you will see terror. >> one thing to understand about republicans, if this is as serious as the president says it is, and he's right, then shouldn't our leaders step up now and take the bullet and not pass it on to our kids? >> thanks for being with us. stay tuned for more tonight. this programming reminder, president obama will address the nation tonight on the debt limit stalemate. cnn's special coverage continues right now with wolf blitzer. -- captions by vitac -- www.vitac.com good evening. the stakes in washington could not be higher right now. a dead lock has left the country facing what some believe could be an economic calamity. this hour, we are no closer to a deal on the nation's debt limit and the clock is ticking. we're awaiting the president of the united states and the republican house speaker, john boehner. back to back remarks to the american people and to the world. this is truly an extraordinary

evening here in the nation's capital. just to underline the peril facing the united states economy, and the american people, democratic officials familiar with the president's speech expect him to say the country right now is, quote, in imminent threat of default. with only about one week left for democrats and republicans to agree on a deal to raise the debt ceiling. in a speech earlier today, the president alluded to the bitter political grid lock between both sides. >> are we a nation that asks only the middle class and the poor to bear the burden? after they've seen their jobs disappear and their incomes decline over a decade? are we a people who break the promises we've made to seniors or the disabled and leave them to fend for themselves? that's not who we are. we are better than that. we're a people who look out for one another.

we're a people who believe in shared sacrifice. because we know that we rise or fall as one nation. >> congressional leaders from both parties unveiled duly last ditch plans that would trays ceiling. harry reid's plan calling for what he says would be $2.7 trillion in cuts with no sbilment or tax changes. the house speaker john boehner's plan would require two separate votes. one this year, one next year to raise the debt ceiling. something democrats including the president have flatly rejected. we're monitoring all angles of this dramatic story. let's to go capitol hill first where our congressional correspondent kate baldwin is standing by. set the scene. what's the very latest? >> reporter: fascinating developments. the top republican in the house, the top democrat in the senate unveiling dueling plans. what they think will be a solution to this debt ceiling

crisis. pretty much within a half-hour of each other and this is what it boils down to. in order to raise the debt ceiling, house speaker john boehner's plan calls for two votes. first a vote on $1.2 trillion in cuts that would raise the debt ceiling through early next year. and then a second vote on $1.8 trillion in cuts that would raise the debt ceiling to 2013. that's not guaranteed. that can only happen if congress approves those additional cuts. and that's where democrats stand opposed. that's where they say no way them don't want a second vote to happen early next year because they believe that it risks us returning right back to where we are now. which is deadlocked. that's why senator majority leader harry reid calls for raising the debt ceiling in one vote. . 2.7 trillion to raise the debt ceiling, all the way to 2013. that does not include cuts to entitlement benefits. it does not include new revenues

and it could also have the possibility of new additional cuts to be part of that package coming out next year. if you need any further evidence of just how far apart these two sides are, listen to how they reacted to each other today. first listen to john boehner criticizing harry reid's plan. >> i believe that the plan is full of gimmicks. we're not making any real changes in the spending structure of our government. and it doesn't deal with the biggest drivers of our deficit and our debt. that would be entitlement program. >> republicans' short term plan is a nonstarter in the senate and in the white house. and certainly the democrats in the house agree wholeheartedly with us. a short term agreement risks many of the same dire consequences that would be triggered by the default itself. >> now, as you very well know, the fact of the matter is part

of this debt ceiling debate comes with a heavy dose of election year politics. democrats accusing republicans of only wanting to drag this debate. these votes into the campaign season and republicans accusing democrats in the white house of only wanting to get it out of the way so the president can focus only on his election campaign. wolf? >> stand by for a few moments. i want to bring in our chief white house correspondent. jessica, this is going to be one of the most important speeches the president of the united states delivers, given the enormous economic stakes involved. >> you can't overstate the stakes for the economy. the president will make that point tonight. as you say, he is going to say that there is an imminent threat of default that the nation faces. the congress is at a point of stalemate. that he is not, we're not expecting him to propose a compromise between the reid and the boehner plans. beyond that i'm told from the white house that he is going to say the consequences are

