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THE SITUATION ROOM

Going Over Fiscal Cliff; Hillary Clinton in Hospital

Aired December 31, 2012 - 18:00   ET

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


WOLF BLITZER, CNN ANCHOR: It's midnight now in Berlin. They're celebrating at Brandenburg Gate. We have got live pictures. Let's listen in for a moment.

(CHEERING AND APPLAUSE)

BLITZER: It's 2013 in Berlin. You see the celebrations just beginning over there. Much more coming up here in THE SITUATION ROOM.

And happening now, breaking news: The United States will, in fact, go over the fiscal cliff at midnight. But can the worst still be averted?

More breaking news: Doctors reveal the dangerous location of Secretary of State Hillary Clinton's blood clot.

Plus, the countdown to 2013. We will take you to New York City's New Year's Eve celebrations. We will also be going to on and Key West.

We want to welcome our viewers in the United States and around the world. I'm Wolf Blitzer. You're in THE SITUATION ROOM.

Right now, we're following two breaking news stories. We now know the United States will in fact go over the fiscal cliff at midnight tonight. The Senate is closing in on a deal, but the House of Representatives has said it will not vote tonight, will possibly take up action tomorrow.

And the other breaking news story, new details of Secretary of State Hillary Clinton's blood clot. Doctors are now revealing it's located in a vein between her brain and her skull. They say it did not result in a stroke or any neurological damage.

Our foreign affairs correspondent, Jill Dougherty, is joining us now.

Jill, Dr. Sanjay Gupta is also standing by, as well as Dr. David Deaton of Georgetown University. But let's start with you, Jill. What else do we know about the secretary's condition right now?

JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Well, Wolf, this came -- this announcement by the doctors who treat Secretary Clinton came at the end of a long day of speculation really about where precisely that blood clot is located. There was speculation it might have been in her leg, but the State Department was not saying. Finally, at the end of the day, they released the statement. I will read part to you.

The doctors of Secretary Clinton say "It's a clot in the vein that's situated in the space between the brain and the skull behind the right ear. It did not result in a stroke or neurological damage. And to help dissolve this clot, her medical team began treating the secretary with blood thinners. She will be released once the medication dose has been established."

And then they add, "In all other aspects of her recovery, the secretary is making excellent progress and we are confident she will make a full recovery. She is in good spirits, engaging with her doctors, her family, and her staff."

So, Wolf, you would have to say knowing that it is in the head, even in this area between the brain and the skull, it does sound more serious. However, they are saying that it would appear at least our experts are saying there is no bleeding within the brain. That is the important thing. So as they try to titrate these anticoagulants, they will try to figure out exactly how much she needs and then hopefully she could be released.

BLITZER: Are they saying at all how long they suspect she will have to remain at New York Presbyterian Hospital?

DOUGHERTY: They are not saying that. I think really -- and this is probably more a doctor's question. But they would have to figure out precisely how much of the blood thinner she needs. Then as they give her the proper dose, they will work on trying to shrink that. And then she would be able go about her work. But it is worrisome, but it is good news she is obviously awake and talking with people and talking with her doctors and her family, et cetera.

BLITZER: We of course wish her only the best. Jill, stand by.

We have two doctors who can help us better appreciate what's going on.

Joining us here in the studio is Dr. David Deaton. He's the chief of vascular surgery at Georgetown University Medical School. Also joining us, our chief medical correspondent, Dr. Sanjay Gupta, who himself is a neurosurgeon.

Sanjay, let me just quickly start off with you. In assessing this carefully drafted statement by Secretary Clinton's two doctors, Lisa Bardack and Dr. Gigi El-Bayoumi, what's the bottom line as far as you're concern? A lot of Americans and a lot of people all over the world are very worried about the secretary of state.

DR. SANJAY GUPTA, CNN SENIOR MEDICAL CORRESPONDENT: Well, you know, the specific issue here is what is known as a cerebral vein thrombosis.

There are arteries around the brain and there are veins. Arteries take blood to the brain and the veins take the blood away from the brain. The problem and the concern from a neurosurgeon's perspective is if the blood can't believe the brain, it will start to build up and that can cause pressure. That's what we always worry about and think about.

In this particular instance as you just heard from Jill, she's talking. She seems very alert. Those are all obviously good signs. I will point out, Wolf, they performed an MRI scan on her on a Sunday to better figure out what was going on. Usually that's done especially over a weekend like that because somebody may have been having some problems., maybe even headaches or something that just were persistent and warranted another MRI scan. And that's how they found this clot.

What it is not, and I think this is very important, this is not a blood collection sort of pushing on the brain in some way. This instead is a blood clot within a blood vessel that happens to be around the brain.

Wolf, let me show you just for a second, if I can. I have a model here. We know this is on the right side of her brain, but I'm going to show you on the left side here because that's what the model here, but just the brain here. If you take out this hemisphere of the brain, I don't know how well you see that, Wolf, but this area of blue around here, this is one of those veins that actually takes blood away from the brain.

