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Street Welcomes Fiscal Deal; Congress Delays Action On Three Fronts; House Passes Fiscal Cliff Deal; President Back On Vacation; New Congress to Be Sworn In; Impact of the Fiscal Deal

Aired January 2, 2013 - 13:00   ET


SUZANNE MALVEAUX, CNN ANCHOR: I'm Suzanne Malveaux. Welcome to CNN NEWSROOM. We are tracking reaction now after a late-night vote in the House pulls the nation back from the brink of economic chaos. President Obama, he is back on vacation in Hawaii. He is prepared to sign the new bill preventing widespread tax increases. Here's some specifics of the bill. No income tax increases for couples making less than $450,000 a year. Itemized deductions will be capped for those making $300,000. Taxes on inherited estates will go up from 35 percent to 40 percent. And unemployment insurance will be extended for a year for 2 million people.

But here's what else you need to know. You will be paying more taxes starting with your next paycheck. That is because the payroll tax holiday, that is over. So, those of you making $25,000 a year will pay $42 more in taxes each month. People making $50,000 a year will see $83 come out of your monthly paycheck. And if you're income is around $75,000, you'll now pay 125 bucks a month in payroll taxes. Those making 100 grand will pay $167 every month.

So, one big question after the fiscal deal was passed, how is Wall Street going to react? Alison Kosik at the New York Stock Exchange. Big rally for the opening bell. Yes, is it holding?

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: It is holding. So, yes, investors are reacting exactly how we expected. We are seeing huge gains for stocks to kick off the new year, and that's after we saw big gains overnight from markets around the world, and that's about the deal to avoid the fiscal cliff. If you look, all 30 stocks that make up the Dow Jones industrial average are moving higher. Hewlett- Packard and shares of Caterpillar, they are leading the Dow. Those are interesting because, Suzanne, they were two of the worst performers of 2012. So, some of what you may be seeing today may be some bargain hunting going on -- Suzanne.

MALVEAUX: Tell us a little bit about what is not in the bill.

KOSIK: OK. So, yes, you have to remember that the automatic spending cuts, that can was kicked down the road another, what, 60 days? And it means another fight is on the horizon for the new Congress, and the same set of spending cuts some say threaten economic growth and others say are necessary, those are still a possibility. And these are eight to 10 percent cuts to the budgets of most federal agencies and they include defense. The threat -- the threat of the sequester, that's already having an economic impact, though, because government contractors have had to plan for a possible slowdown in business. Now, the second and many believe an even bigger issue on the horizon is the debt ceiling, and any debate that's dragged out, you know, over whether or not the country should continue paying its bills, that can impact the U.S. and also impact the global economy as well. In fact, some analysts predict that the U.S. credit rating could be downgraded again if the debt ceiling negotiations get chaotic. And we remember how chaotic they got last summer, don't we, Suzanne?

MALVEAUX: Yes. And, Alison, you're also dealing with the federal budget. I mean, you've got the short-term budget that expires March 27th, so clearly there's going to be a lot of debate from now until that point as well and we suspect a lot of drama.

KOSIK: Of course. And, you know, you look at what the CBO has said. The CBO had said the deal that was reached on the fiscal cliff, what that's going to do is add $4 trillion to the federal deficit over the next decade as opposed to falling off the cliff if we did, which would have reduced the deficit by about $600 billion. So, what's happening because of that, there are lawmakers in Congress who want deficit reduction in the budget, because they didn't get it this time around with the fiscal cliff. And there's a process to the budget. There are hearings, eventually a budget gets drafted, it's voted on, it's signed.

But the reality is that's supposed to happen but probably won't happen because what lawmakers will do is what they've done for many, many years in the past. They don't create a real budget. They just make another extension because the alternative is a government shutdown which would furlough government workers and temporarily cut services. So again, if you -- it's more and more of the same of kind of continuing to just, you know, pass these extensions, kick the can down the road. Procrastination seems to be the word of the day for our lawmakers.

MALVEAUX: Yes. We have to come up with a better way of our government running. I mean, it really seems extraordinary, like one of the few places where that's acceptable to actually operate a kind of business like that. Alison, thank you. I appreciate it.