enormous. that he has done what he can to break this stalemate. to create compromise. that essentially, the options are clear. so sort of what is stopping us from taking one? and that he is going to quote president reagan, and they're saying this. in the words of former president reagan, failure to do los angeles do, quote, incalculable damage. >> to the nation. >> then the value could go down, inflation could go up. there is a dire situation that could affect millions of people in america and it could affect people all over the world. >> absolutely right. i'm talking to senior policy make here's are increasingly worried that a deal will not get done by next week. which means there is an increasing likelihood that we will be get downgraded by these ratings agency. the sense of pessimism is

growing in this town at this moment. >> i want to welcome in cnn's newest anchor. she is joining us from new york. you've covered the markets for a long time. so far, it is an important phrase, so far the markets here in the united states, around the world, really haven't moved too quickly on this. is it your sense, erin, that all of us should be bracing for some sort of market collapse, if you will, if they don't get this deal done soon? >> it is interesting. it is clear. the markets around the world expect there to be a deal. talking to a lot of investors including the biggest bond managers in the world. they to a tee think this will be resolved. there is no one around the world looking at this with glee. three quarters, 75% -- sorry, top rated debt in the world is linked to the u.s. government. this is not insignificant for anyone. in terms of a catastrophic drop, i don't think you'll get a huge surge in interest rates. if we don't get a deal.

the reason for that is that it takes a little time. we've got seven to ten days where the government could issue ious and things like that. there will be insome long term damage. the biggest bond manager in the country thinks we could get a quarter of a percentage point to a half percentage point. that's significant because taxpayers to have pay those down the line and it trickles all the way down to mortgages, cars and things like that. >> there have been a lot of plans out there. we've heard $2 trillion, $4 trillion, $3 trillion in cuts. does it really make much difference which plan eventually gets worked out as far as market reaction is concerned? >> interesting answer to that. what i was thinking about today, in one sense, no. it doesn't matter which plan. a big investor think both plans are really band-aid plans and none of them deal significantly with what i like to call the big three. medicare, medicaid and social security. in the short material, either deal will probably be enough. really interesting this

afternoon, when i was talking to an investor who had met with the ratings agency at standard & poors talking about the downgrade. could it raise interest rates the same way a potential default could. they said the boehner plan probably wouldn't hit the hurried tol prevent a downgrade. even if that was reached, you could still get a downgrade. it is unsure whether that would happen. the reid plan, even though a lot of the parts of that are seen by many as gimmicks, probably would pass that hurdle and you wouldn't get that immediate downgrade. that's an interesting distinction. >> stand by for a moment. i want to bring back kate and jessica. there is a harry reid plan and a john boehner plan. given the stakes involved, why not have these two gentlemen sit down together and sort of reach a compromise? i'll meet you halfway here. you meet me halfway there. let's get it resolved.

we'll post the legislation. get it passed in the senate and the house and the president will sign it, in this krand this crie averted. >> that's what they were trying to work toward this weekend. all weekend long we were here. negotiations were happening behind closed doors. there was some indication that they had, there was some agreement toward a framework. we were hearing about hints of progress. come sunday there was a stalemate as it was described to me. and it was over this second vote in the boehner proposal that would happen early next year them could not come to an agreement. democrats could not get comfortable that there would be any certainty that they would be able to raise the debt ceiling without raising this deadlock. i will till, at the same time, they're clearly not agreeing right now. they're coming out with these dueling plans. my colleague is roaming the hall and talking to senators. he is hearing from both sides, they stay conversations are

