Sens. Charles Schumer and Jon Kyl on 'This Week'

Good morning, and welcome to a special edition of "this week." The hour for immediate action is here. There's no doubt about that. With less than two days before america plunges over the fiscal cliff,... See More

Good morning, and welcome to a special edition of "this week." The hour for immediate action is here. There's no doubt about that. With less than two days before america plunges over the fiscal cliff, lawmakers are finally saying, let's make a deal. I'm hopeful and optimistic. Whatever we come up with will be imperfect, and some people won't like it. What will the imperfect solution look like? Even if there is a deal, will it be able to pass? And why does it always come to this? This is deja vu all over again. We'll ask our headliners. From the senate, democrat chuck schumer and republican jon kyl. From the house, democrat chris van hollen and republican raul labrador. In our powerhouse roundtable on all the week's politics with former vermont governor howard dean, former minnesota governor "vanity fair" and maggie haberman of politico. You are looking at live pictures of capitol hill. Over the next 12 hours, what happens there or what doesn't happen will cut to the very heart of your financial future and the fate of our struggling economy. Good morning, I'm jonathan karl with a special edition of "this week." George is off for the holidays. The world is watching and waiting to see what happens here today in washington. At this hour, congressional leaders are working to find common ground, desperate for some sort of compromise. My sources tell me this morning the odds of a deal are still no better than 50/50. The senate will convene today at 1:00 p.M., The house back in at 2:00 p.M. Stock markets around the world are on edge. The dow down five days in a row falling nearly 160 points friday and early indications are those losses could be much worse if there is no deal. Consumers are jittery too. Their confidence in the economy plunging for the second straight month falling to its lowest level since august. So that's where we begin. Let's get the latest from two top senate leaders. Joining us now, senator chuck schumer of new york, senator jon kyl of arizona. So, gentlemen, do we have a deal? Well, there are certainly no breakthroughs yet between senator McConnell and senator reid, but there's a real possibility of a deal. I've been a legislator for 37 years, and I've watched how these things work. On these big, big agreements they almost always happen at the last minute. Neither side likes to give up its position. They eyeball each other till the very end. But then each side, realizing that the alternative is worse, comes to an agreement. So while an agreement is hardly a certainty, I certainly wouldn't rule it out at this last minute. Give me your odds. I said 50/50. I think a little higher than that. Senator kyl? I don't disagree with chuck, and I also would say the way you opened the program does not under or overstate the consequences. If we are not able to reach an agreement, it will be dire. And that's from everybody from the congressional budget office which is nonpartisan, as you know, to the fed chairman, ably at least another million jobs lost, an unemployment rate over 9% and putting us back into recession. So responsible people on both sides of the aisle do need to try to come together, and there is a significant effort under way right now. But let's understand what we're talking about. What kind of a deal? This is a -- the bare minimum, as the president said? What would this deal include? Well, obviously I think all of us would have preferred the grand bargain, so to speak, of a $4 trillion deal. That can't happen at the lt minute, but to avoid going over the fiscal cliff, to avoid taxes being raised on middle class folks and on 98% of america to avoid, in my view, a sequestration that would be very damaging to the defense and nondefense sides, there's an agreement that's possible, and, you know, there are four issues that are outstanding. Each of them is bridgeable in a certain way. They are, we believe that the bush tax cuts should go up for people above $250,000 income a year. There is a disagreement on estate tax. We prefer the 2009 levels. Jon would prefer something else. Whether unemployment insurance is included in, we feel that's very important, and then whether you use some small portion of the revenues you gain from the tax increases to pay down sequestration per year. Those would be the four areas they have to come to agreement on. There are some areas I think there is agreement. Dealing with the amt patch so that me class people don't go up, the sgr, the medicare and some tax expenditures on business and middle -- let's be clear here. You're talking about extending tax cuts for most americans, you're talking about some more spending, this would be extending unemployment benefits. You're not talking about any of the hard stuff. I mean, this doesn't do anything. As a matter of fact, "the wall street journal" looked at the outlines and projected you'd actually add to the deficit as a result of a mini deal over the next period. Yeah, jonathan, some people have tried to talk about the reductions in spending that are necessary to get our fiscal house in order. That would be the republican side. The president and a lot of folks in his party have shied away from those discussions, and i think chuck is accurate in saying that that's not going to happen in this