The vein in question for the secretary of state is a vein that runs right around this area over here. They say there is a clot in that particular vein. That's what's led to this particular MRI and now this treatment she's getting, Wolf.

BLITZER: Let's bring Dr. Deaton into this conversation, Sanjay, chief of vascular surgery.

We assume -- correct me if I'm wrong, Dr. Deaton -- this blood clot in her head resulted from the concussion she suffered after she fainted?

DR. DAVID DEATON, GEORGETOWN UNIVERSITY HOSPITAL: Well, you would presume that and be correct that the trauma involved in the fall that she had and the resulting concussion has now also resulted in this thrombosis in her venous system.

BLITZER: Sanjay, do you agree with that?

GUPTA: Yes. Certainly, head trauma can cause this sort of thing but keep in mind in particular we know from the secretary of state's history, she has had a blood clot before in one of the veins in her body. In that case it was in her leg.

So whether or not she -- in addition to the trauma is she just one of these people who's more likely to form blood clots? We don't know the answer to that. It could be a combination of both those things, Wolf. BLITZER: Some people have been tweeting me, Dr. Deaton, that if you do have a history of blood clots in the leg and now in the head, you're going to be on medication for the rest of your life. Is that true?

DEATON: Well, there's a whole broad category of problems with the coagulation called hypercoagulable disorders. And I believe that's what Dr. Gupta was referring to.

And if you are diagnosed with one of those conditions, then there are a variety of therapies, but it does often involves lifelong anticoagulation.

BLITZER: Sanjay, this routine follow-up MRI she had on Sunday, it showed that there was no stroke, no neurological damage. How reliable is that?

GUPTA: It's pretty reliable. I mean, even more reliable is to do a very good neurological exam.

You would be able to tell if someone had had any of those problems. But again I want to point out -- this isn't to raise alarm or anything. But this is on a Sunday right at the end of the year the secretary of state gets an MRI, and my guess is she was still having some troubles. Maybe she was still having headaches. It was a few weeks ago, as you will remember, she initially had that concussion.

And there's no absolute fixed time frame in terms of when people start to feel better and feel back to 100 percent. But something warranted an MRI on her. And my guess is she was still having a bit of trouble. Not a stroke. They have been very clear on that. No neurological impairment. They have very been clear of that, but enough of a concern to go ahead and get another test.

BLITZER: I assume both of you and let me ask both of you the question and then we will wrap up.

Dr. Deaton, first to you, do you think it's likely she will be in any position to testify before Congress over the next few weeks?

DEATON: Well, there's certainly no indication she's had any neurologic symptoms whatsoever, if things are as they have been described and she's simply in the hospital to titrate her anticoagulation medication.

BLITZER: Then she presumably would be ready.

But, Sanjay, you pointed out to me and to our viewers over these past few weeks that if someone suffers a concussion, it's best to rest the brain, if you will, and not engage in that kind of activity.

GUPTA: Yes. Again, there's no hard and fast rules here, but I would say two things.

First of all, a concussion is a brain injury. That's a better way to describe it. And in her case it sounded like it was a significant enough concussion where they wanted her to be at what they call brain rest for awhile, really not doing anything with the brain.

But I think more to the recent events, Wolf, again, she probably had some symptoms, maybe persistent headaches or something that warranted this MRI. So she's not 100 percent, I think, probably as a result of all this. The blood thinning medication can be dealt with pretty quickly, but I think in terms of her overall function, I think it's probably going to be a bit of recovery still.

BLITZER: Yes. Her doctors say she's making excellent progress. They say, "We are confident she will make a full recovery. She is in good spirits, engaging with her doctors, her family, and her staff."

I think I speak for everyone here in THE SITUATION ROOM and all of our viewers and around the world, we wish her only a speedy recovery and a very, very happy new year.

Dr. Deaton, thanks very much for coming in.

Sanjay, you will stick around. We will continue this conversation with you.

Other breaking news we're following, including the fiscal cliff, less than only six hours away. We now know the U.S. will, in fact, go over the edge. We have details of 11th-hour deal making. Stand by. So what happens next on the political drama that's unfolding right here in Washington, D.C.?

(COMMERCIAL BREAK)

BLITZER: We're following breaking news that impacts virtually every American. The fiscal cliff that's been looming for months and months and months is finally here. And it appears the United States will, in fact, go over it at midnight tonight.

Negotiations continue in the Senate and although a deal is said to be close, the House of Representatives has already announced it will not be voting on any deal tonight, but may take action tomorrow to undo the damage.

Here's how President Obama assessed the situation.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Today, it appears that an agreement to prevent this New Year's tax hike is within sight. But it's not done. There are still issues left to resolve. But we're hopeful that Congress can get it done. But it's not done.

(END VIDEO CLIP)

BLITZER: Our chief White House correspondent, Jessica Yellin, is joining us, as is our senior congressional correspondent, Dana Bash. They're both working the story for us.

