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The World Becomes 2013; Fiscal Cliff Nearing, Anxiety Rising; Lawmakers Talk As Fiscal Cliff Looms; Fiscal Cliff Nearing Anxiety Rising; Investors Brace For Fiscal Cliff; Obama To Speak Any Moment
Aired December 31, 2012 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SUZANNE MALVEAUX, CNN ANCHOR: I'm Suzanne Malveaux, here's what's going on right now. We are actually going to hear from President Obama on the fiscal cliff negotiations. That is at the White House, that is going to happen in about a half hour or so. We expect that there will be some news. They are clearly trying to hash out some sort of deal on both sides, that both sides feel is acceptable it to avoid the massive tax hikes and spending cuts that nearly all Americans would experience starting tomorrow in the new year if these two sides do not get together. So, we are expecting the president there at the White House to make a major statement to the American people regarding where we are on these negotiations.
Also, taking a look, Pope Benedict holding a New Year's Eve mass. It is at St. Peter's Basilica in the Vatican. Italy will be celebrating the new year in just five hours.
I want to show you some other great celebrations that we've been watching from around the world. This is Victoria Harbor. This is in Hong Kong, a beautiful fireworks show. Organizers say it was the biggest one ever. Watch this. Pretty spectacular, another big party. This one is over Sydney Harbor bridge in Australia. The show was huge. We're talking about seven tons of fireworks. And check out this. Nice. A celebration in New Zealand. That is Auckland sky tower. Organizers had been worried bad weather would be a problem but everything turned out just fine. We are watching throughout the world.
Seoul, South Korea, the mayor and others gathering to hit the traditional bell and welcome in the new year. Happy new year to many of those around the world. And here in the United States, the new year could usher in a sobering reality. We're talking about the major tax hikes for almost every one of us. That is if Congress does not reach an agreement on the fiscal cliff. Well, President Obama, he is now scheduled to make a statement about the negotiations. That's going to take place about 1:30 or so, in less than 30 minutes. We're going to bring it to you live at the White House as soon as it happens.
But we want to talk about what is going on behind the scenes. You have negotiations, it is being led by the vice president and Senate minority leader Mitch McConnell. Now, sources are telling us they are making some progress, but here's the catch. If a deal is reached, there is no guarantee that it's going to pass. Here's what the Democratic senator, Tom Harkin, said on the Senate floor earlier this morning.
(BEGIN VIDEO CLIP)
TOM HARKIN (D), IOWA: 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've said before, no deal is better than a bad deal, and this looks like a very bad deal the way it's he shaping up.
(END VIDEO CLIP)
MALVEAUX: All right. We're covering it from all angles. We've got Dana Bash who's on Capitol Hill. We've got Jessica Yellen who's at the White House. Jess, I want to start off with you here. What do we expect the president to say? Is he going to essentially lay out a deal here, something that they are working on, or do you think this is meant to push the negotiations, push the Republicans a little bit harder?
DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, I'm advised that there is no deal yet. They are still in talks. It's still being worked out, so he -- I would expect he's not going to announce it. Unless something dramatic happens between now and half an hour from now, I do not think he will announce a deal. I think it will be what you suggested that it will be to prod Republicans to agree to it, use the bully pulpit, and to speak more broadly to Americans and use this opportunity to encourage Congress as he has done before to, you know, Suzanne, get their business down before New Year's Eve. So, we've laid out essentially what the details so far would be, and it does seem it's continuing to move in that direction. No major changes that I've -- that we've heard of so far. And I think this is a bully pulpit opportunity for the president -- Suzanne.
MALVEAUX: All right. Thank you, Jess. We're going to bring in Dana here. We know that there is some progress that's being made, but there's a sticking point that you had mentioned as well and that is about the automatic spending cuts that are scheduled to kick in, and that Democrats, Republicans have a different sense of when they should deal with that. Explain what that's about.
JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: I will, Suzanne. But if you -- if I may, before I get to that, I just want to tell our viewers that we now -- I now have confirmation from a Republican aide here in the Senate of what Jessica first reported earlier today which is that they seem to have agreement on a major issue which are those tax rates, where they should go. As Jessica reported, the tax rates are at $450,000 for households, $400,000 for individuals. And what I mean by that is, of course, that tax cuts that are currently in place right now, they'll stay in place up until those thresholds. Above that, they're going to go away. There will effectively be tax increases, at least that's the way many people see them.
So, that, again, has been agreed to by Republicans, according to a senior Republican aide, as well as the Democrats. It was the Democrats' proposal a couple of days ago in the first place, so that seems to be pretty significant movement. There are other things that are still question marks, but the deal does seem to move in the right direction. One of the question marks, of course, is what to do about the sequester and differences. Perhaps at this point, Suzanne, not about -- it's about the length of how long you delay this sequester or those --
YELLIN: -- spending cuts that are mandatory, But also what you replace it with. Democrats still want to replace it with some of the revenues they're getting from the tax increases and Republicans simply don't want to do that. So, that is something that is still being worked out, I'm told.
MALVEAUX: And, Dana, if you can help us understand this, because let's say that the president does come forward and he says these are the parameters, this is what we are talking about, this is what we're working on and hoping the Republicans will move a little bit. Is it likely -- is it likely that it would pass? How would that work?
YELLIN: You know, it's a big, open question. You just played a sound bite for Tom Harkin -- from Tom Harkin. He's one of the leading liberal voices here. He made clear, to me personally, just in a conversation that we had before he went to the Senate floor that he -- it's this -- one of the big issues for him is specifically this $450,000 income threshold --
YELLIN: -- that he thinks is terrible from his perspective. Having said that, the sort of hope among the Democrats and Republicans who are running these talks is that enough people want to come together that they'll get enough votes in the Senate.
And one interesting tidbit about the House, Suzanne. Deirdre Walsh and I have been talking to house Republican sources who say that at this point, because we're already at, you know, 10 after one Eastern time on December 31st -- at this point, even if the Senate passes something today, they think it is much more likely that the House won't take up something until tomorrow. It's just because of the process. It would take too long, but politically what does that mean? It also means that technically what everybody in the House will be voting for is a tax cut, because everybody's taxes will have gone up and they will be able to argue that to their constituents and maybe more importantly against their political opponents. And I talked to one Republican source who said that that could help get a handful of votes --
YELLIN: -- from the Republican side in the House. And the source said, a handful of votes might be all they need. It might really matter in the end.
MALVEAUX: All right. Dana, we're going to be following you and Jessica Yellen, your reporting. Obviously, the president coming out in about 20 minutes or so, and we'll see what he has to say, whether or not there are any more details or if he's just pushing the Republicans a little bit further in the negotiating process. Of course, we know that it's just 11 hours before we actually hit that deadline, the fiscal cliff deadline.
If there is no deal reached, the big question is, how is it going to affect all of us? Well, the Tax Policy Center crunched out some numbers here. I want you to take a look at this. If you are single with no kids and you make $50,000 a year, you're going to see your taxes go up by $1,500. Well, if you take a married couple with two kids making $100,000, they'd see their taxes go up $4,300 a year.
I want to bring in our Christine Romans in New York. And, Christine, the first question I want to ask you, essentially, is what Dana was talking about. Let's say the Senate takes it up, but let's say the House delays, right? They don't really even decide whether or not they're going to approve of this and there is that delay. Would that delay going over the fiscal cliff -- are there some things that are just going to automatically happen whether or not they do anything at all?
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: Well, there's something that already has already happened. And December 29th was the last day of unemployment benefits, the last day of the last week of unemployment benefits for people on the federal extended unemployment benefits. So, that is already over at this point. If we go over the cliff for a day or two or it takes the House a minute to catch up, you're going to have a situation where they're going to have to retroactively go back and fix the unemployment benefit situation. And that's something -- 2 million people, their last check was on Friday.
