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BLITZER: Joining us now, Kevin McCarthy. He's the majority whip, the number three Republican leader in the House of Representatives.
Thanks very much for coming in.
REP. KEVIN MCCARTHY (R-CA), MAJORITY WHIP: Thanks for having me.
BLITZER: Are you ready to jump on that bandwagon and violate that Grover Norquist pledge?
MCCARTHY: I think what the American people want, they want to see the problem solved.
And what we have, we spend more than a trillion dollars than bring in every year, so we got to solve that problem. We have a weak economy. We borrow 8 percent of our GDP for less than 2 percent growth. So, what we need is overall tax reform. Now, the president says he wants a balanced approach. He wants revenues, plus he wants spending cuts. The speaker's been down there. He says there is a way for revenues. Not to raise the rates, because that harms the economy and small business, but close special interest loopholes to get the revenue, but also what the president needs to do, show us where those cuts are. Show us where we can cut back on government growth to have that balanced approach.
BLITZER: Because he said he's ready for some entitlement cuts, cuts in Medicare, cuts in Medicaid, some reforms that would effectively result in some cuts, at least cuts in the rate of growth, if you will. But what I hear you saying is that you're ready for increased tax revenue, but not through raising the rate for the upper income, for the highest income bracket.
MCCARTHY: Well, what you find is when you raise rates, I think most economists will tell you, you harm the economy. The economy's weak. Remember, two years ago, when the Democrats controlled all, we were at the same point.
BLITZER: But if you raise rates from let's say 35 percent to 39.6 percent, which is what it was during the Clinton administration, for those families earning more than $250,000 a year, those families did -- those small businesses did quite well during the years of the Clinton administration, when the rate was 39.6. Why not go back to that?
MCCARTHY: The economy was stronger then.
Remember, two years ago when the Democrats controlled all? What did the president say? President Obama who had Nancy Pelosi as speaker then and Reid said don't raise the rates in a down economy. It hurts it. The president now says, now, too, he's looking for that revenue.
BLITZER: The economy is a little stronger now than it was two years ago. MCCARTHY: I don't know if you have been out there.
BLITZER: Take a look at today.
MCCARTHY: We have seen a lot of people underemployed, out of employed. You see half of those college students coming out, a lot of them can't find a job. We need a much stronger recovery.
We're at our lowest point of new startups in 17 years for small business and that's the greatest growth to the economy. So, when you look to the future, we are in a weak position.
BLITZER: What about raising it from 35 to 36 or 37 percent, not all the way up to 39.6 percent?
MCCARTHY: You raise that. So what does that get you, $31 billion for the next year?
BLITZER: Well, a billion here and there, after a while, you're talking real money.
MCCARTHY: What you really want to do is sit down and find a place that you can control government spending and raise more revenue. If the goal is to raise more revenue, what is the best way to do that at the same time protecting the economy? If you're able to gain more revenue by closing special loopholes and limiting them and keeping the rate down so you have better job growth, isn't that a better outcome? And that's what we should be talking about.
BLITZER: The president says -- and he makes this point repeatedly, the White House put out a whole report on it today -- you know what? The 98 percent who make under $250,000 a year, just let them continue to have the same tax rates. Don't make their tax rates go up at the end of the year. Take them out of this negotiation. Renew the tax -- make sure they keep that rate that they have right now.
Why not do that?
MCCARTHY: Well, the goal is to solve the problem. That doesn't solve the problem at all.
BLITZER: But at least you would remove 98 percent of the middle- class families. They don't have to worry about it.
MCCARTHY: But you do nothing about the growth of government that that 98 percent is still going to be worried about the economy we have, the debt that we have. Let's solve this problem once and for all.
BLITZER: Can you do that in three weeks?
MCCARTHY: Look, I think what we can do in three weeks is set up where we reform some of the government spending, we bring more revenue in.
That's what Republicans are putting on the table that the president asked for and the president would now say he wanted, what, two-and-a-half cuts for every one dollar, show where those cuts are and then set a framework so you have overall tax reform next year, where the committees can work on it. Then you're going to get a robust growth of government.
BLITZER: We do a two-part system.
BLITZER: You do what you can do.
MCCARTHY: You can't solve all the problems in three weeks.
BLITZER: In the next three weeks, four weeks, do you include raising the debt ceiling? Because you know that is going to come up in February or March. They're going to have to raise the debt ceiling. Do you make that as part of the deal now?
MCCARTHY: I think that's too much at this time right now.
BLITZER: Because you're just going to have another battle in February or March if you don't include it now.
MCCARTHY: You can set a framework up where you can deal with all those issues.
You said up where you're going to have overall tax reform. You make cuts in government. You can bring more revenue in. You put us on a path to growth while at the same time protecting small business and get this economy moving again. When more people working, more revenue are coming in.
BLITZER: The president says 97 percent of all small businesses would be exempt from any tax increase if you pass the legislation the Senate passed. He would sign it into law.
MCCARTHY: Most accountants will tell you the majority of small businesses run as an S Corporation. So, what you would do is you would raise the rate over 43 percent based upon what the other tax coming in with Obamacare.
Small business is at its lowest percent in 17 years of new startups. Small business creates more jobs than large corporations. So if you look towards the future, we are at a weaker point. So you don't want to harm more of small business. So, let's sit at the table. Find places you close those special loopholes.
Bring the president the more revenues that he asked for and Republicans have put that on the table now, while keeping an economy able to grow.
BLITZER: What do you think about this idea Lindsey Graham -- pitched it over the weekend -- of capping deductions at $30,000 or $40,000 a year, whether it's charitable contributions, home mortgage deductions? And he says you could raise a trillion dollars.
MCCARTHY: Well, those are different options that all should be on the table you can talk about and you would gain revenue that way than raising the tax rates.
But you got to sit at a table and start talking about it.
BLITZER: Are you sitting at that table now? Have those negotiations started really in earnest? Because the clock is ticking.
MCCARTHY: I know the speaker has started from the very beginning after the election. He's been down at the White House, he's met with the president. I know they talked over the weekend as well.
But the one thing you have to remember here, you can't solve this problem just by more revenue. We're going to have to control the spending of government. And that's why the president even admits he needs two-and-a-half times as much as you get of revenue.
That's what we need to start talking about. The president has offered nothing. We have three weeks to go.
BLITZER: He's offered nothing?
MCCARTHY: I haven't seen anything though yet. Have you heard him talk about it? I know we have talked a...
BLITZER: You're talking about Medicaid cuts or Medicare cuts, entitlement spending.
MCCARTHY: There's loopholes in there that you can limit from all different prospects.
But the thing you can find is we talked a lot about that revenue side. This whole conversation has been more revenue than it has about where can we find the government cuts. And we should spend the same amount of time on that as well. That brings compromise. That brings a solution, but more importantly that solves the problem.
BLITZER: Do you want to raise the eligibility for from Medicare 65 to 67?
MCCARTHY: There's all sorts of things that could be on the table. That's all worth discussing and I think the American people want to see -- at the end of the day, you want a solution, not to continue...
BLITZER: Will there be a deal before December 31?
MCCARTHY: If you're looking for Republicans, we want a deal and that's why we came to the table first.
BLITZER: Kevin McCarthy is the majority whip in the House of Representatives.
Thanks for coming in.
MCCARTHY: Thanks for having me.
BLITZER: Good luck. We're all counting on you guys to get this done.
MCCARTHY: That's great.
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