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REP. CHRIS VAN HOLLEN, D-MD.: Good to be with you.
WALLACE: This week, the House will vote on something called "cut, cap, and balance."
And let's outline what it would do. You would cut the deficit $111 billion next year. You would cap spending under 20 percent of GDP in a decade. It's now 24 percent. And you would raise the debt ceiling only after Congress passes a balanced budget amendment.
Congressman Jordan, you're a big sponsor of this. President Obama says that it would cut Medicare and Social Security much more deeply than Paul Ryan's budget plan.
REP. JIM JORDAN, R-OHIO: It doesn't do that. And basically, it mirrors the budget proposal that House passed earlier this year.
But we like to view it as common sense American plan. I mean, Americans know we're spending too much, we're headed for a cliff, we're headed for bankruptcy. Let's cut spending in year one, let's cap it as a percentage of our economy going forward. Everyone understands our government is getting too big.
And then let's do something historic. Let's, for the first time in American history, pass a balanced budget amendment through the House and the Senate, send it to states. Have this requirement that everyone else has to live under, let's make the federal government, an entity that has a $14 trillion debt, let's make us live in the same requirement everyone else has to abide by.
WALLACE: Sounds sensible, Congressman Van Hollen. What's wrong with "cut, cap and balance"? And what are the chances that it will get through the House, through the Senate, and get signed by the president?
VAN HOLLEN: Well, no one should be fooled about this. They're not proposing a clean balanced budget amendment. What they're proposing is to manipulate the Constitution and use it to impose the Republican budget plan.
If you look that plan, it does end the Medicare guarantee. It slashes Medicaid. It slashes deeply into education. And it protects tax breaks for special interest.
They would write that into the United States Constitution. Under their proposal, it would be easier to cut Medicare than it would be to cut subsidies for oil and gas companies.
You have a majority vote to cut Medicare. You have a majority vote to create special interest loopholes. You need two-thirds to close tax breaks. That's an anti-majoritarian proposition. Framers would be turning in their grave if they read their provision.
WALLACE: And what are the chances that will become law?
VAN HOLLEN: It's not going to become law. And that's why it's so dangerous for our Republican colleagues to say that if you don't do this, we will have the United States to default on its debt.
WALLACE: Congressman Jordan, I want to give you a chance to respond. But also, as we said, there are just 16 days left before we hit this August 2 deadline. Even if "cut, cap and balance" is as good as you say it is, should we be spending precious time on what from outside observers say is not going to become law?
JORDAN: Of course we should. This is something that fixes the problem. Everyone understands in two to three years, we're going to have a debt crisis. We've got to do big, bold things, or that's where we're headed, economists virtually agree on this.
To call balancing the budget dangerous is unbelievable.
Here's what we have to do --
VAN HOLLEN: I said your version of that.
JORDAN: Here's what we have to do. Look, Mr. President, put a plan on the table. Democrats, put a plan on table. And for the next two -- we got 16 days. For the next two weeks, if the president can ever put some details to plan, let's have a national debate. Let's let the American people decide, do they want something common sense as cutting spending, capping the growth in government and requiring a balanced budget amendment to the Constitution. Do they want the common sense thing versus the president's plan? Let's have national debate.
VAN HOLLEN: Let me be clear. I didn't say dangerous to balance the budget. We want to balance the budget. The budget that they passed doesn't get into balance until the year 2040. to balance the budget they voted for would require you lift the debt ceiling by $8 trillion between now and 2021.
WALLACE: Wait, guys, gentlemen, we've got a lot to cover. Let me move to the next thing. We'll get back to a bunch of these issues.
If cut, cap and balance fails, and I must say -- most people say whether it's good policy or not, Congressman Jordan, that the chance it is actually going to pass in the next two weeks are pretty slim. The most likely fallback is some version of Mitch McConnell fallback plan.
Let's take a look at that. It would allow the president to raise the debt limit $2.5 trillion without any spending cuts, but there is talk about including more than $1 trillion in cuts and setting up another debt commission.
Congressman Van Hollen, wouldn't that be almost total failure by Democrats, who control the Senate, who control the White House, to do anything serious about our debt when we've got a $14.3 trillion debt?
VAN HOLLEN: I'm not a fan of the Mitch McConnell deal. We agree on that because it does punt it. What it does it says, we, the Congress, will not take responsibility or accountability for our own decisions.It's a political answer. Not a real answer to the problem.
Now, whether we're driven in that direction by events, I don't know. But we also want big deal. The president did put a grand proposal on the table and we know that --
WALLACE: OK. We're going to get to that in a second. But if it's a choice -- the clock is ticking, 16 days -- if it's a choice between the McConnell plan or nothing, not raising the debt ceiling on August 2nd -- are you going vote for the McConnell plan?
VAN HOLLEN: I'm working very hard so that that's not our only choice. But I will say this. We cannot default on our debt. Americans can't choose not to pay the bills they incurred. And we know what a catastrophe that would be.
You know, I know there have been bills introduced in the House that suggest that you can sort of skate by this Standard & Poor's, Moody's, Chamber of Commerce, they all say that's just not so.
