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CROSSFIRE

Is Senate Nearing A Deal?

Aired October 14, 2013 - 18:28   ET

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


(BEGIN VIDEO CLIP)

ANNOUNCER: Tonight on CROSSFIRE, the pressure is on. There are hopeful signs.

SEN. HARRY REID (D-NV), MAJORITY LEADER: I'm very optimistic.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: And I share his optimism.

ANNOUNCER: But what if they can't make a deal?

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We stand a good chance of defaulting.

ANNOUNCER: On the left, Stephanie Cutter. On the right, Newt Gingrich. In the CROSSFIRE, Austan Goolsbee, who is one of President Obama's top economic advisers, and Carly Fiorina, a former CEO and Republican Senate candidate. Can they get a deal? Are both sides demanding too much? Tonight on CROSSFIRE.

(END VIDEO CLIP)

NEWT GINGRICH, CO-HOST: Welcome to CROSSFIRE. I'm Newt Gingrich on the right.

STEPHANIE CUTTER, CO-HOST: And I'm Stephanie Cutter on the left.

The Senate has been abuzz all day with bipartisan meetings, and tonight it seems clear: cooler heads are prevailing; the adults are stepping in. Which means Ted Cruz has been banished. John Boehner has been bypassed. The adults, the Senate veterans, are trying to prevent the country from defaulting and will reopen the government.

Newt, I'm sorry that it has come to this, but I'm glad that we're on the verge of a deal. There's a report out earlier today by an economic forecasting, Macroeconomic Advisers, that these self- inflicted wounds, these caused crises in Washington, has cost the country about 900,000 jobs.

GINGRICH: Well, first of all, it's a pity that the president hasn't shown leadership and tried to bring people together, but, A, anybody who thinks John Boehner has been bypassed continues to misread the Constitution. If the Senate doesn't pass something that Boehner can pass in the House, it's just a press conference. But second, after all the weeks you and I have been here, debating and debating about whether or not the president should negotiate, the No. 1 things happening today is they're negotiating. Now, I think that's good for America. I'm delighted that finally we are seeing some negotiation, and

I hope that they will, in the next 24 hours, get a deal.

CUTTER: You know why? Because it's not all or nothing. And it's not, let's close the government unless we can defund Obama care. It's not let's let the country default unless we can, you know, cut spending by record levels.

GINGRICH: Clearly -- we're clearly going to disagree this evening --

CUTTER: So we are -- we are --

GINGRICH: -- but we're joined, we have help in disagreeing, because in the CROSSFIRE tonight, Austan Goolsbee, who used to chair President Obama's Council of Economic Advisers, and former Hewlett-Packard CEO and Republican Senate candidate Carly Fiorina.

Welcome to both of you.

Austan, I just want to ask you: Doesn't it trouble you as an economist to see a country with $17 trillion in debt, artificially low interest payments right now, because the interest rates are below the long-term historic average and almost nothing being done to fix it except this kind of dog-and-pony show on both sides?

AUSTAN GOOLSBEE, FORMER CHAIR, COUNCIL OF ECONOMIC ADVISERS: Well, I mean, that sounds like a trick question. After the little love-in at the beginning, where you guys agreed with each other.

Look, the thing is the long-run fiscal challenge facing the country we've known about for a long time, is rooted absolutely in the aging of the population and the growth of health-care costs. We've actually gotten pretty good news about that for the last two or three years. The Congressional Budget Office report is saying our debt-to-GDP ratio is shall shrinking. The government spending and the deficit are falling faster than they have either ever fallen or possibly with the one exception the year that World War II ended, and that the debt-to- GDP ratio for the country, our debt level is not going to return to the levels where it is now for more than a decade.

So we know there's a long-run fiscal issue, but it strikes me that's overwhelmingly not the thing that we should be focused on right now. And shutting down the government and threatening that we might have to default on either domestic obligations or on the bonds is a total welcome to crazy town. This is -- we should absolutely not be doing that. That's going to tank the economy at best.

GINGRICH: So the -- so you think trying to get an extension of the debt ceiling would have been a good thing?

GOOLSBEE: An extension of the debt ceiling, I understand that's what they're going to --

CUTTER: That's another quick question.

GOOLSBEE: And they're going to -- I understand they're going to -- maybe they're going to come up with some short-term extension of the debt ceiling.

GINGRICH: I'm just -- I'm just curious.

GOOLSBEE: If they think --

GINGRICH: Speaker Boehner went down Thursday and offered a six-week extension with all he was requesting was to negotiate.

GOOLSBEE: Well, let's --

GINGRICH: Suddenly -- suddenly this crisis wasn't a crisis.

