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STEPHANOPOULOS: The speaker sure did appear confident, but his demand that a debt ceiling increase be matched dollar for dollar by spending cuts has hit a brick wall with Democrats. That was especially clear after I walked across the Capitol for a conversation with their leader in the House, Nancy Pelosi.
PELOSI: My response to what the speaker said is here we go again. Last year, just the threat of not lifting the debt ceiling caused us to -- our credit rating to be lowered. This is not a responsible, mature, sensible place for us to go. We all know we have to reduce the deficit. We have to do it in a balanced way.
The speaker wants to go over the edge. We have cut over a trillion dollars in the Budget Control Act -- since the Budget Control Act of last year. There has to be more reductions, but we have to have revenue and we have to have growth.
STEPHANOPOULOS: But what about his idea that you should start working on it right now and not waiting until the election?
PELOSI: Oh, absolutely. I challenge the speaker right now to bring the middle-income tax cuts to the floor. That would give a...
STEPHANOPOULOS: That's going to increase the deficit, isn't it?
PELOSI: It would -- no, I don't think so. I think it would -- it would be -- bringing middle-income tax cuts to the floor now, passing those would help our economic recovery, would be a clear signal that the upper-end tax cuts for the wealthy will expire, because they will not be -- the middle-income tax cuts will not be held hostage to those, and that we can go to the table and say, what are the cuts we need to make? What are the -- what is the revenue that we have?
Assuming the expiration of the high-end tax cuts, how do we create growth for small businesses, the entrepreneurial spirit of America? This is exactly the path we should go down. We should work together. They're over the edge. We want a balanced approach.
STEPHANOPOULOS: The speaker's pretty clear about having pressure from his own conference. He talks about being leader. He says it's like having 218 frogs in a wheelbarrow. And -- and I wonder how much pressure you're going to face from your own members on this.
A couple of weeks ago, you actually said you would vote for the Simpson-Bowles deficit reduction plan. And that has caused a former member, Senator Russ Feingold, to call that a potential capitulation on bedrock values. He says it makes it easier for corporate Democrats to join with corporate Republicans and destroy these programs. What do you say to Democrats who...
PELOSI: I don't think...
STEPHANOPOULOS: ... believe that?
PELOSI: ... he understands what that is. What I said was -- and what I believe is, that the framework of Simpson-Bowles was a very important one. It assumed the expiration of the high-end tax cuts. It took a harsh look at all of our spending, including our defense...
STEPHANOPOULOS: Including Medicare and Social Security.
PELOSI: ... our defense spending. It -- it was -- had a proper balance between cuts and revenues that we have to have. What I didn't like about it was what it said about Social Security, but I said that can be handled separately. Social Security, whatever we do on Social Security should be returned to Social Security to extend its life.
What this is about, though, is about the creation of jobs. How do we do that as we do our budget? We do it by a balance between establishing our priorities, making some cuts, but making sure that we're investing in the future and bringing in some revenue.
And so I -- our members have been very -- we stuck with the president on the grand bargain that he had last year, that he and the speaker agreed to, and then the speaker walked away from. He walked away from it.
STEPHANOPOULOS: As you know, he says the president upped the ante on him and demanded more tax increases.
PELOSI: That's simply not true (inaudible) you told that, because it's simply not true.
STEPHANOPOULOS: One other thing he seems quite confident on is if this election is about the economy, the Republicans are going to win.
PELOSI: The fact is, this election, if it is about the economy, the president will make his case that he has been a job-creator from day one. And the president's record of job creation, taking us from a deep recession, almost a depression, to a hopeful place, versus whatever the Republicans will propose, but they have stood in the way of every job piece of legislation that would be significant in that regard. But let's have the debate.
STEPHANOPOULOS: If the election were held today, do you think the Democrats would win?
PELOSI: Yes, I do. I think it would be dead-even, about -- the speaker three -- 30 percent chance that they would lose or something. But I think it's bigger than that. But what he did say that was correct was that there are about 50 Republican seats in play. I would say 75. I feel pretty good about where we are.
STEPHANOPOULOS: I know you're just back from Afghanistan. Senator Feinstein came back a couple of weeks ago and said that she found the Taliban was gaining strength from her time on the ground. Is that what you saw?
PELOSI: I didn't see that, no. I don't disagree with the senator. They may have gained strength, but they have lost some other ground, you know what I mean? So maybe it evens out.
STEPHANOPOULOS: You're not worried if that happens that the Taliban will be able to take over?
PELOSI: If the security is trained properly, yes, I think that they can protect their country. But I think what we -- we do not have an eternal commitment to being there in a military way.
STEPHANOPOULOS: Politically, what more do you think President Obama has to do to win this election? I know you think the Democrats are in good shape in the House. What do you think he needs to do to put over this very close race with Mitt Romney?
PELOSI: These elections are always about the future. As I always say, President Lincoln said, "Public sentiment is everything." So regardless of all the good things he has done, he has to convey that to the American people. And he has to show what the clear distinction is.
STEPHANOPOULOS: The DCCC, Democratic Congressional Campaign Committee, put out a fundraising appeal talking about the Republican super PAC plan on Reverend Wright, calling it race-baiting at its worst. And I just wondered, do you really think that's fair, given the fact that Mitt Romney and even the head of the super PAC have absolutely repudiated this effort?
PELOSI: Well, I don't think so. I think that -- what I saw -- just using the public record as a guide -- was Governor Romney on TV this morning, and they quoted what he said in February, what he said just this past February.
STEPHANOPOULOS: About Reverend Wright?
PELOSI: About Reverend Wright. And then they said to him, "Well, this seems different from what you're saying now. Do you stand by what you said in February?" And he said, "I don't know what I said in February, but I stand by it." But what he said in February was very similar to what they were saying about Reverend Wright.
STEPHANOPOULOS: So no regrets?
PELOSI: No regrets about...
STEPHANOPOULOS: For this fundraising appeal?
PELOSI: Why would we have any regrets? He has -- he stood by his remarks in February. So I think maybe it might be useful to see what he said in February and see that he stands by those remarks. But that's not what the election's about. The election is about three things: jobs, jobs, and jobs. This election is not about Reverend Wright.
STEPHANOPOULOS: And, finally, you're celebrating 25 years in the House this year.
STEPHANOPOULOS: Do you think you'll come back in the 26th as speaker?
PELOSI: Well, I just want to come back with the Democrats in the majority. That's really what is important. So I'm very excited about the election and the opportunity it gives us to make the distinction and very proud that President Obama is the top of our ticket.
STEPHANOPOULOS: And you'll worry about the rest later?
PELOSI: That's incidental. What's important is that the Democrats win and that, again, we have proper airing. What I would like to see in this election is a recognition that we must reduce the role of money in campaigns. So we want to win, move on to public financing of campaigns, overturn the Supreme Court decision on Citizens United, and -- and, again, when we reduce the role of money in campaigns and increase the civility, we'll elect more women to Congress.
STEPHANOPOULOS: Madam Leader, thanks very much for your time this morning.
PELOSI: Thank you.
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