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Video: More compromise needed on Capitol Hill

updated 1/6/2013 12:51:12 PM ET 2013-01-06T17:51:12

DAVID GREGORY: And good Sunday morning. A new year and a new congress. Washington is getting back to work as President Obama ended his Hawaii vacation and members of the 113th class were sworn in earlier this week alongside their families. Spirits high, but the battle lines for the tough fights ahead are already being drawn - chief among them: whether Congress will vote to raise the country's debt ceiling.

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Shortly after lawmakers reached a down-to-the-wire deal on taxes to pull the country back from fiscal cliff earlier this week - the president tried to pre-empt the debt limit showdown by firing a warning shot at Republicans. He reiterated that call yesterday.

(Videotape)

PRESIDENT OBAMA: One thing I will not compromise over is whether or not Congress should pay the tab for a bill they've already racked up. If Congress refuses to give the United States the ability to pay its bills on time, the consequences for the entire global economy could be catastrophic.

(End videotape)

DAVID GREGORY: Republicans have vowed to use upcoming votes such as the debt ceiling as a bargaining chips to get more spending cuts and reforms to entitlement programs like Medicare - some are even threatening another government shutdown.

In just a moment we'll talk to Alan Simpson and Erskine Bowles, the two chairs of the president's debt commission, about where they see the fiscal cliff deal leaving the country, if it falls short.

But first, the man who brokered the deal with the White House on behalf of the Republicans and who will no doubt be a key figure in the battles ahead, the top Republican in the Senate, Mitch McConnell, joins me now.

Leader McConnell, happy new year. Welcome back to Meet The Press.

SEN. MITCH MCCONNELL:

Good morning, David.

DAVID GREGORY:

Let me talk about a preview of coming attractions and the friends ahead, including the debt ceiling that was so bitterly contested back in the summer of 2011. And here's something you said in August of 2011 that I wanted to show our viewers and have you respond to. You said then, "I think some of our members may have thought the default on paying America's bills issue was a hostage you might take a chance at shooting. Most of us don't think that. What we did learn is this: it's a hostage that's worth ransoming." Is that the strategy for the coming fight over the debt ceiling?

SEN. MITCH MCCONNELL:

Well, first, these last minute deals are no way to run the government, I can tell you that. We know what the problem is. You're going to have Al Simpson and Erskine Bowles on. They've talked about this for a couple of years now. We have a spending problem.

We have a debt the size of our economy, which makes us look a lot like Greece. This administration's driven spending as a percentage of our economy from 21% up to almost 25%. We've resolved the tax issue now. It's over. It's behind us. We were able to get permanent tax relief for 99% of American taxpayers and for 500,000 small businesses, so that's behind us.

What's left to be dealt with is the spending. And it's a shame that the president doesn't embrace the effort to reduce spending. None of us like using situations like the sequester or the debt ceiling or the operation of government to try to engage the president to deal with this.

DAVID GREGORY:

But Leader--

SEN. MITCH MCCONNELL:

And he's a great campaigner--

DAVID GREGORY:

--you said that that was a strategy, that's what you learned. So I want to come back to the question. "It's a hostage that's worth ransoming." The debt ceiling of the United States government. Is that the strategy that you would ransom that here again to force the kind of spending cuts that you think are necessary?

SEN. MITCH MCCONNELL:

It's a shame that we have to use whatever leverage we have in Congress to get the president to deal with the biggest problem confronting our future. And that's our excessive spending.

DAVID GREGORY:

All right. But you're--

SEN. MITCH MCCONNELL:

We have a spending--

DAVID GREGORY:

--conceding that that may be the strategy this time?

SEN. MITCH MCCONNELL:

Well, what the strategy ought to be is we ought to be doing something about the problem.

DAVID GREGORY:

Well, I understand that--

SEN. MITCH MCCONNELL:

You know, why we have to drag--

DAVID GREGORY:

--but there are additional problems as well that flow from that. As you know, after the debt ceiling was resolved in the summer of 2011, America's credit rating was downgraded. John Engler, who was a Republican governor of Michigan, said the following. He's the president of the business roundtable as you know.

He said this to Bloomberg News, "It's a terribly blunt, clumsy instrument to try to use. It's not a good weapon for anything except destroying our own credit rating." So I understand your views about spending, and we can continue on that, but just as a matter of how you try to force those spending cuts. You heard the president. He said he will not negotiate over increasing the debt ceiling. You're saying despite whatever the business community thinks, you may have to push it to the brink once again.

SEN. MITCH MCCONNELL:

What we're saying here is the biggest problem confronting the country is our excessive spending. If we're not going to deal with it now, when are we going to deal with it? And we've watched the government explode over the last four years. We've dealt with the revenue issue.

Now the question is will the president lead? Why should we have to be bringing him to the table? Why isn't he leading us in the direction of beginning to solve our long-term debt and deficit problem? It's perplexing to me that the president of the United States, elected to lead the country, is so reluctant to engage on the most important issue confronting--

DAVID GREGORY:

But--

SEN. MITCH MCCONNELL:

--our future.

DAVID GREGORY:

--Leader, you understand, of course, what the president told me last week and what other Democrats have said. They say, "Look, the Republicans had a chance to say yes to a number of things, in addition to the trillion dollars of spending cuts that were enacted as part of the budget control act of last year.

They could have had significant cuts in entitlement programs had they agreed on the revenue issue before you did it in this temporary measure. Going back to the summer of 2011 it's the president who said, "Hey, to all of you Republican leaders, if you didn't have such a hard time saying yes to me, the president, we could have solved some of these problems." Why is he off base about that?

