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US Congress Passes Fiscal Cliff Bill; Dysfunction in Congress

Aired January 2, 2013 - 15:00:00   ET


FIONNUALA SWEENEY, CNN CORRESPONDENT: Good evening, welcome to the program and Happy New Year. I'm Fionnuala Sweeney, filling in for Christiane Amanpour.

We begin the year on a positive note. The U.S. Congress successfully passed a bill late last night, sending President Obama legislation that averts income tax hikes for most Americans and suspends a series of potentially damaging spending cuts due by January 1st.

In America and around the world, financial markets breathed a sigh of relief. The irony is that the deal does nothing to lower the deficit, supposedly the reason Congress teetered on the fiscal cliff in the first place.


SWEENEY (voice-over): Some of the credits for the successful passage goes to Vice President Joe Biden, perhaps the last man in Washington who can get anything done.

And the deal passed with both Republican and Democratic votes, a rare moment of bipartisanship.


SWEENEY: President Obama marked the passage of the fiscal cliff bill in the White House late last night.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: And the one thing that I think hopefully in the new year we'll focus on is seeing if we can put a package like this together with a little bit less drama, a little less brinksmanship, not scare the heck out of folks quite as much.


SWEENEY: Well, unfortunately, that is not very likely. The deadline for those spending cuts, $100 billion, just this year, now hits in two months, right around the time that the government hits its borrowing limit, which means that all the pieces are in place for a blockbuster sequel to last year's debt ceiling fight (inaudible) February.

Well, for better or worse, Representative Barney Frank has teetered on his last fiscal cliff. The veteran congressman, co-author of the Dodd-Frank Financial Region, leaves Washington tomorrow after more than 30 years in the House of Representatives.

Congressman Frank, welcome.


SWEENEY: Let me first of all play a sound bite for you from a fellow Democrat, Senator Joe Manchin of West Virginia, on his reaction to what has taken place over the last few days.


SEN. JOE MANCHIN (D), W.V.: Something has gone terribly wrong when the biggest threat to the American economy is the American Congress.


SWEENEY: So would you agree with him on that?

FRANK: Absolutely. And I will tell you exactly what caused it, the election in 2010 to the House of Representatives of a group of people controlling the Republican Party who do not believe in governance, who are extreme in their ideology, we just saw an example of this.

Now where unbelievably they have refused to even consider in the rest of this Congress aid to the stricken areas from the hurricane. Look, I've been in Congress for 32 years. For 30 of those years we worked together. We disagreed, we debated.

In 2007 and 2008, when George Bush was president, and we, the Democrats, had the congressional majority, we worked with him on a fiscal stimulus when he asked us for one in 2008. We worked with him on the TARP, a very unpopular program, to deal with the crisis.

When Barack Obama was president, we had Democrats in the House and the Senate, and we were able to accomplish things. Then in 2010, the Republicans took over the House, Mitch McConnell announced that his number one goal as Senate leader was -- of the Republicans -- was to defeat Obama, and things broke down. There's a very clear explanation for this.


FRANK: And you saw it yesterday when John Boehner was able to get one -- barely more than one-third of the Republicans to vote for a deal that everybody else had agreed to.

SWEENEY: OK. But you know, they may have lost the presidential election, but the Republicans can be vehement in their victory in the House of Representatives. As far as they are concerned, they still represent the American people as a majority there.

FRANK: Well, even they would claim a majority because, in fact, thanks to the redistricting of 2010 and some other factors, they have a majority of seats in the House, even though they got a minority of the votes for the House of Representatives.

But I don't deny that they did get elected. But I'm explaining, look, the American people vote and elections have consequences. I'm agreeing with Joe Manchin, that things have gone wrong. But it doesn't do to say things have gone wrong and not specify why.

You have in power in the Republican Party in the House people who are so extreme in their views, so opposed to compromising, they're the ones who won't accept the results of the last election. Everybody else, the House Democrats, the Senate Republicans, the Senate Democrats, the president came together on a deal that none of us like entirely or even substantially.

But we knew we had to compromise. The great majority of the House Republicans are the ones who rejected it because of their rigid extremist ideology.

SWEENEY: OK, but where does this leave America now and I'm thinking of our international viewers, who've watched and heard about this debate over the fiscal cliff for days, if not weeks now.

As the 112th Congress ends, what kind of America do you think the incoming Congress represents?

FRANK: Well, first of all, as far as the rest of the world's concerned, vis-.-vis the European Union and the problems they've got, vis-a-vis China, I am not -- I am critical of some things that we do here. I don't have any great national inferiority complex.

And frankly people with money still would rather invest it in bonds of the U.S. Treasury (inaudible) virtually any other government in the world. And they're right to do that.

Secondly, we are now in the midst of a critical question that I want to return to, which is -- and it is this: clearly many of the Republicans who have previously given in to these Tea Party right-wingers are now understanding that politically that's not good for them.