WALLACE: OK. We're going to -- we're going to into the whole question of default, what it would mean in a moment. Congressman Jordan, though, let's on the McConnell plan for a moment. If it comes down that, you are already shaking your head. If it comes down to McConnell plan or going past August 2nd without raising the debt limit, how will you vote?
JORDAN: Well, look, the McConnell doesn't have 218 Republican votes. No way, there's all kinds of conservative in the Republican Study committee in the House conference who will not support the plan. As Chris pointed out, it's path --
WALLACE: Wait. You're saying that the McConnell plan will not pass the House?
JORDAN: Well, I mean, who knows if there's s a combination of R's and D's who go for it. But I'm telling you, House conservative members, members of the Republican Senate, they're not going to support the McConnell plan. I'm not going to support the McConnell plan.
As Chris rightly points out, this is just kicking the can down the road. And that's -- the American people sent us here to make big tough choices. They didn't send us here to set up a commission, give the president veto power. That's not what they sent us here to do.
I keep coming back this. Put some plans on that table like we did. The only plan out there is the "cut, cap and balance" plan. Let the American people look at this over the next two and let's have a real debate.
This is so important for the future of this country. We are headed for a cliff. If we don't fix it, it's -- now, we are in big trouble. So, let's have that national debate. Not some cop out like the McConnell plan.
WALLACE: Let's talk about the debate and the question of the grand bargain, because President Obama continues to say that he wants a big deal, over $4 trillion in spending cuts and tax revenue increases.
Congressman Van Hollen, part of the problem is, and his is something that Congressman Jordan said several times now, is he's not specific. Not specific, especially on spending cuts and especially on entitlements.
And let met put up something that the head of nonpartisan Congressional Budget Office said. He was asked last month, much the president's latest plan would cut the deficit? He said, we don't estimate speeches. We need much more specificity than was provided in that speech for to us do our analysis.
I mean, the fact is that the president talked to a great detail about what he wants in revenue increases, but he is not specific at all when it comes to what he will take in spending cuts.
VAN HOLLEN: Well, the president has put a framework proposal on. He's been discussion with Speaker Boehner. I mean, they were in the White House hammering out a lot of these details. And the president has said that the framework that he wants to approach, not every detail, but the framework, is the Simpson-Bowles, the bipartisan plan.
And the reason those discussions could not continue was because our Republican colleagues refused to agree to close even one corporate tax loophole. They refused to talk about the folks at the very high end, simply going back to the rates that were place during the Clinton administration. That is a stumbling block. That's sort of a conversation ender.
If you're not even willing to talk about ending subsidies for oil and gas companies for purpose of deficit reduction, where do you go? Where do you go?
WALLACE: Let me ask you about this and then -- you can give whatever answer you want. But you were reportedly, Congressman Jordan, one of the key players who forced Speaker Boehner to walk way from talks about a grand bargain. I understand that there's a problem, a legitimate issue with fuzzy numbers coming out of the White House. But assuming that you could solve that problem, you are unwilling to accept $3 in spending cuts for every $1 in revenue increase?
JORDAN: A couple of things. Think about what the president's framework, because there's no specificity to this proposal. Think about his framework.
JORDAN: Here's what he's saying: all the spending that the Democrats did in the last Congress, the stimulus, the Obamacare, and all their budget, all the spending they did in the last Congress that we all voted against and American people didn't like as evidence by last November's election -- the president now is asking us, hey, Republicans, vote for a debt ceiling increase, even though you campaigned against it and the voters elected you to be against. Vote for debt ceiling increase to pay for all that spending. And just to add insult to injury, by the way, support tax increases while you're at it.
That's what the president says and puts no specificity to any plan. It's ridiculous.
WALLACE: Wait. Assuming there were -- if I may -- assuming there specificity, would you not accept a formula of $3 in spending cuts? I mean, this is a liberal Democratic president who is talking about $3 in spending cuts, including entitlements, for $1 in revenue.
JORDAN: Here's the president's problem. First, all the spending cut takes place in the out years. He never gives us any detail what's going to happen in the firs year, which is the only year that counts. It's the only we can make law about.
So, all the spending cuts in the out years, the tax increases are going to come soon. And the American people, this is old, the old cliche, this is Lucy and Charlie Brown and a football. And the American people say we're not falling for that game anymore. We're not going to let you promise spending cuts later to raise taxes.
Now, if these tax increases so bad that Chris talks about, well, the Democrats just controlled all the government eight months ago, why in world didn't they rid of them? You had the House, you have the Senate. You had the super majority in the Senate until Scott Brown got elected, why didn't you get rid of all -- if they are so bad and they're hurting our economy and keeping us from getting to a deal, why didn't you deal with them then?
WALLACE: It's a very good question. And I'm going to let Congressman Van Hollen answer it. But I want to ask a question first before I do -- the polls show, only 20 percent to 25 percent of Americans want a deal that is only spending cuts.
JORDAN: They also show Americans don't want tax increases. Here's what we all know, all three of us sitting here. If you raise taxes on the job creators out there, small business owners who make our economy go, you raise it now when we got 9 percent unemployment, you are making that much more difficult for our economy to grow and for jobs to be created.