SEN. MITCH MCCONNELL:

You can re-litigate the past if you want to. Where we are now is we have resolved the revenue issue and the question is what are we going to do about spending. I wish the president would lead us in this discussion rather than putting himself in a position of having to be dragged kicking and screaming to the table to discuss the single biggest issue confronting our future.

Until we adjust the entitlements so that they meet the demographics of our country we can't ever solve this problem. The time to solve it is now. Presidential leadership is desperately needed. Now we know he's good at campaigning, but when does he put the campaign aside and start governing and addressing the single biggest issue confronting America and its future?

DAVID GREGORY:

You've said, Leader, a couple of times so far that the revenue question is over. The president doesn't agree. He thinks that additional revenue needs to be looked at. And maybe it's part of tax reform. Closing loopholes. Raising additional revenue, if not through direct tax increases, through other means. Simpson Bowles, as you know, also think you have to look more at deductions. Is that your final answer? That the revenue question is solved, done, you won't look at it again?

SEN. MITCH MCCONNELL:

Yeah, that's over. I'm in favor of doing tax reform, but I think tax reform ought to be revenue neutral as it was back during the Reagan years. We've resolved this issue. Look, we don't have this problem because we tax too little. We have it because we spend way, way too much.

So we've settled the tax issue. And the question is now can we address the single biggest threat to America's future. And that's our excessive spending. I would like for the president to lead. It is a shame that we have to kind of drag him to the table to get him to discuss the single biggest issue confronting the future of our country.

DAVID GREGORY:

But, again, I think that people would push back at the idea that you would have to lead him. The president proposed significant entitlement cuts. Simpson and Bowles said he did it, though they would have liked him to have gone farther. But Republicans would not agree on revenues. Going back to last summer. You say you don't want to re-litigate it but you can't say he's been dragged kicking and screaming when he has proposed those entitlement cuts. Has he not? Is that not a true statement?

SEN. MITCH MCCONNELL:

No, he has not. He didn't even embrace Simpson Bowles. Ask Simpson Bowles why he didn't embrace Simpson Bowles. He hasn't embraced any specific proposal here in public to deal with significant entitlement changes. He has suggested he might be for chained CPI, which would be an important step in the right direction. I'd like to see and actually put that on the table in any kind of negotiation. He's mentioned it publicly but is unwilling to do it privately.

DAVID GREGORY:

All right. So on entitlements for you--

SEN. MITCH MCCONNELL:

Until the president leads--

DAVID GREGORY:

For you, though--

SEN. MITCH MCCONNELL:

I'm sorry?

DAVID GREGORY:

--on Medicare. You're the leader of the Republicans. What do you put on the table right now to solve this problem?

SEN. MITCH MCCONNELL:

I've said repeatedly publicly, and other members have, that until you adjust the eligibility for entitlements, do things like raising the age for Medicare for future beneficiaries. Not for those currently receiving or those about to receive. Have serious means testing for high income people. You know Warren Buffett's always complaining about not paying enough taxes. And what I'm complaining about is we're paying for his Medicare. We ought not to be providing these kinds of benefits for millionaires and billionaires.

We ought to make sure that the eligibility for entitlements meets the demographics of America. You know, when Social Security was passed back in the '30s I think the average American lived to be about 61. This year the average male, 79. The average female, 81.

Now, we need to adjust these programs for the future so that they'll still be there. The trustees of Medicare and Social Security say that Medicare is going to tank in 10 years. The question is are we going to preserve these programs for future beneficiaries? The president should be leading, not being dragged to the table by Republicans who want to solve the biggest problem confronting the future of our nation.

DAVID GREGORY:

If you are not satisfied that you're dealing with the spending issue, the entitlement issue, the way that you think it ought to be dealt with, would you rule out a government shutdown to achieve your goals?

SEN. MITCH MCCONNELL:

What I think we ought to do is to encourage the president to actually be president. Address the single biggest--

DAVID GREGORY:

I understand that's your view, but--.

SEN. MITCH MCCONNELL:

--issue confronting the future--

DAVID GREGORY:

My question is--

SEN. MITCH MCCONNELL:

--of our country.

DAVID GREGORY:

--would you rule out a government shutdown?

SEN. MITCH MCCONNELL:

I know what your question is. What I'm telling you is I haven't given up on the president stepping up to the plate and tackling the single biggest issue confronting the country.

DAVID GREGORY:

But you are--

(OVERTALK)

DAVID GREGORY:

--senators like Senator Toomey and Cornyn are saying that they would consider a government shutdown. As the leader of the Republicans, would you rule it out?

SEN. MITCH MCCONNELL:

As the leader of the Republicans what I'm telling you is we elected the president to be president. It's time for him to step up to the plate and lead us in the direction of reducing our excessive spending.

DAVID GREGORY:

As a senator, as the leader who's also facing reelection next year-- yes, next year now. I'm losing track of my dates. I want to get some of your reactions to some of the criticism from the right to this fiscal cliff deal, which, as you know, doesn't deal with spending. It's a temporary measure and taxes are going up.

Charles Krauthammer said in The Washington Post, "It's a complete surrender on everything." Erick Erickson, the blogger from Red State, wrote this. "Dear members of the press. Yes, you can all refer to this as the Mitch McConnell tax hike. Red State approves."

The Tea Party of Louisville, the president saying this week, "The next test will come with the debt ceiling debate. Let's hope McConnell's compromise isn't giving in while getting nothing in return. However, if his fiscal cliff negotiations are any indication we'll most likely see him wave the white flag again." What's your reaction, Senator?