still happening behind closed doors to try to reach some kind of a compromise. to try to gap the differences that are happening. there seems to be an acknowledgement. while these plans won't get very far in the opposing chamber, there is some acknowledgement that they do need to find some way to reach a compromise. and it looks like they're trying to deep lines of communication open. >> they have to resolve this. jessica yellin, it is interesting, the president will deliver his speech from the east room of the white house. exactly two minutes after the president is done, the speaker john bain her deliver his speech to the american people from capitol hill. it is sort of unusual. the state of the union, they have the opposition party response. but this is pretty extraordinary on the way this is unfolding right now. i wonder if the white house was fully sensitive to the fact boehner would ask for the television networks for a time immediately following the president. >> it has been a tricky relationship. i'm constantly assured that they have a good communication between the two of them when

they do speak. the problem is that they, right now, have very differing interests at the moment. because john bainer is having problem getting the votes. the problem is how to trays debt ceiling next year in a way that does not create a fight a second time. it is my understanding that democrats would be fine with a second vote next year as long as it does not have to come in this confrontation. if it could just an vote of disapproval on the debt ceiling, they could go for a second vote. that's the kind of compromise solution folks might be looking for later in this week. >> those three votes of resolutions were envisaged in the harry reid-mitch mcconnell proposal that is not going anywhere. >> allegedly dead. we'll see if it has any life. don't go too far away. erin burnett is staying wuxs we're happy that she is part of the cnn team. we're awaiting the president of the united states. the speaker of the house. you will hear and see their

speeches live here on cnn and cnn international. we're also taking a closer look at the choices about what to cut in spending. what would you cut? what would you keep? it is shaping up to be an historic evening in washington, d.c. our coverage is only just beginning. e future of business. in here, inventory can be taught to learn. ♪ machines have a voice. ♪ medical history follows you. it's the at&t network -- a network of possibilities... committed to delivering the most advanced mobile broadband experience to help move business... forward. ♪ no, it's just for new people. hey ! chocolate, vanilla or strawberry ? chocolate ! chocolate it is ! yeah, but i'm new, too. umm... he's new... er... than you.

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the president is getting ready to deliver a major speech to the nation as i often say to the world as well. so many people are watching. the stakes are critical. the president will try to make the case to try to avert a default, a crisis. he wants the nation's debt ceiling raise asked there is only a week left to do so. a stalemate right now. two minutes after the president finishes his speech, capitol hill will be the action. that where john bain her deliver his remarks to the nation and

indeed the world. the stakes could not be higher when it come to the u.s. economy right now. because one week from today if there is no deal, the government will have to decide who can be paid some of those bills and who won't be getting paid as a result of the nation's debt ceiling, having reached its max limit. let's to go tom foreman. he is at the magic wall for us. so explain how this could work if there is no deal. who would get paid and who wouldn't get paid? >> that is the big question for everybody out there. you're hitting the nail on the head. this is about hard numbers and how you make hard decisions. imagine you have a credit card. you're paying for everything at your house. you have all your plans and suddenly the bank says, you have hit the limit and we're not raising it. and you've already planned the next month. last year, 2010, august, this is how much we had incoming. this is how much we spent. that was our excess amount that we spent above it. we had to borrow. this year, same thing. $134 billion. so if we get into this month, and we do not have any

additional, we only can operate on what we have. so what you have to do is make your choices. look at this. if we pay the interest. we said that's important. let's say this is the republican plan them want to pay the interest. they have to pay social security and medicare. these are huge. they have to watch the number over here. let's play the defense vendors. veterans affairs. we cover that. maybe we'll add military active duty pay and how about federal salaries. right there, already, we're over the line. that's above what we have if we can't borrow anymore. and look at all the things unpaid. same thing happens on the other part of the equation for the democrats. if they were to say that they want think to pay certain things. social security, medicaid, medicare, they go to hud program, unemployment insurance, education funding and they're over. and they haven't covered military active duty pay or federal salaries.

there are only so many ways you can chop up all this money and this is precisely how this problem can wind up at your doorstep at home, beyond all of the debating going on here. >> and as we've been saying, it would have real, real consequences on the american people. tom, thanks very much. let's assess further what's going on with our chief political analyst gloria who is here, also our senior political analyst david gergen. i never thought i would hear democratic official, david, say, and the president is expected to say this tonight. we'll see if he actually does say it. that the country, the united states of america, is in imminent threat of default. right now, unless a deal is reached very soon. did you ever think you would hear that from a president? >> you're right. every time a president in the past that i can remember has gone on the air in an emergency situation, it is because somebody else is doing something to us. and this situation, it is a self-inflicted wound.

