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Ringing in the New Year; Senate Back to Work at This Hour; Obama Urges GOP to Make a Deal
Aired December 31, 2012 - 11:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN ANCHOR: Hello, everyone. I'm Christine Romans, in for Ashleigh Banfield this morning. And welcome to our viewers around the world. And happy New Year.
Today is the day to celebrate, of course. But it's also a day to worry. You see, it's the last day of the year and the last day to avert that fiscal cliff before Americans plunge head long into smaller paychecks.
The U.S. Senate gets back to work right about now. The session -- the House has been in session for about an hour now. Senate leaders are the ones trying to hammer out a deal picking tax break ceilings, trying to lessen the impact of automatic spending cuts.
There are still major obstacles to be passed for either the House or the Senate, even has the time to vote on. But this morning, we're hearing that progress -- progress is being made. We'll have more on that and the fiscal cliff negotiations just in a minute.
But, first, I want to show you the rest of the world is ringing in the New Year. Midnight has arrived in Asia. In Hong Kong, they are calling it a pyrotechnic musical. The first time they launch fireworks from land and sea. The fireworks actually were scheduled to begin an hour before midnight. Hong Kong on CNN.com's list of top ten places to ring in the New Year.
ROMANS: Ring in the New Year from Hong Kong to Beijing to Taipei to Manila, good morning, 2013, in much of Asia. We'll continue to monitor all of these grand celebrations as the day rolls on. The night rolls on in some cases.
Midnight in the U.S., of course, is the big fiscal cliff deadline. There really are two fronts we are watching today, Capitol Hill and Wall Street. We're going to get to the market reaction a little later.
Right now, let's see if there's any movement on Capitol Hill. Stock markets are moving up because it's a little erratic stock market, because it's a little erratic in Capitol Hill this morning.
CNN senior congressional correspondent Dana Bash is watching that live for us.
Dana, last hour, you were saying progress is being made. But, now, you've been hearing rumblings from -- on the opposite from the far left. What are you hearing now?
DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Very interesting. You know, we have been hearing from both sides of the aisle that part of the big issue, the hurdle, has been to get over objections from conservative Republicans who are not going to be happy with any potential deal.
I just spoke with Senator Tom Harkin, who is a veteran Senate Democrat. You know him well -- being from Iowa, Christine. And he's also a leading progressive.
He said that he and other progressives -- they might be the ones to object or at least to try to stop any potential deal, not Republicans. And the reason he says he's so upset is because he does not like the idea that we have been reporting of keeping the tax cuts in place of income levels up to $450,000. He says he just believes that that's too high. Of course, the president, as we know, campaigned with a lot of Democratic support on $250,000.
Harkin also said that he's not happy with the idea that Democrats are talking about keeping the estate tax cut effectively in place, which also expires tonight. And he's not happy with talk of patching the AMT, which is effectively when the middle class gets -- you know what? I'm going to toss it back to you because Mitch McConnell, we believe is on the floor, he's the key negotiator on the Republican Party.
ROMANS: All right. Thanks, Dana. Let's go to that -- Mitch McConnell on the floor. You know, he has been the closer on this. Mitch McConnell and Joe Biden.
All right. I'm going to go back to you, Dana, because he's not there quite yet.
Let's talk -- this is all in the hands of the Senate at this point. You were talking about Tom Harkin.
You know, but the chained CPI, something progressives hated, this idea of Social Security changes being on the table. They won on that.
BASH: Christine, I have to tell you I'm having some audio problems but I think you asked about Social Security. So I'm going to go with that. That was a big issue, potential issue yesterday. It seems to have been resolved.
Republicans, we were told by Democrats, this was a clear tactic to tell us about this. Republicans had put that on the table, the idea of so-called chained CPI which would have an effect on Social Security recipients. Republicans backed off on that after a meeting yesterday. So, that doesn't seem to be on the table.
But forgive me, I thought Senator Mitch McConnell was going to be on the floor. We are expecting momentarily. It was Senator Harkin actually.