You know, shortly after the fiscal bill passed in the House, the president took off for Hawaii. He's trying to get back on vacation with his family. Our Dan Lothian, he was aboard Air Force One with the president, and he's join you goes from Honolulu. Dan, you know, it's nice, right? You get a break there and the president gets a little break. But I imagine this is going to be short-lived because they've got a couple things that Alison and I were talking about. That is, of course, the debate over the debt ceiling, whether or not to raise that, and the budget that is to come. I imagine the president might just be getting fortified, ready for the battles ahead, yes?

DAN LOTHIAN, CNN WHITE HOUSE CORRESPONDENT: That's right. And perhaps that's why he headed straight to the gym after flying all night to pick up part two of his vacation. Certainly the debt ceiling something that's looming in the next couple of months, and the president has made it very clear that this is something that he will not negotiate on. Why? Because he believes that it was bad for not only the U.S. economy the last time around but also the global economy and the president pointing out that if you have that kind of showdown again, that it could be much worse than the actual fiscal cliff. So, it'll be interesting to see how he's able to deal with it when he has pointed out, made it very clear, that he will not negotiate on this.

The other thing we're watching for is how the president will be able to carry out his second term agenda. He's made it clear that he wants as his top priority to be dealing with immigration reform, also dealing with gun violence in the wake of the shootings in Connecticut. And so, there are a lot of questions about how the president will be able to get anything done when he still has all these fiscal hurdles facing him in the next few months -- Suzanne.

MALVEAUX: Hey, Dan, do we know -- does he feel any more optimistic about the new Congress that's going to be sworn in tomorrow, the 113th Congress, whether or not they're going to be any more moderate or if he's going to be able to work with them any better than the -- than the previous one in terms of pushing forward his agenda?

LOTHIAN: Well, as one official told me, hope springs eternal (ph). They hope that they'll all -- they'll be able to work with this new Congress. They're always looking for ways to move forward in a bipartisan way. But we'll have to wait and see. I mean, the president has faced many challenges from Republicans. They believe -- Republicans say -- point the finger at the White House saying that the White House is the reason for all this gridlock. So, we'll have to see how it plays out over the next couple of months. But as I pointed out, we do have sort of these dual tracks issues that will be taking place. The president trying to carry out some of his second year agenda issues while at the same time these deadlines that are coming up, which will be very important, and then the American people out there watching it all, getting very frustrated with the way that Washington has been working.

MALVEAUX: And Dan, I know it's hard to sometimes get the back story. You don't see the president if he's, like, you know, out in the ocean or anything like that or on a surfboard. But do we have any sense of how he's spending time with the family and how long he's going to be there?

LOTHIAN: As you know, Suzanne, covering the White House for so many years, this is one of those things where they tend not to give you a lot of details about what the president plans to do on his vacation. In fact, when you look at the daily schedule that comes out, it will always say that the president is not doing anything public. As I said earlier, the president did head to the gym. We expect, perhaps, him being out on the golf course. That is what he likes to do when he's there in Hawaii. It's what he did during part one of his Hawaii vacation. So, we expect he'll be doing that as well. So, it's a chance for the president to relax with the family and then head back to Washington. We don't know exactly when but expect at the end of the week since the first daughters head back to school on Monday.

MALVEAUX: All right. We suspect he'll be back here as well around that same time. Get a little rest if you can if you get a break here. LOTHIAN: You bet.

MALVEAUX: Thank you, again, Dan.


MALVEAUX: Well, if you were to describe President Obama's biggest challenge for his first term, it might be gridlock. So, with the new Congress being sworn in tomorrow, are the freshmen going to help push his agenda forward?


MALVEAUX: Out with the old, in with the new. That is what happens tomorrow on Capitol Hill. The 113th Congress is going to be sworn in. Our John Avlon is joining us from New York, CNN Contributor and Senior Political Columnist for "The Newsweek" and "The Daily Beast." John, good to see you. I know you were working really hard over the holiday like so many of us looking and watching to see if this deal was going to happen here. We got a new Congress coming in tomorrow. Do we expect that they're going to be any more cooperative with the president and his agenda than the last one?

