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Joining us now, two Senate leaders on fiscal issue, Democrat Senator Kent Conrad, chairman of the budget committee, and Republican Senator Tom Coburn, who joins us from his home in Muscogee, Oklahoma.
Senator Coburn, you voted against extending the payroll tax cut this week. And, in fact, a lot of congressional Republicans have problems with it. Let's talk about that. They say it doesn't stimulate the economy. They say you are paying for a one-year tax break, with 10 years of spending cuts, and it weakens the Social Security trust fund.
Question: is the GOP prepared to let the tax payroll cut lapse, which means a tax increase for middle tax workers at the beginning of the year?
SEN. TOM COBURN, R-OKLA.: Well, you know, I don't think I can speak for all the GOP. The principle that you would, in fact, create a tax cut and say you are going to pay for it over 10 years is exactly why we are bankrupt as a nation. And we are. People don't necessarily see that, but we are.
So, whether or not we continue a reduction in the amount of taxes that come to Social Security is one thing. Paying for it, we have so much waste in Washington to take 10 years to pay for it is ridiculous.
WALLACE: Well, let me just follow me for a second. A good policy or not, haven't Democrats turned the table on you? I mean, here's the situation where you would be perceived if you let it lapse that they are proposing a tax cut for the middle class, and the Republicans are opposing it?
COBURN: I don't think so. I'm all for changing the tax code. I have demonstrated that the game -- the political gotcha game they are playing on this. Let me -- one example, both votes on Thursday didn't matter at all, because both no tax item can start in the Senate.
So, it was pure politics. It was all for playing a game.
America is tired of that. They want real solutions to the problems we have. And all we were doing is playing a charade and America saw right through it.
WALLACE: Let me pick up with Senator Conrad.
Is spending $120 billion next year to give a payroll tax cut, continue a payroll tax cut for middle class workers -- is that good fiscal policy or is it really good politics? You can say we support the tax cut for the middle class, while they support a tax cut for the wealthy.
SEN. KENT CONRAD, D-N.D.: Back up and think what the country needs. What the country needs right now is additional lift for the economy. We still have one in every six Americans is either unemployed or underemployed, and when you asked the nonpartisan Congressional Budget Office, as I did, what's the biggest bang for the buck in terms of giving the lift for the economy? They said extending unemployment insurance is number one. And very high on the list is a payroll tax cut.
And so, it is good economic policy to do. Most economists have said, if you don't extend the payroll tax cut, you will reduce economic growth and reduce jobs in this country by 1 million. So, it would be a very bad mistake to let the payroll tax lapse.
And the Democrat's proposal is paid for, paid for in a different way than what Senator Coburn was discussing. Republican proposal -- paid for a surtax on those earning over $1 million a year.
WALLACE: We both know that's not going to pass. I mean, that is a political stunt.
CONRAD: Well, look, it is a serious proposal and it is --
WALLACE: A serious proposal, I'm not saying it's wrong. But it is serious proposal with no chance of passing.
CONRAD: Look, it got 51 votes in the United States Senate. Normally, this is a country where majority rules. Only in the United States Senate does it take 60 votes.
We understand it is going to take a change. Majority Leader Reid called me yesterday and said he will propose tomorrow a compromise plan to extend the payroll tax cut. You know --
WALLACE: How do you pay for it? What's the compromise?
CONRAD: He will offer at that point and it's probably in my purview to announce his plan. But indicated to me it will be paid for. It will be paid for in a serious way. We will change -- WALLACE: With a tax increase or with spending cuts?
CONRAD: Again, I think that's up to him to define his plan, discuss his plan. But it will be paid for. It will be paid for in a way that's credible and serious. It will be able to represent a compromise from what was voted on last week.
And then it's a serious attempt to move this ball forward because we should not have a tax increase on the middle class. That makes no sense in this economy.
WALLACE: Senator Coburn, will the payroll tax cut be extended? And what about unemployment benefits, will they be extended for the 10th time at a cost of $50 billion?
COBURN: Well, probably they both will be extended. The question the American people ought to ask is: where is the backbone in Washington to actually pay for these extensions in the year in which the money is spent? All we see coming out of Washington is promise about the future, collecting revenues to pay for expenditures today.
We are in very serious trouble. We continue to kick the can down the road. We lack the courage in Washington to make the hard choices now.
Nobody is making hard choices now. What they are doing is promising a benefit and no pain now. It always comes later.
When we start actually making difficult choices and really taking care of people, like unemployment should be shortened somewhat, but we're going to have to include it and probably, the payroll tax cut. We ought to pay for that by decreasing spending now and other low priority areas.
WALLACE: OK. Let me ask you about another issue and a choice, a hard choice you could make right now, Senator Coburn. The government runs out of the money on December 16th. Now, as part of the debt deal last summer, Republicans and Democrats agreed to spending totals. But now, some Republicans, particular in the House, are saying, you know, those spending totals are too low.