conversation but it should. You are right. I can quote from the "the washington post" editorial just a few days ago in which they chastised the president for not following through on his campaign promises to talk about a balanced solution, one that would involve both tax revenue and savings. Ironically, the revenue that's produced in the president's proposals is about the same amount of money we're going to be spending just to provide disaster relief because of the hurricane to some of the folks on the east coast. Now, wait. I don't think that's fair to the president. The president had put serious spending cuts on the table. He and speaker boehner a week and a half ago were this close in a $4 trillion deal, they were 200 billion apart on revenues and 200 billion apart on cuts and then what happened, all of a sudden, speaker boehner decided to do this plan b. He went back and for a week tried to raise the amount that you would extend the bush tax cuts to people over a million dollars, couldn't get -- the plan was flawed from the beginning. Instead of trying to get a bipartisan deal with democrats and republicans, he tried to win over the 50 most hard right conservatives in his body. It fell -- wait, wait, it fell apart, and it's leading us to this last minute, so our choice is simple. Avoid the fiscal cliff and people's taxes going up or do nothing and let it happen. We didn't want to be in that position, but speaker boehner pulled out of the deal a week and a half ago. It's not fair to blame the president. But I've got to ago you this question because this is one f the big sticking points left. Whose taxes go up, people making over $250,000 as the president wants or republicans suggested nobody or people making over a million dollars, but you, senator schumer, had proposed raising taxes only on those making over a million dollars. And I want to take a look at what you said about this proposal going up $250,000 last year. You said "in the eyes of many, it is hard to ask households making $250,000 or $300,000 a year. In large parts of the country, that kind of income does not get you a big home or lots of vacations or anything else that is associated with wealth. It also would affect too many small businesses." Weren't you right back then when you said it would be wrong to raise taxes on those? We offered that to our republican colleagues two years ago when the political landscape was different. They rejected it and then the president sticking to 250 campaigned on openly, overtly. He won the election on it overwhelmingly on that issue, 60% of the public was with him. So that is our position. It's a position that brings in more revenues, and what we have learned as the fiscal situation deteriorated, if you go much higher than 250 to raise the rest of the revenues you need, you're going to hurt the middle class as you take away their tax deductions. But you said back then -- so it's the right place to be. You said back then it would affect too many small businesses. Frankly, you sound a little like senator kyl. The bottom line is very, very simple and that is that if you do -- if you go much above 250 u'll hurt the middle class even worse and small businesses even worse by having to take away tax deductions. That's not the place we were at two years ago. It is the place we're at now because the situation is deteriorating. Jonathan, it's exactly the opposite. The higher you set that level, the less small business you're going to hit, and you're exactly right, and chuck was right back when he talked about a million because the increase in the tax rates for individual taxpayers sweeps in about a million small business owners. Remember, about half of small businesses are women owned, and it sweeps them up because they don't pay corporate tax rates. They pay as individuals. But -- but wait a second. That's counting big hedge funds as small businesses, big hollywood productions like oprah winfrey as small businesses. It affects very few. We all know mom and pop small businesses, the dry cleaner down the street and others, don't make millions and millions of dollars. And let's remember, all the tax cuts are set to expire on JANUARY 1st, SO I'VE GOT TO ASK You, senator kyl, a lot of republicans, a lot of your colleagues, people you greatly respect have said, you know what, why don't we do 250. We've got to do what we can do. Let's take a look. Senator cornyn will replace you as the number two republican in the senate said "i believe we're going to pass the 250,000 and below sooner or later. We really don't have that much leverage there because those rates go up by operation of law DECEMBER 31st. I would focus on areas we have more leverage on." So why would the president agree to raise that limit by a dollar when you have so many republicans that -- I don't think you have so many republicans. That was one statement and the context was what is realistic as a deal given the president's adamant position he wouldn't compromise on anything above $200,000. Let's just get back to the theory because chuck had it right the first time. The more people you sweep up in this big tax increase, the worse it will be for economy and small business and for workers. Let me point out two interesting statistics. Over hof the dividends paid by corporations go to people 65 years of age and older. In fact, a majority of adult americans own stock or -- let me just make this point, so when the dividend rate goes up to 68.6%, which is the combined corporate and dividend