Hewitt Blog

GOP Senate Leader Mitch McConnell joins me at the start of the second hour of the program to discuss the debt ceiling/spending debate.  The transcript will be posted here later.

HH: What is most important in the United States right now is not what just happened, but what is going to happen between now and March 1^st. Joining me to discuss that is the GOP leader in the United States Senate, Mitch McConnell. Senator McConnell, welcome back and Happy New Year. 

MM: Happy New Year to you. Glad to be with you.

HH: Congratulations. I think what you pulled off there was vitally important to the United States, but if I can spend our time looking forward, what is going to happen on the debt ceiling and on entitlement reform next?

MM: Well, the President thinks he can bully us into not talking about spending. And it clearly won’t work. We know, you remember that old story about they asked Willie Sutton why he robbed banks, and he said why the reason was of course that’s where the money is. If you look at our debt and deficit problem in this country, we only vote on annually about 40% of what we spend. The rest of it is interest on the national debt and entitlement programs, very popular, but don’t currently meet the demographics of America. And if we’re going to have programs like Social Security and Medicare and Medicaid there for future generations, those programs have to fit, meet the demographics of our changing society. Until we solve that problem, you can’t fix the country. This revenue that the President got out of very high income people is a drop in the bucket, a drop in the bucket. But the most important thing about what we just did was we got permanent tax relief for 99% of Americans. And the reason permanence is important, if the law sunsets, you have to go back and have the debate all over again. Permanent tax relief, the Bush tax cuts for 99% of Americans, the Class Act, which was one of Ted Kennedy’s kind of last wishes, a new entitlement program, was repealed. And now we’re ready to talk about spending. The tax issue is over. It’s behind us. He campaigned on it. He wanted to raise taxes on rich people. We knew he was going to get that anyway because the law sunsetted. It ended two days ago. But now, the tax issue is over, and we move on to engage on the biggest problem confronting the future, and that’s the overspending.

HH: Another time, I’ll spend some time talking with you about getting a permanent fix to the AMT and an estate tax that makes sense. But looking forward to the debt ceiling, those are the big wins that I thought you pulled out of the hat here. But looking forward to the debt ceiling, are you willing to go through it as Senator Paul described it yesterday on this program, saying he’s willing to go through that debt ceiling if he does not get what he wants out of this deal? Are you, Senator McConnell?

MM: Well hopefully, it won’t be necessary. I mean, the President has said in public that he knows that the current health care and Social Security trajectory is unsustainable. He knows that. And he has said it publicly. What we have been unable to get him to do so far, in multiple conversations, and in various legislative negotiations, is to get him to actually agree to make the changes that are necessary to save the country. So hopefully, it won’t come to the issue of whether or not we have to default. Default is something that I think most people would think would be a bad idea, but it doesn’t mean that the President just kind of willy-nilly gets a debt ceiling increase just because he asks for it. He’s got to earn it. And asking for a debt ceiling increase is certainly related to how much debt we have. So this is the time to engage, and he’s not going to bully us into not talking about spending.

HH: My friends in the House tell me they hope to pass a bill with specific entitlement reforms coupled with a debt ceiling increase by the end of the month. And things like raising the Social Security retirement age, or the Medicare eligibility age, or the chained CPI, all these different things, do you welcome that order of business, which is regular order of business, Senator McConnell?

MM: I’d rather have the regular order of business. These last minute negotiations with whoever is in the White House are not of course anybody’s favorite way to do business. And I hope the House can send over a bill like that. That’s exactly the kind of thing that we need to do. And until we do those kinds of things, we can’t save the country. Look, we’re not going to have the same kind of country for our kids that our parents left behind for us unless we save, this is about saving these programs, saving Medicare, saving Social Security, saving Medicaid. Until they reflect the demographics of our country, they won’t be there. They won’t be there. I mean, Social Security has been in the red for the last two years. It’s spent more than it took in. The trustees of Medicare and Social Security, appointed by Barack Obama, say Medicare’s got about ten years to go before it tanks. So in order to save those programs, we have to act, and act soon.

HH: When the President says he will not negotiate about this, he is of course negotiating in the press. Is the presidency by press conference productive in this situation?

MM: No, it’s not helpful. I mean, the other day, for example, he had a campaign rally type thing right in the middle of the discussions I was having with the Vice President. All it did was make it harder to get Republican votes. Fortunately in the Senate, we got virtually all the Republican votes anyway. But it’s not helpful. I wish they could turn off the campaign. He won. Congratulations. Great victory for you, Mr. President. You’re not running again. Let’s try governing for a while.

HH: Is there mystery about what needs to be done on the entitlement side? I just have been reading about this for so many years. It doesn’t seem to me like we need more supercommittees, or we need lots of CBO estimates. Everybody knows things that have to be done.

MM: Yeah, all we need is the courage to do it. And ironically, divided government is the best time to do it, and I’ll give you the perfect example was when Ronald Reagan and Tip O’Neill raised the age for Social Security back in 1983. I mean, it didn’t take effect immediately. It’s still kicking in, by the way, all these years later. But they did it on a bipartisan basis. The public accepted it. It was not a campaign issue for either side. It was the right thing to do, an adult decision for the future of the program and the country. That’s exactly what we need from President Obama. And I can guarantee you there are plenty of Senate Republicans who would vote for such a proposal. And we’re going to give him an opportunity to do that in connection with his request of us to raise the debt ceiling.

HH: Now there are a lot of Democrats who are looking at a very short time span until they’re back on the ballot. I’m thinking of your colleague, Senator Landrieu in Louisiana, your colleague, Udall from Colorado, a lot of blue Senators from red states. Do you expect they will help you pass entitlement reform as part of a debt ceiling package? Or are they going to try and demagogue this?