SEN. MITCH MCCONNELL:

Well, the election'll take care of itself in 2014. The question is what are we going to do now? We know that everybody's taxes were going up a couple of days ago. What we did was prevent tax increases on 99% of the American public. Nobody in the Senate, not the 90% of Senate Republicans who voted for this, voted to raise anybody's taxes.

And the arbiter of whether something is a tax increase or not is Americans for Tax Reform. The head of Americans for Tax Reform said it was not a tax increase. And he had been a senator he would have voted for it. Look, this was not a tax increase.

It was not the kind of complete deal we'd like, because we want to cut spending. But we did stabilize taxes. The tax issue's behind us. And now we move forward to try to see if we can get a reluctant president to do something about reducing our excessive spending.

DAVID GREGORY:

What do you say about all the division, though, within the Republican party? I mean look at the difference between Senate Republicans and House Republicans. The fact that Speaker Boehner doesn't seem to be in a position to negotiate with the White House any further. That seems to be falling all to you. How much damage does it do to your goals for the government that the Republican party seems to be so divided over what you've just done on the fiscal cliff and continues to be divided over the way forward on taxes and spending?

SEN. MITCH MCCONNELL:

Well, there're divisions among Senate Democrats as well. In fact, I don't think there is a bipartisan majority in the Senate for not raising taxes further. In other words, taking the same view that I do, which is that the tax issue has been resolved. It's behind us. So there are divisions on both sides. I mean we can spend a lot of time talking about that, but the question is what are we going to do for the country in the meantime?

The American people chose divided government. We have a Democratic president, a Democratic Senate and a Republican house. They expected us to figure out some way to make progress for the country. And that's my view. I wouldn't have chosen this government. I voted for Mitt Romney. If Mitt Romney had been elected, nobody's taxes would have gone up. But this is the government we have. And can we make some progress for the country over the next two years? I'm hopeful we can.

DAVID GREGORY:

You said notably in the president's first term that your number one political goal was to make him a one term president. He's now a two term president. What's your number one political goal today?

SEN. MITCH MCCONNELL:

Well, as Bob Woodward pointed out, all of you left out the second part of that discussion which was that that was a long time off in the future and in the meantime we needed to do important things for the country. My goal is always to try to accomplish progress. To achieve things for the American people.

The single biggest issue we have right now is this massive, massive debt hanging over the heads of our children and grandchildren. We need to address it. And the American people elected divided government. They expect us to deal with the problems, even though they are hard to deal with when you have different points of view. I would hope the president would step up to the plate here and say, "We need to do something about this spending addiction and I'm going to lead the way."

DAVID GREGORY:

Couple of quick ones, Leader. Chuck Hagel appears to be all set to be nominated as defense secretary for the president's second term. Will he be confirmed, do you believe?

SEN. MITCH MCCONNELL:

Well, I think he'll be subjected to same kinds of oversight hearings that any nominee for such an important position would expect. And his views with regard to Israel, for example, and Iran and all the other positions that he's taken over the years will be I think very much a matter of discussion during the confirmation process.

DAVID GREGORY:

So you're not predicting smooth sailing for Chuck Hagel?

SEN. MITCH MCCONNELL:

I think it will be a lot of tough questions of Senator Hagel but he'll be treated fairly by Republicans in the Senate.

DAVID GREGORY:

As you know, I spent the holidays in Kentucky, in your home state, and I know full well there's a much different view of gun regulations in your state than in other parts of the country. Nevertheless, the president appears to be poised to push ahead on a series of gun regulations but a more comprehensive approach that's being reported this morning in The Washington Post that deals with mental health, that deals with other kinds of background checks. Have your views changed at all after the Newtown massacre? Are you willing to entertain the idea of new gun regulations?

SEN. MITCH MCCONNELL:

Well, I think what we need to do first is see what the Vice President's group comes up with. What their recommendations are. There'll be plenty of time to take a look at their recommendations once they come forward. What's going to dominate Washington for the next three months here is going to be spending and debt.

DAVID GREGORY:

Before I let you go, you talked about your reelection next year. There's talk that Ashley Judd, the actress, might indeed try to challenge you for your Senate seat. I know you've said you're a fan of her movies. Do you actually think she'd be a formidable opponent if it comes to that?

SEN. MITCH MCCONNELL:

Look, the election's going to occur in 2014. In the meantime I've got my hands full trying to deal with all the issues that we've been discussing here this morning. We'll worry about the election in 2014.

DAVID GREGORY:

All right, Leader McConnell. Thank you very much as always.

SEN. MITCH MCCONNELL:

Thank you.

DAVID GREGORY:

Coming up, with all the numbers being thrown around in the last two weeks during the fiscal cliff negotiations, we thought we'd try to put things into perspective. Take a look at these figures. These are the key numbers in simple terms for the money that the U.S. takes in and spends roughly every year. You see the amount that we spend is greater than the total tax revenue that the country brings in. And that's the difference between the two or the money we'd have to find to borrow to cover our spending. And there's the total debt. $16.4 trillion for the United States government.

If we wanted to bring those numbers down to size, say for a family budget, by removing some of those daunting zeroes, here's what it would look like. The family would have an income of about $24,000, while in that same year spending more than they take in. $38,000. That would mean $14,000 or so would have to be put on a credit card that already has a balance of about $164,000.

In the past it's been politically difficult to make far reaching cuts. The debt ceiling deal back in April of 2011 cut $38.5 billion in spending. So if you scale that down to your family example we just showed you, that would be like paying down the $164,000 credit card balance by $385.

So bigger automatic cuts are expected in two months, but our next guests, Alan Simpson and Erskine Bowles, who men who were on the president's debt commission, think it won't be enough. And so Washington missed a magic moment to do something big. They're here to tell us where the fiscal cliff deal falls short.