But the other thing I wanted to just tell you about is that McConnell and the vice president have been in intense negotiations up until 12:45 in the morning and then again at 6:30 in the morning and those negotiations are continuing. And that is why we're getting from both sides of the aisle despite some grumbling, major grumbling on the flanks of the left and the right that they are making progress.
ROMANS: All right, Dana. I want to listen to a little bit of what Tom Harkin, the veteran senator from Iowa -- the progressive, you're talking about, unhappy with parts of the negotiations. Let's listen to him for a minute.
(BEGIN LIVE FEED)
SEN. TOM HARKIN (D), IOWA: Fifty thousand, $60,000 a year, that's the real middle class in America. I know they are the ones that are getting hammered right now. They are getting hammered with housing costs, rental, heating bills, kids going to school. They have no retirement.
Now they are talking about raising the retirement age on people who work hard every day, standing on their feet. Women standing on their feet every day for 30, 40 years, and raise the retirement age again on them. Well, again, if we're going to have some kind of a deal, the deal must be one that really does favor the middle class, the real middle class. Those that are making $30,000, $50,000, $60,000, $70,000 a year. That's the real middle class in America.
And as I see this thing developing, quite frankly as I have said before, no deal is better than a bad deal. This looks like a really bad deal the way this is shaping up.
So I just want to make it clear. I'm all in favor of compromise. I've been here a long time, Mr. President. I have made a lot of compromises. I'm willing to make more comprises.
(END LIVE FEED)
ROMANS: That's Tom Harkin, the veteran Democratic senator from Iowa, saying this deal doesn't look good to him.
If a deal is reached in Congress, the president still has to sign it. President Obama set his terms and challenged the House and Senate to get it done.
CNN White House correspondent Brianna Keilar joins me now.
Brianna, is the president just sitting in the Oval Office waiting to get delivered -- waiting for a bill to get delivered to him? Where's he in all of this right now?
BRIANNA KEILAR, CNN WHITE HOUSE CORRESPONDENT: No. I mean, Vice President Biden is very much the president's proxy in all of this. And it's pretty easy to understand why. Of course, both the president and vice president served in the Senate, but Biden served in the senate for decades, with all of the players that he now has to engage with. He knows the personalities. He knows the rhythms of the Senate and of Congress better than President Obama, you could argue.
And so, it makes sense that he's serving as the president's proxy. This is something the president is very engaged with. This is something the White House is obviously very engaged with.
He said yesterday, Christine, he is optimistic that a deal can be struck. I think that's not surprising. That's what you'd expect to come from President Obama. But we're also -- you know, we sort of said tonight is the deadline and that's true because a lot of these tax cuts expire at midnight.
But the sense we're getting from a lot of sources and from members of Congress is that perhaps tonight isn't a hard and fast deadline. Mitch McConnell and the vice president are negotiating in earnest to find a deal. But it's sort of difficult to see how exactly that may come to be by midnight and have votes in both the Senate and the House. Logistically, that would be very difficult.
But the thought is that going over the cliff gives cover for some Democrats and certainly some Republicans. And there will be a lot more pressure after the cliff comes to be in order to put a solution in place. So, even after midnight were to come and go tonight, we would see them working towards an agreement, we would expect.
ROMANS: Politicking around a cliff that was always meant to be sort of the suicide that would never be.
KEILAR: That's right.
ROMANS: John Avlon, I keep quoting John Avlon. John Avlon, "The Daily Beast" columnist and CNN contributor, he said, Congress is raising to diffuse a time bomb, a very dangerous time bomb that Congress wired.
KEILAR: That Congress set. That's true.
The thing is, and we will continue to be in this process, because now the expectation, obviously, is that dealing with the long-term fiscal health, entitlement reform, tax reform, that will now get into the mix with the debt ceiling, which we're looking at in February and March. So, we'll be talking about these issues for still a long time to come here in the next couple of months, Christine.
ROMANS: For another metaphor, I think we're in the second inning of what will be a very long and painful process in this country of how to -- how to have a budget and how to stick to it.
