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CNN "The Situation Room" Trancript: The Fiscal Cliff Debate


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BLITZER: Jessica Yellin, we'll be staying in very, very close touch with you.

As soon as you hear anything important over there, let us know.

There may be an agreement at hand, but at least technically, the United States is, in fact, now going over cliff. There were some tough words on Capitol Hill today.

Listen to this from Senator Rand Paul of Kentucky.


SEN. RAND PAUL (R), KENTUCKY: Mark my words, you will raise tax rates and you will feel good because you went after and you got those rich people, because you said you were. You campaigned against rich people and you got enough envy whipped up in the country. And you're going to get them. You're going to stick it to those rich people.

Well, guess what?

You may not get any more revenue. You may not get any more economic growth. But you can say I stuck it to the rich people.


BLITZER: And Senator Paul is joining us now from Capitol Hill.

Senator, thanks very much.

Tough words from you. I want you to explain what you meant in a moment.

But let's talk about what's going to happen.

Are you hearing there will a vote tonight, before midnight, on the floor of the Senate?

PAUL: I think there's a very good chance there will a vote tonight. I think they have come to agreement. I think taxes will go up; also, spending will go up.

But I've always thought that, really, the crisis of the tax rates going up is not the real crisis in our country. The real crisis in our country is the debt crisis. And I think we -- we missed it on that. We're not going to address the debt crisis in any meaningful way.

BLITZER: How will you vote on the legislation, assuming there is a deal and it comes up tonight?

PAUL: Well, you know, I've always said it's a bad idea to raise taxes on anyone. And it doesn't really matter whether they're rich, poor or middle class.

If you take more money out of the private sector and send it to government, most of what I've seen up here, with the money that we receive is wasted, inappropriate and counterproductive. So I don't think there should be more revenue coming in. I think we should actually have less revenue, but a lot less spending, because we don't do it very wisely.

BLITZER: So will you hold your note and vote in favor of it or will you reject it?

PAUL: You know, we're going to protect 99 percent of the people from drowning, which, you know, when you use the analogy of drowning, it makes everybody -- they should understand that basically raising taxes is drowning. It's a bad idea.

So we're going to save 99 percent of the people. We're going to make those tax rates permanent, is what I'm hearing, which is good.

The only thing that kind of confuses me still, that is that if it's good to protect 99 percent of people from a policy akin to drowning, that why is it good, then, to go ahead and throw the 1 percent overboard and raise the taxes on those?

Maybe because they can afford it. Well, the problem is, a lot of us work for rich people. You might sell a fancy car to a rich person or you might build a yacht that a rich person buys. So we are interconnected with these people. So I don't think you can necessarily punish one segment of the economy and it not have repercussions on the middle class.

BLITZER: So does that mean, Senator -- I'm sorry for being obtuse, are you going to vote yes or no, in favor or again, the legislation, the deal?

PAUL: I'm a likely no, because there's a lot of new spending in it, also. And there's going to be tax increases, which I think are bad for the economy. There's also going to be increases in spending. We have a spending problem up here. And instead of trying to restrain spending, they took entitlements off the table and they've actually added in new spending. There will be new spending in this bill, which I think is the wrong direction to take the country in. BLITZER: You know, of course, if you were in the majority and you voted no and there was a majority in the Senate that voted no, millions of people in Kentucky would automatically see their taxes, if you make under $400,000 a year as an individual or $450,000 a family, your taxes are going to be going up. And that would be painful to 99 percent of the people out there.

PAUL: I agree. But you have to realize who's insisting on taxes going up. The president has created this fiscal cliff. He has said that he will not approve keeping the same tax rates for those 99 percent that people have sympathy for, that I have sympathy for in my state.

I'm one of the 99 percent. I'm not one of the 1 percent. Most of my friends I know are in the 99 percent. So, I do want to protect their rates. And I would protect everyone's rates.

The president is the one who has created this fiscal cliff. He insists on raising taxes. It's really his intransigence that endangers those 99 percent.

BLITZER: But the president is saying that he is now willing to do what the Republicans asked back in 2001, 2003, make those Bush tax cuts permanent. And he's saying yes, the Democrats now have agreed. Democrats say they will be permanent. There will be no tax increases for 99 percent, for people making under $450,000 a year. Those will be permanent taxes.

You support that. But because 1 percent are going to have to pay a little more, they're going to go from 35 percent to 39.6 percent, if you're making more than $450,000 a year, you're going to be willing to see all those millions of other middle class families suffer?

PAUL: It's actually not that. Actually, if it were only that bill, Wolf, if it were just protecting the 99 percent, well, I want to protect 100 percent. I would vote for a bill that protected 99 percent. Heck, I'd probably vote for a bill that protected 80 percent, because I want to protect anybody from big government.

But the thing is, is it's not just that. They're heaping on new spending. So, not only are they raising taxes, maybe on a small percentage of people, but a large amount of money, but they're also going to spend more money.

So, it's a spending bill. It has stimulus spending in there. It's going to give a five-year stimulus spending to some of the president's plans from 2009.

So, I object to increasing spending and increasing taxes. That's really the deal killer for me. If it were just tax rates and you told me I had the choice of protecting 99 percent, I would vote for -- you know, when the House bill came up that would have protected 99 percent, I would have voted for that because it didn't have new spending.

This has new spending which I think is taking the country in the wrong direction.

BLITZER: But just put on your political punditry hat for a moment. I assume you agree that if Harry Reid and Mitch McConnell put it up on the floor and there's a vote tonight, it will pass the Senate despite your objection?

PAUL: Yes, I think it will pass with bipartisan support in the Senate. And the House is a little more unpredictable. I think it will end up, once Democrats sign on board in the House, it should pass as well. But it's going to require Democrats and Republicans, it probably in both bodies, in order to pass.

I personally just don't like it because I think we're kicking the can down the road and we aren't really addressing the real crisis, which really, to tell you the truth, was not the fiscal cliff that everybody has been talking about. It's a debt crisis, where we're spending over $1 trillion each year we don't have, where we now owe more per person than they do in Greece. In some -- by some measurements, we're worse off than Greece now. And this deal will do nothing to help reduce the deficit.

BLITZER: Hey, Senator Paul, happy new year to you, to everyone out there. Thanks very much for joining us.

PAUL: Thank you, Wolf.

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