(OFF-MIC CONVERSATION)

DAVID GREGORY:

Joining me now, two of the nation's leading voices on fiscal responsibility, the co-founders of the campaign to fix the debt. Former Republican Senator Alan Simpson and former Clinton Chief of Staff Erskine Bowles. Welcome to you both. Mr. Bowles, let me start with you. You heard Leader McConnell. He said the question of revenue is now over. They've done this fiscal cliff deal and there's no more concern among Republicans about raising more revenue. How do you respond to that?

ERSKINE BOWLES:

Look, I think he's right about a lot of stuff. First of all, we've done all the easy stuff but all of the hard decisions lay ahead of us. We have got to reform the tax code to make it more globally competitive. We have got to reduce this entitlement spending, particularly as it relates to healthcare. We've got to slow the rate of growth of healthcare to the rate of growth of the economy or it will eat the rest of the budget alive.

And we've got to make Social Security sustainably solvent. If we do these things we can go a long ways to stabilizing the debt and keeping it on a downward path as a percent of GDP. But it's got to be growth, it's got to have some revenue, but the big part going forward's got to be spending cuts.

DAVID GREGORY:

All right. Well, Senator Simpson, you called this fiscal cliff deal that was just passed that doesn't deal with spending a "missed opportunity." Why?

FMR. SEN. ALAN SIMPSON:

Well, the sad part of it is the mountain roared and gave birth to a mouse. This thing isn't going to do anything really. And Erskine is so correct. Erskine and I have been working on-- and don't forget, in our commission we've got five Democrats, including Dick Durbin, five Republicans, including Tom Coburn, and one independent. How do you do any better than that?

And the president ignored it and the Congress has ignored it because they won't do the big stuff. And the big stuff has to get done. This other stuff is nothing. And as Erskine says so beautifully, we're the healthiest horse in the glue factory right now. The trajectory of debt, deficit and interest right now, the trajectory of debt, deficit and interest will match any of the PIG countries, Portugal, Ireland, Italy, Spain. Match it.

But of course we're lots bigger and, let me tell you, everybody out there in the Congress knows exactly what we have to do. And when Erskine and I traveled around for that whole year we knew they were in Congress because I could see their button. I didn't know any of them. And they said, "Save us from ourselves." How's that for courage?

DAVID GREGORY:

Well, but Mr. Bowles, you know, I asked the president this last week. I said, "You know, there's so much frustration out there. There's a pox on both houses." And he and other Democrats reject this idea that there's some sort of equivalence in intransigence in Washington. And this is how the president responded to it, laying the blame at the feet of Republicans. Let me play you this and have you respond.

(Videotape)

PRESIDENT OBAMA: The offers that I’ve made to them have been so fair that a lot of Democrats get mad at me. I mean I offered to make some significant changes to our entitlement programs in order to reduce the deficit. I offered not only a trillion dollars in -- over a trillion dollars in spending cuts over the next 10 years, but these changes would result in even more savings in the next 10 years. And would solve our deficit problem for a decade.

(End videotape)

DAVID GREGORY:

Mr. Bowles, you heard Leader McConnell and his views about the president not leading. Had Republicans conceded the point on revenue earlier, say in 2011, could we have had a broader agreement along the lines that you think is necessary?

ERSKINE BOWLES:

Oh, we definitely could have had it. I think, as you said in your opening part, this was the magic moment. This was our opportunity to do something really big to bring down this deficit and put our fiscal house in order. Yes, the president has taken some steps forward on the entitlement programs, but has he done enough? Absolutely not.

And has the speaker shown the flexibility he needs to show in order for us to broaden the base and simplify the code and reform our tax structure or to be specific about which ones of the entitlements he would actually reduce? No. What we've got to do is both of us have got to get out of our comfort zones, both sides, and we've got to come together and make the tough decisions it takes to bring down this deficit. We believe it can be done. I think the American people want it done. And now's the time to do it.

DAVID GREGORY:

Let me ask you specifically about Medicare, and I'll start with you Mr. Bowles and then get Senator Simpson's reaction. The president, again, when I asked him specifically about what he would do on Medicare, had this response. Watch.

(Videotape)

DAVID GREGORY: What is your single priority of the second term? What is the equivalent to healthcare?

PRESIDENT OBAMA: Well, there are a couple of things that we need to get done. I've said that fixing our broken immigration system is a top priority. I will introduce legislation in the first year to get that done. …

The second thing that we've got to do is to stabilize the economy and make sure it's growing. Part of that is deficit reduction. Part of it is also making sure that we're investing, for example, in rebuilding our infrastructure, which is broken. …

Number three. We've got a huge opportunity around energy. We are producing more energy and America can become an energy exporter. How do we do that in a way that also deals with some of the environmental challenges that we have at the same time?

(End videotape)

DAVID GREGORY:

So to both of you, Mr. Bowles first, what would you specifically call on the president to do on Medicare that he's been unwilling to do heretofore?

ERSKINE BOWLES:

Well, first of all, David, if you look at the combination of what was done in the Budget Control Act, the cuts there, and in this cliff deal, it's about half of what we need to do in order to fix our debt problem. So we've got about $1.6 trillion worth of spending we've got to do and we've got about $600 billion worth of revenue we've got to get from broadening the base and simplifying the code and wiping out this back door spending in the tax code. What would I do on healthcare?

(OVERTALK)

DAVID GREGORY:

On Medicare?

ERSKINE BOWLES:

--going to have to reduce healthcare spending on Medicare by about $500 to $600 billion over the next 10 years. You're going to have to do it in some of the ways that Mitch McConnell talked about. You're going to have to look at some kind of cost sharing. Some kind of means testing. You're going to have to look at age. You're going to have to look at lowering the price we pay the drug companies for the drugs.