JOHN AVLON, CNN CONTRIBUTOR: Well, Suzanne, there are some rational reasons for optimism and here is why. These folks were all elected during the presidential election of 2012, and the atmosphere and the message voters were sending couldn't have been more different than the message voters were sending in 2010. The big difference, of course, presidential elections bring out broad representative samples of the electorate. Midterm elections tend to be narrow and in 10 seconds of the electorate, Tea Party members really motivated by anger and animas (ph) towards President Obama. These members have an overwhelmingly entrepreneurial background and they got a message of problem solving from the voters. That's what the voters wanted to see. Not high bipartisanship but problem solving. And hopefully they will affect behavior among the freshman in Congress.

MALVEAUX: Tell us a little bit about the group here. You've got two more Democrats in the Senate, eight more in the Republican-controlled House. Do we think that there's going to be a little bit more room for compromise? And do we think that they are going to be the kind of group that is going to behave the same way the last did which is procrastinate, procrastinate, procrastinate? How do you -- how is their behavior going to change, if at all?

AVLON: Well, let -- first of all, let's hope not. I mean, the last- minute flurry of dealing to sort of defuse the time bomb that Congress set themselves for the fiscal cliff is just inexcusable. And they are, of course, going to have challenges very early on, because right now we have essentially kicked the can to late February, early March when the debt ceiling is coming due and the sequestration cuts. So, there will be a large focus to Congressional activity coming together with the outlines of a grand bargain on deficit and debt, entitlement reform, tax reform. The president spoke about that last night. These are serious challenges. Other high items, immigration reform, possibly a new gun legislation with regards to assault weapons and high-capacity ammunition clips. So, the early challenges will be there. Again, the good news is this is not a hard core ideological bunch. The message they heard from voters this time around is stop fighting, start fixing and that hopefully will adjust their behavior. Overall also, slightly more Democratic tilt especially in the Senate.

MALVEAUX: Right, right.

AVLON: So, that could adjust the balance of power and the conversations as well.

MALVEAUX: And John, talk a little bit about how the Congress is going to look different here. You've got a record number of women in the Senate, 20 of them. There were 17 in the previous Congress. There were also a record number of Latinos serving in the Senate. First openly gay senator, Wisconsin's Tammy Baldwin. The group is definitely more diverse this go round.

AVLON: It is. Slowly but surely, Congress is starting to look more like America, and that is a good thing, obviously. You know, I'll add to that list two specially notable senators. First of all, independent senator from Maine, Angus King, former independent governor to the state. You know, 40 percent of Americans are self- identified independents, like myself. We've got a representative in the Senate, someone who really does walk the walk and talk the talk.

Second thing that I think is especially notable, obviously Tammy Baldwin historic in that she's the first openly gay senator. But Tim Scott, appointed by Nikki Haley, but the first African-American Republican in the U.S. Senate since Ed Brook, first elected back in the 1960s, and the first Republican -- first Republican senator from the south since reconstruction. So, a very significant figure he'll be cutting in the coming years. We'll be talking a lot about his contributions.

Another person to look for, Ted Cruz, a Hispanic Republican from Texas. He's going to be a major factor in the conservative coalition for years to come (INAUDIBLE.)

MALVEAUX: And John, finally, I know you and I, we're talking a lot about the budget deal and the debt ceiling and that kind of thing. I mean, that's kind of immediate -- the immediate things that he has to focus on in getting done. Do we think that big term items he can actually accomplish for the second administration, whether it's immigration reform or even something dealing with gun control?

AVLON: Well, look, we know for a fact senator Dianne Feinstein of California is going to be putting forward new legislation on assault weapons and high capacity magazine clips on the first day of the new Congress. Obviously, that national outrage and reflection in the wake of Newtown massacre creating some impetus to move forward on that. Immigration reform as well, as you mentioned. You know, Republicans hopefully got the message this election that they can't simply depend on getting an increasing percentage of the white vote and win. They need to reach out. The president moving on The Dream Act helping him and Democrats on that. So there is a real chance at getting comprehensive immigration reform. Something that President George W. Bush tried in 2007 and failed to do in part because conservatives in his own party undercut that effort. So there's a ground to build on.