Jessica, let's go to you first. Is the White House still optimistic? Because the president seemed pretty upbeat a few hours ago.

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: Wolf, yes, the White House is optimistic that a deal will come together perhaps even as soon as tonight, perhaps a deal that could be voted on in the Senate tonight.

There's a sense here that I'm picking up that momentum would be on their side, that they need to capitalize, that the Senate needs to capitalize on the pressure of the ticking clock as we approach New Year's Day to move this thing forward, and that the more they can use this, the more they can actually encourage/pressure Democrats to come along and sign on to this thing and get this over the finish line before we move into a new year and start the potential for a battle again, as we pass the threshold and the politics become different after the fiscal cliff is behind us.

BLITZER: Is there one or two sticking points out there we should know about? What's the latest?

YELLIN: So, as I understand it, right now is obviously how is this debate over the sequester. Apparently, there's an agreement on the time frame or roughly for a few months' delay in the sequester, but how to pay for it.

There's some disagreement on how to pay for this doctor fix, reimbursing providers who take Medicare. Apparently, Republicans are asking for some cuts from Obamacare. And then there's something to do with how the estate tax would be changed. That is how Democrats are characterizing this.

These are terms that are not acceptable to Democrats. And so that's where they're resisting. I think if we heard this from a Republican, we'd get a different take. Republicans' concern is that there should be bigger, more details about how everything's paid for. And so that's where the tug of war still lies, but, again, some optimism that this will be resolved in the coming hours -- Wolf.

BLITZER: All right. Jessica, you and I will be working late into the night, I suspect.

Let's go to Capitol Hill to join -- joining us is Dana Bash, our senior congressional correspondent, who's going to be working late into the night as well.

Do we know if the Senate is going to vote tonight for sure, Dana?

BASH: Well, we just -- we're standing just down this hall of a meeting of Senate Republicans. Many of them came out pretty optimistic there will be a vote tonight.

Senator Kay Bailey Hutchison, Senator Corker and others told us that they do expect to have votes late into the night. The problem, Wolf, is that, as you well know, Republicans don't run the Senate. Therefore, they don't set the schedule. Democrats do. And the Democratic leadership is not saying that they're going to vote tonight. Both sides do appear to be closer. Jessica just laid out one of really the biggest sticking points that has been left, which is the whole idea of these mandatory spending cuts, the sequester. Republicans coming out of this meeting said that there is agreement to delay the sequester for two months and replace it with a combination of other spending cuts and money from the new tax revenue.

But as we were getting that information from Republicans, we heard from a Democratic source saying that they have now an issue with the way the estate tax portion of this is done. So it's almost like Whac-A-Mole. As soon as they get one thing done, another thing pops up.

But one thing I will tell you is that there does appear to be a lot more optimism about a deal and a lot maybe even desire to get a deal done at the White House than we are seeing and hearing from Democrats here. Maybe desire is too strong, but there definitely is more optimism there than here, perhaps simply because they write the legislation here or there might be some political reasons as well.

BLITZER: Because you remember, Dana, of course, you remember, that the president said that if there can be no deal, he would hope that Harry Reid would at least put his plan, whatever you want to call it, XYZ, out there and have one vote on a really scaled-back version to avert a tax increase for 98 percent or 99 percent of the American people.

BASH: Right. That is still in their back pocket. But it doesn't seem like that is going to happen, because on the big issue of taxes, both the Senate Republican leader, Mitch McConnell, and Democrats are telling us they have a deal on that. And that deal is for households making more than $450,000, below that their tax cuts will stay in place.

Everybody else, it will go up. So that is a very, very big agreement that the two sides made. Given that, it's hard to imagine them going back to plan X, Y or Z, as you said, to go back to the president's original plan.

As I'm talking to you, I'm getting word also that other Republican leaders, Senator Jon Kyl, for example, is making it clear to reporters down the hall behind me that he also believes there will be votes tonight. But because according to Democrats here, there's another issue with regard to the estate tax of portion of the bill, we have to wait and see what gets worked out.

But it is going to be a long night or maybe even an early morning.

BLITZER: We will be watching.

You and I and all of our team, we will be watching every step of the way. Because of the ramifications, the stakes are enormous out there, not only for the United States, but for people watching all over the world, because if the U.S. economy goes into recession once again, people will be suffering in Europe and Asia and Africa, South America as well. So stand by. Stay with us for complete coverage.

Senator John McCain told me just a little while ago even if a fiscal cliff deal is done, the battle between the White House and congressional Republicans is far from over.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: I think there's going to be a whole new field of battle when the debt ceiling rolls around.

(END VIDEO CLIP)

BLITZER: All right. Let's dig a little bit deeper with CNN contributor Ryan Lizza. He's Washington correspondent for "The New Yorker" magazine. Also, CNN's Ali Velshi, our chief correspondent, is joining us.

