the U.S. economy: the debt ceiling. You heard her talk about that and about spending, the debt ceiling. CNNMoney's Jeanne Sahadi is getting ready to help us make sense of it all and look how you may -- and look at how you may be affected.

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VELSHI: All right. Both Republicans and Democrats agree that there need to be changes in the U.S. tax code. That's just one of the thorny issues facing lawmakers' last ditch efforts to avoid going over the fiscal cliff, but there's this other thing happening, the debt ceiling.

Let's go straight to Jeanne Sahadi there; she is standing by in New York. I don't think she ever leaves the place. She's a senior writer for cnnmoney.com.

And, Jeanne, the debt ceiling, $16.4 trillion. That's the United States' borrowing limit. That's actually the thing that got us into this ridiculous pickle in the first place is -- you remember that night in August of 2011 when we were battling about the debt ceiling. They couldn't make a deal and so they pushed it off to today -- to tomorrow. We're going to hit the debt ceiling again tomorrow.

The Treasury can probably find $200 billion through what they call extraordinary measures, which is sort of shifting things around a bit. But at some point in the next month or so, this is going to be a big problem. We're not really dealing with that today in Congress, are we?

JEANNE SAHADI, CNNMONEY.COM SENIOR WRITER: Oh, my God, no. We're not even coming close to it. In fact, we are basically going to have the same sort of brinksmanshiplike experience again in February or somewhere around there because we're going to hit the debt ceiling tomorrow.

The Treasury Secretary has said, I've got about $200 billion of so- called extraordinary measures to buy us some time. And, ironically, if we go over the cliff it might buy him a little more time.

But for anyone who remembers the summer of 2011 -- and I still have tics from the experience --

VELSHI: Yes, it was horrible.

SAHADI: -- we're going to have a big fight over spending cuts. No problem with the fight over spending cuts. The problem is if you tie it to the debt ceiling, you run the risk of pushing the U.S. to the brink of default, and that's where it becomes unacceptable. We're the world's largest economy, we really shouldn't be messing with our full faith and credit.

VELSHI: Right. So there's really not any --

(CROSSTALK)

SAHADI: (Inaudible).

VELSHI: You know, Steven Moore was on here, and he said, look, we shouldn't fearmonger that the U.S. isn't able to pay its bills, but, in fact, technically speaking, once you hit the debt ceiling, it's not that you're able to, you just -- they can't -- the Treasury can't cut checks.

SAHADI: It's the law. That's right. It's the law. It's supposed to keep a curb on spending, but it doesn't actually work that way. And the problem is lawmakers will pass spending increases and tax cuts in a separate place from where they increase the debt ceiling. It's a divorced decision from the actual decision to spend more money and give more tax breaks, so it's kind of a perverse way to talk about spending cuts.

VELSHI: Right. So it's --

(CROSSTALK)

SAHADI: -- have that debate, but -- VELSHI: It's kind of like you are out spending and you're just not conscious of what your credit limit is. So it's a bit of a -- like you said, it's perverse, there's something actually wrong with the system, there are a lot of people who say we shouldn't even have a debt ceiling because it's a -- countries don't -- it's just a -- it's sort of an accounting problem.

But others say if you didn't have the debt ceiling, you'd just let the government spend endlessly and they probably would. That's the argument.

SAHADI: Well, OK, but then you can tie the debt ceiling decision -- the Government Accountability Office has been calling for this a long time, tie the debt ceiling decision to the -- to the same day that you make the decision to pass tax cuts or the same day you make the decision to increase spending so that it's very clear to everybody what you're actually passing.

You're passing a number of bills on to the Treasury that they are going to have to pay. That's all Treasury is doing, is paying our bills. That's it. That's why they need the debt ceiling increased.

SAHADI: Jeanne, you always make it very clear.

Go to the site. Go to money.com, CNNMoney.com. Look up Jeanne's stuff, you'll be like a Ph.D. in economy, economics stuff by tomorrow morning.

Thanks, Jeanne.

Jeanne Sahadi, CNNMoney.

SAHADI: Thank you.

VELSHI: All right. James Carville coined the phrase, it's the economy, stupid. They seem to be -- that seems to be the phrase for many Americans when it comes to the fiscal cliff stalemate. We'll hear what some of you had to say next.

(COMMERCIAL BREAK)

LEMON: Let's face it, fiscal cliff has most people outraged. We asked for you to send in your iReports with your thoughts and -- on this matter, and, boy, did you ever do it. And we opened up a can of worms when we did that.

Terry Savage, personal finance columnist with the "Chicago Sun-Times" joins us now from Orlando.

And we received lots of feedback from our iReporters, Terry, I want you to listen and I want to get your reaction to one of them who holds nothing back, calling lawmakers spoiled brats.

(BEGIN VIDEO CLIP)

MISSY LEFLAR, IREPORTER: This whole fiscal cliff mess shows how incredibly out of touch you are with the way people really live in this country. You are off in la-la land and everyone is saying how you're acting like a bunch of spoiled brats who are more interested in being right than in doing the right thing and actually representing the people who elected you.

(END VIDEO CLIP)

LEMON: I can understand why she's upset, because most Americans -- I don't know, do you think most Americans have an idea of what all this financial cliff chatter means?

TERRY SAVAGE, "CHICAGO SUN-TIMES": Oh, yes. Oh, yes, Don, I think people have a very, very good idea, and it's not just a selfish idea, either, about the fact that they'll have less money in their paychecks as we go over the cliff and companies take out more withholding or the payroll tax holiday goes away.

It's not just a selfish thing, it's a great fear for our children, grandchildren, that the America that we contributed to, where we elect representatives and we pride ourselves on being a great democracy, that it won't be there because of what's going on in Washington right now.

That's a real fear.

LEMON: Hey, I have got a few seconds left here, literally, Terry, but you said today and tomorrow are big deals, because a lot changes, a lot happens.

SAVAGE: Yes, not only all the things that we've been talking about all day, but tomorrow for the stock market is the last day you can sell stocks where you have gains. This is not inside your retirement plan, but people that have long-term capital gains, tomorrow will be the last day they can sell them and get the benefit of the current tax rates on capital gains, are lower than they will be the next day.

So you could see some volatility in the stock market. It is not a reason to sell at the end of the year, but it is a reason to continue investing regularly, but take your gains tomorrow if you want the lowest rates.

LEMON: Wish we had more time. Terry Savage, thank you, appreciate you joining us from Orlando. Ali Velshi is in New York, and for Ali and everyone here at CNN -- there he is, my friend, got your slippery chicken out of the way? We got 10 seconds here.

VELSHI: I'm done. I'm finished. Got my slippery chicken out of the way, the Coke Zero is gone, I'll be here all night.

LEMON: By, Ali. We'll be here if something happens. See you at 10:00 Eastern.

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