Thanks so much, Brianna -- White House correspondent Brianna Keilar. Coming up, we're going to take a closer look at the cliff and what failure to reach a deal could do to your paycheck and when. We'll also look at the hit that you're going to take even if they do reach a deal.
But, first, here's a look at other top stories we're following right now.
Secretary of State Hillary Clinton is in the hospital. She's there because doctors discovered she had a blood clot. It was found during a follow-up exam for the concussion Clinton suffered earlier this month when Secretary Clinton fell and hit her head. She was suffering from a virus and was dehydrated at that time. Doctors say they'll keep her in the hospital for 48 hours to monitor and treat her condition.
After 80 years on the newsstand, "Newsweek" magazine is going all digital in the New York, which means you'll only be able to read it online from now. In a sign of the times, the final issue baring today's date has "#lastprintissue" stamped across the cover.
"Newsweek's" editor in chief says the growing use of tablet computers by readers, combined with weakness in print advertising led to this decision.
Oregon State Police are trying to figure out why a charter bus skidded off a highway and tumbled 200 feet down a snowy embankment. This happened yesterday. Many of the passengers were ejected as the bus rolled down the hill. Nine people died and more than two dozen others were hurt.
The driver is severely injured and has not yet talked to investigators to help determine exactly what happened there. The bus was returning to Vancouver, British Columbia, from Las Vegas.
(BEGIN VIDEO CLIP)
RICK HUFFMAN, IREPORTER: I cannot begin to tell you how irresponsible I think this has been for both parties to play all the politics they have been playing and leaving the people out -- leaving the people's concerns out and just letting this thing happen. Both parties are responsible for this. Both of them have been playing just little silly games.
(END VIDEO CLIP)
ROMANS: That was CNN iReporter Rick Huffman sounding off on the silly games, he says, lawmakers are playing in Washington.
So, let's get off the politics and focus on the bottom line, how falling off the cliff would affect you and me.
A roundtable of fiscal cliff all stars joining me now. Hal Sirkin, senior partner and managing director of the Boston Consulting Group, Maya MacGuineas, president of the Committee for a Responsible Federal Budget, and CNN contributor Ryan Lizza, who's also a correspondent for "The New Yorker".
Ryan, let me start with you on what's new right this second.
There's a lot of chewing and throwing from both sides about what's on and off the table, and what the sticking points seem to be. It looks as though, now, a couple of sources telling our chief White House correspondent Jessica Yellin and CNN Radio's Lisa Desjardins that a possible delay of the sequester is part of the negotiations right now -- pushing off the sequester for three months, which would mean another showdown in three months, I guess, in March.
What are you hearing is happening right now?
RYAN LIZZA, CNN CONTRIBUTOR: Well, I'll tell you the big news and this is going to break your rule of talking about what it means to people and get a little bit into the politics is what we saw with Tom Harkin on the Senate floor. Right now, liberals and some prominent Democrats are r rebelling against what's being reported as the outlines of this it deal.
The outlines, according to some reports, are the threshold goes to $450,000 -- income of $450,000. That is taxes would go up for income you make over $450,000. That's $200,000 higher than Obama's campaign promise of $250,000. It looks like there's a short-term extension of unemployment insurance, which would be a win for the White House, and then some kind of compromise on the estate tax.
But a lot of Democrats, especially a lot of liberals, do not think this is a great deal. That's why you saw Tom Harkin on the Senate floor railing against it. So, we don't know what the final number is, we don't know what the final revenue number is, which is the most important thing. But right now, it looks like if the deal as it's being reported, this would be a pretty big victory for the Republicans.
ROMANS: So this is still a work in progress, this deal. We should be very clear about that.
I want to bring in --
LIZZA: It's a work in progress, absolutely.
ROMANS: Yes, a work in progress.
So let's put the politics aside for a minute and the new politics of the politics and let's talk about the people, OK?