Ryan, let me start with you. Deal or no deal?

RYAN LIZZA, CNN CONTRIBUTOR: Looks like from what Dana is reporting, that a deal is in sight. Republicans are saying they're going to have a vote tonight. Looks like a deal is in sight.

(CROSSTALK)

BLITZER: With the Senate.

LIZZA: With the Senate.

BLITZER: Is it automatic that the House will approve it

LIZZA: No. This is one thing we're overlooking today is we don't know what the House will do. And the last time John Boehner tried to put something on the floor, his caucus rebelled. And he couldn't get it passed. He'd have to let the House vote its will. That is, he would actually have to bring it to the floor...

(CROSSTALK)

BLITZER: But you agree that if the president of the United States supports it, most of the House Democrats will support it. So you don't need a majority of the Republicans. You need a few Republicans to get to that magic number of 218.

(CROSSTALK)

LIZZA: Exactly. Obama and Pelosi seem to have a pretty firm grasp on the House Democrats.

It's just a matter of getting it to a vote in the House. What's happened over the course of the day is we had this seesaw. When details leak out that angers Democrats, they go back to the negotiating room and fight for a little bit more. Then some details leaked out that there weren't enough spending cuts. That angered Republicans. Obama's comments angered Republicans at the White House. So I think they're back in the negotiating room, Republicans pushing a little bit harder on the spending cut side. I think that's what we have seen through the day is that see seesawing.

BLITZER: Ali, based on my years of covering Washington, the longer there's no final vote in the Senate and House, the more likely this whole thing could collapse.

ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Yes.

It gives everybody an opportunity to think it through. It removes the urgency. This is kind of the contradiction in this whole thing, that when you think back to the debt ceiling deal, you think back to the government shutdown, these are all 11th-hour deals. We have become accustomed to doing things right before the deadline. And once that deadline passes or the deal isn't getting made, there's some sense that urgency is out.

What you have heard through the course of the day is some Democrats who have come up and said we don't like that the White House, that Joe Biden that they're moving toward a higher threshold on taxes. The longer it doesn't get done, the more people get to say let's take a harder line yet. Like you, Wolf, we're just going to sit here until it happens. Because I'm not sure it's actually going to happen.

There are still some remarkable philosophical differences and as you and I have been discussing this evening, a great deal of misinformation about the economic effect of some of these things, whether it's the tax increases on the wealthy or the spending cuts and what is going to happen.

There's a lot discussion being based on emotion right now and not necessarily economic fact. You're right. The longer it goes, the more I worry about it.

BLITZER: I'm always worried.

But Dana Bash is still with us.

You're getting some more information. What are you learning?

BASH: While I was talking to you, Wolf, I got a message, an e- mail saying -- from a senior Democratic source saying the goal is tonight. The goal is to have a vote in the Senate tonight. We were talking about how Republicans were saying that, but they don't run the Senate. Democrats do. An important Democratic source said they do have a goal to vote tonight. It's note done yet. We can't call it a deal, but they're working towards that.

(CROSSTALK)

BLITZER: What would be the big deal, Dana, if the vote in the Senate is delayed until tomorrow morning? BASH: You know, technically, not much. I think psychologically, the fact that we are all talking about the House not being able to vote tonight as us technically going over the fiscal cliff is something that they recognize in the Senate.

And I also think that for Senate Republicans and even some Democrats, it's not as much of an issue to be able to take home politically the idea of voting for a tax cut as opposed to a tax increase, which the House would be doing tomorrow. As Ryan and you were just talking about it, it's also just the idea of momentum. They have got the momentum. They don't want to blow it if they have got it.

BLITZER: Ryan, you know this well. A lot of Democrats, especially liberal Democrats, they're not happy that the president raised that $250,000 threshold to $450,000, since he had spoken of the $250,000 figure for months and months and months, ran his reelection campaign in part on it.

LIZZA: And won.

And there was a rebellion today among Democrats in the morning. If you remember, Tom Harkin actually went on the Senate floor and said he did not like the deal that was emerging. I don't know if that caused them to go back into the room and change some things or if some Democrats just didn't know exactly what the details were.

But it took a lot of convincing by the White House. There were conference calls today to sort of assuage Democrats and liberal interest groups and to defend the deal that Obama was cutting. I think that's why you saw Obama make that very sort of tough public statement.

BLITZER: He was speaking to Democrats.

LIZZA: He was speaking to the base and saying, hey, guys, I am on the precipice of getting Republicans to vote for a tax increase. They never, ever do that. Give me some credit here.

Now, he did move his red line on the threshold for upper income tax hikes. He moved it from $250,000 to $400,000. Right? The White House would point out what is important is the overall revenue in the deal, and whether you get that revenue from marginal income tax rates or other taxes, it doesn't matter. The key is the overall revenue and this whole battle here is about the revenue piece.