But the immediate thing, unfortunately, Suzanne, as you know, the countdown clock is on again. We've got two months before the debt ceiling and the sequester cuts come due. So my guess is that the real impetus there will be, can they find a way to reason together on entitlement reform and tax reform, the outlines of a grand bargain. That is high stakes, very important for the long term economic security of the country.

MALVEAUX: Yes, and that's going to take some real effort on the White House's part as well.

AVLON: It is.

MALVEAUX: John, thank you very much. Good to see you. Happy new year.

AVLON: Thanks, Suzanne, you too. You too.


The head of the NAACP, Ben Jealous, he is talking to us as well about the fiscal cliff deal. Is it a good deal for the middle class? We're also going to be talking about the new face of Congress. Of course, it will have more women and African-Americans. We're going to hear from the NAACP president and CEO Ben Jealous up next.


MALVEAUX: Taking a look at the big board. Stocks shooting up more than 200 points this morning. Right now, the Dow is up 228 points. Investors ringing in the new year with a pretty broad rally.

The fiscal cliff deal the Senate and House have signed on to raises income taxes for individuals making more than $400,000 a year and couples making more than $450,000. Everyone's going to get hit, however, with a rise in the payroll tax. Joining me now is NAACP president and CEO Ben Jealous.

Ben, good to see you, as always.

BEN JEALOUS, PRESIDENT & CEO, NAACP: Suzanne, good to see you.

MALVEAUX: Tell us a little bit about your reaction when you see this plan. We know that taxes are going to go up on the wealthy, but working Americans' paychecks, they are going to actually shrink because of this payroll tax rate that was allowed to go up. And I want to give you a couple of examples here.

We've got Americans earning $35,000 a year, going to -- will take home $700 less. Those earning $100,000 are going to lose about $2,200. How do you think that American taxpayers fared in this deal overall? JEALOUS: Yes, well, look, I think there are things here that are good for the short term and good for the long term as well. In the short term, the president has kept a key campaign promise to extend tax cuts for 98 percent of the people. In fact, in this deal, it's 99 percent of the people in this country. That's important because it keeps dollars going into our communities and helps keep this recovery going. This very kind of vulnerable recovery going forward.

With regards to Social Security, you know, it really depends on how you see Social Security. Those of us who know that this is an important program for people to make sure that they can survive, their families can eat when they get older. When somebody dies young to violence and they leave children or a surviving spouse, we understand that what we pay into Social Security we get back. So it's not a pure tax like an income tax where you pay in and it goes for defense and this and so forth. It's more like a retirement contribution. In fact, most households, in the span of the household's life, will get more than they pay in. So we see this as good for the short term and good for the long term as well.

MALVEAUX: And let's talk about the big picture here, Ben, because it's a very challenging time for so many folks. If you take a look at the U.S. census, it says that 49 million Americans are poor. That is one out of six, every American here.


MALVEAUX: Does this plan, does it help or increase the burden on people who are not doing well and particularly within the African- American community?

JEALOUS: You know, one of the key things here that happened that was very important is that we extended unemployment insurance for the long-term unemployed. That's important because there's 2 million people in our country out there every day of all colors beating the pavement trying to find a job.

In our community, in the black community, the average length of unemployment is 27 weeks. That's exactly as long as it takes to qualify as being long-term unemployed. It's a week past six months. And so for the average black person, long-term unemployment insurance is critical. And for our communities, it's critical, because every dollar that an unemployed person receives, they spend. And they spend very close to where they live. So, you know, that was critical, and I think it -- and, frankly, we saw it as one of the most critical things.

MALVEAUX: And, Ben, talk a little bit about the expectations here. The president has a second term. Ninety-three percent of African-Americans voted for him the second go-around. But you do have unemployment rates for the African-American community still pretty high, 13.2 percent, 5 points higher than the average -- national average for all Americans. Are there higher expectations for the president in his second term?

JEALOUS: Look, this is a very weighty moment, right? It's very historic. You have the first black president going into his second term. It happens to come on the 150th anniversary of the Emancipation Proclamation. And, unfortunately, in too many ways, our struggle now is similar to what it was then. And what black households sit around talk about, just as we did 150 years ago, is how do we get all our children access to good schools? How do we get beyond this persistent discrimination in employment? And how do we make the justice system work for all of us?

