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REP. JEB HENSARLING, R-TEXAS: Good morning.
WALLACE: Simple question -- is this thing dead?
HENSARLING: Nobody wants to give up hope. Reality, to some extent, starting to overtake hope. There were 12 good people who invested a lot in this and trying to find common ground to achieve the goal of this committee. So talks have that taken place over the weekend and they will continue to take place.
But the reality is, we need to come to an agreement. We have to get it drafted. It has to be estimated by the Congressional Budget Office by the end of Monday. So, it's a daunting challenge, no doubt about it.
WALLACE: Is there any sign that either Republicans are going to make a big concession or Democrats are going to make a big decision, because as you say, you really got a little over 24 hours to make a concession that will somehow break the logjam.
HENSARLING: You know, Chris, we're not going to give up hope. Talks are continuing and we are not giving up hope.
WALLACE: But --
HENSARLING: But we're not going to give up hope.
WALLACE: This is a big missed opportunity, Congressman.
HENSARLING: I agree. It's a huge missed opportunity. The nation is facing a debt crisis. It's facing a jobs crisis. And the two are interrelated.
And we all know -- I mean, even the president will admit the great drivers of our debt are Medicare, Medicaid and health care, and nothing else comes close. And he's right. I give him an A for courage for stating that.
But, unfortunately, what we haven't seen in these talks from the other side is any Democrats willing to put a proposal on the table that actually solves the problems.
And so, unfortunately, what we have -- particularly in Medicare, there is a program that seniors are going to see forms of rationing. Seniors like my parents. It's going to be around for my 9 year old daughter and my 8 year old son. And it's driving the country bankrupt.
And so, here was an opportunity. Republicans put forth a plan that was in our budget. It was rejected by Democrats. We went and then we gave them the bipartisan plan, the Rivlin-Domenici Medicare plan, which was principally drafted by the Democrat Alice Rivlin, who was the director of the Office in Management and Budget in the Clinton administration -- preserves an option for fee for service Medicare. That was rejected, too.
Now, to their credit some of the Democrats were willing to put some aspects of health care on the table. But at best, it would just kick the can down the road. And, frankly, part of the challenge we have, I think it was on your show last week, where Congressman Jim Clyburn said the Democrats hadn't coalesced around a position. And so, it's a little hard for us to negotiate with them when they're still negotiating with themselves.
WALLACE: I want to get to this -- follow up on what you just said in there. But I just want to make it clear. At this point, is there any effort or going to be a final, last-ditch Republican plan? A new offer?
HENSARLING: Chris, there are multiple offers that are on the table now.
WALLACE: I mean, a new offer.
HENSARLING: There is frameworks that are out there now, and if we have an opportunity to work on one of those frameworks, the answer is yes. There are multiple frameworks. Now, only one came to the attention of the media but there are multiple frameworks out there. So, again, we know that the time is very late when one or two strokes before midnight and we understand that. But we haven't given up hope. Again, there is a jobs crisis.
We also hope and we thought maybe there could be some common ground for fundamental tax reform that could help create jobs and make the tax code fairer, simpler and more competitive, broaden the base, bring down everybody's rate, keep current levels of progressivity. So, people, defending on their income bracket, would pay the same percentage of taxes.
There's been studies by the National Bureau Economics Research that that could help create, you know, over half a trillion dollars of pro-growth revenues. Some show it could create a million jobs.
WALLACE: Excuse me -- are you saying that this is all the Democrats' fault?
HENSARLING: I am not saying anybody's fault. I'm saying you got people have very different views, frankly, of what it means to produce -- what it takes to produce jobs and what it takes to produce economic growth. It's not assigning blame.
But we are unaware of any Democrat offer that didn't include at least $1 trillion tax increase on the American economy. Now, again, it's not a matter of blame going on here. It's just a matter of fact. We believe that's bad for the economy. We don't want to do that.
WALLACE: But let me pick up on that and we are going to talk with Congressman Becerra in a moment about entitlements and what they were and not willing to do. The fact is, Republicans -- at least they say, Republicans wouldn't agree to a sizable increase in taxes especially on the wealthy, because even the Toomey plan, yes, it was going to do away with the deductions. But it was going to actually have a 20 percent reduction in the tax rate. Not only would the Bush tax cuts be extended, but you'd see a 20 percent reduction, to 28 percent. And they say the result of that was going to be is a huge tax windfall for the wealthy.