BLITZER: But if you raise that to $450,000 instead of $250,000, you reduce the revenue from about $800 billion over 10 years to, what, $500 billion, something like that?

(CROSSTALK)

LIZZA: That's right. But then you have got to look at the other pieces that will emerge once we have all the details, whether the estate tax or what they have done on limiting the deductions for people of income over $250,000. That's another part of this that's going to raise more money. It's not going to make up for all that's lost on the changing the threshold, but there are other pieces of this where revenue comes in.

BLITZER: We're going to ask you to stick around. Ryan, thanks very much. Ali, of course, is with us throughout these hours of the night. Dana Bash is with us, Jessica Yellin. We're watching what's happening with the fiscal cliff.

We will have much more on this coming up. The former Labor Secretary, by the way, Robert Reich, and the anti-tax activist Grover Norquist, they are both here in THE SITUATION ROOM for what promises to be a spirited debate. That's coming up in just a for minutes.

(COMMERCIAL BREAK)

BLITZER: So with the U.S. now going over the fiscal cliff at midnight, drastic across-the-board spending cuts will automatically take effect the following day. That would be January 2.

CNN's Tom Foreman is joining us now with a closer look at the impact.

Lay this out for us, Tom.

TOM FOREMAN, CNN CORRESPONDENT: Yes, Wolf, in our virtual studio here, what we set up is everything that the government spends money on, on all these programs, the Justice Department, Treasury, the Defense Department, Energy Department, all of these things out here.

And right back there on that scoreboard, you see what the fundamental problem is. Last year, we took in $2.3 trillion in revenue, or taxes, but we spent $3.6 trillion. That is the deficit. And this whole process has been aimed at dealing with that deficit.

Because neither party could really come up with a decision on what they were going to cut in here to deal with spending, what they said is if we don't have a deal by January 2nd, sequestration will set in. What is that? That's essentially a 10 percent cut across the board to everything out here and everyone has to deal with it the best way they can.

Now, I want to point out something you can notice here. There's a big difference in the size of these departments. For example, housing or personnel or energy are really quite small. You can cut them dramatically and not have nearly the impact you would have as if you hit bigger programs like defense or health and human services, that sort of thing.

Some of these programs are also somewhat protected by law. So, they can't all be hit the same way. And the truth is a lot of people aren't sure what the result will be if full sequestration sets in.

But, we do know that it could have real impact on a lot of real Americans out here. For example, many federal workers could wind up furloughed if this happened. There have been warnings sent out by some departments to tell workers to get ready for the idea they may not be working at the start of the year if this goes on. Obviously that impacts them. But it could impact the economy too.

Beyond that, another big impact on the economy -- what about job loss in the private sector? Think about all the companies out there that supply services or goods to the federal government? If sequestration sets in, many of them will simply not have the business they had before. That's going to have another big impact.

And even if you don't work for the government or work for the government in some fashion in private industry, you still may be affected because of huge delays that could come into the system. And in this case, time really is money. You're talking about delays getting on airplanes because there may not be enough people to check you in; delays on your tax returns because there may not be enough people in the IRS to check you out. There could be all sorts of issues that could ripple through the entire economy out here.

So those are the real impacts that all of us could feel from sequestration. The problem, though, for Republicans to say yes, but the reason sequestration was put into effect was the score board in the first place, the fact that we're spending more than we have and some day we have to bite the bullet and deal with it.

That, Wolf, is the newest and latest and sharpest battle front in this fight over the fiscal cliff.

WOLF BLITZER, CNN ANCHOR: The battle is continuing. Tom, thanks very much. Let's get a little bit more on the fiscal cliff.

Joining us two guests: the former Clinton laborer Robert Reich. He's professor of public policy at the University of California, in Berkeley, and the author of the book "Beyond Outrage: What Has Gone Wrong with Our Economy and Our Democracy and How to Fix It."

Also, joining us, Grover Norquist. He's president of Americans for Tax Reform.

And, Grover, let me start with you.

If the Senate votes tonight on this new legislation, the new agreement which will keep the tax rates for everyone earning under $450,000 a year, those senators who vote in favor of it, are they violating the commitment, the tax pledge those Republicans largely made to your organization?

GROVER NORQUIST, AMERICANS FOR TAX REFORM: Look, they didn't make the commitment to my organization. They made it to the people of their state. And that's awfully important to keep in mind.

And right now as explained, like with Plan B that Boehner put forth, this makes protects and makes permanent the tax cut for many, many Americans.

BLITZER: For 98 percent.

NORQUIST: Ninety-eight percent of them. In fact, 84 percent --

BLITZER: So, is this a violation of the pledge?

NORQUIST: No, it is not.

BLITZER: So, Republican Senator X --

NORQUIST: Sure.

BLITZER: -- votes in favor of the agreement tonight, he or she is not violating the pledge?