You're going to have to look at paying for quality instead of quantity. You're going to have to have some kind of tort reform. And we've got to do something about this whole end of life scenario without talking about death panels. We think these kinds of things we could bring down the cost of healthcare.

DAVID GREGORY:

Senator Simpson, tactics and strategy are part of this. To achieve goals. You heard Leader McConnell. He's not ruling out a government shut down. He wouldn't do that in the interview. He also didn't back away from a comment he made in 2011 which is using the debt ceiling, holding it ransom, even though our credit rating suffered as a result, to force spending cuts. What do you think of those strategies or those tactics?

FMR. SEN. ALAN SIMPSON:

Well, I'll tell you what I think. I've been on a lot of commissions and a lot of them worked. I was on the Iraq study group. I did other things. The issue is what happened in the past, that doesn't matter a whit. Or who said what. It's what the hell do you do now.

And right now I can't imagine a worse place for Mitch McConnell. He apparently can't deal with Reid and that's a sad thing. I know them both. But let me tell you, when I was in the U.S. Senate the work was done between Howard Baker and Robert Byrd and Bob Dole and George Mitchell and Tom Daschle.

And now, apparently, poor Mitch is caught in a situation he has to go to the vice president, who's a good egg. I've known Joe for 40 years. Think of that. You can't do the work of the Senate because the leaders won't work together. They don't like each other.

DAVID GREGORY:

So Senator--

(OVERTALK)

DAVID GREGORY:

--said.

FMR. SEN. ALAN SIMPSON:

--forget who said what.

DAVID GREGORY:

Okay. So what breaks this impasse? I mean you're looking at the next two years. The president's talking about immigration and gun control and energy and all the rest, but he's locked in trench warfare with the Republicans over the budget.

FMR. SEN. ALAN SIMPSON:

Look, that's going to happen. It is happening. But if the American people can't understand. I love it. They say, "Well, the polls showed you should tax the rich." Well, great, I'm ready for that. But they also said, 75% of them have said, "Cut spending." Now if anybody can't get that, and if you can't cut-- forget the word cut. You stabilize. You do something with healthcare.

You stabilize Social Security. For god's sake, there were 16 people paying into that and one taking out when I was a freshman at the University of Wyoming. Now there are three people paying into that baby and one taking out and the life expectancy is 78.1 instead of 60. What the hell? Who's kidding who.

DAVID GREGORY:

All right. Senator Alan Simpson and Erskine Bowles. Simpson Bowles. Thank you both very much this morning.

I want to bring in our roundtable for some reaction. Joining me here at the table, former speaker of the House Newt Gingrich. Columnist for The Washington Post our friend E.J. Dionne.

Chairman of the House Democratic Caucus, Congressman Xavier Becerra. Sorry I butchered your name just a minute ago. I should have known better as a Californian. Vice chair of the National Republican Senatorial committee former head of Hewlett Packard, Carly Fiorina. And joining us for the first time, the newly elected freshman independent senator from Maine, Angus King, succeeding the retiring Olympia Snowe. He's the former governor of the state and has said that he will caucus with the Democrats. And, by the way, he's a big Redskins fan, which is particularly important today as they play Seattle.

Senator, welcome, and all of you welcome back to the program and happy new year. Senator, let me start with you. Based on everything you've heard this morning. Doesn't seem like a great way to run the government or solve big problems, does it?

SEN. ANGUS KING:

Well, I think one of the things that comes out of this is of course the budget is important. The deficit is important. Because I think there's an underlying sort of structural issue that's affecting the economy and the market. And that is people have lost confidence in the ability of our government to do anything.

This whole fiasco with the fiscal cliff going two hours over the deadline, coming back, how it finally worked out. And Simpson and Bowles are right. It's a very small piece of the solution. It's not much of a solution at all. It was, in effect, the easy part. So I think the discussion you had with Senator McConnell is very important because it's the inability of our government to work in a way to solve these problems that itself I think is a big drag on the economy.

DAVID GREGORY:

But as you approach the job newly here, how do you propose to break that sort of impasse?

SEN. ANGUS KING:

Well, I hope I can do-- listen, I'm not arrogant enough or naive enough to think that one guy from Maine is going to change the way the U.S. Senate works. But clearly I think there have got to be some people that come in and say, "Look, the solutions are more important than the parties. The pragmatic solutions to these issues really transcend ideology. Let's try to solve some of these things and make some decisions." And I think that's a big part of what we just saw. By the way, I once asked Erskine Bowles why it was always called Simpson Bowles. He said because they realized if it was Bowles Simpson the initials might have thrown people off.

DAVID GREGORY:

Fair enough. Speaker Gingrich, you thought this fiscal cliff deal was a disaster for the Republicans. I asked Leader McConnell about the division within the Republican party. How severe do you think that is and what's the impact of it?

NEWT GINGRICH:

Yeah, I think there's a real internal argument underway and it's partially over the very nature, which we're setting up once again, of these kind of negotiations. We're now going to spend 60 days or 90 days totally fixated in the media on the next big crisis. And then the crisis will go down to the White House. And then there will be secret meetings. And then at the last minute we'll once again produce 2,400 pages no one will have read.

It is exactly the opposite of healthy self government. And I think that people are fed up. If you're a House member and you thought you've won an election and you came here to do something and you're told, "Actually, your job is to sit around for two or three weeks while all the real work is done by three people in some room you're not allowed in." You inherently build up the hostility. And I think that we're seeing the same dance start over again. I said 11 months ago we will end up at the last minute doing something in secret which no one will have read, because you could just see the dance.