So, the cliff is already there for those folks. Incredibly critical for them. And then, you've got another million or so by the end of the quarter who will see their unemployment benefits or federal extend unemployment benefits, they won't -- they won't be eligible for them. The payroll tax, that holiday is over. Payroll taxes, the withholding is going to rise to 6.2 percent. You're likely -- from what I can tell from the negotiations, you're likely going to see a little bit lower paycheck anyway. That payroll tax holiday, I think, is not going to be part of this deal. Early tax refunds could be delayed. I had mentioned the long-term unemployment benefits. There's a whole host of things that are right here on the tipping point right now. That payroll tax holiday and the unemployment benefits is probably the things you're going to feel the most and first.
MALVEAUX: Yes. And, Christine, I want to talk about the one thing they seem to be caught up on here is what they're calling the sequester or in kind of layman's terms, it really is the $110 billion in spending cuts, whether or not that would be delayed for three months or whether or not that would be delayed for a year. Can you explain how that's tied into the debt ceiling debate and what that means?
ROMANS: So, here's the thing about the sequester. It's such a budget-wonk word isn't it? It's such an ugly thing for an ugly thing. It's just a dumb -- I just -- I don't like this word. So, if you push off the sequester for three months, all of those budget cuts, you really haven't solved a big part of this budget deficit and debt problem. So, you're kind of creating a mini-cliff down the road. You're going to fight about this again. The debt ceiling is something that comes at $16.4 trillion. We're going to hit it probably right now, the treasury secretary says.
They've got some wiggle room, Suzanne, about $200 billion worth of breathing space, as they call it. They can move some things around in the checkbook, I guess, and they can wait to hit that maybe in February or March. But you're looking at -- if you push the sequester down the road and you're not handling the debt ceiling, then you're talking about a -- setting yourself up for another painful political crisis ahead. That could be trouble, I think, for stock markets and for businesses who still need some sort of certainty overall.
MALVEAUX: And finally, Christine, there was one thing that we've been talking about, that is the extension of unemployment benefits. How would that impact a number of people who really need, really need that kind of support?
You know, it's interesting because unemployment benefits -- Mark Zandi Moody's Analytics, he has said all along the unemployment benefits actually are pretty stimulative (ph) to the economy. They cost money to the federal -- on the federal budget lines, but they also put money right back into the economy. So, if you don't have unemployment benefits moving in the economy, and you have all these people who suddenly do not have this lifeline, 2 million of them as of Friday, I mean, that could hurt the economy. And that's what this whole fiscal cliff debate is all about, right? It's about taking money out of the economy. It's about slowing job growth. It's about the potential for a recession in the beginning part of this year, and 9.1 percent unemployment by the end of the year because of all the money that's taken out.
So, what they're doing here is some pretty critical stuff. And you heard people talk about this is -- whole process has just taking a hatchet, you know, in the efforts of budget control, when you should use a scalpel. But, you know, Congress hasn't shown any willingness or ability to use a scalpel or do anything carefully, have they?
MALVEAUX: All right. Christine, thank you very much. And, of course, we're going to get your perspective on the other side of the president's address.
MALVEAUX: It's about 15 minutes away or so. The president will be speaking at the White House addressing the American people essentially about the updates on the talks with Republicans. It has been the vice president, vice president Biden, and the Republican Senate minority leader, Mitch McConnell, who have been in negotiations and discussions. We'll see just how far they have gotten and whether or not there is something real that has been put on the table. We're going to have that as soon as it starts. It was just the last hour we heard from Democratic senator Mary Landrieu. She wanted to weigh in as well about the gridlock in Washington. Here's what she said.
(BEGIN VIDEO CLIP)
MARY LANDRIEU (D), LOUISIANA: The good news is I'm glad we're here at work. We need to stay at work and get this done, and the negotiations seem to be moving in the right direction.
(END VIDEO CLIP)
MALVEAUX: Coming up, we're going to hear from the other side of the aisle, Republican senator John Barrasso, he is going to be joining us live.
MALVEAUX: Less than 11 hours from a midnight deadline. A deadline that's going to basically spark a combination of tax increases, spending cuts that add up to the fiscal cliff that we've been talking about if there's no deal to stop it. There has been some progress we've been reporting this morning. In the last couple of hours, actually. We're hearing that Democrats, Republicans, still have a lot of work to do on some key issues. There are some sticking points here. We are expecting, however, to hear from the president in about 15 minutes or so. 1:30 Eastern. He's going to be making a statement, updating us on the state of negotiations.