MM: Well, I think if the president of the United States comes out for something, Democrats fall in line. I can tell you, Hugh, without fear of contradiction, Democrats in Congress hated what we did the other night. Hated it. Yet because the President said do it, only three Democrats in the Senate voted against it, and only 16 Democrats in the House voted against it. We made 99% of the Bush tax cuts permanent law. They’ve been campaigning against the Bush tax cuts for 12 years. They all fell in line, because the President said I’m going to do this deal. The way to get Democratic votes is to have the only person in American who can sign something into law on board. And that’s the way to line up the Democrats.

HH: Now it is a fact that Bill Clinton has often talked about his welfare reform package as one of his great legacies, even though he was dragged kicking and screaming to that in a divided government.

MM: Right.

HH: Are we up for the same situation now where the President doesn’t, speaks about not wanting to do entitlement reform, and has Labor screaming at him not to do it, but that if he does it, it’ll be like the biggest room in the Obama Library.

MM: I think it would be, because it would be widely viewed across America, the financial markets, foreign countries looking at us, the message would be the Americans are not going to become Greece, they are not going to drown in their own entitlements like almost every Western European country. It would be a big win for the President, but look. I don’t mind giving him a win if it’s a win for the country, and it’s something we know on a bipartisan basis ought to be done.

HH: As we get closer to the March 1 deadline, Senator, there will be a temptation to forget the sequester in the Department of Defense. What’s your position on that, because it was avoided by your negotiation for 60 days, but it’s still out there, and we had DOD spokespeople saying this has really got to be fixed soon.

MM: Well, if the fix is not cutting spending, that’s not something I’m in favor of. But it’s not the best way to go about cutting spending. Look, we’re spending $3.5 trillion dollars a year, a trillion dollars more than we’re taking in. We ought to be able to figure a way to cut spending in exactly the same amount that would be done under the sequester, but do it in a more sensible way.

HH: Would that mean the same amount from the Pentagon? Or the same amount total?

MM: Same amount total. We need to reduce spending by what we promised the American people we would reduce spending by a year and a half ago. Doing it this particular way is not the smart way to do it. But you can’t tell me we can’t find this amount of money in a $3.5 trillion dollar expenditure.

HH: And last question, Senator, when do you think we actually do hit that debt limit? The sequester kicks in on March 1, but I think the debt limit comes before that, doesn’t it?

MM: Well, the Treasury Department has a number of what we call tools in their toolbox. I think it’ll come in the next two or three months. And we’ll have this discussion all over again. And hopefully, the House of Representatives, as you suggested earlier in this conversation, will follow what we call the regular order, send us a proposal over to the Senate that deals with all of these issues in a way that cuts spending. And hopefully, we can get the President on board and pass it.

HH: Senator Mitch McConnell, thanks for joining us. Congratulation on getting us off the cliff, I look forward to talking to you early and often in 2013.

End of interview.

.

In my conversation yesterday with Paul Ryan (and to a lesser extent in the chat with Rand Paul) the focus was on the debt ceiling negotiations.

Paul Ryan ticked off a list of what the GOP would like to have before agreeing to raise the limit.  Rand Paul noted the only thing he would take --a Balanced Budget Amendment.

There is a problem with both.  The Ryan approach lacks specificity as to priority. 

The Paul approach asks for an amendment which is more gesture than solution as it will never arrive as a ratified amendment in time to help in the present crisis, if ever.

What is necessary is a list of specific non-negotiables that the GOP lays out as its objectives in the negoitations.  Examples: A "chained CPR;" a higher retirement age for Social Security; a higher eligibility age for Medicare; means-testing for one or both programs.  I don't know what the list is, but if the GOP wants to get it, that list must be laid out soon and repeated endlessly along with explanations as to why. Indeed, the list ought to be put into a House bill and sent along with the debt hike over to the Senate asap so as to center the debate in the Senate, where it belongs after the House as acted.

Congressman Ryan stated that the goal must be reductions in spending of the 1:1 variety, but this is too elusive a goal, and subject to manipulation until reduced to writing and in legislation.  If we need to change entitlements, then lay out the list of changes and go for it.

The second preparation for the end-game that has to begin now is the discussion of what happens if "we go through the limit" as Senator Paul put it and lose the ability to borrow.  He and Congressman Ryan discussed how doing so doesn't mean default on sovereign debt, and if you want to prep markets for that eventuality and the partial government shut-down that follows, it is crucial to begin discussing it  --now.  

Arthur Brooks was on yesterday's program as well, arguing that it was very bad policy for the GOP to "go through the limit."  I will check at AEI.org to see if James Pethokoukis or others are stating their case as to why we should not do this, but if the GOP intends to have leverage in this debate in February as the limit approaches, they have to make and win this argument, as well as the case as to why they will not be folding after two days of bad Beltway press.

All of this is easily foreseeable.  Easily.  What is not foreseeable is if the GOP will approach the debt ceiling deadline and the triggering of the sequestration as though it intends to win a round for itself --and for the country.

.

Mark D. Roberts has been writing extensively on the movie version of Les Mis, as well as on the musical and the novel.  His most recent installment (with links to the earlier entries in his series on the film) focuses on the Bishop of Digne.  

I open the new year with conversations with Congressman Paul Ryan and Senator Rand Paul.  The transcripts will be posted here and on the transcript page later tonight.

HH: I’m very pleased that the first guest of the new year is House Budget Chairman, Paul Ryan. Congressman Ryan, Happy 2013 to you, good to have you back. 

PR: Hey, Hugh, Happy New Year.

HH: Let’s start with yesterday. You voted for the McConnell-Biden deal and H.R. 8. I think that was a good choice. Why did you do so?