That's why John Boehner did send the bill to the floor yesterday. He was outvoted by most of his caucus. He voted for it. His majority leader voted against it. Now I think, frankly, we're going to have to see what some of the supporters of the Republican Party think, because the debt limit issue is coming up. It is an entirely artificial issue.

All it means is that you pay debts already incurred. The notion that you would not pay those debts, or that you would demand that we hurt Social Security recipients or put off Medicare just to pay debts already incurred, by the way, some of those debts were from the Iraq war that I voted against. I didn't incur all those debts myself. I voted against them.

But the question is, will the responsible elements in the Republican Party finally stand up to their extremists and say, no, we will debate about issues. We will push for spending cuts, but we won't endanger the economy by refusing to do something that ought to be routine, raising the debt limit.

SWEENEY: OK. If you were a mainstream Republican now, having watched what's taken place over the last few days, what do you think the chances are for the spirit of compromise? Was this a compromise or was it a fudge?

FRANK: Well, compromises are fudges. A fudge is a compromise maybe you don't like. I don't understand, frankly, what is the difference. Fudging means that you --


SWEENEY: -- another day, yes.

FRANK: No, not (inaudible) we have now over $600 billion in new revenues to help the government over 10 years. That's a useful thing, some of which I believe can go to some important programs, some of which will go to deficit reduction. We have unemployment compensation extended, which is important.

I think what the mainstream Republicans have to say to their fellow Republicans on the extreme side is, look, you did not do very well in the last election. They expected to pick up Senate seats by the -- by the general geography, they should have.

They lost Senate seats. They lost some House seats, not as many as they would have lost if it hadn't been for the gerrymandering of 2010. And they lost the presidency.

So if I were a mainstream Republican now, I would be saying to these people, do you not understand that you're not only hurting the country, but you're hurting our party?

SWEENEY: And what about the Democrats? I mean, not necessarily completely united, either; some people very unhappy on the Left about what has taken place over the last couple of days.

FRANK: Not nearly comparable. The Democratic vote in favor of this compromise -- it was a genuine compromise -- was better than 90 percent in favor as opposed to the Republican vote, which was 60 percent against.

Yes, there were some people on the Left who are critical. They are, I think, not a substantial faction of the Democratic Party, as (inaudible) in the Senate, I think the Democratic vote was 50-something to 3. In the House, it was 172-16.

We did protect Social Security and Medicare. We did say that we will have cuts that should come, but they'll come equally from the military and that -- and by the way, that's another important point. Some of my Republican friends hypocritically say we've got to cut spending, but they want to spend more and more in the military.


FRANK: The biggest increase in spending recently has not been for Medicare, it's in the military budget over the last 10 years.

SWEENEY: A final question, Congressman, you are leaving this Congress. And it's a twofold question, if I may, going back to what I raised earlier.

For international viewers, what do you think America is standing for now with this incoming Congress? And let me ask you as well, have you achieved for yourself everything you'd hoped to achieve during your time as a congressman?

FRANK: No, I haven't achieved everything. I felt we've made some gains. I'm very pleased that we are finally now gotten to this debate about reducing military spending and I have to say to the rest of the world that (inaudible) a little paradoxical to the extent that they are critical that we are not reducing our deficit.

They need to understand that one way we do that is for our European allies to start taking care of their own defense and not hiding behind the American military budget. It is important for others to take a lead. So part of what we need to do is to tell the rest of the world that they are now better able to participate in the common defense than they have been.

Other than that, what we have in the country that has a strong economy, but we need to readjust, to some extent, so that we can improve the quality of life for everybody while we are going forward.

And I'm critical of some of what we do. But compared to the European Union, compared to China, compared to the other nations, I think we're doing reasonably well. And, again, the (inaudible) is that everybody in the world who's got extra money, their first choice for safety is to put it here.

SWEENEY: We'll have to leave it there. Congressman Barney Frank, thank you very much for joining us and good luck with your post-congressional life.

FRANK: You're welcome.

SWEENEY: And when we return, we'll take a wide shot of the 112th U.S. Congress. Some say it's been the worst Congress ever. But when the 113th edition is sworn in on Thursday, will the dysfunction end or come back stronger than ever?

But before we take a break, it wasn't just America's economy that almost went over the fiscal cliff. America's dairy cows were this close to udder disaster.

The so-called dairy cliff would have sent farm subsidies back to the levels of the 1940s (inaudible) the price Americans pay for milk to $7 a gallon. Fortunately, Congress found a temporary solution. But unless new legislation is passed, Americans may soon be crying over any spilt milk, given those prices. We'll be right back.




SWEENEY: Welcome back to the program. I'm Fionnuala Sweeney, in for Christiane Amanpour.

