Bill Clinton Network Exclusive: Proposes Debt Impasse Deal, but Fears GOP Too Hamstrung by Ideology

June 30, 2011 — -- Former President Bill Clinton sees a possible way past the bipartisan impasse over raising the debt limit: agree to cut spending AND raise taxes, but do neither until later, after the economy improves.

"If they [the Republicans] said, look, that now is not the time for big tax increases to harm the recovery, they would be right," Clinton told ABC News in an exclusive interview at the Clinton Global Initiative America conference in Chicago. "But it's also right to say that now's not the time for big spending cuts.

"What I'd like to see them do is agree on the outlines of a 10-year plan and agree not to start either the revenue hikes or the spending cuts until we've got this recovery underway," Clinton added. "The confidence that the Republicans say would be given to investors with a budget plan, they'd get whether we started this year or next year or the year after that, for that matter."

For the first time, the former president is focusing his Clinton Global Initiative on creating jobs here in the United States. He suggested waiting for the recovery to take hold before pushing spending cuts and tax increases will make the issues clearer.

"We've got to get the jobs back in this economy again," Clinton said. "The more people we get going back to work, the more businesses we start, that'll bring up the revenue flow, and it will cut down on the expenses. Then, we'll see what the real dimensions of our problem are."

Unfortunately, however, Clinton fears Republicans' "ideological conviction" about never raising taxes recalls the lead-up to government shutdowns in the '90s, adding that the pressure on GOP candidates to toe the ideological line could hamstring their bids to unseat President Obama.

"They were in a similar anti-government fever, anti-tax fever in 1995 until, you know, the struggle went on for a year and they shut the government down twice," Clinton said. "The public made a judgment that that was not right. And then we finally broke through. It wound up with the balanced budget act and forced surpluses and real prosperity."

Could the dispute this time push past the Aug. 2 deadline when, officials say, failing to raise the nation's debt ceiling could lead to America defaulting on its loans? Clinton didn't discount the possibility.

"When I passed my budget in 1993, they routinely said it would bring on a terrible recession, [that] it was the end of capitalism as we knew it," he said. "And we had the best eight years in our history. But they just kept saying it. You've got to give them credit. The evidence doesn't deter them. ... It's an ideological conviction. So, I don't know that it can be resolved until there's some break in the action."

Bill Clinton Expects Obama Re-Election: Here's Why

Public opinion, Clinton said, swung against the Republicans when they pushed their anti-tax arguments over the line in the mid-1990s. But the possibility of the same thing happening again isn't the whole reason he believes that President Obama will be elected to a second term in 2012.

"I'll be surprised if he's not reelected," he said. "I've always thought he would be."

For one thing, Clinton believes the economy will be better by Election Day than it is now, though unemployment still will be relatively high and the improvement in the economy won't be as dramatic as the emergence from a shallower recession during his first four years as president.

"The circumstances are different," Clinton said. "When President Obama took office, we were in the midst of avoiding having a financial collapse turn into a depression. So, the unemployment rate was higher and people were scared to death about what was going to happen. The so-called stimulus bill actually outperformed expectations, not underperformed, but it wasn't big enough to lift this whole economy out of the hole it was in. The auto restructuring is working. And I think he'll be able to point to that."

He also believes whichever Republican gets nominated to face Obama will get boxed in by ideology.

"Since they, apparently, ideologically, will not permit their candidates to do some of the things that would be most effective in creating jobs and in balancing budget, I just don't think they'll be able to get away with what they got away with in the election in 2010," Clinton said. "You won't just be able to say, 'Vote for me, I'm the non-Obama.' I think he's going to be able to point to a lot of very specific things that are better. I think that he's going to be able to convince people that it takes a little longer after that kind of collapse to recover. It took Japan a decade to recover. ... We're coming back quicker than that."