PR: We had been hit with a $4.4 trillion dollar tax increase yesterday, and I had the opportunity to knock it down by $3.8 trillion dollars. That means 98% of the country don’t get hit with a tax increase. I wanted 100% of the country not to get hit with a tax increase. The problem is, current law spoke otherwise. President Obama held the card on that. And so we were able to knock it down by $3.8 trillion. I’ll also say that John Boehner originally offered $800 billion in higher revenues. This gives Obama $600 billion. So we actually moved it in the right direction. And I did not see a better deal coming, given that the Senate was 89-8 in favor of this deal. It was obviously, you know, I’ve been legislating here for a while, that we were not going to get a better deal. And if you think something should pass, because I think if we failed to pass this, it would have been a disaster. If you think something should pass, then you should vote for it. And you know, I know a lot of people in Congress were saying I hope somebody else votes for it so I don’t have to. Well, I just don’t take things like that. If you think something needs to pass, then you vote for it. There’s a lot of stuff in this bill I didn’t like, but I liked the fact that we prevented $3.8 trillion dollars in tax increases, and prevented tax increases on 98% of the country.

HH: Many conservatives are upset that spending wasn’t part of this…

PR: I agree with that as well.

HH: So how do you respond to them? I’ve got my own answer, but how does Paul Ryan respond to that?

PR: Well, I’m upset about that as well. I mean, this is a president who has proven over and over again that he’s not interested in cutting spending. But I do not want to hold taxpayers hostage for the fact that this president will not help us cut spending. I want to prevent taxpayers from having a tax increase. Now that this excuse is gone, it helps us to focus solely on spending. His excuse of having a higher tax rate on wealthy people is gone. He got it. That’s what the law did. We tried to prevent it. We couldn’t. He’s got it. Now there are no excuses left. And so I like the idea of getting the excuse behind us so that we can now solely focus on spending, which really is the issue here. That is the driver of our debt crisis. That is what we have to focus on. And the President can’t hide behind any other excuses anymore. He has to face this.

HH: And that brings us to the debt ceiling, Congressman Ryan. Will you vote to raise that unless there are serious spending reforms in place?

PR: No, that’s the whole point. That’s what we’re all working on strategizing, how do we get the most of spending cuts and reforms during this debt debate? We have very few pieces of leverage that we can use by being the minority of divided government. This is one of the obvious ones. And so that’s what we want to do, is get the most spending cuts we can get, to at least buy time with the debt crisis. I don’t think, given that Obamacare is being implemented because Obama got reelected, I of all people understand the consequences of that, I don’t think we’re going to solve our debt crisis once and for all, because health care entitlements is the biggest part of that. But we have to get spending down in every way we can, and reform these entitlement programs in every way we can with the divided government that we have.

HH: Will the Republicans speak with specificity as to what they are demanding on Social Security, Medicare and Medicaid as part of this round of spending reform?

PR: Yeah, I mean, I have been, we have twice already. I mean, this session ends today, or we have a new session tomorrow. We passed two budgets that showed you exactly how we would fix this. We’ve passed budgets that show you precisely what we would do with Medicaid, precisely what we would do with Medicare. We’ve shown exactly how we would handle Social Security, exactly how to do welfare reform part two with food stamps and all the other benefits, exactly where we want to cut discretionary spending. There is no lack of specificity and detail on how we think we ought to prevent a debt crisis and get spending down, balance the budget, and pay off the debt. We don’t have a problem with that. We have a problem with a president who literally does not want to do any of this. And so that’s the challenge we have in front of us. But I’d like the idea that we got this tax issue behind us so that now we can get on with the spending issue.

HH: Now Congressman, I agree that the budget is very specific, but not as to the priority of what you must have in this deal. And I think one of the problems we had in the last two months is that there wasn’t great specificity as to what the Republicans insisted on having as opposed to wanting to have.

PR: Right.

HH: So is there a conversation underway? Will the Republicans on the Hill unveil their specific, must-haves as opposed to want to haves before we get to the end game, as happened over the last 48 hours?

PR: Yeah, I mean, I’m not going to get deep into detail, because we’re still having all those kinds of discussions among ourselves, and we need to have it with our friends in the Senate as well. And the idea here is to show early on what it is we are going to do in addressing this. Look, we will have a debt crisis in this country based on the path that we are on. That’s really not a question. It’s really a question of not if but when. And we feel that it is our obligation, just as members of Congress representing our districts, representing the country, to do what we can to deal with this debt crisis. And that means spending. And so we’re going to come up with the best plan we can to deal with a president who is really unwilling to deal with spending, and to make sure that we can leverage as much as we can out of this divided government that we have. But I think getting this tax issue behind us, look, using the Democrats’ own formula of three to one, their own “balanced” plan meant for every dollar of tax increases, you get three dollars of spending cuts. Well, President Obama just got about $600 billion dollars in spending increases, so we ought to be getting $1.8 trillion dollars in spending cuts from him right now. Well, we’ll see. We need to talk about that. We need to see where are those spending cuts? We’ve offered ours. Our budgets offered $4-6 trillion dollars of spending cuts. So we can show you plenty of ways from our perspective on how to achieve it. The President seems to be against all of them. But now he cannot hide behind the tax increase for the rich. He’s got to put up, using his own rhetoric, using their own formula, where are the spending cuts that he says are necessary to “have a balanced plan”.

HH: Talking with Congressman Paul Ryan as we begin the New Year on the most important conversation we’ll have this year about how to get spending under control. Congressman, there are some shortcuts in the language that Republicans sometimes use and don’t. For example, chained CPI came into the language over the last two days, and then it went out again. Raising the retirement age, raising the eligibility, all these different things, will the Republicans learn to communicate in those phrases as opposed to…

PR: I don’t know. That may be asking too much. We talk like accountants too often, that’s for sure.

HH: But that at least sets up something that everyone…already the media is attempting to say that we will be in grave trouble if we do not raise the debt ceiling. It’s already warning, but we’ve got to warn back about what you just said, which is there is a debt crisis coming sooner or later.

PR: Yeah, it is coming. I mean, look. It’s just a math problem. If you want to look at how it looks, what it looks like when this happens, just look at Europe. Look no further than that. We have our Federal Reserve buying most of our paper, meaning most of our debt. That’s a very dangerous proposition. And it just means that we will have an even harder fall down the road if we don’t get our fiscal policy under control.