DAVID GREGORY:

Well, and Congressman, you voted against this. You thought this fiscal cliff deal was a bad one. Why?

REP. XAVIER BECERRA:

Well, I think Newt just gave the explanation for my no vote. These political showdowns don't work. This is no way to run government. You can't give anyone any kind of certainty about where to go, whether it's the markets or the average American family. And we have to get to the point of dealing with these tough decisions with big deals.

You can't keep hitting singles or hope to be walked to first base and win the game. You have to go for the big deal. And it's time for us to sit down, lock ourselves all in a room, not just a couple of folks, and come out with a deal. And at the end of the day you had to do what ultimately happened, which is if you can't agree because you've got these extreme sides, then put your best proposal on the table and let the best proposal win.

DAVID GREGORY:

E.J., you have a dissenting view. I mean you think that view is too narrow. This is a better deal than it's gotten credit for.

E.J. DIONNE:

I think I'm the only person here who thinks it is a better deal than it's gotten credit for. The Congressman and I both love baseball. If you keep hitting singles and actually start scoring runs you could win the game. And I think to say that this was the easy part, since when is raising taxes, $620 billion, the easy part?

I agree that there were flaws in this deal. There were things I wish it had done. The real question is what we do now. And in a sense, I'd like to challenge the whole premise of this conversation, because we can spend all our time arguing about how to fix the debt in 2035 and what to do about 2035, or we can stabilize the debt at a rate that's way below Greece, way below most countries with a deal of about $600 billion in revenue, $600 billion in spending.

And then we can start dealing with the problems we face now. Getting more job growth, above all. Broadly shared economic growth. And dealing with problems like gun violence and immigration and education and infrastructure. We've got to stop being accountants. I think if we're going to keep talking like these we might as well have a Constitutional amendment requiring all members of Congress to be accountants, because all we're going to be--

DAVID GREGORY:

But--

E.J. DIONNE:

--doing for four years is talking about budget.

DAVID GREGORY:

Carly Fiorina, there is some cynoture (PH) here. The White House would argue that, "Look, 2010 elections happened. Republicans have big gains. Trillion dollars in cuts in the Budget Control Act of last year. President wins reelection. He gets his tax hikes. Now we've got a debt ceiling negotiation. They're going to push for additional spending cuts." Is this the right balance to get ultimately to where we have to go?

CARLY FIORINA:

Well, unfortunately, I think, this will sound like a crazy thing to say, but everyone in Washington is spending way too much time talking about the politics and not enough time talking about the pragmatic facts. Here the are pragmatic facts.

The economy has been in a slow growth mode for now three years, reconfirmed by the latest job report. The deal that just got done adds $4 trillion to the debt. It will cut 1.5 points from economic growth according to Goldman Sachs economists. We have not solved a single problem that is real. We cannot focus on growth until we deal with some of these problems.

So forget who's winning politically and who's losing. The only way to change the current trajectory is, unfortunately, for someone to lead. And the president, as he is want to remind us frequently, won and he is the president. And therefore the obligation and the opportunity to lead falls mostly on his shoulders. And he has to--

DAVID GREGORY:

But he's got to have--

CARLY FIORINA:

--step forward--

DAVID GREGORY:

--somebody to negotiate with.

CARLY FIORINA:

Absolutely. But he has to be willing to negotiate as well. And he wasn't truly willing to--

DAVID GREGORY:

Well--

CARLY FIORINA:

--negotiate. I've negotiated many deals in my life and here's what they take. A win-win and a willingness to treat your opponents with respect. Not a constant win-lose and a denigration of your opponent at every opportunity. You're not going to get a good deal that way.

REP. XAVIER BECERRA:

David, the president put several proposals on the table and at the end of the day Republicans, once again, Speaker Boehner, walked away from the deal and just washed his hands of this. All of this. And at the end of the day the president did everything he could to fulfill his commitment to not let middle class Americans take a tax hit. But this is not the way to do it.

Let me show you the level of dysfunction in the House of Representatives on the Republican side. The same week we were supposed to vote to provide the victims of Hurricane Super Storm Sandy relief, they're all suffering, millions of folks, a bipartisan bill passed in the Senate with over 60 votes, Republicans and Democrats, to provide the $60 billion in relief debt.

Governor Cuomo and Governor Christie, Democrat and Republican say we need. Republicans in the House would not allow that bill to come to a vote. And today we're watching the victims in those four states, New York, New Jersey, Pennsylvania and I forgot the fourth state, I apologize--

CARLY FIORINA:

And why--

REP. XAVIER BECERRA:

--suffer. Connecticut suffer as a result of this.

CARLY FIORINA:

And why is there no outrage that politicians, as usual, use a real disaster to lard up a bill with a bunch of special interest gimmes that have nothing to do with the victims of Sandy. Why isn't there any outrage about that?

NEWT GINGRICH:

I think it's, this will clearly distinguish the two parties. That bill, 64% of it did not spend out in the next two years. 31% of it had nothing, nothing, zero, to do. The train came through and the boys said, "Let's throw the pork on the train." It came out of the Senate as-- exactly why the country's now sick. This is not emergency spending.

E.J. DIONNE:

Okay, but Governor--

NEWT GINGRICH:

What the House should have done--

E.J. DIONNE:

--Christie and collected the Republican members in the House from those states--

NEWT GINGRICH:

Sure.

E.J. DIONNE:

--four states, who said they needed that bill--

NEWT GINGRICH:

Yeah, they of course they want any bill. They don't care how much extra the rest of the country spends as long as they get what they want. I understand that. That's local politics in a crisis. I think the House should have passed a purely stripped down reform bill that met everything for Sandy and nothing for the pork. Now the country would have understood clearly doing that. And I think the House is not moving at the speed it needs to.