Everyone understands that fundamental point. They also understand the basics: government spends too much. It's not a revenue problem. It's a spending problem. Everyone gets that basic point.
WALLACE: Congressman Van Hollen?
VAN HOLLEN: Well, we all know that CBO, nonpartisan entity, has said that the number one driver, policy decision driving the need to raise the debt ceiling now and big contributor problems were the tax cuts 2001, 2003, that disproportionately hit the top.
WALLACE: Wait, wait, wait. I just read -- I just read yesterday. If I may, I just read yesterday that Barack Obama has increased our debt 35 percent in the last 2-1/2 years. That's not the Bush tax cuts.
JORDAN: Three-point-eight trillion in the last two and a half years.
VAN HOLLEN: Number one policy decision, the biggest driver of the debt is the economy going down. That's obviously a decision -- that's not a policy decision.
WALLACE: How of $1 trillion for the stimulus?
VAN HOLLEN: The $1 trillion -- that's a short-term thing. We all know. That was a short term thing to get the economy going.
JORDAN: But it didn't work.
VAN HOLLEN: But it's not a long driver of the debt. We should get our facts straight here
Look, you asked the fundamental question, are they willing to take a bargain? It's $3 in cuts to $1 in revenue increases. The revenue increases they are talked about to begin in 2013. Nothing in the short-term. In fact, the president has talked about a payroll holiday. Number two, we're talking about closing a lot of corporate loopholes. And number, we've said, go back to the same rates that were place in the Clinton administration, which was a time when the economy was booming, 12 million jobs added -- that because they won't even talk about that framework, three-to-one, the conversation ends.
WALLACE: OK. This, what we've just seen here is problem, frankly, which is that you a not agreeing that there's no effort to get together on either side, which brings us to the deadline, 16 days.
Congressman Jordan, you say that the world isn't going to end on August 2nd. Let me just finish. You say the world isn't going to end on August 2nd, that we can pay our bondholders with the revenue that's coming in and we'll prioritize the rest of the spending. Here's the problem and let's put this up on the screen. The Bipartisan Police Center -- this was a fellow who was a Treasury official, Jay Powell, in the George H.W. Bush administration did an analysis of what the government would have to cut -- 44 percent in other spending. Even if you pay Social Security and Medicare benefits, you have to choose among military salaries, veteran benefit, unemployment insurance, the FBI, the FAA.
And Bill Gross, the head of PIMCO, which is the world's biggest bond company, bond fund, which already sold, they have already spoke within their wallet, they've already sold most of their treasury securities, he says, "The market situation might resemble what happened after Lehman Brothers collapsed in 2008."
This isn't a politician. This is the market talking.
JORDAN: Again, but the market is also saying this. Standard & Poor's is saying if we don't do something real, something that puts us on sustainable fiscal path, if we don't do something real, they're going to downgrade us, whether this debt ceiling gets passed by August 2nd or not. So, that's the most important thing to keep in mind is where we're headed.
The big crisis that's coming, that's more important than anything now. But when we get -- if, in fact, we get past August 2nd, the president is going to have to lead. He's going to have to make some choices. He's going to have to prioritize.
And there is enough money in the month of August to make sure we pay the bondholders, we make sure we pay Social Security recipients and we make sure we pay our troops in the field. After that, the president, he's going to have to do something he's unwilling to do right now. He's going to make some decision to lead.
WALLACE: And you're saying that's preferable to passing the McConnell fallback.
JORDAN: The most preferable plan --
WALLACE: I know that.
JORDAN: The preferable plan is to cut, cap and balance, which is common sense. That's the most preferable before August 2nd.
WALLACE: What is preferable, McConnell plan or go past August 2nd?
JORDAN: The McConnell plan kicks the can down the road and makes it even more likely that we're going to the big crisis that's coming two to three years from.
VAN HOLLEN: So, what you've heard is, unless you pass a constitution amendment that puts their proposed budget plan in place.
JORDAN: What's wrong with letting the states decide that? Someone's got to tell me -- what's wrong with letting the states decide whether we should have a balance -- 49 out of 50 states have it.
VAN HOLLEN: The reality is --
JORDAN: Every municipality, every township government, every city government, every family, every business. Tell me what's --
VAN HOLLEN: And you know it. You have a provision in there that makes it easier to cut Medicare. Read your own
VAN HOLLEN: It's not a real balance budget amendment --
WALLACE: Wait, wait, we're going to end this segment, gentlemen.
VAN HOLLEN: And you know it because it has
WALLACE: No, no, I'm going to end this segment.
VAN HOLLEN: Let me say this, if you allow the United States to default on its debt, which no family in America could do --
JORDAN: No one wants that.
VAN HOLLEN: It's going to hurt every family America out there in America. That's irresponsible
WALLACE: You got one sentence to response, Congressman.
JORDAN: No wants that. But a balanced budget requirement which everyone else has to live under --
WALLACE: Congressman Jordan, Congressman Van Hollen, we were able to settle all of this and arrive at a deal. Thank you, both. Thanks for coming in today, gentlemen. And we'll see how this plays out over the next 16 days.
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