it is something we're doing to ourselves. i think that's one of the reasons why so many american are disgusted looking at this. basically, i think people were less interested in speeches than they are in solutions. let's get this done. >> the american people are frustrated. they're angry. if you believe the poll, they're angrier, i guess, a little bit at the republicans than the democrats. more at the republicans than the president. is that what you've seen? >> right. i don't think it looks good for president obama but it certainly looks better than it does for the republicans dwex some polls at cnn this week. we asked whether the president has acted responsibly in these talks on the debt ceiling. you see the numbers here. yes, 52. no, 46. okay. so majority think he has acted responsibly but not by a wide margin. when we asked the same question about republicans, have republicans acted responsibly in these talks. yes, 33%, no, 63%.

it is very clear, the president has made his argument. made use of the bully pulpit. that's why we're seeing him putting the pressure on republicans. talking about how important this is to the country. in the end, wolf, if we default, i think you could have, and david and i were talking about this earlier. you could have a very large anti-incumbent election. >> you can have a very large group of people who say, i don't like the democrats i don't recollect like the republicans, i would like a third party to come in and talk some common sense. >> i don't think that's the first reaction. the first reaction is how i am a going to be hurt? and a lot of people are worried they will get hurt. and they will get hurt in the case of a default. even if they lift the debt situation, this has been so prolonged, so messy, there is a good chance our credit rating will go down even if we get -- >> so explain what that means. the credit of the united states has a aaa credit rate forg 70 years.

the highest in the world. if it goes down, what would that mean? >> the aaa credit rating tells the world if you buy a bond from the united states furcal lend money. >> a lot of banks hold treasury bills against reserve. it is passed around like cash. if that goes from aaa to aa, it is not as valuable as it was. that mean people won't be willing to pay for bonds so readily. that drives up interest rates. it costs more. >> the same for a country as it is for an individual. if you have a good credit rating and you go to the bank and say i want a mortgage i want a loan. you'll get a better rate. if you have a bad credit rating. >> right. technically, the first auction of these treasuries is august 4th. >> two days. $87 billion.

so it would begin almost immediately. and you would really see til pack. what's interesting about the american public is, a couple months ago, most americans when you asked them about raising the debt ceiling, they say, well, about 40% said maybe you have to do it. now that has completely flipped. and people understand the importance of raising the debt ceiling. there are some republican who's believe in the house in particular, who believe that it is not a real date. you want to take that chance? >> and some other republicans especially in the house. here's what i don't understand. if the polls are accurate reflection of the mood out there, why would the speaker john boehner want a second vote next year in this whole issue to come up once again just as the election, everyone is getting ready for a congressional election. >> fundamentally they think the first down payment. the first phase of the boehner

plan, they need a second phase and big a chunk of money to be saved in that second phase. from the republican point of view, the only leverage they have is tied to the debt ceiling. it forces the action as we're seeing here. the president didn't want any of this. he wanted a clean debt ceiling. nothing attached to it. just pass at this time way did you for george w. bush, bill clinton and the like. if you really care about the presidency, there is a potential shift in power. if the future congress raises the debt ceiling, that puts more power in the congress. >> and some have suggested maybe we shouldn't have to have these votes to raise the debt ceiling. maybe there ought to be another process where you don't have to take it to congress. that's exactly why -- >> a lot of republicans like it. because it will result in some reduction in the size of government. which is what they got elected to do.