HH: What does that look like? Because I really think a lot of Americans are driving around, and they’re listening intently, here you’re the national nominee, and you’re the chairman of the Budget Committee, and you’ve used the term debt crisis. But they may disconnect with their own lives, yeah.

PR: Yeah, what does that mean? So what happens when you have a debt crisis is once the markets don’t believe you’re going to get your fiscal house in order, you’re going to get your deficit and debt under control, they’re going to charge you a whole lot more to lend you their money. And the problem for us as Americans is we’re not like the Japanese where we save a lot of money and lend our own money to our government. We borrow money from other countries. About half of our debt is borrowed from other countries. The Federal Reserve is printing money to buy our own debt in a way that sort of artificially keeps down interest rates. Once those rates go, then the cost of servicing our massive debt gets really high. And so we’ll have high interest rates, which is bad for economic growth, bad for getting a car loan, bad for getting a home loan, bad for getting a small business loan. We’ll have slower economic growth, fewer jobs, less take home pay. And it will cost us so much more as a country and a government to get out of the ditch we are in, because our interest rates will go up, and our fiscal system, situation, compounds away from us to the point where we can start losing control of our own fiscal situation, and we are basically slaves to the interest on the debt that we owe, because our debt has gotten so big. That’s the problem.

HH: That makes an enormous amount of sense. Let me switch, then, to what happens if we do not raise the debt ceiling in order to maximize the leverage that you have. We’ve been talking about the debt ceiling. So what happens if the Congress and the President can’t come to an agreement on the spending reforms that are necessary by March 1, and we do not raise the debt limit? What do you think happens?

PR: Well, I don’t want to get into an elaborate default discussion. Technically speaking, what happens is Treasury does not have the authority to go out and borrow money to pay our bills, and they can’t redeem bonds. So the problem with “default” is you can’t make good on your bonds. And that means you’ll have a triggering event where your interest rates shoot skyrocketing up. And it will cost us a whole lot more money to borrow money, and it will cost us a whole lot more money as individuals to borrow money. It hurts our economy, and it will cost our government a lot more money to borrow money, and it triggers a debt crisis. That’s the horror scenario that is played for people when you entertain the idea of whether or not we would default on our bonds. I don’t believe that that would happen. I don’t believe we’re going to default on our bonds. I believe that we can do things to prevent that from happening, but more importantly, we need to snap out of this, and recognize the fact that we have a spending problem, plain and simple. We spend more than a trillion dollars than we take in each year. We have done that for each and every year of the President’s presidency. We’re on path to doing it again this year. And it’s not just that we’re hurting the economy today because the debt is so great, we are destroying it tomorrow for our children and our grandchildren if we don’t get this under control. This is why we passed budgets to get it under control. The President has opposed budgets to get it under control. He won the election, though, and so elections have consequences. He won, and we have divided government. And so we’re just going to have to try to find a way to make this divided government work, so that we can get this spending under control, to try to prevent this kind of a default or debt crisis from happening.

HH: Speaking of the election, I want to turn there for just a couple of minutes. And first, I want to being by saying when you were on the show the first time after your nomination, I surprised you with a question. And I never clear my questions with anyone, but I surprised you with a question about your running, and I’m sorry about that, because you didn’t have a chance to check with your brother.

PR: Well, I just forgot. I mean, it was, what, 22 years ago? I hurt my back when I was like 24 or 25, and I quit running. But I used to run a lot, and I’d literally just forgot what the time was, and I threw it off the top of my head. That was the mistake I made. I ran an ordinary time. I thought I gave you an ordinary time answer. Apparently not, because I just forgot that the sense of these things.

HH: But that was an illustration of the environment in which the campaign operated.

PR: Yeah.

HH: …where hypertechnical gotcha overtook the big issues like we’ve been talking about.

PR: Right. Yeah.

HH: Having run for vice president, there are very few people in the country who can speak to this, you and Governor Romney, the President and the Vice President. Have we lost the ability to have the conversation about the big issues?

PR: No. Gosh, no. I don’t think so. Look, Mitt and I worked at making this a big choice election about two very different views of government, visions for the future. And we did that. And you know, look at our advertising. Look at our speeches. Look at the way we closed our race versus the way President Obama closed the race. We tried to give the country a very, very clear choice. Look, it was a closer election than the media likes to say. It was something like between 400,000 and 500,000 votes spread across four different states that would have made the difference. So it’s a close election, it’s a closely divided country. And what we wanted to do was give the country a very clear choice so they could see what choice of two futures they want. He won the election, and I would argue that I don’t think the country in voting for the President gave an enthusiastic endorsement to the kinds of deficits we have, the kinds of fiscal profligacy we have, or for Obamacare, such as it’s going to be implemented. Nevertheless, he won the election, and we have to live with that. You know, I of all people need to understand that.

HH: I have argued that the combination of Sandy, Candy and ORCA undid this, Sandy the storm taking the narrative away, Candy, a friend of mine and a friend of this show, but she did make a mistake in that critical debate about Benghazi, and then the failure of the get out the vote system. Is that enough of an explanation for what happened?

PR: You know, I just don’t like getting, I don’t want to go into the woulda-shoulda-coulda, what was the explanation, and why it happened. It happened, and I’d just prefer not to get into all of that hindsight stuff. It happened, it’s unfortunate, it’s not what we thought was going to happen, it’s not what we’d planned on happening. And you know, the disappointing part of it all is this isn’t one of those elections where the country just goes slightly left of center instead of slightly right of center. It’s a much bigger election than that. And the pendulum swings pretty far to the left, because that’s where President Obama is. And these are the consequences.

HH: Now I was a, and have been a big fan of, Governor Romney for a long time. Do you believe that the American people got a good sense of who he was?