We continuing our coverage of America's last-minute deal to avoid the fiscal cliff. The drama surrounding the deal revealed deep dysfunction in the U.S. Congress and set a course for more face-offs in the weeks ahead.

Meanwhile, the world is watching and holding its breath. With me now are Chrystia Freeland, an editor for Thompson Reuters Digital. Her latest book is called "Plutocrats."

Norm Ornstein is a long-time observer of Congress and a resident scholar at the American Enterprise Institute. He's the author of "It's Even Worse than It Looks."

Thank you both for joining us. My first question to you, Mr. Ornstein, which is that there is a quote from a Democrat senator from Virginia, where he basically says it is really trouble when the American Congress is proving dangerous to the American economy.

Is that something with which you'd agree?

NORM ORNSTEIN, AMERICAN ENTERPRISE INSTITUTE: I would agree with that. (Inaudible) --



ORNSTEIN: -- well, if you look at where we were, we were poised to have a substantial economic recovery with a fairly simple balanced approach to solving our debt problem.

And that Congress couldn't get to yes until not just the final hour, the 11th hour, but a day later, and did it through a farcical process and did it in a very modest way while setting up yet another set of end game hostage-taking confrontations in two months does not speak well for Congress.

SWEENEY: Well, this is something --

ORNSTEIN: (Inaudible) really have a takeoff in the economy and this jeopardizes it.

SWEENEY: Well, this is something that interests me, Chrystia Freeland, is that not being born in the United States, I'm fascinated at the proactivity of many Americans. And yet what took place on Capitol Hill over the last couple of days, seems to go against that sense of moving forward.

So what I'm asking, essentially, is is there no firewall at all between what takes place in politics here and the economy?

CHRYSTIA FREELAND, THOMPSON REUTERS DIGITAL: Well, I agree with Norm's essential point that sort of what is tragic about what's happening right now is the U.S. economy in 2013 absent the politicians messing things up, is really poised for success.

2013 could and should be the year of quite a strong economic recovery, partly because the financial crisis has started to heal, partly because of the discovery of all of these energy resources, partly because driven by those cheaper energy resources, I think you could see a manufacturing renaissance. So it could be a great year. Politics could be slowing it down.

What does that say about the nature of America? I mean, I think for international observers -- and by the way, I myself am Canadian -- what is really striking is the ways in which the structure of the U.S. government, the divided structure of the U.S. government makes getting budgets through incredibly hard. I mean, think about what happens in Europe, right?

The prime minister in most European countries and Canada, the prime minister, his finance minister, his chancellor, present a budget and it's voted that afternoon. That's it. You push it through. So American politics, for it to work, requires a much greater not just spirit but culture and practice of bipartisanship than politics in most countries. And the problem is, it's broken down.

SWEENEY: Norm, (inaudible) this was not, however, what the Founding Fathers had in mind, because they believed that there would be enough of a center for bipartisanship among the two main political parties.

ORNSTEIN: And usually it has been that way, even though --

SWEENEY: So what has changed?

ORNSTEIN: -- politics is always messy.

Well, we've had a number of things that have created a different atmosphere. And Chrystia's point is an important one. We have parties now that have grown so far apart -- and it's not just ideology, it's partly a culture of tribalism that we're operating almost like parliament parties. And particularly the Republican Party has become a parliamentary minority.

In a system like Canada's or Britain's or Australia's, you can still act with legitimacy. But when you've got divided government as we do now, and a Republican control of the House, and a Republican House divided, then you run into trouble and that's just what we're seeing.

And if you throw in the money culture, which Chrystia has written about so eloquently, in the post-Citizens United world, you can see a set of pathologies that an election itself, like the 2012 one, simply does not cure.

SWEENEY: Well, let me actually pick up on that with you, Chrystia, because a recent Pew Research poll said that more than half of all Americans believe the economic system in this country is working against them becoming wealthy. When did that happen?

FREELAND: Well, I think it's happened quite recently. I'm going to quote Warren Buffett, who said in a recent interview, that this new sort of skewed form of capitalism snuck up on people. People didn't really notice it.

And I think they didn't notice it before the financial crisis because you had all of this cheap credit pumped into the economy, credit card debt, home equity loans; people didn't feel what was happening. But the reality is, over the past decade, middle class incomes have stagnated.

And so when people see that, they see that their incomes and actually their wealth is either declining or not increasing, then, yes. They say, wait a minute, this economy isn't working for me.

SWEENEY: And this is what I'm interested in in terms of politics, Norm Ornstein, is do you think that these days that there are any Democrats on the right of the party who are perhaps more fiscally conservative than any Left Republicans at the moment?

ORNSTEIN: Oh, definitely so. And actually, you still have a center in the Democratic Party. And we've even added to it a little bit in the Senate. We have new members, like Joe Donnelly from Indiana coming in, who are very much centrists; people like Mark Warner of Virginia, who are fiscally conservative. You still have some people on the Republican Party -- in the Republican Party in the Senate who feel the same way.

