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GREGORY: So here's my sense, Congressman McCarthy. Why in the minds of Republicans aren't they processing it this way--look, Mister President, we'll give you what you want on rates. Let them go up. But we got to get something in return, if we do say big cuts on entitlements in the Medicare program; we're willing to make a deal. Is that essentially the thinking of Speaker Boehner at this point?
REP. KEVIN MCCARTHY (R-CHRIS ANDERSON:, Republican Whip): The president wants the rates to go up, that doesn't solve the problem and we don't want to be back here in another year, in another 10 years answering the same questions. But right after the election we sent a plan to the president where we gave revenues, but we're looking for spending cuts. And he took three weeks to come back to us. He has gone on still on the campaign trail, still working through. But you got to understand, Republicans have not waited to solve this problem and sat back. In the summer, we passed a bill that froze the rates, took care of sequestration and passed it. It sat in the Senate. We're one who believes we want to solve this problem. We think this is our moment. This is our time.
GREGORY: So is the moment-- does it come down to this, where you would say, look, we'll give you higher marginal tax rates if we get something significant on spending, on Medicare, in return?
REP. MCCARTHY: It doesn't solve the problem. If the president is asking for higher ratings, he is asking for more revenue. Most economists agree the best way to get that is through closing special loopholes. And, you know what, when you close those, it makes a fair tax process. So people invest on the return, not invest based upon what the IRS says.
GREGORY: All right, Senator Durbin, the opening position, as I sort of gleaned it from being on Capitol Hill on doing some reporting this week, is what I just said. Do you see it that way?
SEN. DICK DURBIN (D-IL, Assistant Democratic Leader): I can tell you that Congressman McCarthy is going to struggle with the numbers just as Mitt Romney did in the debates. They don't add up. If you don't increase tax rates on the highest two percent of income earners you cannot generate enough revenue to have meaningful deficit reduction. And unfortunately the changes in the tax code, which the Republicans say they want to turn to will start cutting tax-- increasing taxes and cutting tax deductions for the middle-class Americans.
GREGORY: But, Senator, can I stop you on that point because I think that's significant. What you just said is what the president has said, is that hey, we can't get enough revenue to solve the problem unless those rates go up. But wait a minute, last summer, in July of 2011, this is what he said about how to get to 1.2 trillion in revenue. Listen.
(Videotape, July 22, 2011)
PRESIDENT BARACK OBAMA: What we said was, give us 1.2 trillion in additional revenues which could be accomplished without hiking taxes, tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions, and engaging in a tax reform process that could have lowered rates generally, while broadening the base.
GREGORY: So if that was true then, Senator, why can't he just do tax deductions? Republicans say they would agree to that, and not focus so much on raising the top rates?
SEN. DURBIN: David, we've set a target of cutting four trillion dollars out of the deficit over the next 10 years, four trillion. And to reach that, the president said he needs 1.6 trillion dollars in revenue, which is the same percentage of revenue as the Simpson-Bowles Commission. In fact, it's a little lower. You can't reach 1.6 unless you put the upper rate for the highest income Americans on the table and include tax reform. The reason why the Republicans have stuck with 800 billion dollars is it's-- it really is their goal in this, but it doesn't reach the four trillion dollar deficit reduction.
GREGORY: Congressman, what do you say about that?
REP. MCCARTHY: Well, let me tell you that the Republican goal is to solve the problem, economic problem. And look, the numbers don't lie. We're two months into this fiscal year. We already have a 292 billion dollar deficit. But you know what, in those two months, revenues have increased by 10 percent, 30 billion dollars. You only get 31 billion dollars in the first year when you raise those two rates. But you know what the problem is? We increased spending by 16 percent, 87 billion. This is more about a spending problem, not a taxing problem
GREGORY: All right. But I'm going to get to that.
REP. MCCARTHY: and that's the problem with Washington.
GREGORY: First of all, Congressman, you threw out a number there, there's a lot of numbers that can confuse people. You talk about 31 billion dollars. The reality is, over 10 years, based on documents I've seen from Republicans, raising those top rates would get you over 400 billion dollars in new revenue. So that seems to be a
REP. MCCARTHY: Yeah. But in two--
GREGORY: fact that both sides agree.
REP. MCCARTHY: David, David, in two months of this new fiscal year, you've achieved 30 billion more in revenue, 10 percent increase in revenue, but we spent 16 percent increase in spending. That's 87 billion more. It is a spending problem. And the president wants to increase taxes to continue the spending.
GREGORY: All right. But here--
REP. MCCARTHY: He proposed a plan that put a new stimulus in that added more than just those top two rates' worth in the first year. That's the problem with Washington.