PR: That’s what I always was concerned about. No, I don’t. Mitt Romney would have been a fantastic president. Knowing him as well as I do, first of all, he is just a genuine, good man who is a very caring person. And I think of the hundreds of millions of dollars of negative advertising spent against him, based on his successful business career and all the rest, it made it look as if he’s an un-relatable guy. That was the President’s, you know, that was President Obama’s campaign strategy. He’s one of the most compassionate, intelligent, honest people of integrity that I have ever known. And so I really believe he would have been a fantastic president, because he had the temperament, he had the demeanor, he had the intellect, and he had the core, guiding conservative principles that I think are necessary for anybody to be a successful president. And more importantly, he was not going to be afraid of taking on the big issues. He was not going to be afraid of tackling this debt crisis head on, taking on our entitlement programs and reforming them, to getting the economy growing, reforming the tax code, getting our military built up so that is unquestionably the strongest in the world. That was going to be the agenda of 2013 under a Romney presidency. And it’s a shame that it didn’t happen, because I think this man would have been a fantastic president.

HH: Two exit questions, Congressman. The DOD sequester, you just mentioned Defense, and the Sandy relief bill, and let’s start with the sequester. A lot of Republicans are headed isolationist, they are not concerned about the sequester. I think it will be devastating to the military. Will it be reversed by March 1?

PR: I think so, but it’s got to be with other spending cuts. Look, this was, because we needed $1.2 trillion dollars in spending cuts, to pay for the last debt ceiling increase. We don’t like these spending cuts on Defense, so let’s substitute them for other spending cuts. I agree with you. I think this combined with the Obama budget on Defense, which is $487 billion dollar cut, would be devastating, and would severely undermine our military. So I agree with that. And number two, the flood, there’s a flood insurance fund that starts running out of money in a handful of days, where it can’t pay all the claims. So that fund does need money soon, and I think we’ll replenish that funding so that those claims can be paid, because a lot of claims are coming in, obviously, in New Jersey and New York, and that area.

HH: And you expect that to occur this week?

PR: I expect that to occur in the next day or two. But all the other stimulus spending on top of it, which is not as emergency, I’d say, as the flood funding is, will probably go in a different traunch.

HH: Paul Ryan, great to have you back. Thanks for joining us, and a Happy New Year to you and your family.

PR: You bet, Hugh. Take care.

HH: Thank you.

End of interview.

HH: Joining me now from the great state of Kentucky, Rand Paul. Senator Paul, welcome, Happy New Year to you. 

RP: Happy New Year. Good to be with you, Hugh.

HH: Gosh, I hope every one of my shows is as significant as Paul Ryan and Rand Paul after a major vote this year. That would be a good 2013 for me. Can you tell us why and how you voted no on H.R. 8?

RP: Well you know, I think the biggest problem we face as a country is this debt crisis. The fiscal crisis was sort of a created concoction by the President, because he said he wanted taxes to go up. So he forced the taxes up on some folks, but it did nothing to address the real problem, which is the debt crisis, and in fact, I think made it worse, because this bill had $330 billion dollars worth of new spending in. So I just can’t vote for more spending, taxes going up. It really was going the wrong direction, as far as I’m concerned.

HH: Many of your colleagues, I think only Marco Rubio, was the only…actually, Chuck Grassley and Marco Rubio joined you, and that’s pretty significant.

RP: Oh, and my buddy, Mike Lee as well.

HH: Oh, Mike Lee. You’re right. I’m sorry. I don’t want to get the great Senator from Utah upset with me. So you had four Republicans with you, and forty against you. To those other forty, they’re concerned about spending. What do you think was going on in their rationale?

RP: I think it was 2:00 in the morning, and everybody kind of wanted to go home. And so I think nobody had a chance really to read the bill. I’m not sure the bill really was even around for anybody to read at 2:00 in the morning. It certainly defied all of the rules that we have in the Senate. We have one specific rule that says bills have to be online for 48 hours. So when things get thrown together hurriedly in the night, people have no idea what’s in these bills. And so I really just can’t, really on the face of it, vote for something that’s thrown together in such a hurry. I think it shows poor planning. I think the American people are disappointed with Congress, because we lurch from one deadline to the next. So I really just don’t think it’s the way you ought to run your government, and I won’t vote for anything that I don’t have time to sit down and read.

HH: Now Senator Paul, I’m a big fan of getting out of the box canyon that we were in yesterday, because the President had all the chips. But I’d like to focus on what the President’s style was approaching this. Do you believe it is possible to negotiate with this president? Or does he do everything with a political end in mind?

RP: Everything is done with a political end in mind. Everything is done, and everything has been done for the last several years based on envy, fear, jealousy, all things that I think aren’t really what typify what’s made our country great. And so no, I object to the way he’s characterized these things. And really, I tell people over and over again, the facts of the matter are that the rich pay most of the taxes in our country as it is now. And the other fact is that when you take money out of the private economy, whether it’s rich people’s money, middle class or poor, when you take it out of the private sector, you’re taking it out of the efficient sector, and you’re giving it to government. And there’s no objective evidence that government spends it wisely.

HH: Now looking ahead to the debt ceiling, are you afraid of a default on our obligations, not on our debt. We will not default on our sovereign debt. We might default on our obligations, and that would mean some people who are owed money won’t get paid, but they won’t be the sovereign debt owners. Are you afraid of that happening?

RP: One of the things that’s been lost on people, and we tried to get the word out last time, is there’s no reason every to default. We bring in enough tax revenue every month to pay our obligations, to pay the interest on our debt. We also bring in enough to pay our soldiers. We also bring in enough tax revenue, probably, to pay for Social Security and Medicare. We might have to do some means testing. We bring in enough tax revenue every month to pay for 70% of our expenditures. So what I’d probably do is say the moment the debt ceiling comes, if we haven’t agreed to something good like a balanced budget amendment, and that’s the only thing that’ll allow me to vote for it, is just spend what you have. Go ahead and pay for your obligations, pay your interest on your debt, and spend it on the absolute necessities of government. Maybe we won’t have $3 million dollars to study monkeys on methamphetamine, $300,000 dollars to build robotic squirrels to see what rattlesnakes do with a robotic squirrel. There’s an endless amount of waste in our government throughout, from top to bottom. So I would say let that part of government stop, keep funding what’s essential, but I’d blow right through it and say this is when we have a real discussion about reforming spending.