>> exactly. they want to do it and they want this add leverage. >> don't go away. this is an historic night in washington, d.c. the president of the united states will be speaking from the east room of the white house followed by the speaker of the house, john boehner. only one week to go before the nation's debt ceiling is reached. we'll have continuing coverage leading up to the president's speech. among others, we'll be joining by two united states senators who are right in the middle of all of these negotiations. stand by. ♪ let me entertain you ♪ let me make you smile ♪ let me do a few tricks ♪ some old and then some new tricks ♪ ♪ i'm very versatile ♪ so let me entertain you ♪ and we'll have a real good time ♪ [ male announcer ] with beats audio and flash, you can experience richer music and download movies straight to the new hp touchpad

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you're looking at the white house right now. about a half-hour or so, we expect the president of the united states will be addressing the nation. he will walk into the east room of the white house with prepared marks, very carefully prepared remarks.

we expect about 15 or 20 minutes or so to hear what the president, in the course of that, to hear what the president has to say. he will immediately be follow by the house speaker, john boehner. we don't know how long he will speak but he will make a very different case to the american people as well. we'll have live coverage of all of this. stand by. don't go too far away. i want to bring in now the formerer labor secretary under president bill clinton. robert rice, the author of the book "after shock, the the next economy in america's future." he is no professor of public policy at berkeley. is that right, mr. secretary? >> yes, i am. good evening, wolf. >> thanks so much for joining us. what would happen, and it is really possible, i'm afraid to say, if there is no deal raising the debt limit, what would happen next monday, tuesday and wednesday? >> interest rates would shoot up. not only for federal, on the federal debt and on treasury bills but because so many

interest rates around the country in so many transactions, including variable rate mortgages, are pegged to the interest rates on the treasury bill. interest rates are going to go up. and if there is widespread belief that there is going to be no immediate increase in the debt limits past tuesday, if this will drag on, then e who lends money to the federal government will demand a higher and higher interest rate to compensate for that risk. >> because we've been hearing from kraigt official that the president may go as far as to say tonight, professor rice, that the united states right now is an imminent threat of default. i never expected a president to say that. did you? >> no, i didn't. this was far, far more serious than shutting government down. this has to do with that phrase you hear over and over again

interesting full faith in the united states. foreigners, americans, everybody lengd money to the united states, may not be paid back. if they're paid back, the payments may be delayed somewhat. that raises the risk to everyone. not only interest rates as i said a moment ago, but remember, the united states dollar is the reserve currency for the entire world. so the repercussions are likely to be global. >> because republicans make the point. and they strongly make this point. if you're going to start cutting spending, which they say you have to do. the democrats say that as well. you have to deal with the biggest chunk of federal expenditures, entitlements, medicaid, medicare. the president is willing to deal with that. are you? >> the president has said clearly over the next ten years that he does want to modify, change, reform social security and medicare.

my position on this for what it's worth, wolf, is that medicare is not the problem. the problem really is rising health care costs that underlie health care that everybody is facing. that has to be tackled in a very, very big way. social security is not a problem. social security payments by people who are about to retire have been a surplus. they have been making the federal budget deficit look less than it actually is. social security has been a big plus for the federal government. >> so basically, if the threat of default is so great to the united states, why shouldn't the president and the democrats basically say, you know what? we'll work out a deal with the republicans. we'll accept what you want. they were relatively close them weren't all that far apart. the consequences of that clearly would not be as disastrous as the consequences of default. >> i think they will. i would be very surprised, wolf,

if the united states actually went into default. the clock is ticking. given the congressional calendar, you need several days to post new bill and to get it understood. get it voted on in the house and the senate. the other piece of this that washington hands know all too well, any ten-year commitment, well, that can be changed. no congress can bind the next congress. that's why many republican freshmen, the tea partiers are saying, no, we want budget deficits to start right now, fiscal year 2011. but that could have very negative effects on the economy that is already suffering from huge unemployment. >> professor robert rice, thanks very much for your insight. >> thanks very much, wolf. >> let's get a different perspective now from senator jeff sessions. the republican of alabama. he is the ranking member of the senate budget committee. the plan that harry reid put outdoes not call for any increased revenue or any

