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CBS "Face the Nation with Bob Schieffer" Transcript: Fiscal Cliff and Hagel Nomination

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O'DONNELL: All right, Nancy and Major, thank you for that new information. Let's turn now to our senators that are here. Senator Durbin, you're the number two senator on the Democratic side. How far apart are you with the Republicans to reach a deal?

DURBIN: Well, I think there still is a chasm there. There's work to be done and not much time left. And it's interesting that it does come down to two very basic issues. One is, what percentage of the wealthiest people in America will pay a higher tax rate? And secondly, how many of the richest Americans who pass away should be spared paying extra for estate taxes? So from the Republican side, those remain their highest priorities, protecting the highest income individuals from tax increases and protecting up to 6,000 estates a year from paying an additional $1 million. That's what this is about. We see it differently. What's at stake as far as we're concerned are 98 percent of the American families, working families and middle- income families who shouldn't see their taxes go up on January 1st. That's our highest priority, and as the president added, the 2 million who would lose unemployment benefits immediately if we don't act to change that between now and the deadline.

O'DONNELL: So you say there's a chasm. You don't think there will be a deal today?

DURBIN: I wouldn't go that far. I have been around Washington long enough to know that it takes a deadline, it takes a lot sweat and a lot of worry, and people reach a point where they finally say, all right, let's try to find a way through this. It has happened before and it could happen again.

O'DONNELL: Are Democrats willing to raise that threshold from $250,000 to $400,000 or $500,000?

DURBIN: Well, each time you raise it, you're adding more to the deficit in terms of what we're going to face later on. Tom and I know this, we've been working -- this amazing Washington odd couple has been working on this for a long time. But each time you decide that you're going to protect some of the higher income Americans from paying more in taxes, it imposes more of a burden to cut spending, to reduce expenditures in Medicare and other areas, it becomes very problematic for a lot of working families.

O'DONNELL: Senator Coburn, what are you hearing from your Republican leader? Has he come up with a deal?

COBURN: We haven't heard anything, just minimal in terms of what's going back and forth. I think they're far apart. You know, I don't think anybody knows what's going to happen. The odds are that we've not seen the leadership on either side of aisle to solve this problem, and why would we think that we're going to see the leadership in the next 24 hours to solve the problem? But I would take issue with Dick, the characterization is, is we're the -- no matter where we raise taxes, what's going to happen to the money? We're going to grow the government with it. We're not going to reduce the deficit because we refuse to solve the bigger problems like saving Medicare, insuring Social Security, disability. We're not going to use that money to do anything except continue to grow the government. So the characterization is that we're wanting to protect -- what we're wanting to do is to make sure we have a dynamic economy, and I have no problems -- I've been out there for a long time with saying those that are making more ought to contribute more. But where does the money go? And what do you do with the money? Do you do something with the money that will actually get us further down the road and fix our ultimate long-term problem, which is we're bankrupt? And we went off the cliff two years ago when we covered 90 percent of our debt-to-GDP, and by the way, if you actually look at it the way every other country, our debt-to-GDP right now is 120 percent, not 90 percent, not 100 percent, it's 120 percent. So if you look at that, and what's ultimately going to happen -- one last fact, the average Greek citizen debt for their country is 36,000. We're at 51,000 per person in this country. We're becoming Greece, and we have a government that we're willing to pay the taxes for 65 percent of the cost of it. We need to change that. And we need both, both -- we need to do both.

O'DONNELL: Well, I'm glad you brought that up. And we're going to talk about that long-term fiscal challenges, because I want to talk with both of you about that. But we're not even there. We're just dealing with this little short-term patch that you can't even get an agreement on. What does that say about what has happened here in Washington and a real lack of confidence among the American people that the body that you guys serve in is just broken?

DURBIN: Well, it is, and it needs to change. Tom and I were part of the Simpson-Bowles Commission. We both voted for it. This conservative Republican, this progressive Democrat, we both voted for it. We worked on this for three years. There is room for compromise and room for agreement. Here's what we ran into the problem with. Forty percent of deficit reduction in Simpson-Bowles came from additional revenue, 40 percent. And when we said to Speaker Boehner, you have to come up with revenue, he said, I'll come up with a plan that protects those making less than $1 million. He couldn't sell the Republican Caucus. The only way, the only way we deal with this crisis and the deficit is on a bipartisan basis. This can't be done exclusively Democratic in the Senate, exclusively Republican in the House. It will never work.

