CNN "State of the Union with Candy Crowley" - Transcript

Interview

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CROWLEY: More of that Romney interview in just a few minutes. But I wanted to bring in Republican Senator Lindsey Graham of South Carolina. Thanks for joining us, Senator.

GRAHAM: Glad to be with you.

CROWLEY: Let me ask you first about the president's plan or his wish to raise taxes essentially on those making $250,000 and above. We now have some Democrats saying, you know what? If Republicans are going to dig in, let all these taxes expire on the middle class, on everybody. Are you willing to go that far?

GRAHAM: Well, I think you've got a lot of the Democrats saying it would be a bad idea to raise taxes on a million small businesses. Here's the point. Two years ago, President Obama said now is not the time to raise tax rates because the economy is weak. Forty Democrats, less than two years ago, voted to extend the tax cuts. I'm dying to hear how our economy is better today than it was two years ago. How it's better policy today right before this election, given the 42 months of 8 percent unemployment, 316,000 people have left the job force since the stimulus passed.

This is all politics. This is not economics. This is all politics, good for Governor Romney not buying into this construct.

CROWLEY: It is true that since that time when the president agreed to go ahead and let all of the tax cuts stay in place that we have had many, many months of job creation. Not enough job creation, the president would say, but nonetheless the recession has ended.

GRAHAM: No.

CROWLEY: And we're now looking at a huge debt as you know.

GRAHAM: So the Democratic Party has said our economy is in good shape enough to raise taxes on job creators? Everything is worse since he's taken office. The debt has gone up by 49 percent. The unemployment rate has gone up by over 6 percent. Gas prices are 50 percent higher. Your home values are going down. The stimulus promised a 6 percent unemployment, but now it's at 8.3 percent.

None of his policies are working. Obamacare. You were not supposed to lose your health care. Millions of people are losing their health care because it costs too much. Premiums were supposed to go down. They're going up. So the idea that now the economy is better than two years ago when President Obama said don't raise taxes, it would be bad for the economy, is all politics. It's not based on economics.

CROWLEY: So just quickly, yes or no, if the Democrats stay where they are and if the president stays where he is, would you be willing to say, fine, if we can't reach a deal, taxes go up on everyone?

GRAHAM: I'm willing to do the Bowles-Simpson plan. Not one person who has looked at this in a bipartisan way said you need to raise tax rates. Bowles-Simpson says let's flatten the tax code, let's eliminate all deductions but two, take the money to pay down rates, and to pay off debt.

CROWLEY: But that's sort of a long-term thing. These cuts are going to expire on the 31st.

GRAHAM: I'm not going to do a short-term thing that's stupid. It would be stupid in an economy this weak to raise tax rates on a million small businesses at a time they can't hire people now. If you're looking for a job, this election is not about Romney's tax returns. It's about your tax returns. Look how many millions of people are underemployed or have lost their jobs. The last thing I'm going to do is play politics with their future.

What we should all be doing is fixing sequestration in a bipartisan manner. Both candidates should pledge, if I get to be president of the United States, we're going to do Bowles-Simpson. That's what America is yearning for. And I want both candidates to step up to the plate and lead here and stop this political stuff.

CROWLEY: And neither one of them has to your satisfaction.

GRAHAM: I think Governor Romney has said he would embrace Bowles-Simpson. And the fact that he rejected raising taxes at a time that our economy is so weak is a good sign of leadership. What President Obama is doing is 180 degrees out from what he did two years ago when they had large Democratic majorities.

CROWLEY: Let me talk to you about sequestration, which basically is come the end of this year, automatic spending cuts will get into place that will cut over 10 years more than $1 trillion out of the economy.

GRAHAM: Right.

CROWLEY: You have raised the red flag about that. You have been talking with some Democrats. Can you tell me if there's any hope out of the group you're talking with that you can keep this from happening? Because everyone sort thinks this would be disastrous. These across the board cuts.

GRAHAM: Here's what Secretary Panetta said. Half the sequestration cuts, the penalty for failing -- the super committee's failure is to take $600 billion out of the defense budget on top of the $478 we're already cutting. It also hurts special education. It hurts a lot of nondefense programs like the National Cancer Institute.