HH: You know, Senator, those robotic squirrels might have some cross-purpose use in radio production. We might learn some things about radio from robotic squirrels. Let’s talk a little about, though, you just said a balanced budget amendment is the only thing that would get you to vote for raising the debt ceiling. What about systemic entitlement reform, because balanced budget amendment doesn’t actually change anything, because the states would have to agree, and it would take years. But systemic entitlements could take effect tomorrow.

RP: Yeah, and here’s the thing, and the reason why I don’t is I don’t believe these people. They always put the spending cuts ten years from now when there’s a new Congress. All these budgets, they say, will balance, take 28, 30 years to balance. So I think you have to have an amendment. But as far as the entitlements, what I don’t like about what the Democrats do is they say oh, if you give us this, if you trade us this, we’ll agree to fix entitlements. Well, entitlements affect all Americans, Republicans or Democrats. They’re not broken because of either party’s fault. They’re broken because we’re living longer, and because the Baby Boomers are retiring. So I think as an obligation as a good legislator, you should just agree to fix them. But they always want to trade something. They want to see that they’ll raise taxes on some more people, give them some more spending for earned income tax credit or what have you, but they want something in exchange for doing what is the right thing, and that’s to fix entitlements so we can save them.

- -   -    - 

HH: Senator Paul, when we went to break, we were talking about entitlements. And I know that your position that we ought to do the right thing on them, do you think we need to chain the CPI for Social Security and Medicare?

RP: Well you know, I think a lot of people don’t understand exactly what that means. I have a bill that would do two things. It would raise the age gradually, a couple of months a year over about 20 years, and then I would means test the benefits. I think means testing is a little more acceptable than slowing down the cost of living increases for everyone. What you do with means testing is that the richest among you will actually get a cut in their Social Security, and then you work your way down to the poorest among us, who won’t have any cut. And so then something like a chained CPI and all these other complicated formulas won’t hurt the people on the lowest end of the totem pole. And so I think that’s the better way to approach it.

HH: Let me ask you about that, because a lot of people instantly say Social Security, at least, was always about a savings program. If you begin to means test it, you break faith with people who have for decades been paying in on the expectation they would get back.

RP: It’s been a fiction, though, for a few decades now. And now for the first time in the last two years, Social Security pays out more than comes in. In fact, with Medicare, it’s dramatic. You pay a dollar in Medicare taxes, and you get three dollars in return receipts, so really, these things are so broken and have to be changed. I think means testing is a way of doing it that’s acceptable to people. And what people need to understand is if you were, if you made over a $100,000 dollars a year, that’s basically the top bracket for Social Security. You get about $2,200 dollars a month. My plan that means test takes about $300 dollars a month from those who made more than $100,000 dollars a year. So they would actually get less, but it would actually start having savings immediately. If you do not do that, you have to do all these manipulations to CPI that really, you know, there are a lot of poor people in our country who are having trouble living on the Social Security check they have. And you slow that down, I just think it’s harder to get through Congress, it’s harder to make work. I’ve told the President, Biden, I’ve told all the Democrats, why don’t you work with us on this, because you keep saying you want the rich to pay more. This is a way that the rich receive a little bit less in benefits. It doesn’t, it helps to make the system solvent, and I think it’s the best way to go.

HH: Now I want to go back to the debt ceiling, since that looms on March 1. Are you afraid, now we will hear, and we’ve already begun to hear, that if we do not raise the debt ceiling in time to borrow more, that the bond vigilantes will arrive, they’ll attack our bond rating, they will attack our credit rating, and everyone will suffer. What’s your response to that, Senator Paul?

RP: The best way is to affirmatively pass legislation, and Senator Toomey had this last time, and I was a co-sponsor, affirmatively pass legislation that says the tax receipts will go to pay for the interest on the debt. The first one in line will be interest on the debt. And then we also designated, I think, a few other people – Social Security soldiers’ salaries, the military, things like that. We prioritize our spending, and we go ahead and pay tax receipts. So that way, we let the world know we will not default. So when they play this game, they are always saying that we will default. They want to scare both Congress into voting for more spending and more debt. But they also want to scare the marketplace, and I think it’s a bad idea to scare the marketplace. I would preemptively go ahead and put out there that we will never default on our debt, that it is an obligation, something that’s a Constitutional obligation that we have to pay the interest on our debt. So I would let the world know we would do that, and I think that would give a great deal of confidence. You know, we bring in billions of dollars of tax revenue every month. And there’s actually plenty of it to pay interest, Social Security, soldiers’ salaries. Eventually, you get down to a lot of the discretionary spending, but I think you could delay discretionary spending and have none of it for about three months. People might discover that we don’t need most of the discretionary spending.

HH: Now Senator, that might be interesting, but I know Senator Reid will not bring that forward. And so if we’re up against the wall in late February, and it appears that we are going to run up against the limit, and there has not been any sort of prioritization of payment beginning with sovereign debt and then down through the Soldiers, Sailors, Airmen, Marines, et cetera, are you afraid of what will happen if we get to that limit and we have not established that prioritization, and we can’t borrow?