rate, "a," corporations aren't going to pay dividends, and, "b," if you are one of those seniors who get it you'll be taxed 68% and secondly the death tax. 55% rate -- how fair -- let's go to the death tax. 6,000 of the wealthiest wealthiest estates are the difference between what president obama wants and jon kyl wants, $119 billion over ten years. For those 600,000 estates to give $119 billion away and instead take it out on cuts on medicare and roads and education is unconscionable. If you look at the bigger picture for a second, we've known for two years that these tax cuts would be expiring the day after tomorrow or the end of the day tomorrow. We've known these automatic cuts, the so-called -- this was goto be happening for more than a year. Aren't you a little embarrassed as leaders in the congress that it has gotten to this point that tomorrow is new year's eve, the day it all expires, and you still don't have an agreement? I mean, we've been having this argument for two years. It is embarrassing but almost every disagreement we've had is not because of a senate where we've had lots of -- we've come to agreement on many things. There are 50 hard right people in the house who don't want to compromise. They don't believe in any revenues. They say compromise is a dirty word, and speaker boehner just as recently as last week played their tune. You cannot make a deal -- okay, but -- if you're going to let the people who are the hardest right and uncompromising dictate what we should do. So it's embarrassing, but I am hopeful in the new year after speaker boehner is re-elected and he doesn't have to worry about those 50, that he will start working in a way like the senate works a little more, which is democrats and republicans together, a majority of each party deciding and the extreme not deciding. Let me get a word in edgewise here. ON DECEMBER 14th, HERE'S WHAT "The washington post" concluded an editorial by saying, "there's no way to fix america's problem without doing something on entitlement. If the democrats and mr. Obama in particular don't get more seriously into that discussion, they have no standing to complain about the republicans' lack of balance." This is not just a problem with the house, the house passed legislation that would overt the fiscal cliff, both on the sequestration side and on the tax rate side. They've already acted. I've -- that was vouchering medicare and no one wants to do that. I've got to ask you, senator kyl, though, there was a fascinating column yesterday by a conservative, mark thiessen in "the washington post" making the case for allowing all of the tax cuts to expire. Let's take a look at what he said. He said "shopping on a credit card is fun until the bill comes due. But if the bill never arrives, what incentive do people have to stop spending? Big government is great if you don't have to pay for it. Well, now it's time to pay for the bill. Maybe when the costs of the stimulus, obamacare and exploding entitlements are finally deducted from their paychecks, americans will rediscover the virtue of smaller government." Doesn't he have a point? If we have expanded the size of government so much under president bush and president obama, isn't it time to see somebody pay higher taxes? Well, the way to economic recovery and growth is not by raising tax rates on the very people that employ the workers you want to keep working. Raising taxes is not going to provide the kind of growth that we need in the country to lift the people in the middle income and lower income brackets higher and to provide the capital that's necessary to invest in the markets to hire more people. That's why both senator schumer and I are committed to trying to resolve this cliff problem because, yes, it would be a very difficult thing, and if you want to go back into a recession and lose a million more jobs, then just talk about -- see, there is one place we agree. Nobody wants to raise taxes on people below 250, and that will be the impetus and why both of us have some degree of optimism that we can avoid this fiscal cliff in the next 24 hours. Okay, we are just about out of time. I want the bottom line from both of you even if senators reid and McCONNELL COME TO A DEAL. You're the top republican vote counter. Will it pass and will it fly in the house? Will this be done in time? If there is enough in the agreement for republicans to be able to support it, and we can get a majority of republicans in the senate and a majority of democrats in the senate, then i think there's a good opportunity for a majority of democrats and republicans in the house to support such a package, and i think a lot of that depends upon whether president obama is willing to compromise this sort of fixation with raising taxes above anybody making more than $200,000 a year. REED and McConnell are both very good leaders and vote counters. If they come to an agreement, they know that they will be able to carry a majority of each of their troops. The real question mark is the house. The house is a bit out of control. They're the reason we've had the problems all along but my guess, if the house and senate agree AND leader McConnell agrees, the house will go along with it too. Senator -- I would just say it is not out of control to want to do something about our runaway spending in our country. You've got to compromise. You've got to compromise. Senator schumer, senator kyl, thank you very much for joining us and I hope you are right to be optimistic.