Are you willing to say, "Let's cut spending now, let's not go with those spending totals, and therefore let's risk another government shut down"?
COBURN: Well, I think the big lie coming out of the Washington which actually quite frankly the press has helped to present to the American people is that we cut spending. We didn't cut a penny. The budget control act will increase spending over what we're doing today $830 billion.
Tell me how many people understand that. And even -- no matter what you do, even with the sequestration, we're still going to have $265 billion of additional increase of spending. So, we are playing games. We're like the guy in the fair with the pea under the walnut, we are playing the game with the American people. Nobody has cut anything yet in Washington.
WALLACE: Let me bring in Senator Conrad.
Is there a possibility we're going to get a government shut down?
CONRAD: I don't think so and that would be a big mistake. But the time is right, is we have this debt threat looming over the country and it is absolutely imperative for the nation's fiscal security and national security that we find a way to come together in a bipartisan basis on a comprehensive plan.
Senator Coburn and I were part of the fiscal commission. We've been part of the group of six.
WALLACE: The fiscal commission, a lot of people know that as the Bowles-Simpson Commission.
CONRAD: Exactly right.
CONRAD: We did find a way to come together, Republicans and Democrats, to propose $4 trillion of debt deduction. And it is critically important that we find a way to get that discipline in place going forward.
WALLACE: All right. Well, let's review, let's put up on the screen what Bowles-Simpson called for. You actually anticipated where I was going to take this conversation.
It calls for cutting deficits by $4 trillion over 10 years, eliminating tax deductions so that you can lower tax rates. But also, using some of that, what's called tax expenditure, to reduce the debt by $1 trillion over 10 years, raise the retirement age and reduce benefits for Social Security and reform Medicare.
Question, I'll start with you, Senator Conrad. Is there any chance, any chance -- I mean, realistically -- that Bowles-Simpson gets revived and passed in the next year of Congress?
CONRAD: I believe there is. And I believe it's critically important that it does. Look, all we have to do is --
WALLACE: How are you going to do that? The super committee couldn't come up with $1 trillion.
CONRAD: But we on the Bowles-Simpson, 11 of 18, five Democrats, five Republicans, one independent, we agreed to this plan. That is 60 percent. Even in Washington, 60 percent should pass a plan. But we had a super, super majority requirement on the Bowles-Simpson commission.
Look, we have 150 members of the House and Senate who will join together to say let's move forward with a Bowles-Simpson-like approach. And we've got the opportunity to do something critical important for the country. Let's do it. WALLACE: Senator Coburn?
COBURN: Well, I think it's entirely possible we could do it. The question is, what the American people ought to be asking is why would we not, begin the fact that what's in front of us is catastrophic in terms of what's going to happen over the couple of years.
So, I agree. I think we can. I would tell you, I think some of the super committee was designed to fail from the start simply because it was so polarized by the leadership on both sides.
So, I think we have a good basis with which to come together, reforming the tax code, generating the additional revenue, modifying the long-term problems associated with Social Security, Medicare and Medicaid. I think we can do it.
The important thing is, is we better do it.
WALLACE: Let me, Senator Coburn, switch topic. I want to ask you about one last political issue. You served with Newt Gingrich in the House and you say that he was brilliant.
But earlier this year, you were asked about whether or not he could be a good president and you raised questions about that. Let's watch.
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COBURN: We need somebody whose eye is critical but is not harsh in their -- in their manner. And I don't mean to say he's necessarily harsh. But I'm looking for a leader that can bring us together.
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WALLACE: As Speaker Gingrich takes the lead in the Republican race, do you still have those questions about his fitness to be president?
COBURN: Chris, there is a lot of candidates out there. I'm not inclined to be a supporter of Newt Gingrich, having served under him for four years and experienced personally his leadership.
WALLACE: Why is that?
COBURN: Because I found it lacking often times.
WALLACE: I don't want to pull teeth, but if you could just explain why. I think it's an important thing. People want to know what you think.
COBURN: Well, I -- you know, the thing is, there's all types of leaders. Leaders that instill confidence. Leaders that are somewhat abrupt and brisk. Leaders that have one standard for the people that they are leading and a different standard for themselves. I just found his leadership lacking and I'm not going to go into greater detail in that. And I think if you were poll the gang -- the group of people that came in Congress in 1994, in which he did a wonderful job in organizing that, he's brilliant, he has a lot of positives. But I still -- it would be -- I will have difficulty supporting him as president of the United States.
WALLACE: We're going to have to leave it there. Senator Coburn, Senator Conrad, we want to thank you both for coming in today and talking with us. And we'll stay on top of the debt story, which isn't going away. Thanks, gentlemen.
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