Want to bring in Republican Senator John Barrasso.
Senator, we have heard, at least an outline of what is on the table and I'd like to get your reaction to it. We've heard the new threshold, $450,000 for a household. Anybody above that, the tax cuts would expire. That is considerably higher than what the president had offered initially, which was $250,000. Does that sound like that's something acceptable to you?
SEN. JOHN BARRASSO (R), WYOMING: Well, I think that there is some good news coming out today. Things are moving in a positive direction. I do want the American people to have certainty. I mean, they need to know what's going to happen come midnight tonight in terms of what they're going to be paying in taxes. I'd like to see taxes go up on no Americans. I don't want to raise taxes on anyone. But I think that we're heading in the right direction, and people ought to be expecting some certainty coming out of Washington and a better functioning Congress than what they're seeing.
MALVEAUX: Is this something that you would sign, you would support?
BARRASSO: Well, I've been talking with people in the cloakroom and on the Senate floor, Republicans and Democrats alike. We do want a solution. This is something we should have done six weeks ago. The president has put off, because of the election, dealing with any of these things. The big concern I have is, if they're raising taxes on anyone, you know, the president campaigned on raising taxes for people making over $250,000 a year. The question is, what are they going to do with that money? And I want to see, as the president promised, it would be used to pay down the debt. But that's one of the sticking point. The president just wants to spend this additional money. And it is the spending that is our problem and why we have a $16 trillion debt.
MALVEAUX: All right. So, senator, just to be clear here, in the talks that you've had and the colleagues that you've reached out to this morning, do you think that what we are working with now is an acceptable deal? Is it something that Republicans would sign on, at least on the Senate side?
BARRASSO: Well, I think they're going to get an agreement that's something that can pass the Senate. And I would hope it would be in a bipartisan way. But no senator is going to say yes right now until they actually get a chance to see what's in the agreement, which is from the beginning why I say, Senator Reid should put a bill on the Senate floor, let the American people see the process. Not another deal cut behind closed doors. Why aren't we on the Senate floor debating these issues, bringing forth amendments and having them voted up or down? That's the way that democracy is supposed to work. And that's what I would like to see happen today in the United States Senate.
MALVEAUX: Senator Tom Harkin of the other side, the other aisle, he had this to say earlier this morning. And I want to get your take on this.
(BEGIN VIDEO CLIP)
SEN. TOM HARKIN (D), IOWA: 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've said before, no deal is better than a bad deal. And this looks like a very bad deal the way this is shaping up.
(END VIDEO CLIP)
MALVEAUX: Would you be willing -- I mean do you agree with him, that no deal is better than a bad deal if this is not the kind of deal that you would sign onto?
BARRASSO: Well, I think that Senator Harkin's speech really points out how divided the Democrat Party is on these things, about what level of taxation, taxes on our small businesses all around the country, and the death tax. The Democrats are terribly divided on these issues. When most Americans say, hey, we ought to prevent these death taxes from making people sell their farms or their ranches and their small businesses. We need to protect small businesses. They're the job creators in this country. So there is a fundamental difference. The --
MALVEAUX: Well, senator, with all due respect, clearly the Republicans are also divided as well. I mean, Speaker Boehner had a hard time even getting his own party to sign onto a plan b, which was much more modest. How, at this point moving forward, do you get the Republican Party united and in lock step with something that's going to help the American people?
BARRASSO: Well, the discussions are continuing. They're heading in, and I think, in a positive direction. People are going to want to look at it and make the vote. But Republicans, I will tell you, are going to wait and make sure that we focus on the spending. Wherever you draw these lines and what the tax rates are going to be on, it's going to pay for, at the most, a week of what the government spends. You still have to deal with the other 358 days of the year. And that's where we have to focus on how we're spending the taxpayers' dollars. And most taxpayers think that the money's being wasted.
MALVEAUX: All right. Senator Barrasso, thank you so much. We appreciate your time.
