CNBC "Power Lunch" - Transcript
Interview
MS. CLAMAN: Just a short time ago, you saw it here live on CNBC, the president holding a news conference. Before taking questions he said, quote, "Congress has work to do on everything from housing to trade to education." He also said this: "Two houses need to work out their differences on these bills and get them to my desk as soon as possible. They also need to pay us the remaining spending bills one at a time and in a fiscally responsible way."
Well, joining me now are the power brokers in charge of spending and fiscal responsibilities, Senator Max Baucus, Democrat of Montana and Chairman of the Senate Finance Committee, and Senator Charles Grassley, Republican of Iowa, the committee's ranking member.
Gentlemen, it is a pleasure to have you here.
SEN. : Thank you.
MS. CLAMAN: Thank you very much for joining us.
SEN. : You bet.
MS. CLAMAN: It was a wide-ranging interview with the president, but basically there are a few issues that I'd like to run through if possible. The SCHIP -- the president says he is willing to compromise. The vote comes up tomorrow for a possible override.
Senator Baucus, I'll start with you first, how's it going to play out?
And then, Senator Grassley, if you would weigh in?
SEN. GRASSLEY: Yes.
SEN. BAUCUS: Well, I very much hope that enough members of the house -- enough Republicans vote to override the veto because it's the right thing to do. This is just helping low income kids and I hope that they listen to the facts and not listen to all the myths and the misrepresentations that some have said about the bill. But if they read the bill and know what it really does -- that is helps kids, not help adults, they'll vote for it and that'd be a good result, helping kids.
MS. CLAMAN: Senator Grassley, you got the votes or not?
SEN. GRASSLEY: Right now it's questionable but we're working on maybe 10 to 15 Republicans that we hope we can get.
I would correct one thing that the president said -- (inaudible) -- conference, he said he never had a chance to work with members of Congress on SCHIP. And I can document for you and if you'll call my office I'll make sure you get a whole list of dates and times and who we met with in the administration to talk about possible SCHIP things.
MS. CLAMAN: So -- well, he also said that you basically weren't on the same platform. That's not his words certainly, but he seemed to indicate that there was some miscommunication about the amount, Senator Grassley. Is that the way you interpreted it or not?
SEN. GRASSLEY: As far as I'm concerned, yes. There was differences amount because the president had $5 billion in his budget. We ended up in a bipartisan compromise between Senator Baucus and me with the House Democrats for 35 billion (dollars) which was 15 billion (dollars) under what the Democrats had in their budget. So it seems to me that 35 billion (dollars) is a compromise between the president's 5 billion (dollars) which wasn't enough to even do what he said he wanted to do -- and what the Democrats wanted to do. And in Congress particularly when you have a Congress of one party and a president of the other party, you can't expect one party to get their way 100 percent.
MS. CLAMAN: Okay.
SEN. GRASSLEY: So this is compromise.
MS. CLAMAN: Senator Baucus, let me turn you to the AMT. A lot of people want to see it reformed; the question is how to do it. How is it going to be fixed -- if it's going to be fixed at all this time? And how are you going to pay for it?
SEN. BAUCUS: Well, the bill is going to be fixed -- it has to be fixed. Frankly, I think Senator Grassley joined me in legislative repeal the AMT's altogether; it's just a bad program.
MS. CLAMAN: But that leaves a big spending issue.
SEN. BAUCUS: Oh it does -- oh, clearly, yeah, we can't repeal it totally because it costs too much right now. But certainly anybody who does not pay AMT taxes in taxable year 2006 is going to have to pay AMT taxes in 2007. And Senator Grassley and I will work together to make sure that happens.
MS. CLAMAN: How would you do it, Senator Grassley?
SEN. GRASSLEY: You understand that when you use the term, it will leave a big hole in the budget. You know, you understand that you're talking about the way the congressional budget office, under our present law, figures money coming into the federal treasury.
Well, this is figuring money that's coming from the middle income taxpayer that was never expected to pay it. So why should we consider phantom money as being a hole in the budget that has to be filled? And we ought to repeal this without any tax increases any place else.
MS. CLAMAN: How do you think that would happen, though? I mean, it sounds good on paper but --
SEN. GRASSLEY: We have -- well --
MS. CLAMAN: Senator Baucus, how's that going to work?
SEN. BAUCUS: Well, we have to work it out. There are two competing goals here. One is repeal and alternative minimum tax certainly hurt this next taxable year, hopefully next year. The other goal which is competing with that in the Congress is -- (inaudible) -- we pay for everything we do around here. That is we don't want to add to the budget deficit.
So this is an issue that Senator Grassley and I will work together with, talk to members of the committee about and try to find a good resolution.
But clearly we want to repeal the AMT, certainly for -- this at least for one full year.
MS. CLAMAN: Okay.
Senator Grassley, Senator Reid says that it's unlikely that we will see changes in the law to talk about carried interest and taxing private equity and hedge funds. Is that indeed the case; is that dead for the year in your opinion?
SEN. GRASSLEY: It's not dead as far as I'm concerned. But on the other hand, on the carried interest part of your question, I have not made up my mind yet what I want to do. And the reason I haven't made up my mind is I'm still studying carried interest. Is it capital gains? Then it ought to be taxed at 15 percent. Is it compensation? Then it ought to be taxed at the same rate as the John Deere workers in my state at whatever the rate is of taxation up to 35 percent.
MS. CLAMAN: Which way are you leaning so far?
SEN. GRASSLEY: I don't have a lean. I'm sorry, I --
MS. CLAMAN: (Laughs.) You don't have a --
SEN. BAUCUS: I think it's important to point out here, we're talking about an industry that's been very strong in America, private equity hedge funds, so forth, and the growth has been tremendous. It's an American phenomenon and we're very proud of it. But we want to make sure that the tax code is structured appropriately and fairly with respect to this new phenomenon. And that's -- it takes a little time to figure out what's right and what's not right. And all of us, I think -- I think I speak for the vast majority are trying to figure out the right approach to this very complex question.
MS. CLAMAN: Yes.
SEN. BAUCUS: It's not just private equity and hedge, it's capital, it's real estate -- there's a lot here. We want to make sure we do it right -- (inaudible) --.
MS. CLAMAN: Well, and actually, Senator Grassley, Governor Elliot Spitzer weighed in on that this very morning in New York saying that he thinks that if the tax is levied, depending on how it is of course put together which goes to your debate, he thinks it might make the United States and New York in particular less competitive than it already is in his opinion against the likes of London as a financial capital. Do you agree with that or not?
SEN. GRASSLEY: I agree with that -- very definitely has to be taken in consideration and I don't want to do anything in our tax laws that make us uncompetitive. But that also brings up a bigger issue and that bigger issue is the extent to which we have laws that maybe discourage some investment in the United States, we have laws -- tax laws that encourage money leaving the United States and also the corporate tax rate. Every other country in the world is lowering their corporate tax rates; we're going to have to review lowering our corporate tax rate and maybe broaden the tax base.
MS. CLAMAN: All right.
Gentlemen, thank you very much. It's always a pleasure to have you join us on Power Lunch.
SEN. : You bet, thank you.
MS. CLAMAN: See you soon. We'll let you get back to work.
SEN. : Thank you. Bye bye.
END.
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