GOOLSBEE: Here's my view. The guy from UPS has -- brings the package to your house. He has the ability to run over your package, to throw your package away, whatever. That doesn't mean you should give him a tip because he did not run over your package or throw it away.

The debt ceiling has to be raised. We should be negotiating actual policy content on something that is just a job of Congress to do. We should be negotiating about the grand bargain, about the budget, about all of those issues that face the country, though I have a feeling when we start that negotiation, we're going to flounder on the same rocks that we have floundered on in the past, like revenue versus cuts and things like that.

But I think it's a little misleading to say that's what Boehner was doing, because he was asking to negotiate on the debt ceiling.

CUTTER: For a crisis that he created.

GOOLSBEE: Yes.

CUTTER: So Carly, I want to bring you in here. Now, we were just having a -- I would call that a substantive conversation of how we deal with our long-term fiscal problems and what we should be debating and what we should be holding hostage. Nothing, you know, says have a substantive debate like a Tea Party rally with Sarah Palin, Ted Cruz and the confederate flag. And that's what we saw yesterday.

So this entire crisis that Ted Cruz led us down, you know, you have hundreds of thousands of people not getting a paycheck because the government is shut down. That's not even counting the many small businesses that are dependent upon government across the country. You have consumer confidence at an all-time low this year, and you have a new "Washington Post"/ABC poll out that shows Republicans at a record low. Handling of budget negotiations, Republicans are at 21 percent. So 1 out of 5 Americans approve of what Republicans are doing. So that means they're even losing Republicans.

So if you were in the Senate and you were advising Mitch McConnell, what would you tell them to do here? What's the way out of this?

CARLY FIORINA (R), SENATE CANDIDATE: So first I've been public in saying that the tactic of trying to link a continuing resolution for the government with defunding Obama care was foolish. It was inevitably going to fail.

However, here's what the American people think. They think that it's reasonable to associate a discussion about limiting or reducing federal spending to an increase in the debt ceiling. And the reason they think that is because they understand what credit means.

If you're an American with a credit card, and you have a debt -- you have a limit of $2,000, and you want to spend $3,000 next month? You go to your bank and you say, "Would you increase my credit limit?" OK? That's different than defaulting on your payments.

What we're talking about here is raising the debt ceiling for the government, and 70-plus percent of Americans think it's common sense to associate a debt ceiling increase with a substantive discussion about lowering federal spending.

The problem that Republicans have, I would argue the problem the country has, the demonstrable lack of leadership on behalf of this president, is ever since Simpson-Bowles -- Remember Simpson-Bowles? My goodness, that's three years ago. There has not been a single substantive proposal by this administration on tax reform, a key component of Simpson-Bowles, entitlement reform, a key component of Simpson-Bowles, and now you have Democrats saying, "Oh, a continuing resolution shouldn't include lower sequester limits." One of the reasons the debt-to-GDP ratio is lower right now is because Republicans succeeded in lowering the overall spending by government through the sequester.

GOOLSBEE: Wait a minute.

CUTTER: You want to respond?

GOOLSBEE: Carly and I are friends and we've debated many times. I thought for a second, wait, is it April Fool's Day? That's completely not true. Since Simpson-Bowles, the president's budget is the only budget put forward by either of the parties which proposed both new revenues and entitlement cuts, and brought the deficit to a level that would stabilize debt to GDP.

FIORINA: And that's why his own party rejected it, and it didn't -- it didn't push forward any reasonable debate.

GOOLSBEE: The president did put forward these proposals. And let us remember what happened. When the president said, "Here as part of a grand bargain, I'm willing to put the following things of Medicare on the table," the Republicans turned around and began condemning them: "The president just proposed to cut Medicare."

FIORINA: And when the Republicans put $900 billion of additional tax revenue on the table and the president accepted it, it was like "What have you done for me lately?" There hasn't been -- Simpson and Bowles, if they were both sitting here today, would tell you how disappointed they are that there has not been a single substantive commissioned discussion about how to reduce federal spending, lower the debt-to-GDP ratio, get entitlements reformed, and get tax reform going, which this economy desperately needs. That's the conversation we could have.

So if there is a deal tonight, which I desperately hope there's a deal tonight, it's a content-free deal. Let's just extend the limits. Fine, but let's at least have a process for having a substantive discussion about these substantive issues. And in that regard, the president must lead.

CUTTER: And do you think that Republicans should also lead? You know, what has shut down many of these talks is not the unwillingness of the president or Democrats to talk about entitlement reform. It's been Republicans talking about revenue. They're still drawing a line on revenue. And you can't have a balanced deficit reduction unless you're going to look at everything.