GREGORY: And I want to get to the spending and the entitlement question in just a moment, but I want to stay on tax rates for one minute. And I still put the challenge to you, Congressman. There are members of your own party who are saying privately, some saying publicly, look, just fold on the tax rates so that conservatives can get a better deal. Just this week on Morning Joe on MSNBC, here's Senator Tom Coburn, Republican conservative from Oklahoma. This is what he had to say.
SEN. TOM COBURN (R-OK): Personally, I know we have to raise revenue. I don't really care which way we do it. Actually, I would rather see the rates go up than do it the other way because it gives us greater chance to reform the tax code and broaden the base in the future.
GREGORY: How about that, Congressman?
REP. MCCARTHY: Look, I think if you close special interest tax loopholes, you have a fairer process. Because those who are listening today, they don't have a lobbyist, they don't have some attorney or they don't have some high-priced account or some special interest out there. They want a fair process that they know when they go fill out their tax code others aren't getting a special loophole. That is a more efficient way and a fairer way. And it also makes you invest your money not based on what the IRS says but based upon the economy. And it will grow the economy stronger--more taxpayers, more workers produces more revenue.
GREGORY: I want to talk about spending, Senator Durbin. And I-- a challenge for you, based on a speech that you gave a couple of weeks ago here to progressives, you said the following about entitlement cuts. And I'll put it up on the screen. This was in your prepared remarks which you stuck by.
"Progressives should be willing to talk about ways to ensure the long-term viability of Medicare and Medicaid, but those conversations should not be part of a plan to avert the fiscal cliff." Why not, is my question? You said in that very same speech there's absolutely savings to be derived from the Medicare program and trimming it back. Why shouldn't it be front and center in-- in a specified way beyond what the president is proposing here, which is about 350 billion dollars over 10 years in-- in cuts?
SEN. DURBIN: David, Medicare will run out of money in twelve years. We know that we have to do something to make sure that we take an approach that doesn't voucherize it or take the approach of the Paul Ryan budget, but keep this a sound program and a solvent program. I just don't think we can do it in a matter of days here before the end of the year. That was my point. We need to address that in a thoughtful way, through the committee structure after the first year. But the point I want to get to is this. We've already cut more than a trillion dollars in spending as part of deficit reduction. We now need to put revenue on the table. The American people spoke on this issue in the election. I'd say to Speaker Boehner and Congressman McCarthy, listen to what the American people said in the election. Listen to the fact that two out of three Americans believe that the wealthiest should pay a little more, and listen to your own caucus. When you have people like Republican, conservative Republican senators like Tom Coburn, Kay Granger, Tom Cole, speaking up and saying, this is the right thing to do, for goodness sakes, let's get it done.
REP. MCCARTHY: I'd ask the senator, just do the math. If you go to a small family-owned business in Bakersfield, California, that hires my friends, hires my neighbors, with the new tax, say, they pay 37, 39 percent. California, you add another 13.8 percent. Is it fair that any American pays more than half their income into taxes? And that's before paying a sales tax.
SEN. DURBIN: May I respond to that, please?
REP. MCCARTHY: That's more than paying for the cable tax just watching this show. Is that fair that we ask or should we make it a more efficient, more accountable government? The spending is the issue, senator?
SEN. DURBIN: May I respond?
REP. MCCARTHY: The president proposed a plan that you didn't even vote for.
SEN. DURBIN: May I respond?
GREGORY: Go ahead, senator.
REP. MCCARTHY: 97 percent of American businesses are exempt from any tax increase because of the proposal by the president to protect people making less than 250 thousand dollars a year. 98 percent of all Americans are going to be exempt from paying any higher taxes if and only if Speaker Boehner will pass the bill that we sent him in July to protect middle income families.
SEN. DURBIN: You want to protect the people in Bakersfield, I want to protect the people in Chicago and Springfield.
GREGORY: All right. Well, senator, let me just-- I want to pin you down on one point about Medicare. You say you want to basically put off this discussion until later. But bottom line, should the Medicare eligibility age go up? Should there be means testing to really get at the benefits side, if you're going to shore this program up, because as you say, 12 years before it runs out of money?
SEN. DURBIN: Here's what it comes down to David. I do believe there should be means testing. And those of us with higher income in retirement should pay more. That could be part of the solution. But when you talk about raising the Medicare eligibility age, there's one key question--what happens to that early retiree? What about that gap in coverage between their workplace and Medicare? How will they be covered? Now I listen to Republicans say we can't wait to repeal Obamacare and the insurance exchanges. Well, where does a person turn if they're 65 years of age and the Medicare eligibility age is 67? They have two years there where they may not have the best of health. They need to have accessible, affordable medical insurance during that period.