The big problem is the growth of a group of radicals -- they're not even conservatives anymore -- for whom cutting taxes is the only mantra; it trumps anything, including getting our fiscal house in order -- and others who talk a lot about cutting spending until it comes to any of the specifics. And that's the problem we've got now. And if you add on to that the tribalism and --

SWEENEY: OK, so how --

ORNSTEIN: -- campaign finance system, then getting to yes becomes more difficult.

SWEENEY: How do you see this playing out in the 113th Congress? Because there might have been a lot of politicking here. But we know it's the beginning of a second Obama term. And presumably the Republicans now are having to go back and figure out a strategy for moving forward.

ORNSTEIN: You know, it's not easy to be optimistic. I do think because of the energy boom that we could reach an accord on energy issues, a new attitude on immigration, on infrastructure, there are areas where you could see compromise that didn't exist before.

But on the fiscal side, conservative Republicans believe that they caved on this fiscal cliff compromise and they want to double down on the debt limit again. And if we have another hostage-taking episode with the debt limit, threatening the full faith and credit of the United States again, at the end of February or into March, God help us. That would be a truly self- inflicted wound.

SWEENEY: And that raises questions for how much can be achieved by the Obama administration. Let me ask you, Chrystia, in terms of the wealthy 2 percent of this country, has it always been comprised (sic) of the same groups of people or is it a fluid ever-changing group over the last 10-20 years in terms of education, background, outlook, beliefs?

FREELAND: Well, I think it's fluid in that there is a lot of turnover of who those actual people are, you know, what is quite interesting and characteristic of the people at the very top in the U.S. is this isn't largely inherited money. This is not sort of a (inaudible) world. Having said that, what is also happening is a real decline in social mobility.

So one of the scariest latest economic results that we've seen is a very smart, low-income student who scores very well on SATs has a lower chance of graduating than a child from a middle or upper class family who scores very badly.

That, to me, is profoundly against the grain of the American idea of the whole land of opportunity, which even as non-Americans, right, we really admire. And that's the heart of why -- I agree with Norm, you know, America really has to sort out its political system so that it can start fixing these big problems.

SWEENEY: And what would it take, Norm Ornstein, to sort out the political system? I'm thinking of the two main parties, Republican and Democrat. Could there ever be a scenario in which you would envisage a third party, perhaps a Tea Party?

ORNSTEIN: Very unlikely, because there's so many structural impediments in the United States to a third party actually securing a foothold in power, separate elections, single member districts for the House and Senate, no proportional representation.

But you're going to see a Republican Party going through enormous stresses and strains, an establishment that understands that the demographics work very much against the contemporary Republican Party, and their policy positions don't have much to say to minorities or even to young people, a growing Tea Party wing, but also a group of people who were moderate or moderately conservative Republicans, fiscally conservative, socially moderate, who have no place to go right now.

And they are one of the real challenges for the Democrats, is whether they can provide a home for them or if we see, at some point, an increasing group of independents who become a different balance of power in the country.

SWEENEY: We'll have to leave it there. But thank you both very much indeed there, Chrystia Freeland and Norm Ornstein, for your insights.

Well, as we have seen, the U.S. Congress waited until the last tick of the 11th hour to prevent an economic meltdown. But in so doing, it turned its back on a natural disaster. If you think Sandy was a superstorm, wait until you hear the storm of protests that has hit the nation's Capitol over failure to help the victims. Broken government and broken promises when we return.




SWEENEY: And a final thought tonight, imagine the U.S. Congress narrowly averting a manmade crisis while ignoring a natural disaster. Remember Hurricane Sandy? Well, it was just a little over two months ago that the superstorm devastated the northeastern United States. President Obama promised that the country would not forget.


OBAMA: We are here for you and we will not forget; we will follow up to make sure that you get all the help that you need until you've rebuilt.

SWEENEY (voice-over): The U.S. Senate approved $60 billion in emergency relief, but the Republican-led House of Representatives must have a short memory. It adjourned without even bringing the bill to a vote.


SWEENEY: Outrage was swift and passionate.


REP. STENY HOYER (D): There are Republicans who are deeply grieved by this action and there are Democrats on this floor deeply grieved by this action. This is not the right thing to do.

REP. NITA LOWEY (D): Dysfunction, Mr. Speaker, in this Congress, shouldn't result in punishing victims of Sandy in New York, New Jersey, Connecticut and Pennsylvania. This is a sad day.


SWEENEY: With President Obama also demanding action, House leaders now say they'll take up the bill once the new Congress is sworn in on Thursday. But meantime, winter temperatures keep falling and Sandy's victims wait for the richest nation on Earth to keep its promise.

That is it for tonight's program. Meantime, you can always contact us on our website, Thank you for watching and goodbye from New York.