NORQUIST: No. All the Republicans who voted in the past to make the tax cuts permanent, all the Republicans, all the pledge takers --

BLITZER: So you're giving your blessings to the Republicans and Harry Reid, not only the Democrats, but to Mitch McConnell, all the Republicans, go ahead and support the deal.

NORQUIST: Well, not having read it all, I'm not endorsing it. But right now as explained, it doesn't violate the pledge. Now, we need to go back and at the end of the day make sure the tax cuts are made permanent for everybody, but that's a fight for the weeks and months to come. This is progress making 84 percent of the Bush tax cuts permanent, including the AMT patch. The Democrats all oppose the Bush tax cuts.

BLITZER: All right.

NORQUIST: Now we're making permanent.

BLITZER: So, you're -- if you were a senator, you'd vote for it?

NORQUIST: Yes.

BLITZER: All right. Let's bring in Professor Reich.

You don't like this because of the $450,000, is that the threshold? Is that right?

ROBERT REICH, FORMER LABOR SECRETARY: Wolf, there's several problems. It is a $450,000 threshold. It makes the Bush tax cuts permanent up to $450,000. That doesn't generate much revenue. It's about $500 billion over the 10 years.

The top 2 percent really are not going to be contributing very much to deficit reduction. That means the lions share of the burden of deficit reduction falls on the middle class, either in terms of higher taxes down the road, or fewer government services.

Also I'm concerned that nothing in the deal deals with the ceiling, the debt ceiling. I mean, the Republicans, you know, a month from now or two months from now after the Treasury has exhausted all of the possibilities for dealing with the debt ceiling, they could just do what they did in the summer of 2011. BLITZER: Let me just press you, Professor. If you were a senator, Grover Norquist says he would vote for the bill if it comes up on the Senate floor tonight. How would you vote if you were a senator?

REICH: I would vote against it.

BLITZER: Really? Even though the president of the United States wants this deal done.

REICH: You know, because the people of my state would not want it done. And I think no deal is actually better than a bad deal. I would go over the fiscal cliff and then introduce legislation to provide middle class tax cuts and also restore a lot of the spending cuts and the Republicans would have to go along with it.

I don't want to make the Bush tax cut permanent up to $450,000. And also, I want the Republicans to deal and make a deal on the ceiling, on the debt ceiling.

BLITZER: All right. Here's something unusual. Grover Norquist, respond. You support if the deal happens tonight, you would go with the president. Robert Reich, a Democrat, would go against the president. But you'd be with Barack Obama.

NORQUIST: Barack and I are centrists. We are moving forward. And some people on the hard left are opposed to this proposal.

But, look, yes. This is progress in terms of making much of the Bush tax cut permanent. Is it enough? No. Does it do anything on spending? No.

But that's what the next four years are going to be. That's what Robert Reich is complaining about. The next four years will be clawing back the overspending of the Obama years. And now we need to get the spending down.

The problem we have is too much spending. Not too little taxes. And now we turn our attention to spending cuts.

BLITZER: I'll let you respond to that. Go ahead, Mr. Secretary.

REICH: Yes. I think on the spending side, the big problem is health care costs that are rising rapidly. And the problem there is that we are not using the government's clout, bargaining clout, under Medicare and Medicaid. About 50 percent -- almost 50 percent of Americans have some sort of health care coverage by government, but we're not using that bargaining clout to keep a lid on provider costs and to make the system for efficient. Make it into a fee for healthy outcome system in terms of -- well, rather than a fee for service system.

It is not right now a budget deficit problem. In fact, right now the government ought to be spending more in terms of getting people employed and investing in education and infrastructure. BLITZER: Grover Norquist, the House of Representatives has just announced, we put it up on the screen, they are in recess until noon tomorrow, January 1st. Then they will come back. We do expect according to Dana Bash, our senior congressional correspondent, there will be a vote in the Senate on the Senate floor some time tonight.

Looking ahead to tomorrow, what advice do you have for Republican House members who will consider -- assuming it passes the Senate tonight -- what's your advice for them tomorrow?

NORQUIST: This is not the end of the game. This is the beginning of the game. Take the 84 percent of your winnings off the table. We spent 12 years getting the Democrats to seed those tax cuts to the American people. Take them off the table. Then we go back and argue about making the tax cuts permanent for everyone.

And we engage in a four-year, three yards and a cloud of dust fight to cut spending every day using the tools of the debt ceiling power and the fact that they have to come and ask the House and the Senate for money every month or so because the Senate hasn't done a budget. That's where we're going to have a continuing resolution fight over and over again. The spending fight is going to last four years. This is not easy.

BLITZER: All right. Let me ask the secretary --

REICH: Wolf --

BLITZER: Let me -- I'll let you respond. But if it passes the Senate tonight, it's on the House of Representatives floor tomorrow, you would tell liberal Democrats, progressive coalition, if you will, in the House of Representatives to reject it?