GOOLSBEE: -- piece of Simpson-Bowles. That's the thing.

FIORINA: I find that so fascinating. It goes further than the president's plan on raising revenue.

CUTTER: So --

FIORINA: So the increase in tax revenues that the Republicans put on the table and agreed to --

CUTTER: -- which is a distraction.

FIORINA: -- less than ten months ago.

GINGRICH: OK.

FIORINA: Just sort of doesn't count. And oh, by the way, should you --

(CROSSTALK)

FIORINA: My own view is let's lower every rate, let's close every loophole, let's broaden the base. It would absolutely raise revenue. That's different than raising rates.

GINGRICH: We're going to come back to this in a minute, but first of all, I just want to suggest what we're really watching here in Washington is something between a meltdown and pathetic. I'll explain why in a minute.

CUTTER: I would agree with that.

(COMMERCIAL BREAK)

GINGRICH: Welcome back to CROSSFIRE. We're here with President Obama's former economic adviser, Austan Goolsbee, and former CEO, Carly Fiorina.

Washington and the country are awaiting some kind of debt limit deal. However, there is zero possibility that senators Harry Reid and Mitch McConnell will achieve anything significant. What we're really watching here is something between a meltdown and pathetic. The meltdown would be a default.

But what's pathetic is simple. For years -- and we were just discussing it on the first segment -- on a bipartisan basis, this city has failed to deal with the big problems facing America, and the world is noticing.

I found it very chilling today that China's government-owned news agency is now pointing to our continuing crisis and basically saying, the U.S. fiscal failure warrants a de-Americanized world. Now, other countries are saying similar things. I think we should take that as a serious warning that, in fact, we need to get our house in order in order to remain the leading country in world.

CUTTER: We do. And we have to stop doing the self-inflicted wounds that I brought up at the beginning. What they're really saying is "Don't shut down the government over defunding your health-care plan. Don't threaten default because you're not getting what you want."

These are things that shouldn't be a hostage-taking situation. These are bills that Congress has racked up. They should extend the debt limit. They have a responsibility to fund the federal government, not hold it hostage to some political agenda.

GINGRICH: But --

CUTTER: So that's China's propaganda agency --

GINGRICH: But I don't think they're just responding to this week.

CUTTER: I think we're agreeing on how the world sees us right now. We're just not agreeing on how we got there.

FIORINA: By the way, I agree that we look foolish to the rest of the world. And I just came back from an international trip this weekend. It's clear the rest of the world is saying, what are we doing?

And for a moment, if we can, to take it out of the immediate term and the partisan bickering in Washington, I think the reality is that people are worried, whether it's business people or consumers, regardless of their party, or observers overseas, are worried that the issue is not time, and the issue is not deadlines.

In other words, it's not that our government, or Congress people, our admission don't have enough time to fix these problems. And it's not that we're up against a deadline. It's that we don't have the will, we don't have the processes to come together and find reasonable solutions.

The reality is that when our crating -- credit rating was dropped for the first time in our history, they weren't just talking about a failure to meet a deadline. They were talking about an unsustainable debt-to-GDP ratio and no observable progress in how that was ever going to get solved. And that hasn't changed. Here we are. It hasn't changed.

GOOLSBEE: I would disagree with you a little. If you look at the downgrade, which granted they made an accounting mistake when they did it, and that's why the other two didn't follow along, but when they said it, they quite specifically said the reason they were downgrading it was not based on an unsustainable debt-to-GDP. It was based on unsustainable politics, that they didn't think that the political system could do anything.

FIORINA: Well, let's not contest that. It hasn't changed.

GOOLSBEE: But if you look at Simpson-Bowles, we have actually, as a country, partly through good fortune, that health-care cost inflation has been lower than they predicted then; partly from sequester; partly from new revenues, we've actually done almost three quarters of the amount of deficit reduction that Simpson-Bowles said we needed to do. And the government spending and deficit levels are shrinking at the fasters they have had shrunk in something like 70 years.

So the question is why is it --

GINGRICH: Wait a second.

GOOLSBEE: -- you think the most important thing we should do right now is go figure out how to cut the deficit even farther?

FIORINA: But Austan, are you really arguing --

GOOLSBEE: I think what we need to do is grow.

FIORINA: Wait, are you --

GOOLSBEE: We need to stop with this. This is crazy.

FIORINA: Are you really arguing that this country is on a sound economic footing? You and I can agree the most important thing is growth here. We might disagree on how to get growth. Clearly, stimulus isn't working. Clearly, printing money isn't working. I would argue that --

GOOLSBEE: Threatening default doesn't seem to be working either.