So, Hal, in my view, the first group to get hurt if a deal is not reached is the unemployed, right? The people who lose, maybe 2 million people who lose unemployment benefits is set to expire. You know, that actually -- the last check would have been on the 29th of December, right?
HAL SIRKIN, BOSTON CONSULTING GROUP: Yes. They are the first ones to get hit and quickly after every American gets hit who are working because we have the payroll decrease will now snap back. So, everybody's paycheck will drop by another 2 percent. So, we've got the unemployed who need the money and we've got the common working man who needs the money all getting hit at the same time.
ROMANS: So, Maya, let me bring you in here. So, now, you've got the working Americans, Americans who aren't working.
And then, look, I'm a mom. And I'm looking at some of the tax credits, tax advantages really for people who have children that will be scaled back or lost, including a tax credit especially helpful to low-income families for sending their kids to school, college. Talk to me about the effect of families ongoing over the cliff here.
MAYA MACGUINEAS, COMMITTEE FOR A RESPONSIBLE FEDERAL BUDGET: Well, that's right. Some of the tax breaks that have been expanded and put into the tax bills over the past years would be lost abruptly.
And part of the issue is it's not being done in a thoughtful way. There are so many tax breaks throughout the tax code, many of which we should be overhauling, looking at whether they're really worthwhile or not, and changing them as part of tax reform. That's not what we're doing here at all. We're using the blunt tool of letting things expire, which will have real effects on families and in many cases, those that need the tax breaks the most. This is --
ROMANS: Maya, to be clear, you're somebody who has been critical of the American budget process. You're someone who has said, look, we have got to get some sanity in how we're spending our tax policy. But this is not the way to do it.
MACGUINEAS: That's right. And I'm also somebody who believes that revenues need to go up. I also think we need to get control of spending.
But we don't do it in a way by saying let's put these huge tools into the budget and then Congress takes no affirmative action picking what's working and how to actually do the budget and a thoughtful budget that lays out how we want to spend our dollars and how we want to pay for them. This is just saying, we can't figure it out, we can't work together, and we will let these things expire in a damaging way and a very abrupt way.
One of the other things that's going to affect American families is, if we do this all at once, in all likelihood, it puts the economy back in recession. So, not only are people who are losing their unemployment benefits harmed, people who would have been able to get back to work if the economy started growing are less likely to have that chance.
The overall damage to the economy is going to harm all of us, in addition to the fact that many of these benefits and tax policies would be changed in ways that weren't thoroughly thought out.
ROMANS: Yes. And we know, Ryan, that we've already -- nearly 890 percent of U.S. households would have to pay more in taxes, on average about $3,500.
I'm going to look at some numbers at the Tax Policy Center. Some of the poorest Americans who make up to $20,000 a year would have to shell out about $412 more to the IRS. And pretty much everyone earning more than $40,000 a year would be affected.
If you make -- you can see $64,000, you pay nearly $2,000 a year more. I mean, you get the picture.
ROMANS: -- bottom line, with all these people facing higher taxes, why in the world --why in the world are we having this fight still?
LIZZA: Well, you know, I think it's important to point out, Christine, that we might get some kind of agreement that passes the House and Senate. I think there's some chance that will happen today, but people should not confuse a piece of legislation with a comprehensive solution to all the problems that the fiscal cliff encompasses.
No matter what happens today, Washington failed. Congress failed. The White House failed. They will not solve all the issues put in front of them.
And if you get a deal today, it's likely going to kick down just a few months down the road a lot of the key issues. They are talking about in Congress right now, a mini deal that will deal with tax rates. It might deal with unemployment insurance. It might a deal with a few other things. But it's not a comprehensive solution.
So, people should be aware of that when they see reports later on today, if you see them, that there's been some deal.
ROMANS: I think you're absolutely right.
And all three of you, I think that we face this period of deadline after deadline, in 11th hour, short-term solutions to very big, long- term problems. I mean, it shows a budget process that's really aggravating.