increased revenue from tax changes, from tax hikes. anything along those lines. are you ready to accept what harry reid had a put on the table as a way to avoid seeing the nation get into default? >> well, we do need to avoid a defall. i want to apply a little bit to my friend here, mr. rice. in saying that absolutely, the constitution requires that the debts of the united states be honored. no official or former official of the united states should suggest that we will not pay the debts that we owe. they are required by law and the constitution to be paid. this agreement, this proposal that he's made is a gimmick to make it look -- >> the harry reid proposal? >> yes. >> he says over the next ten years, cut $2.7 trillion without raising or changing any tax laws. >> when you look at that carefully, it is about $1.twurk $1.3 trillion in cuts. we'll be spending $46 trillion,

increasing our debt over the next ten years from $9 to $13 trillion. this $1.5 trillion reduction in spending is not enough really to change the debt trajectory we're on. and i am worried about that. the problem we've got is not the debt ceiling. the problem we have is the surging deficits that pruting this nation at risk. and we've got to change it. and the president needs tonight. he needs to say just how critical it is that we reduce our spending and bring our nation in fiscal control. >> but senator sessions, you've been in washington a long time. you fully understand the need for compromise when there is divided government. a republican majority in the house. a democrat administration jort in the senate. a democratic majority. were you ready to go along with the deal speaker boehner said

they were close to achieving that would have included $800 billion in increased taxes, boehner was ready for that. were you willing to go along with that? >> well, i have been complaining and pointing out all year that we are heading to this very last minute. and that our leaders would produce a complex series of proposals that we were expected to vote on at the 11th hour. and i was very much opposed to that. and i said i will not vote for anything. i haven't had a chance to study. however, i would point out that there was a bipartisan agreement between senator reid and mr. boehner. it went to the president and he said no. he rejected a recent bipartisan agreement which i thought was pretty stunning, actually. he asked them to work on it themselves worked on it and brought it to him. and he turned that down. so that is frightening, actually, as to where we are tonight. when was that agreement presented to the president? which agreement are you referring to? >> i believe it was sunday

night. it was in the "washington post." jennifer rubin's article said a bipartisan agreement was reached. and quote, the president said no, close quote. >> the explanation that you've heard from, at least from your sources at the white house? why would the president reject something that harry reid and john boehner supposedly accepted? >> the reason that was suggested is that has been suggested is it required, it extended the debt ceiling only long enough to get into next year. and it would come back up again before the election. and he didn't want to have to face that problem before the election. but he is asking for the largest increase in the debt ceiling in our history. and i don't see what's wrong with having it come up again soon. because we need to stay on top of this issue. >> yeah. the president has repeatedly said he will veto anything that require another vote next year, leading up to congressional elections and presidential elections. he doesn't want the country to

have to go through this ordeal once again in the middle of an election. >> he doesn't want. he doesn't want. he doesn't want. he's talking about his election. >> he doesn't want the country to go through it. >> he doesn't want to have to do it again. >> he wants any deal that is reached to go through the election in november, 2012. and maybe in early 2013. you guys can start fighting once again about spending and taxes. >> well, he wants the largest increase in history. and i don't think he is entitled to that and dmeeth senator senator reid, apparently. >> senator sessions, appreciate your joining us tonight. thank you very much, jeff sessions of alabama. the ranking member of the budget committee. getting toward hear from the president. we'll hear about what he has to say fairly soon. we'll hear from john boehner, the speaker of the house. the strikes enormous right now. one week to go before the nation, the country has to make major decisions. which bills to pay, which bills won't be paid.