O'DONNELL: Both of you are also part of the "gang of eight," a group of senators that many people look at and say, these are the grown-ups in the United States Senate in terms of looking at real ways to reduce the deficit. But with all due respect, why haven't you ever put pen to paper and put anything forward and rally people around your proposal?

DURBIN: Well, we put to paper many times and we have ideas that we think would be part of the ultimate answer here in terms of deficit reduction. None of it is easy, though, I don't want to mislead you. It's not easy. We floated some of the concepts and some of the ideas and they've had some traction. But get back to the premise. The premise is, if we're going to follow Simpson-Bowles as a starting point, we need revenue as a starting point. That has been a breakdown issue under the Boehner House of Representatives. And until we get beyond that, perhaps beyond the cliff, we can't have an honest discussion.

O'DONNELL: Senator Coburn, on that very issue of increased revenue, do you think that Boehner is part of the problem? Senator Reid said he's running a dictatorship.

COBURN: No, I don't think so at all. I think that, you know, the frustration in the House -- and I'm not known as a non- conservative -- is that they passed a lot of things that there hadn't been action on in the Senate, and that's the majority leader's prerogative. But if you take it and then bend it to the will of the Senate and send it back, that's how you get compromise. To not move things and not ever establish the process -- I think Speaker Boehner has done a good job with the members that he has. I think they made a mistake in not supporting the Plan B because we would have modified it and we would have sent it back and then they would have had to make a decision on it. But the basic fact is is the government is twice the size it was 11 years ago. And nobody in Washington is doing anything to fix the growth of government to where we have one that we can afford. And we're going to have to grow at 8 percent or 9 percent, if we think we can outgrow it. That isn't going to happen. So we have to do the things. We have to modernize Medicare. We have to actually achieve some real savings that won't change health care but will actually save some money.

O'DONNELL: Do you think there's an advantage to going over the fiscal cliff?

COBURN: I think there are a couple of advantages. There's a lot of disadvantages. One of the advantage will be that the American people are going to see what the real cost of their government is, the actual real cost for both the very wealthy, the very, very low will have minimal impact on. It's about $200 a year. But for the very, very wealthy -- you know, and that's one of my criticisms of the tax code. One of the things we did in the Simpson-Bowles was a reform of the tax code. What people don't realize is the well-connected, well- heeled in this country take most of the advantages of all the deductions and all the giveaways in the tax code. To reform that would redirect capital, which would generate growth, which would generate more revenue. So unless you reform the tax code in a way that will create capital formation, you're not going to do anything. Raising taxes doesn't do that.

O'DONNELL: Why should there be any confidence that you'll ever get that done? I mean, this idea you're just going to once again have a small fix, if you even get that here, you're going to continue to have the budget battles in 2013 because this won't deal with any of the spending issues. It won't deal with any of the entitlement reform, tax reform, all the hard issues. Won't even deal with the debt ceiling. You'll just have to refight all these things again in 2013.

DURBIN: I think it comes down to this. The president is committed to this. He proposed a plan to Speaker Boehner for real deficit reduction and unfortunately that negotiation fell apart. But the president's still committed. That's important. Secondly, Tom and I believe that, honest to goodness, if we come to grips with this deficit issue, and come up with a responsible, bipartisan answer to it, it will not only put our fiscal house closer to being in order, it's going to spring this economy forward. You know, take a look around the world. Where would you invest in the world? What is the best world currency? Even with all our problems it's still the U.S. dollar. Think of what it would be if there was confidence that we were dealing with our debt, that we came to grips with it on a bipartisan basis. So that will trigger the kind of growth, business creation, job creation, that I think will help us ultimately resolve our deficit issues and resolve the wealth problems we have in this country.

O'DONNELL: I want to just show both of you, sort of -- and remind our viewers, too -- a pie chart which essentially shows our federal budget and where we spend our money, because I think it's important to know where the money goes, taxpayer money. And you look at it, and just about half goes to entitlements. And then you see education in green there is just a small chunk of what we spend money on. And the defense is a large chunk as well. I have to ask you, Senator Durbin, because you have said, even in a grand bargain, that we shouldn't be tackling entitlements. How you can be serious about deficit reduction if you're not willing to take on Medicare?