RP: Well, that’s why our job is to talk about prioritizing, how we would pay for it. Our other job is that what we ought to do is what we did last time, is the House passed in advance a bill that says we will agree to raise the debt ceiling. Actually, we had over $2 trillion dollars we were going to agree to, if you’ll pass a balanced budget amendment. So the only way to get the leverage of the debt ceiling to work is you have to be willing to go through the deadline. If you’re willing to go through the deadline, and have the Treasury keep taking tax receipts, and continue to pay the interest on the debt, and pay for the primary functions of government, if you’re willing to do that, which would be saying that part of the government wouldn’t get funding until we got a solution, I think you would finally get to a point of leverage where Congress would say you know what? We should have a balanced budget amendment to the Constitution, and I think we could pass it. I know we can pass it in the House. We just have to get some Democrats to agree that there’s a fiscal problem in our country.

HH: If we are at this point, find majorities of Republicans willing to go through the deadline, enough to stop any kind of debt relief bill, how long will they stay strong on that, do you think, Rand Paul? Will they fold up when the media begins to barrage them with criticism?

RP: Well, here’s the problem. And this is it in a nutshell. We give up before we ever get started, usually. So we give in and we have absolutely no leverage, because we know that many have the spine of an invertebrate. And so, like for example, we gave up the whole fight over whether or not we were going to pay for the Sandy emergency funding before it got started, $60 billion dollars, you know, not offset at all. The Republican alternative in the Senate was $24 billion now, and they’d give you more later, but not offset, either. I said let’s give them the $9 billion that they need to spend in the next year. That’s all they’re estimating they’re going to spend. But I offset mine with real cuts.

HH: And so obviously that did not work, because your colleagues in the House and in the Senate decided they weren’t going to play hardball. And I agree with that, by the way. I think Mitch McConnell did a fine job. But I want them to play hardball on the debt ceiling. How long will they play for when every single Beltway reporter is hitting them with a hammer?

RP: Well you know, I think we’ll have to see what happens. There’s quite a few people, you may know a few people on talk radio, that are pretty conservative. And I think if everybody’s out there talking about it, you’ll find that the grassroots folks in Kentucky or anywhere else, I get nothing but people coming up to me and saying stick by it, stick by our guns, we’ve got to do something about the spending. And so I think the majority of Republicans and the majority of Americans out across the country agree with us, and we need to draw a line in the sand. We need to do something about spending. And people just need to listen to the folks at home and not listen to reporters inside the Beltway.

HH: Senator Rand Paul, thank you for joining me, Happy New Year, come back early and often in 2013.

RP: Thanks, Hugh.

End of interview.

.

The GOP did little between the election and Tuesday's passage of the tax bill to explain that the major issue facing the country is spending.  

Much of the time was spent silent --wounds being nursed etc-- or talking of grand bargains or rumors of secret meetings at the White House.  The Speaker, with the biggest platform not belonging to the president, didn't use it at all.  The Manhattan-Beltway media elite, in love with the confrontation between the president and the Speaker, paid no attention to spending, and after the horror of Newtown covered almost nothing else.

Now the table is clear and the clock running down to the moment when the Treasury cannot borrow any more money.  That is also the moment that the Defense Department-smashing sequester hits.  The GOP has 60 days to outline and argue for its vision of what has to be done, especially with regards to entitlements.

It needs to be concise.  It needs to be repeated.  The consequences to individuals have to be spelled out.

"Social Security needs a new retirement age.  Medicare needs a new eligibility age. Medicaid needs a cap.  They all need reform to their cost-of-living escalators."

What also needs repeating is that there will be no more tax hikes. The president got what he campaigned for, and the revenue flowing into the government is enormous.  

"Revenue to the federal government was $___ in 2008 and $____ in 2012, and is likely to be $____ in 2013.  We don't have a revenue problem.

Next, the consequence of the spending --past, present, and future-- is a massive crisis.  The GOP needs to spell out, again and again, how much we are paying in interest charges on that accumulated debt and what will happen to that cost as interest rates rise.  Crucially, the GOP must explain what will happen when the debt limit is not raised and why it is willing to accept those consequences.

These are not hard things to do.  But they must be done if the country is to be ready for the showdown in late February.

Yesterday's deal, as the Washington Examiner's Philip Klein put it, was "objectively bad and relatively good."  Hats off to Mitch McConnell for getting the GOP out of the box canyon and avoiding a massive tax hike for every American which I think the president was hoping would occur and which he could blame on the GOP.

The tax hike on people making more than $450,000 a year was a red herring, an absurd cul-de-sac for the public debate to go 'round and 'round in, but the GOP never made clear why, never even drove home how much revenue it would raise much less the relative impact such revenue would make.

The GOP needs to make an argument, repeat an argument and grow hoarse making the argument.  Perhaps with the turn of the calendar it will do so.  Every day that you don't see or hear one of the Republican big guns making these arguments, with the specifics attached, is a lost day.  And ever lost day is bad news for the country headed towards the debt cliff.

If you are still confused about why many GOP members of the House (and even a few in the Senate) fear being understood to break their pledge against raising taxes, visit the web site for The Campaign for Primary Accountability.  This group --a super PAC with significant resources behind it-- targets incumbents who, in its view, ought to be toppled for their indifference to the basic principles on which they were elected.

In the last cycle it went after most notably the Chair of the House Financial Services Committee, Spencer Bachus.  It didn't topple the Alabama Republican, but it did exhaust his treasury and expose his record, and the CPA will probably be back around again this cycle to take on Bachus a second time.

A vote to raise the highest rate may or may not be enough to trigger a primary challenge --candor in admitting the breach coupled with serious fiscal conservatism will no doubt protect some incumbents.  The worst thing for any sitting House GOPer to do is pretend that any vote to raise taxes isn't a vote to raise taxes just because it prevents tax hikes on most people.  Confession of impotence and appeals to the greater good make a lot more sense than arguing "up is down," because candor excuses many political sins.

.

A break from vacation to comment on one of the worst interviews of a sitting president ever.