REICH: Well, I'd say to them to amend it, at the very least make sure that the Republicans can't use the debt ceiling in exactly the way that Grover Norquist is saying that they will use it. You see, by not including the debt ceiling agreement, by allowing the Republicans to use a threat of not agreeing to raise the debt ceiling, once again we're just back to battle. I mean, the battle never ends. We are going to see exactly the same set of tactical and strategic complexities we've seen up until right now. We got to at least settle the debt ceiling for the next year or two or more.

BLITZER: Well, as you know, Mr. Secretary, the president tried to get that debt ceiling issue solved in this current round. He apparently could not achieve that. So, it's going to be hanging out there as you correctly point out in February or March. And the Republicans will have some increased leverage.

I want both of you to stick around, Robert Reich, Grover Norquist. We have much more to discuss, including we're getting new word now on the vice president of the United States, Joe Biden. What will he do if there's a Senate vote tonight? Stand by.

(COMMERCIAL BREAK) BLITZER: All right. We're just getting word that the vice president of the United States, Joe Biden, who happens to be the president of the Senate, he goes up there if there's a need to break a tie. He will be going to Capitol Hill, we're told, if there's a deal. And apparently they're getting very, very close to a deal. Democratic sources suggesting there will be a vote on the floor of the United States Senate tonight at some point.

The House of Representatives has now gone into recess. They will not reconvene until noon tomorrow.

Let's bring back Robert Reich, the former Clinton labor secretary, and Grover Norquist, who is obviously very much involved in all of this as well.

Robert Reich, first to you on this whole notion. It's surprising to me that you're holding out for so much when the president has done his best -- the vice president has done his best to achieve what they think is achievable. But you're saying it's not good enough.

REICH: I think that the president and the vice president have more bargaining leverage or at least had. I think the bargaining is over.

But when you consider that not only did they win the election, but that overwhelming majority of Americans on almost every poll show that they are in favor of increasing taxes on people earning over $250,000, ending the Bush tax cut on people earning over $250,000, and also considering that the fiscal cliff is on the side of the Democrats and the president. That is if we went over the fiscal cliff -- well, then the Democrats have an opportunity to put in new legislation offering a middle class tax cut which the Republicans would have been hard pressed not to agree to.

Given of all this, Wolf, it seems to me that could have -- that is the president and the vice president could have struck a better deal.

BLITZER: So are they just bad negotiators?

REICH: Well, are you going to ask me to say something like that? No, I just think that they could have done better. They could have pressed the Republicans harder.

BLITZER: What's the biggest succession, Grover Norquist, that Republicans made this first round?

NORQUIST: Well, that you didn't have a continuation of all the tax cuts into the future.

BLITZER: That's the biggest concession?

NORQUIST: Two years ago, Obama and the Democratic House and the Democratic Senate extended all the Bush tax cuts for two years.

BLITZER: And at that time, the president said it would not happen again.

NORQUIST: But the president also did it because he said it would hurt the economy not to. Now that he's safely in his job, that doesn't seem to be keeping him up at night that other people may lose jobs because of these tax hikes.

BLITZER: Are you afraid, Mr. Secretary, that if the U.S. were to really go over the U.S. fiscal cliff and there's no deal, the economy would go back into recession, unemployment would go from 7 percent to over 9 percent, thousands and thousands of people would lose their jobs?

REICH: No, Wolf. I don't think there would be a permanent situation where we went over the fiscal cliff and nothing was done.

My point is that if we went over the fiscal cliff and tax rates went up and spending cuts were substantial, that Republicans would be -- would be under a huge pressure, even greater pressure than they are now to agree to a Democratic initiative to cut middle class taxes and also restore the spending cuts that really do need to be restored, especially for the middle class and the poor.

Under the present circumstances, we -- to some extent -- have the worst of both worlds. The president loses the bargaining advantage of having that fiscal cliff and also having the public behind him, and has given in to Republican demands of moving that threshold from $250,000 over $450,000.

BLITZER: All right. We've got to leave it there. Grover Norquist and Robert Reich, thanks to both of you. I know you'll be joining us later tonight as well.

We're following other stories here in THE SITUATION ROOM including a deadly plane crash caught on tape. Now, there are new clues in this airline disaster.

Plus, a close call for the world's top ranked tennis player. Stand by.

(COMMERCIAL BREAK)

BLITZER: Some remarkable plane crash video. Mary Snow is monitoring that and some other top stories in THE SITUATION ROOM right now.

What do you have, Mary?

MARY SNOW, CNN CORRESPONDENT: Wolf, a dash cam captured debris from the crash scattering across a highway. It happened over the weekend at a Moscow airport. A Red Wings airline jet overshot the airway, possibly due to brake failure. There were no passengers on board, only the crew, five of whom were killed.

Take a look at what happened to tennis star Novak Djokovic. A crowd barrier fell on his legs as fans surged forward to get his autograph. The world's top ranked player wasn't seriously hurt, but he did appear to limp off the court, and he cancelled his post-match news conference. But he returned to play later in the day. He called the incident a bit of a shock.