But I also want to say one other thing, David. Republicans ought to quit worrying about President Obama. The president's going to be president. The House ought to worry about being the House. Senate Republicans ought to worry about being Senate Republicans. Let the president deal with reality from their side.

The House has no obligation to pass a C.R., a continued resolution, on the president's terms. It has no obligation to pass a sequester in the president's terms. I think those are both much better fights than the debt ceiling. And the debt ceiling guarantees a crisis. It guarantees that the markets will cave in on the Republicans. And the Republicans in the end will give up.

(OFF-MIC CONVERSATION)

DAVID GREGORY:

We're back with our roundtable and we're talking about the coming fights, E.J., which include the threat from some Republicans of a government shutdown, or at least using the debt ceiling debate as ransom. You heard Leader McConnell not back away from that. Is that the future here? The near term future of the president's second term?

E.J. DIONNE:

I just want to say on Sandy relief I don't understand why the House walked away from something that Congress does, has done in every other disaster. But I almost never get a chance to do this, so I want to say that I hope Republicans listen to Newt Gingrich, because Newt Gingrich is absolutely right when he says that using the debt ceiling as part of this fight would be an absolute catastrophe for the country.

People talk about hostage taking. Who's the hostage here? The hostage here is the American economy. The hostage here are the American people. We're saying, "If you don't give us what we want, we will risk wrecking the economy." That's bad substantively and it's dumb politics--

SEN. ANGUS KING:

And--

E.J. DIONNE:

And I know that Mr. McConnell did not answer your question, which made me wonder where is he on this.

DAVID GREGORY:

Senator?

SEN. ANGUS KING:

David, it's important to talk about what the debt ceiling really is. The debt ceiling has nothing to do with the future. It has to do with the past. The debt ceiling is allowing us to borrow money to pay money that we've already borrowed. It's as if we spend money on our credit card, at the end of the month say, "Well, I'm not going to pay it." And that wrecks your credit.

And that's really we're talking about. It's not about future opportunity to borrow. It's spending that's already been incurred. And if you look back at 2011 you can see the job numbers dip in the summer of 2011 when we went through that hostage taking.

DAVID GREGORY:

And just as a matter of politics, Carly, I mean the reality is you've got the business community that the White House will try to line up in a way that they haven't before to say, "Uh-uh (NEGATIVE). Don't mess with this." John Engler, who I quoted earlier in the program, saying, "Don't play around with the debt ceiling. You saw what happened last time." That could give the president a little bit more strength, could it not here?

CARLY FIORINA:

I agree. And I also agree that it is not wise to fool around with the debt ceiling. On the other hand, let us be realistic once again. If the debt ceiling is increased and there is no progress on solving these fundamental problems that Erskine and Bowles spoke of, Moody's will still downgrade our credit, as they have been very clear in saying.

And so I would argue that if the president is serious about not wanting an argument about the debt ceiling, then what he should put forward is a substantive and sincere process where planned spending is going to be on the table. Because so far we've had a commission--

(OVERTALK)

CARLY FIORINA:

--we've had a task force, we've had a fiscal cliff. Nothing has put spending on the table.

NEWT GINGRICH:

Let me ask you this. And I appreciate E.J.'s support here. But I want to make a point that probably he may not be as enthusiastic about. They have two vehicles. They have a continuing resolution, which is at the end of March, and they have the sequester bill.

Now, these are legitimate government spending bills. The debt ceiling is different because it triggers all of these international financial problems and triggers the credit of the United States. They don't have to say, "We're going to be wimps." I've helped closed the government twice. It actually worked. Bill Clinton came in and said, "The era of big government's over," after two closings. Not before.

DAVID GREGORY:

You also wrote in your memoir that you regretted it from the point of view, you relied too much on the enthusiasm of the activists and didn't factor in the disdain of the American people.

NEWT GINGRICH:

But, no, we got reelected for the first time since 1928. And we would argue we would never have gotten to a balanced budget and we would have never have gotten welfare reform without that fight. So I think if the Congressional Republicans want to say, "You're going to have a really hard time with continuing resolution," that's perfectly legitimate. And it's a exactly the right grounds. And then take the president's speech from yesterday in which he said, "Once you have spent it, you have an obligation." And that's when I say, "Terrific. We agree."

DAVID GREGORY:

Can I--

NEWT GINGRICH:

"We're not going to spend it."

DAVID GREGORY:

Can I just come back to the Senate for a second. As an independent voice, you said you'd caucus with the Democrats, but as an independent coming in to the Senate how do you think you can have a real impact on these debates and on the strategy and on the politics?

SEN. ANGUS KING:

Well, in the first couple of weeks after I was elected, before even being sworn in, I came down here and had a series of meetings with a variety of senators. In fact I met with 30 different senators. I think it was 11 Republicans, 19 Democrats.

And what I found was my peculiar status as an independent, I could have frank discussions with both sides without being viewed as a member of the enemy camp. And we talked, for example, a lot about the filibuster. And I heard the Democratic side about abuse in the filibuster. I heard the Republican side about the abuse of the amendment process. And I feel I came up with a view that was more balanced than it might have otherwise been.

I hope I can play that role. And that's certainly the role I hope to play. I'm going to be on the Rules committee, for example, to talk about things like campaign finance reform. This budget thing, the reason it's not being resolved is the hard part is left to do. There's got to be more revenues. There's got to be more significant cuts. And there's no way-- I spent a good deal of the campaign sort of digging into this. We're not going to grow our way out of it. There are going to be painful cuts. And I think that's why it's so hard. Nobody wants to do it. I agree, though.