HENSARLING: Well, I disagree. I mean, this is exactly the same approach that every other bipartisan plan put on the table, be it Simpson-Bowles, be it Rivlin-Domenici. And again, the idea is we have over $1 trillion of so-called tax expenditures in the tax code. We want to take out all the different loopholes and special interest provisions.
And so, again, you are broadening the base. And as I said earlier, you keep the current rates of progressivity. So, by definition, you can't have a tax cut for the wealthy. I mean, that's not just what happens.
What I want to do is I'm not trying to tax the wealthy into oblivion. I'd like to take away the bailouts. I'd like to take away the subsidies. I'd like to take away the special interest deductions.
But most importantly, I want to create jobs for the American people and I don't understand the economics that says that if we raise taxes on my employer, or my boss, somehow they're going to go out and hire my unemployed brother in law.
WALLACE: All right. There are a bunch of issues out there for the next few days. And let's do a lightning-round quick questions/quick answers.
How is this going to end? There's some talk that you're going to have a formal meeting on Wednesday. You'll put up your plan, they'll vote it down. They'll put up their plan, you'll vote it down.
And then there's some talk that you and other co-chair, Patty Murray, would just come out and say it's over?
HENSARLING: Chris, I don't know. And again, people have invested so much in this. Nobody wants to give up hope. So, I can't answer that question.
And until, again, we have the stroke of midnight, I suppose on Monday. As long as there we have members who have an opportunity to continue to talk, we'll continue talk.
WALLACE: But do you see any point in having a formal meeting on Wednesday for both sides to vote the other down?
HENSARLING: You know, we'll see what the group of 12 wants to do. Right now, I don't find that a useful discussion as we're still trying to say we can put forward something that deals with the nation's unsustainable spending crisis and unsustainable unemployment that we have today.
WALLACE: Assuming there is no deal, what happens to the extension of unemployment benefits and the extension of the payroll tax cuts?
HENSARLING: Well, I think all of us have been laser-focused on trying to get success on this. I don't know the answer to that. Certainly, we would want to make sure that they are paid for.
We know the tube of the debt crisis and the unemployment crisis are related. And so, that's something that Congress would have to debate.
I mean, the good news, if -- if there is no agreement, the nation is going to end up with what Republicans said. And that is -- there will be a dollar spending reduction for every dollar increase in the debt ceiling. Now, it's going to be $1.2 trillion perhaps the dumb way as opposed to $1.5 trillion the smart way.
But the bigger tragedy is we have unsustainable debt that is threatening our national security, is threatening our jobs, frankly, and is threatening our children's future. There was an opportunity to do it. But unless you fundamentally figure out as a nation how to get quality health care opportunities for all of our citizens at a price that doesn't bankrupt the children -- yes, we will fail. WALLACE: A couple of questions, final questions. One, the reason you say that there will be deficit reduction is because you have these automatic triggers, $1.2 trillion.
WALLACE: Half in the Pentagon, half from nonmilitary spending. What do you think of the chances that the Pentagon trigger and the $600 billion for the Pentagon will be changed so that, yes, you'll still get $600 billion, but it won't all come out of the Pentagon?
HENSARLING: Well, I hope it will be changed. I mean, the Secretary of Defense Leon Panetta said that cuts of that magnitude would hollow out our national defense. I would hope members of Congress, I hope the president of the United States, will listen to it carefully.
But I am committed to insuring that the American people get the deficit reduction that they were promised. But under the law, Congress will have 13 months to do that in a smarter, more prudent fashion. And I plan to be part of the process.
WALLACE: Finally, and we have a less than a minute left. During the debt ceiling mess this summer, there was a 2,000-point drop in the stock market, and the approval ratings for everyone in Congress jumped just sharply. Assume and you certainly are leading me in the direction to believe you are going to fail, whether it's Monday or Wednesday, what do you think the impact will be both in the market and politically?
HENSARLING: I don't know what the impact in the market will be. I would hope there wouldn't be again an adverse impact in the sense that the American people are still going to get the deficit reduction that was contemplated under the law. But it is a huge blown opportunity.
And, Chris, as a nation, we are on borrowed time. We are borrowing 40 cents on a dollar from the Chinese and sending the bill to our children and grandchildren.
So, it wasn't so much of a failure as it was a failure to seize an opportunity. And if it's not this opportunity, this nation better seize another one or we will be in economic trouble.
WALLACE: Congressman Hensarling, we're going to have to leave it there. Thank you so much for coming in. I hope that we and you get surprised over what happens in the next few days.
HENSARLING: I agree. Thank you.
WALLACE: Thanks so much.
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