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on the left you see the woufls the president will be in the east room. on the right you see capitol hill. the speaker of the house will be addressing the nation right after the president. in fact, exactly two minutes after the president stops speaking, we will hear from john boehner. senator chris coons standing biffle i want to bring in our political reporters to assess what's going on. alex, the american people is sick of this already. they know the strikes enormous. they will pay a huge price if the nation goes into default. and democratic official stay president may actually utter those words, that that the nation is in imminent threat of default themselves want this done with so they can move on with their lives. >> they do. everyone understands that. i've been talking to republicans on the hill and i think we've

heard the same thing tonight. there are two very different points of view. the secretary said looked at social security and it is in great shape. republicans look at social security and see tow lifetime, an average american like him or me or you, we may pay in $100,000 but take out $300,000 and it is going broke. the problem we have is not just the debt ceiling. the problem is do we pass this huge debt on to our kids? and republicans are determined to do something about it. that's why they don't want gimmicks. the reid plan says we won't be in iraq and afghanistan. that's $1 trillion. we'll have a commission. that will save us $$1 billion. those aren't real. the problem you have is ideological purity. when you sit here and look at the congressional budget office, made it clear that if the bush

tax cuts were not extended, all of them, deficit goes down. if you extend all of them, $3.3 trillion increase over ten years. that's fact will we won't sit here and debate a fact. it is a fact. and so on democratic side, it is crazy to sit here and say we have no issue with medicare, medicaid. no issue with social security. you have rising costs. at some point you cannot have people on the democratic side and the republican side say absolutely not. i'm not giving up anything. you have to be able to give up something. >> the republicans were willing, at least until recently. you heard john boehner, the speaker of the house saying he was willing for $800 billion in tax revenue. increases in taxes in effect. that's not ideological purity. >> right. could he sell that to his party? >> and at the end of the day, towed get 218 votes. could he get it? it is clear he couldn't get the votes. >> we could sell more revenue,

not only to republicans but to the american people. his way is to create more taxes. >> excuse me. >> what republicans want to do is not create more tax. create more new taxpayers and more successful taxpayers. that's growth. and limit spending. >> is it a fact, alex -- is it a fact? >> no. >> ideological purity -- he is right about one thing. ideological purity is a problem. the democrats won't budge from raising tax and shrinking the economy. that's a real problem. >> fact check.org. both have the information. >> and the trillion dollars obama is taking out of economy for his health care plan. >> that's a fact. >> stand by. i want to bring someone, a democrat of delaware. is there anyway out of this mess at this late moment, you think, senator? >> well, frankly, the republicans need to hear us saying yes. i'm struck that leader reid has

presented to our caucus and willing to move forward on a plan that frankly gives the republicans in the house and senate everything they've been asking for. >> not everything. >> i wish -- >> he not including any entitlement cut, medicare, medicaid. he didn't include any cuts in spenl and entitlements which is what the republicans want. >> let's be cleefrl it doesn't make it into a voucher program. but he has no new revenue. using cuts that were already adopted in the house plan or agreed to in the negotiations led by vice president biden. and does it with one vote. i frankly think that is more than reasonable. we've come more than halfway. and it is my mope the republican who's are having trouble hearing us will open their hearts, open their eyes and recognize that we have very little runway left. it is time to land the plane.

quit scaring the markets. >> you're right. the reid plan does not include any additional taxes no, tax increases, no elimination of tax loophole, tax deductions. the revenue as far as taxes remains the same. but it does include a proposed cut. they say would reduce spending by about $1 trillion. as a result of the u.s. winding down, the wars in iraq and afghanistan, but the u.s. is doing that anyway. and as a result, the republicans accused senator reid and the democrats of doing fuzzy math. >> if that's fuzzy math, the republicans shouldn't have put it in their proposal. the reduction spevs come from our reduction on wars overseas, and the caps on domestic discretionary spending are part of the proposal, the savings on future debt service. those are real reductions in federal spending.