Here's what it would be for the Defense Department. The smallest Navy since 1914. You'd go from 285 ships to 232. The smallest Army since 1940. The smallest Air Force in history. We're working with Carl Levin and some other Democrats to find a way to avoid this for four months from January to May, using the Bowles-Simpson formula. No one is talking about --

CROWLEY: Bowles-Simpson for those who don't know was a deficit reduction plan.

(CROSSTALK) GRAHAM: Exactly. It rejects raising tax rates. But what we'd do is we'd go into the tax code and generate revenue, taking whaling deductions away from whaling captains, suspend the corporate jet deduction for a time so we can buy fighter jets. We'd have other cuts in the budget, mandatory spending cuts, a balanced approach to offset sequestration for four months. Here's what sequestration --

CROWLEY: Are there enough -- can I just ask you, are there enough of those loophole -- whatever you want to call them, these tax increases or these tax loopholes that you want to shut down? GRAHAM: Special deals.

CROWLEY: Special deals for people. Are there enough of those to balance out the cuts that would have to take place to bring Democrats on board?

GRAHAM: In four months, there are plenty of them. When you go --there's $1.2 trillion we give away in deductions and exemptions. But here is the bottom line. The construct of sequestration is, if politicians fail to do their job in the supercommittee, the penalty was to destroy the military. We got this wrong. We should fire the politicians, keep the soldiers. So I believe the American people are going to be outraged when they hear what comes the military's way because we couldn't get our act together in cutting $1.2 trillion in over a decade.

CROWLEY: So you're talking about a four-month deal. Do you have any reason to believe that the White House would be on board with it? I know you've talked about the vice president recently.

GRAHAM: If they watch CNN, and I'm sure they do, join us. Send a representative from the president's office to engage the senators who are trying to find a way forward. I'm willing to put revenue on the table. But not by raising tax rates. Carl Levin is willing to cut mandatory spending in a responsible way to buy us four months. I cannot tell you how important it is for our economy. If we let sequestration go forward, we destroy the military. 1.1 million jobs lost in the defense industrial complex on the civilian side. 4 percent GDP affected if sequestration goes forward.

We do dumb things in Congress. This sequestering idea was the dumbest thing.

CROWLEY: And what is the totality of tax on the revenue side that you think you could get to get this four-month deal?

GRAHAM: I think four months, you should need about $22 billion. Break it out in three buckets -- one third from revenue, no tax increases. Close loopholes, and we can find them. One third spending cuts to other parts of the government, one third mandatory. Get it done. Mr. President, we need your help. You're the commander in chief. Your secretary of defense says this is a Navy without ships, a brigade without bullets, an Air Force without trained pilots. Don't send a signal to Iran and Syria and the rest of the world that we're going to disarm. Don't use the tax cuts. Here's what OMB director Zients said. The only reason we don't have a deal on sequestration is because Republicans won't ask the 2 percent to give their fair share.

This idea of holding the Defense Department hostage to the tax debate makes me sick to my stomach. Knock it off. Find a way to avoid sequestration. Let the next Congress and the new president fix this, give them a little breathing room.

CROWLEY: I need a two-word answer from you, and that is what vice presidential pick would best help Mitt Romney? GRAHAM: You know, I think Pawlenty and Portman are in the hunt. One last thing. You didn't ask me about Harry Reid. I've been around this town for a while. I actually like Harry. But what he did on the floor of the Senate is so out of bounds. I think he's lying about his statement of knowing something about Romney. So this is what's wrong with America--

CROWLEY: That's pretty stiff. You think--

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CROWLEY: -- the leader of the Senate is lying?

GRAHAM: Yes, I do. I really do. I think he has created an issue here. I think he's making things up. And at a time when the country is just about to fall apart. Cyber security. There is a bipartisan desire to do this. There's plenty of blame to go around. But, candy, we're running out of time as a nation. Let's start talking about the real issues that matter to real people. And I just can't let that pass. I just cannot believe that the majority leader of the United States Senate would take the floor twice, make accusations that are absolutely unfounded, in my view, and quite frankly making things up to divert the campaign away from the real issues.

CROWLEY: Senator Lindsey Graham, I wish we had more time. I've got to run. Thank you so much.

GRAHAM: Thank you, Candy.

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