If we topple over the "fiscal cliff," it will of course be the fault of President Obama and his continued inability to negotiate with anyone in good faith and to use absurd arguments in support of indefensible positions. The transcript of David Gregory's Meet the Press "interview" with the president as provided by Politico's Mike Allen includes all the regular features of an Obama conversation --self-absorption, condescension, blame-assigning, and a refusal to answer even basic questions. And of course a representative of the craven press. There's a reason why POTUS picked Gregory and not say Jake Tapper and it is because Tapper isn't going to look dreamily into the Commander-in-Chief's eyes and as "Is this your Lincoln moment?" At least the president has the good sense to decline to embrace that much adulation.

The worst part of the exchange comes here:

GREGORY: “Would you commit to that first year of your second term getting significant [entitlement] reform done?” …

OBAMA: “David, I want to be very clear. You are not only going to cut your way to prosperity. One of the fallacies I think that has been promoted is this notion that deficit reduction is only a matter of cutting programs that are really important to seniors, students and so forth. That has to be part of the mix, but what I ran on and what the American people elected me to do was to put forward a balanced approach. To make sure that there's shared sacrifice. … And it is very difficult for me to say to a senior citizen or a student or a mom with a disabled kid, ‘You are going to have to do with less but we're not going to ask millionaires and billionaires to do more.’”

No follow up from Gregory on how the president wasn't "very clear," and how insignificant the revenue raised from asking "millionaires and billionaires to do more." No surprise there, but it will be a surprise if the GOP is surprised that the president is simply not going to touch entitlements --ever. He refuses to care about the deficit and thus the debt and the nation's defenses and is betting that he can get out of Dodge in four years without the roof having fallen in him thanks to Ben Bernanke and perhaps the theory that the world's reserve currency can be printed in endless amounts.

As the responsible party the GOP will have to force the issue and sooner --perhaps today-- than later. Senator McConnell is the best fellow to be on the GOP point here, and it is hard to imagine the wily Kentuckian given up all his leverage for one cycle of praise from the White House Annex at NBC and the other nets. We'll see. Even if he felt the good of the country required an immediate fix to the tax rate debacle, scores of GOPers will have to vote "no" because of their understanding of their pledge not to vote to raise taxes, or, having broken the pledge or defined it away, explain to their constituents why they did so. The president's political strategy is pretty obvious: Destroy the GOP's credibility on taxes while launching a number of primary challenges to GOP incumbents forced to vote for an economy-hurting tax hike by the exigencies of the moment.

Whatever Senator McConnell does, I also expect the president to be campaigning to neuter him in the same way he cut the legs out from under John Boehner. It is what the president does. Looking forward to the high-flying rhetoric of the inaugural address given this backdrop.

As for David Gregory, he missed a chance to make Meet the Press relevant again, and embarrassed Tim Russert's memory two weeks in a row. Russert was always about saving Social Security from insolvency, maddeningly so in some cases, but he never let his guests waltz away from the consequences of their fiscal irresponsibility. This, the most fiscally irresponsible president in history and perhaps, as Mark Steyn suggests when he notes that the U.S. is the "brokest nation in history," the most fiscally irresponsible political figure ever (some of the old Romans were even more profligate in percentage terms, but POTUS is getting close to going Caesar when it comes to the public treasury).

"Lincoln moment?"  Sheesh.  Did Gregory offer to wash his car?

.

"Hill GOP cool to Obama overtures on fiscal cliff deal" is one of the unintentionally funniest headlines of the year.

Like "Charlie Brown cool to Lucy's football."

The president has been speaking about bipartisanship since 2009 even as he has conducted the most relentlessly partisan presidency of modern times.

The Congressional GOP should stop trying to be the executive and start waiting out the president, mocking his rhetoric by pointing out, again and again and again, that the president has not put forward a plan, nor has Harry Reid.

The Wall Street Journal reports on the state of relations between the president and the Congressional GOP:

A review of the negotiations, based on interviews with a dozen aides and lawmakers, suggests the problems lay in Mr. Boehner's inability to coax his rank-and-file to support a deal that raises taxes on higher-income Americans. Another factor was what Republicans saw as President Obama's unwillingness to bend when a deal was in sight, jamming the speaker with a deal his party couldn't swallow.

The negotiations offer little evidence November's election brought the president and House Republicans closer together. If anything, the talks poisoned an already distrustful relationship.

Powerline's John Hinderaker regrets the failure of Plan B, and flatters me that I had something to do with its collapse.  I'd be happy to take a bow if that were the case but the real explanation is that GOP backbenchers have had it with being props in the Obamadrama.  John's argument is the GOP has to do something, anything, to change the dynamic, but in truth all they can do is wait, and in the waiting, make an argument about what is happening to the country because of the president's posturing.  They do not improve their position by trimming their commitments unless and until they have to, and they don't have to unless and until the president makes them an offer they cannot refuse for the good of the country. Serial concessions and multiple breaches of very public vows lead, rightly, to the conclusion the party is neither courageous nor principled.  

"The average low-information voter has no idea what Republicans want with respect to taxes, spending, and the budget," John writes, "and therefore is quite ready to believe Barack Obama’s absurd lie that Republicans are just trying to protect rich people."

John's correct about this, and the GOP has made no systematic effort to change this fact blackout.  Ask yourself, have you seen or heard any of the House GOP leadership on any talk show --radio or television-- in the past six weeks?  If they did appear on one that I missed, did they make an effective argument about what is at stake?  The great Beltway conversation goes on in classic fashion, but it isn't making any dent on public opinion because the president talks in slogans and the GOp doesn't talk at all.

Here's a gift suggestion for your local GOP Representative: "The Last Lion: Alone 1932-1940" by William Manchester, the second volume of Manchester's biography of Winston Churchill.  It focuses on his wilderness years when the most important thing he did was make arguments about what was really going on in the world.  His speeches did not avert the crisis, of course, but they did help prepare his country to deal with it when it arrived.

If the GOP doesn't adapt to its position, using its real power judiciously but not overestimating it or attempting to be more clever than the combined power of the presidency, the Senate and the MSM, there will be plenty more defeats ahead, and even greater embarrassments.