(OVERTALK)

SEN. ANGUS KING:

Here's where I agree with Senator McConnell. I think the president needs to take an affirmative step and say, "Look, we've got to do something here." He keeps saying it's going to involve revenues and cuts. Call some people together, I don't know who they are, and start working on it. We've all seen Lincoln. Lincoln got his hands dirty negotiating the 13th amendment. And the president can't do it by remote control. I think he ought to call them up to Camp David, lock the door and say, "Let's get it done."

REP. XAVIER BECERRA:

David, I agree with a lot of what the senator just said, because you do have to have this balanced approach, which includes everything. Painful cuts, some additional revenue. But we have to be honest, Carly. Put everything on the table, we have already had over a trillion and a half dollars in spending cuts. Not taxes. Spending cuts in the last year's deal.

We had over $700 billion in savings to Medicare under the Affordable Care Act that in fact a lot of Democrats got pounded on by Republicans during the campaign. And on top of that we've got an additional trillion, 200 billion dollars in spending cuts that will take place unless we figure out a way to deal with the sequester in a more smart way. So that's over $2 trillion. That's close to $3 trillion in spending cuts--

CARLY FIORINA:

But it--

REP. XAVIER BECERRA:

--that are in place now, without us having to do--

DAVID GREGORY:

All right.

REP. XAVIER BECERRA:

--a thing.

DAVID GREGORY:

So Carly and then--

CARLY FIORINA:

But it doesn't change the fact--

DAVID GREGORY:

--E.J.

CARLY FIORINA:

It doesn't change the fact that everyone agrees that the fundamental issues sit in front of us. Reforming the tax code so it was simpler. Broaden the base, lower the rates. Deal with healthcare costs. Stabilize Social Security. Get out of control spending under control. Grow the economy. Those fundamental problems are still in front of us, despite good work by many--

(OVERTALK)

CARLY FIORINA:

--on both sides.

REP. XAVIER BECERRA:

--we have done.

CARLY FIORINA:

In the deal that we just--

REP. XAVIER BECERRA:

And taxes. We've got to keep doing it--

E.J. DIONNE:

Right.

REP. XAVIER BECERRA:

--in a balanced way.

DAVID GREGORY:

E.J.

E.J. DIONNE:

First, I want to underscore something that both Ms. Fiorina and Newt Gingrich said, which is let us right now, why don't the Republicans announce. "We will take the debt ceiling off the table. We've got other power we can use. Let's get rid of that issue right now." That would be great for the economy, because there would be some certainty--

SEN. ANGUS KING:

If--

E.J. DIONNE:

--that we're not going down this crazy road (UNINTEL)--

SEN. ANGUS KING:

I bet if Senator McConnell had said that this morning the markets would have gone up 200 points.

E.J. DIONNE:

Right. And then we could deal in a rational way. We would argue with each other. Newt Gingrich and I probably disagree quite radically on what needs to be done because I think we need more revenue than we got in this deal. And the other thing is we forget how much we've already done. There has been one deal after another after another that has cut spending very significantly. And that's why to say it's now only about spending and no more revenue on the table is just a big mistake.

(OVERTALK)

CARLY FIORINA:

You would get broad, widespread agreement if the revenue argument was, as Simpson Bowles have suggested, a vast simplification of the tax code. This latest deal complicated the tax code, continued corporate welfare. Simplify the tax code, close the loopholes, lower the rates. You would get broad agreement.

E.J. DIONNE:

Where is the--

(OVERTALK)

CARLY FIORINA:

--unfortunately--

MALE VOICE:

--tax reform easier (UNINTEL).

CARLY FIORINA:

Unfortunately, that has never been close--

(OVERTALK)

DAVID GREGORY:

All right. Let me come over to--

MALE VOICE:

You're right. That's what we need to do.

NEWT GINGRICH:

Well, let me come back to exactly the point that E.J. just said. Because the media plays a major role in this mess. Okay? We went through a fiscal cliff. Oh my god. You're sure that somebody from Bloomberg said it's--

(OVERTALK)

DAVID GREGORY:

Let's not bash your media here.

NEWT GINGRICH:

No, no, no. Well, it's not a question of bashing. It's a question of mutual responsibility. The fact is fiscal cliff became a way to hypnotize all of us to avoid thought. And we all sat around and said, "What are we going to do? What are we going to do?" Now we have the crisis of the debt ceiling. And that will allow us to avoid that. The House Republicans should meet with the 30 Republican governors who have vastly more of the majority of the population in their states--

MALE VOICE:

Who all have to balance their budgets.

NEWT GINGRICH:

Who all have to balance their budgets. They should spend the next month and a half on hearings. We have a $4 trillion government. Does anybody at this table seriously believe we couldn't find things to eliminate that in fact the country would be overwhelmingly happy with? Sometimes first steps towards success are doing easier things, not harder things.

DAVID GREGORY:

Can I ask, I have about 30 seconds left, Senator. I want to put you on the spot in a couple quick ways. Senator Hagel. Could you vote to confirm him as defense secretary?

SEN. ANGUS KING:

Well, I'm going to be on the armed services committee, so I'm going to reserve judgment, but let me just share my standard, because I have thought about this. I start with the premise that the president should be able to appoint his own people. As a member of the cabinet. I think the standard is different for a cabinet member than it is for a judge who's in for life. So I start with that premise. But I'm going to want to ask some serious questions, hear from Senator Hagel about the issues. He's a guy with a distinguished record and I'm going to listen to the answers.

(OFF-MIC CONVERSATION)

DAVID GREGORY:

Thank you all for a terrific discussion this morning. That is all for today.

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