And, of course, we are waiting for the president. He's expected to speak -- the South Court Auditorium at the White House. This is happening at 1:30. That's in about 10 minutes or so away. We really are very interested in if whether or not there are some real meaty details, significant progress that is being made from both sides. We do have an outline, some framework based on the talks, negotiations that are taking place between the vice president and the head of the Senate on the Republican side. So we will see if, in fact, they are making any real, real progress, or if this is just a push from the president, a tactic if you will, to push the Republicans and to get public support by using the bully pulpit there at the White House. We're going to bring that for you just moments away.
MALVEAUX: Wall Street investors are waiting to see if there is any breakthrough in the fiscal cliff talks today. Alison Kosik is at the New York Stock Exchange.
And, Alison, talk about the concern or the fear. I mean how investors -- how are they responding and reacting to all this kind of behind the scenes talks and the uncertainty of what's happening.
ALISON KOSIK, CNN CORRESPONDENT: Well, what's interesting is you look at the market movement, Suzanne, over the past week or so and you can certainly see that investors have gotten more pessimistic. The Dow has fallen almost 2 percent over the past five days. But what's interesting, as soon as the news came out that President Obama is having this statement from the White House, stocks went back up. They've since fallen a little bit more, but they're holding steady. The Dow up around 65 points. So you're really seeing this market react to every headline coming out of Washington, D.C.
So, you know, it begs the question, where do stocks go from here? So, if we do get a partial deal on the fiscal cliff, what analysts say would happen is we'd probably see a modest sell-off with the tone getting more negative as time goes on because with a partial deal, there's less certainty for the marketplace.
Now, without a deal at all, there could be a rude awakening for investors when everybody wakes up, goes back to work on Wednesday and when the market re-opens. But, remember, you know, it's not a given that Congress will do something. Some experts are actually hoping to see a big sell-off in the market. They say it could inspire some actual policy -- some policy-making. But one points out, although the market can act as a disciplinarian, it's not a sure thing that we get a clean and lasting solution. Something that the market is certainly looking for.
MALVEAUX: All right, Alison Kosik. Thank you, Alison.
President Obama expected to speak at the White House. We're looking about just five minutes away or so. We're going to bring it to you live as soon as he begins. We're also going to have, of course, our team of reporters to do some analysis as well. We're going to take a quick break and we'll be right back.
MALVEAUX: Welcome to all our viewers across the country and around the world.
The fiscal cliff talks now intensifying. Any minute now we're going to see President Obama. He's delivering a statement from the White House on the ongoing fiscal cliff negotiations. Of course, we are watching and waiting. We'll bring that to you live as soon as it starts. You see the podium there. Already been set up awaiting his remarks.
Negotiations have been led by the vice president, Biden, as well as Senate Minority Leader Mitch McConnell. We understand they have made some progress, but there are some unresolved matters as well. I want to bring in our correspondents and anchors that are covering this from all angles here, this breaking news. Of course, Wolf Blitzer here in Washington, along with our senior congressional correspondent Dana Bash, chief White House correspondent Jessica Yellin, and CNN business correspondent Christine Romans in New York.
Wolf, I'd like to start off with you.
One of the things we have learned is that initially the president said those making more than $250,000 would face the tax cuts, Bush tax cuts, expiring. Now we understand that the new deal raises that to $450,000 for a household. How big of a concession is that from the White House's position in light of the fact that he ran on that mandate of $250,000 during the election?
WOLF BLITZER, CNN ANCHOR, "THE SITUATION ROOM": It's a major concession. It's a significant concession for the president of the United States. For months and months and months during the campaign, he threw out the $200,000 number for individuals, the $250,000 number for families and now it's going up to $400,000 for individuals, $450,000 for a family. So that represents a major concession on the part of the president.
We'll obviously bring in a lot less revenue, tax revenue, into the IRS, into the U.S. government, because fewer people are going to be involved in seeing their taxes go back up from the 35 percent rate right now to the 39.6 percent rate, which existed before the Bush tax cuts were implemented in 2001 and 2003 during the Clinton administration. So it will be less revenue. They're going to have to come up with more revenue elsewhere. But it's something that the president felt he obviously needed to do to try to get a deal to show he's ready to negotiate.