FIORINA: I totally agree with you. And I don't think anyone who is talking about default thinks that's helping growth.

But I think the point is that, without more robust economic growth, without tax reform, which is part of growth, without entitlement reform, without regulatory reform to get government off the back of small business, we're not on a sustainable economic footing. I actually think Democrats and Republicans both agree with that.

What's dispiriting to consumers and business people and the rest of the world is why can't they sit down and talk about this? GOOLSBEE: I think the polling is quite clear on what America is dissatisfied with, and that is they view -- even Republicans. Independents and Democrats overwhelmingly view that some segment of the Republican Party has -- I don't want to use the inflammatory language of hijacking or whatever. They feel that a small group of Republicans has taken this into a heavily confrontational way that is deeply undermining of the economy, and even -- almost the majority of Republicans think that.

GINGRICH: OK. So that's this week's poll at this moment.

GOOLSBEE: But it's based on the truth. This was a plan. This was a planned thing. They spent the summer announcing that they intended to try to extract concessions by threatening to hit the debt limit.

GINGRICH: Right.

GOOLSBEE: And they wanted the defunding of Obama care. They wanted the cutting of short-term spending.

GINGRICH: So --

GOOLSBEE: They wanted to put in cuts on Medicare and Social Security. How is that reasonable? I don't understand what you're saying.

GINGRICH: Just wait for a second. After weeks of your party screaming about hostage-taking --

GOOLSBEE: Yes.

GINGRICH: -- over the weekend -- over the weekend --

GOOLSBEE: Yes.

GINGRICH: -- Senator Harry Reid walks out and says, "Oh, I want to change the sequester rules, and I won't move a bill unless it changes now." Isn't Reid now -- isn't Reid now hostage-taking?

GOOLSBEE: I don't -- I don't think so. That was in private. My understanding was that was an argument about what date would the government restart?

CUTTER: Yes.

GOOLSBEE: And if you restarted it on a certain date, then technically it would not abide by what was in the previous sequester. I think that was a very small technical thing.

FIORINA: Austan -- But I think what Harry Reid absolutely did do this weekend, here you have Susan Collins, not exactly a Tea Party flamethrower, who comes together with six Republicans and six Democrats and puts forward a proposal. A compromise proposal that had broad bipartisan support, and Harry Reid rejects it out of hand.

GOOLSBEE: OK. FIORINA: But let's get off the immediate term for a second. I think that was exceedingly unreasonable on Harry Reid's part. Let us -- let's stipulate, because I think I have over and over again. Let's stipulate that threatening to defund Obama care and shutting down the government over it was a poor tactic that has harmed many and that Republicans are suffering for it. I'm totally willing to stipulate that. OK?

GOOLSBEE: You did.

FIORINA: Now, let's, however, move on and say this: I've negotiated a lot of deals in my life. I'm sure you have. I'm sure all of us have. When you are actually wanting to make progress, you have to empower your opponent.

When President Obama -- we talked a lot about all the things Republicans have done wrong. President Obama is the leader of the free world. His party controls Washington right now, no matter what the House Republicans are trying to do. When the leader of the free world over and over and over at every opportunity castigates Republicans, tells them that they are poorly motivated, that they don't care about America, et cetera, et cetera, and then declares over and over and over "I will not negotiate. I will not negotiate. I will not negotiate," he is empowering the flamethrowers. It's bad negotiating strategy. It's not good leadership.

And unless he steps forward and says, "I want to reach a resolution on tax reform. Here is my proposal on entitlement reform," a serious proposal that could actually gain bipartisan support, it isn't going to happen.

GOOLSBEE: OK, all I would say are, I would make two points. The first is, he stated from the beginning the totally reasonable position that we cannot commence negotiating over the debt ceiling. That we do not attach policies --

FIORINA: Other presidents have.

GOOLSBEE: No, they absolutely have not.

(CROSSTALK)

FIORINA: Then why do 70 percent of Americans think we should negotiate spending over it?

GOOLSBEE: They do not.

FIORINA: That's what a poll says.

GINGRICH: Austan, you may be a good economist. You're a terrible historian.

FIORINA: What he's saying is that --

GOOLSBEE: No. Even in the time of your speakership --

FIORINA: Yes.

GOOLSBEE: -- they attached debt ceiling increases to budgets. But there was never a time. You never -- Mr. Speaker, you -- I know you like to stir it up. But you never threatened, "If you do not give me what I want, I will default the government." That's totally irresponsible.