You know, we're a country that leads the world in incarcerating its people of all colors. But a black man in this country today is five times more likely to be incarcerated than a while man in this country and five times more likely to be incarcerated than a black man in South Africa at the height of apartheid when South Africa was the world's leading incarcerator. And so our hope for this president is that he will go real hard and, yes, closing this divide between the haves and the have-nots for people of all colors. But also to deal head-on even more aggressively with racial discrimination and to deal head-on with this new Jim Crow of mass incarceration. You know, late in --

MALVEAUX: Hey, Ben, do you have specifics here? Do you have -- I mean you're very strong on this point. Is there something specifically that you are thinking about that you feel like the president needs to do in that regard?

JEALOUS: You know, one thing that we would like to see -- I mean we've actually requested from the U.S. Department of Justice, is that they actually offer an alternative to a report that President George Bush won, if you will, George H.W. Bush, his AG Ashcroft issued very late in his first term, which is called "The Case for More Incarceration." And that really ushered in this kind of supersized period of mass incarceration in this country. It's time for us to have a report called the case for less incarceration. We've seen Republican governors in states like Georgia, Texas, sign off on bills that will downsize their -- the size of their justice system by switching from failed, tough on crime policies, like incarceration for addicts, to proven smart on crime policies like treatment for addicts.


JEALOUS: And so it's time for this president and his DOJ to take the lead on that issue and start getting us back towards sanity in the justice system that works.

MALVEAUX: OK. And finally here, Ben, a final point. We're looking at a new Congress that will be sworn in tomorrow. It is a dramatically different-looking Congress. Much more diverse. We've got Tim Scott of South Carolina getting the nod from the Tea Party. And, of course, you've got more than half the Democrats in the house, women, African- American, Hispanics, Asian. We're seeing a more diverse party, if you will. Does that give you any more optimism or hope that this is the kind of group that your organization can work with in terms of promoting your own agenda for job opportunities and leveling the playing field?

JEALOUS: You know, for us, it's always about what's in folks' hearts. You know, we have people like Congressman Cohen (ph) out of Memphis, a white congressman, who gets an A on our report card. And we have congressman now, going to be a new senator like Tim Scott who's black, he gets an F on our report card every year. When I look at Senator Scott, I'm very glad that going into the 150th celebration, if you will, of the Emancipation Proclamation we can now say we have one black senator. Given that we're 12 [percent or so of the population, we should probably have at least 10. But when I look at him, you know, I say, quite frankly, what one of my old coaches used to say about me in a sport I wasn't so good at, he has nothing but potential. There's nothing but room for him to improve. And we would hope that he would not continue to get Fs on the NAACP report card (INAUDIBLE) --

MALVEAUX: Is that because he's a Republican man or what is behind -- what is behind that grade?

JEALOUS: No, no. No. Look. Look. We have Republicans who believe in civil rights. You know, the -- unfortunately, he is not one of them. And unfortunately his party, as you know, has really gone after so- called rhinos, as they call them, you know, these Republican who believe in civil rights again and again. So, you know, for instance, you take Senator Specter, right, who was there until very recently. He was very good on the same sorts of justice issues that I was talking about. You know, so there's an opportunity here for him to live up, to have this be the party of Lincoln, the party of Frederick Douglas, the party of Colin Powell, the party of Jack Kemp, the party even of Arlen Specter.

MALVEAUX: All right. OK. Ben, we're going to work on getting Tim Scott for tomorrow to respond to some of your accusations. We appreciate your time and --

JEALOUS: Accusations? I said he had nothing but potential.

MALVEAUX: Oh, OK. Well --

JEALOUS: Going from an F to an A is (INAUDIBLE) all --

MALVEAUX: Your criticism, Ben. Your criticism. But in all fairness, we will get him on this show to respond to -- to respond to it.

JEALOUS: All right, thank you.

MALVEAUX: Ben Jealous of the NAACP, thank you very much. We appreciate your perspective.

JEALOUS: Thank you, Suzanne. Happy new year.

MALVEAUX: Happy new year.

We're going to have more after the break.