And insurance giant AIG wants to say thank you to you. It's launching an ad campaign thanking the American taxpayers for the $200 billion government bailout that kept the company from collapse back in 2008. AIG has paid the money back, and notes that taxpayers netted more than $22 billion profit from the deal -- Wolf.

BLITZER: Thank you, Mary. Countdown to the New Year. We're going live to London where it's almost midnight. Key West in Florida, where the party is just getting started.

(COMMERCIAL BREAK)

BLITZER: A little bit more than six minutes from now, they're going to be ringing in the New Year in London. You're looking at live pictures on the right there, Big Ben in London -- six minutes away right now from the new year in London. You're looking at live pictures over there.

We'll show you some of the excitement at the top of the hour. We're still more than five hours away from New Year's Eve here on the Eastern Time Zone of the United States. Looking at live pictures from Times Square right now.

The party is already getting started, as it always done a little earlier, in Key West, Florida. That's where John Zarrella is standing by.

Walk us through what's happening tonight in Key West, John.

JOHN ZARRELLA, CNN CORRESPONDENT: Sure, Wolf.

Well, you know, they have been partying all day here in Key West. We're on Duval Street, home of the famous Bourbon Street Pub and the red stiletto. That's where Sushi the Drag Queen will be coming down in the shoe at midnight. We're stapled down here, been down here for 10 years and the crowd is gathering.

Some folks who wanted to be in THE SITUATION ROOM, right?

UNIDENTIFIED FEMALE: Yes, right.

ZARRELLA: Where are you from?

UNIDENTIFIED FEMALE: (INAUDIBLE), Indiana.

ZARRELLA: Indiana?

UNIDENTIFIED FEMALE: Indiana.

UNIDENTIFIED MALE: That's where the snow is deep.

ZARRELLA: I was going to say. It's a little colder there than here, huh? UNIDENTIFIED FEMALE: It is, lot a bit.

ZARRELLA: Quite a bit.

And where guys are you from?

UNIDENTIFIED MALE: Jacksonville, Illinois.

ZARRELLA: Illinois. Yes, chilly up there?

UNIDENTIFIED MALE: Yes. I must, it's a thrill to be in THE SITUATION ROOM.

ZARRELLA: Well, I'm sure, Wolf, appreciate that.

UNIDENTIFIED MALE: What a way to end 2012.

ZARRELLA: Exactly.

I have the mayor with me, Craig Cates.

And, mayor, this is a big night for you. How are the crowds looking?

MAYOR CRAIG CATES, KEY WEST, FLORIDA: Looking great, every room in Key West, hotels and guest houses are sold out.

ZARRELLA: You know, now, we have this big event here, of course. The annual drop of the shoe with Sushi. But you have other things going on here as well, all up and down Bourbon Street and other parts of Key West.

CATES: Yes, we've got a dropping over there (INAUDILE) a new key lime --

ZARRELLA: Key lime drop, huh? Into a margarita glass?

CATES: A margarita.

ZARRELLA: Only in Key West.

CATES: And then at Sloppy Joe's, we've got the dropping of the conch shell.

ZARRELLA: What about the New Year's resolutions?

(CROSSTALK)

UNIDENTIFIED MALE: It's all good. I'm Jack, from Ohio. Been down here 15 years, great place to be for New Year's. I recommend it for everybody every year.

ZARRELLA: But no resolutions?

Well, what can I tell you, Wolf? They don't have any resolutions here right now, but I'm sure -- you can see the crowd picking up on Bourbon Street. Look at this.

(CHEERS)

ZARRELLA: Duval Street, and we're at the Bourbon Street Pub. Again, we'll be here all night to bring in the New Year, Key West- style -- Wolf.

BLITZER: You look very, very distinguished, too, John. I love the tuxedo. I love the whole outfit. You guys are going to have a few laughs in Key West ringing in the New Year. We'll check in with you, of course.

In just a moment, we're also going to go to London. We're going to watch the British capital ring in the New Year as well.

(COMMERCIAL BREAK)

BLITZER: Look at a live picture from Times Square, New York City. They're getting ready, they're counting down to 2013 as well.

We're, of course, going to have live coverage of what will happen in Times Square later tonight. Our own Anderson Cooper and Kathy Griffin will be anchoring our coverage from Times Square. That starts at 10:00 p.m. Eastern. Getting ready for midnight.

We're also going live to London. Take a look at this. They're counting down. Six, five, -- let's watch the New Year coming in in the British capital.

All right, they're celebrating in London. It's 2013 there in London right now. Look at those amazing, amazing fireworks in the British capital. They're celebrating there. They're celebrating around the world.

Meanwhile, we're getting ready to celebrate here in the United States as well. But for now, there's breaking news we're covering. The United States of America is getting ready to go over the fiscal cliff even though a Senate deal maybe very close at hand. I'm Wolf Blitzer. I'm reporting in Washington.