GINGRICH: Since -- since --

FIORINA: That is different from saying there has never been a negotiation over an increase in the debt ceiling.

CUTTER: That's what Republicans are doing today. That's what many of them said on TV today.

GOOLSBEE: Traditional Republicans. If they are coming together with the unanimous Democrats to get us away from a thing in which we're going to negotiate about the debt ceiling, I'm 100 percent for that.

(CROSSTALK)

FIORINA: Well, then Harry Reid should have accepted Susan Collins' deal instead of rejecting it out of hand.

GOOLSBEE: No, but Susan Collins tied it to the debt ceiling.

GINGRICH: Now listen.

GOOLSBEE: You cannot set that as the precedent. Horrible precedent.

GINGRICH: OK. Wait a second. I just want to make this clear. Starting in 1953, under Dwight Eisenhower, we have consistently used the debt ceiling. We have attached conditions to the debt ceiling. When I was in Congress we did it routinely. Gramm-Rudman was attached to the debt ceiling. This is one of those things that the White House has invented, that you guys repeat mindlessly. And it's factually untrue.

GOOLSBEE: I'm not repeating it mindlessly.

GINGRICH: It's untrue.

GOOLSBEE: Name to me ever in American history, name a single Democratic Congress person that has ever said, "If you do not give us 'X,' we will run across the debt ceiling."

FIORINA: You just changed the argument. What you said is there's never been a negotiation --

GOOLSBEE: Over the debt ceiling. And you cannot name for me a single --

FIORINA: OK. All right.

GINGRICH: Barack Obama and -- and Senator Reid both vote against raising the debt ceiling. CUTTER: That's different. That's different.

(CROSSTALK)

GINGRICH: And Senator Obama said --

CUTTER: OK. We've got to go to break. We've got to go to break.

GOOLSBEE: If Republicans in Congress want a showboat like Mitch McConnell's old one --

FIORINA: Oh, a showboat.

GOOLSBEE: They should be able to have it.

CUTTER: A showboat is one thing. Threatening to default on the government unless you get what you want is another thing. However, we're going to talk about it --

FIORINA: We're talking about increasing the debt ceiling, not defaulting on the debt. You as an economist know the difference.

GOOLSBEE: Defaulting on the --

(CROSSTALK)

CUTTER: We're going to talk about this when we come back from break. I want you both to stay right here so that we can do that. And we're going to "Ceasefire" and see if there's anything that you two can agree on. Let's see about that.

And we also want all of you to weigh in on today's "Fireback" question. Are you optimistic that a deal will pass Congress this week? Tweet yes or no using hash tag crossfire. We'll have the results after the break.

(COMMERCIAL BREAK)

CUTTER: We're back with Austan Goolsbee and Carly Fiorina. Now we're going to call a "Ceasefire." Is there anything that you two can agree on? I think I know the answer to that, but --

GOOLSBEE: I think frequently we agree on a lot of things. I mean, I would say we probably agree that growth is the most important thing, and, you know, we might -- we might differ on some of them, or we might say, "Hey, let's make a package of a lot of" -- whether it's regulatory tax, I would say investment in skills, education, infrastructure. I bet we agree on a lot of that.

FIORINA: Well, I think we agree that growth is the most important thing. I think we agree that a substantive conversation that includes regulatory reform and tax reform is necessary for growth. And there may be other things, as well, that we wouldn't agree on.

And so I think, whatever deal comes through this week, and I believe there will be a deal, it will be pretty content free, it will kick the can down the road. But whatever deal comes this week, I hope that we can step back from the blame game on both sides and have the adults get in a room and say, "Can we finally have a substantive conversation about how to get this country on a sound fiscal footing that encourages growth and stop being the laughingstock of the world?"

GOOLSBEE: I do agree with that.

CUTTER: Well, that sounds good to me. What do you think?

GINGRICH: I think it is good. The only thing I would suggest because of the way our system does work, is a lot of that conversation has to be in public. The American people have to buy into it. It's very hard to get very large change if the American people don't understand.

FIORINA: I agree with that.

CUTTER: Thanks to Austan Goolsbee and Carly Fiorina. Go to Facebook or Twitter to weigh in on our "Fireback" question: "Are you optimistic that a deal will pass Congress this week?" Right now 39 percent of you say yes; 61 percent of you say no.

The debate continues online at CNN.com/Crossfire as well as Facebook and Twitter.

From the left, I'm Stephanie Cutter.

GINGRICH: From the right, I'm Newt Gingrich. Join us tomorrow for another edition of CROSSFIRE.

"ERIN BURNETT OUTFRONT" starts right now.