GREGORY: Congressman, is there a deal by January 1st? And if there are tax increases as part of a deal? On tax rates, is there a Republican civil war that's going to start?
REP. MCCARTHY: The president says he wants tax rate because he wants revenue. Republicans already offered him the revenue. The president also says he wants a balanced approach. That means two and a half to three times as many spending cuts as there are to revenue. We have spent all this time talking about revenue. But as we watched, our government continued to spend more. This is really about spending. You listen to the senator right there. He doesn't want to move on spending. And that's the core of the problem. I don't think Republicans or Americans want to raise any taxes just to continue the spending in Washington. They want it more efficient, more effective and more accountable. So what we're saying here is we need to do exactly what Ronald Reagan did with Tip O'Neill. Show the leadership to get in the room and make the changes. Same as Bill Clinton did with Newt Gingrich. Get in the room and make the changes that are needed to make this. Look, we faced bigger problems before but we've been able to overcome this. I believe we can do this one more time.
GREGORY: Senator, the politics of this are also quite interesting and there's certainly part of the calculation. Here you have the treasury secretary saying, sure, absolutely, the president will go over the cliff if that's what it takes. When push comes to shove, you really think that's the White House position? They want to risk recession as well just to drive home the point about raising taxes?
SEN. DURBIN: The president wants to solve the problem. That's what he said during the campaign. That's what he is saying now. We cannot lurch as we have for the past two years from one crisis to another. Think of all the times that Tea Party Republicans and Speaker Boehner threatened to shut down the government, shut down the economy over the debt ceiling. Listen, if we're going to have the certainty for businesses to invest, for workers to know that new jobs are being created, we've got to get this behind us once and for all, I plead.
GREGORY: Even if it means going over the cliff?
SEN. DURBIN: I can tell you, I don't want to do it. The president doesn't want to do it but we need to solve the problem. We cannot allow
REP. MCCARTHY: Then senator
SEN. DURBIN: a reckless position to drive this economy into another recession, a recession which the Republicans will own.
REP. MCCARTHY: Then senator, ask the president to come off the campaign trail. He's been to Pennsylvania. Tomorrow he's going to Detroit. It's now time to govern. The election is over. That's why Republicans sent a plan
SEN. DURBIN: He's a phone call away and you know it.
REP. MCCARTHY: ...right after the election.
SEN. DURBIN: The president
REP. MCCARTHY: He is a phone call away. We will come right down to him.
SEN. DURBIN: No, listen.
REP. MCCARTHY: We sent a plan-- it took him three weeks to respond.
SEN. DURBIN: The president
REP. MCCARTHY: He has not responded to our current one.
GREGORY: Let me-- let me do this.
REP. MCCARTHY: You can't negotiate with yourself.
GREGORY: The-- the-- the-- this-- this is the public part of the stalemate that, I think, people are-- are-- are so uncomfortable with, even if there's more action behind the scenes. I want to end on this point, though, Congressman, you're a Californian. The Supreme Court is going to take up the issue of same-sex marriage in a very big way with the-- the Prop. 8 ban in-- in your state as well as the Defense of Marriage Act on the-- on the federal level. Do you think the days of same-sex marriage being not recognized, unrecognized as a-- as a civil right are coming to an end?
REP. MCCARTHY: Well, I think the Supreme Court will make the decision. You know, prior to this election, every vote has always been and it's only made it through by a legislator, not the vote of the people and it's always in California the people voted itself. So we'll look and see from the Supreme Court itself.
GREGORY: Senator, how do you see it?
SEN. DURBIN: Marriage equality is part of America's future and we saw that in state after state in the last election. The Supreme Court will take up the issue, and I hope that they understand as most of us do that this is part of our future. Marriage equality and the equal treatment of people who have made this decision is part of what America is all about.
GREGORY: Final point, Senator Durbin. Susan Rice. Will she be the president's secretary of state nominee and could she get ap-- confirmed in the Senate at this point?
SEN. DURBIN: I can't-- I can't say that because the president has not told me what his decision will be. There've been two excellent names mentioned, Ambassador Rice and my colleague, Senator Kerry. Either one of them would have a tough job following the great job of Hillary Clinton, but they could both serve this country in an extraordinary way as secretary of state.
GREGORY: But you're saying that Rice could get confirmed.
SEN. DURBIN: I do believe so. I think at the end, some of the criticisms against her have been unwarranted.
SEN. DURBIN: Many have gone just too far. There is really a basic feeling of fairness. She is an extraordinary person. She's certainly well-educated and has really served our nation well as ambassador to the United Nations.
GREGORY: All right. We'll leave it there. Senator Durbin, Congressman McCarthy, thank you very much.
SEN. DURBIN: Thank you, too.
REP. MCCARTHY: Thanks for having us.
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