DURBIN: Norah, I tackled them with Simpson-Bowles. We need to tax them again. What I said was in the last few hours before the fiscal cliff, don't make program policy changes in Medicare that you're going to live with a decade or beyond. Reflect on this. Yesterday 10,000 Americans reached the age of 65, today another 10,000, tomorrow another 10,000, and every day for the next 18 years. These people have paid in for a lifetime into an insurance program called Social Security and into Medicare. And they are expecting the benefits they paid for. And frankly, we have to resolve, as Tom said, how are we going to come to grips with the growing health care costs in Medicare and in Medicaid and still keep our promise to these people? So, yes, we need entitlement reform. Let's do it in a calm, thoughtful way, using something like a Simpson-Bowles commission on Social Security, for example, to come up with 75-year solvency.

O'DONNELL: Yes, another thing, (inaudible) the Pew Economic Policy Group did a study this week in about how much it's going to cost to make all these tax cuts permanent again, the Bush tax cuts. If you did all of them, it would be $3.1 trillion over the next 10 years. It was just the tax cuts for those making under $250,000. We're looking at additional $2.3 trillion. I mean, Democrats are willing to go along with those for under $250,000, and that's a big expense or cost or loss of revenue, however you want to look at it. How you can vote for those, extending those, and not have additional spending cuts?

UNIDENTIFIED MALE: You can't.

(CROSSTALK)

O'DONNELL: -- vote for on Monday if it gets down to Plan D, what Nancy called Plan D, where you just have to vote to extend the tax cuts, would you vote for that?

COBURN: It depends what the deal is and what's in it. A couple of points: one is, we have a government that we refuse to pay for. That's number one. Number two, the average couple in Medicare pays in $110,000 during their lifetime of taxes and takes out $350,000. Today, the people on Social Security in real dollars will take $21 trillion more out of Social Security than they paid in, $21 trillion more than they paid in. So the question is it-- it goes back to what Thomas Jefferson said-- never design a program, never create a government program with which you have not laid a tax to pay for it.

O'DONNELL: Or a war?

COBURN: Or a war. I have not voted for one defense supplemental bill since I've been in the Senate because it wasn't paid for. We didn't make hard choices. We delayed hard choices. That's what the Congress is doing now. And going back to your earlier point. The reason people are upset with Congress and especially the Senate is because we make decisions based on what is in the best interest of our politics, not in the best interest of the country. And so there's this lack of trust that we will do what's in the best interest of our country, even if it hurts us politically. And that's called leadership. And we don't see much of that. And that's not a partisan statement. That's both sides. When we look at a parochial interest more important than the interest of the nation, which is exactly the opposite of why the Senate was created in the first place, why we had a bicameral legislature, you see why we have such low esteem in the voters.

O'DONNELL: Let me turn quickly to -- you both served with Nebraska Republican Senator Chuck Hagel, who has been mentioned as a choice for Defense secretary; Senator Coburn, would you vote for him?

COBURN: I cannot vote for Chuck Hagel for --

O'DONNELL: Why?

COBURN: -- department -- just simply because of the -- some of the positions that he's taken and some of the statements that he's taken.

O'DONNELL: What about you, Senator Durbin?

DURBIN: I wouldn't say that. I think Chuck Hagel has proven his patriotism, his courage and his public service. Two Purple Hearts in Vietnam. This man deserves more than just a hearing. He deserves our respect for the service he's given our country in the military and in the Senate. And to disqualify him for statements that were made-- I think he at least deserves a hearing and an opportunity.

COBURN: That's not the only reason to disqualify him, is he does not have the experience to manage a very large organization like the Pentagon. And we've actually had-- I think Leon Panetta has done a wonderful job. I supported his nomination. He did have a lot of experience prior to coming here. And if there's a place we need great management, it's the Pentagon -- and a great manager.

O'DONNELL: Senators Coburn and Durbin, good luck today.

UNIDENTIFIED MALE: Thank you.

O'DONNELL: I know it's a busy day this Sunday (inaudible).

COBURN: We actually had breakfast together.


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