ROMANS: So far, the world markets have been saying, we still think America is the best place to invest. And ironically, all of this drama about us getting out of debt has made it cheaper for us to borrow money, which is a whole another topic altogether. But we certainly do have a lot of work to do and we'll be talking about this again in the days and months ahead.
Thank you, Hal Sirkin, Maya MacGuineas and Ryan Lizza -- thanks all of you.
Next, I'm going to ask Democratic Congressman Steny Hoyer what measures lawmakers are taking to avoid this manmade, this Congress- made disaster.
(BEGIN VIDEO CLIP)
RICH POLLNER, IREPORTER: We keep on talking about having to make the tough the decisions to cut spending on domestic programs and health care or unemployment, education, Social Security, yet we continue to spend billions every year in foreign aid for similar programs in other countries. Does this make sense to you?
(END VIDEO CLIP)
ROMANS: All right. Last day for trading in 2012. We're going to look at the big board. It's down, oh, I don't know, four points or so. The Dow opening down double digits this morning. It's been bouncing around the break even, all morning. And the reason is investors are waiting to see what in the world is going to happen in Washington over this fiscal cliff.
Joining me live from London is CNN'S Richard Quest.
Good morning -- good afternoon to you, Richard.
Richard, Europe has seen its own budget crisis over the past few years. Are there any valuable takeaways that lawmakers in the U.S. could use as guidance?
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: I'm not sure. I thought very long and hard since I knew we were discussing this for parallels or for circumstances. And I think what you really come down to, Christine, is that of compromise, and the ability to do a deal, when in the face and the teeth of opposition, you just have to get something done because the ramifications are so serious if you don't.
In the case of the eurozone, you had 27 countries and nobody could agree and you had different political philosophies that were all pushing. That sounds very similar to the fiscal cliff and certainly the eurozone pushed things to the absolute limit. Almost to breaking point during the summer where again and again, Christine, they would not agree until disaster was on their doorstep. And that's perhaps the similarity to what we're seeing tonight.
ROMANS: I know. And, you know, we're hearing that negotiations are ongoing. They are continuing. There are a number of issues on both sides.
Ryan Lizza from "The New Yorker" following this, all of our reporters following this. And it appears as though some -- obviously, some elephants of this -- elements not elephants, they're elephants -- have to be pushed forward, maybe pushing parts of the sequester three months.
I see, Richard, a series of cliffs that again and again this Congress is going to have to handle, which cannot be good for global economic security. QUEST: You've put your finger perfectly on it. This is not a one- shot wonder. You see, what happen -- and again back similarly with the eurozone crisis. Yes, you can hit the deadline and you can put humpty dumpty back together again after he's fallen off the wall.
Of course, they did it with Greece. They did it with the fiscal compact. They did with the U.K. vetoing the agreements.
You can put it back together again. But there's an enormous amount of damage, a lack of credibility and a feeling of lack of investor confidence that's taken place during that process.
And to your very point, if you -- let's look at this for a second. We have got the fiscal cliff. You then got the debt ceiling. Don't forget the debt ceiling.
ROMANS: No, no.
QUEST: That's the next big battle. Then you got back to Europe in the middle of 2013. And by the time you get to it, you're back to a U.S. budget impasse once again.
So you're right, it's perpetual cliffs and falls and slowdowns.
ROMANS: Well, that just is not very heartening, my friend. So why is the U.S. stock market having one of the best years, one of the 10 best years ever?
QUEST: That's an easy one.
Firstly, very low. 2008, look at the graph. And, yes, it's gone like that all the way down and it's come back up again and equities remain cheap. Bonds weren't doing that much.
It was a perfect opportunity to take advantage of certain special situations.
But don't be fooled. There's an element of scotch missed about this. The first whiff of really nasty problems, you're going to see the market volatility.
We know the VIX index. We know high frequency trading. We know all, if you like, the time bombs are out there if somebody chooses to detonate them.
And there's no question that the fragility of that which we are seeing remains firmly in place.
ROMANS: An element of scotch missed about this.
Richard, you always enlighten me. Thank you. Richard Quest in London, thank you, dear.