i had hoped for, the president had hoped for, leader reid and many others hoped for a bigger deal that tackled the very real problems. we need to get serious about reducing spending. right now we have a politically generated short term default crisis. and i think we all agree, we cannot afford to have america default. it is my hope after we get past the default issue this coming week, we'll get back to the very serious question of how do we get america's economy back on track. the best thing we can do for the markets and our future to make our country competitive and not risk becoming a junk bond nation, is to really deal with our deficit. >> i don't know if you heard senator jeff sessions who was here a little while ago. he made the point as recently as last night, there was a deal between harry reid and sgraboeh but the president rejected it because it would have required a vote next year in the period leading up to congressional and

presidential elections, and the president didn't want to go through this again next year. is that your understanding as well? >> let's be clear. what we've gotten is warnings from the market, from the bond rating agencies and folks in the everything with it markets who say that we are creating a huge. a uncertainty. that a short term deal that is not simply to work out the supplementation of a bigger deal will repeat and repeat. the uncertainty that is coming from this high stakes poker. i fully expect we will have a difficult negotiation between the house and senate, republicans and democrats. the message we got from several of the bond rating agencies this week is that a short material deal such as speaker boehner was proposing would simply expose the markets and our economy to the uncertainty of not having this resolved. i have heard other senators such as sessions suggest that this is really only motivated by the president's short material electoral concerns. i just wanted to reiterate that

we've heard from rating agencies in the markets that this uncertainty is wreaking havoc. it is keeping corporate dollar on the sidelines that might otherwise be invest in the new employment or new infrastructure. it is preventing us in the congress from focusing on creating jobs which should be job one for all of us in the capitol. >> good luck to you and good luck tow one in the senate and the house. we hope there is a deal other. wise the consequences could be tragic for so many people. appreciate your joining us. >> let me bring back our republican strategist. he makes a fair point. it is not necessarily politics that's causing the prefts united states to want to avoid another vote next year. if you go through this again, it just open up the united states to the credit ratings and the undermining of confidence in the u.s. economy. why put the country through that again next year? >> i agree with the president. it should be a longer term solution. if that's what he wanted, he should have said it. he said only through the next election.

>> at least he said through the next election. >> that is as far as he got. what i would like, democrats like the senator to answer is work they support something that had no new tax? or have they taken a mandatory tax pledge to get us out of this situation? >> when the president says sentence it through all of 2012, through january 2013, that is also after the election. so don't sit here and act like it will end after the first tuesday in november. he is saying, you're going to have the same drama. so you shouldn't go through this nonsense in an election year. >> stand by. we're awaiting the president of the united states. he is getting toward address the nation from the white house. we'll also be hearing from the speaker of the house, john boehner. he will be addressing the nation as well. we'll check with our correspondents and our analysts as we get ready for this historic night. uture of busines. in here, inventory can be taught to learn. ♪ machines have a voice. ♪

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we're only moments away from the president of the united

states. you're looking at live pictures of the white house. the president getting ready to address the nation on the economic crisis facing this country. he'll be follow by the speaker of the house, john boehner. he'll be'ing the nation from capitol hill. everyone agrees the nation cannot go into default but there is according to the democratic party officials, an imminent threat of that unless there is an agreement that is reached very, very soon. one week from today the government will have to decide which bills it pays, which bills it won't pay. there simply won't be enough money. let go to the white house. jessica yellen, our chief white house correspondent is standing by. the president was doing this from the east room of the white house. explain to our viewers what you're hearing from your sources. yes decided to address the nation tonight. >> reporter: with just eight days to go before the debt ceiling must be raised interesting goal is to isolate speaker john boehner and to us

that his plan and republicans on notice at a time when he is already starting to lose republican support for that plan. i believe in his speech, he will outline and walk through elements of that plan and yes believes it is not good for the country. and look at the other alternative and talk about a way forward. the goal is in essence, to force a plan. he can use his bully pulpit and talk about that he believes the options for compromise are clear and must start now. >> stand pitch erin burn set standing by now, our newest cnn anchor. earlier this hour we spoke. you said something that got a lot of buzz on twitter. you suggested one investor who was actually briefed by some of the ratings agencies like standard & poors suggested that if speaker boehner's plan is approved, it might still result in some sort of ratings reduction for the united states. whereas if harry reid's plan is

approved, the u.s. aaa rating might not necessarily go down. i want to you explain, what that means. >> it is interesting. i'm glad i have the chance to do. so i spoke to an investor, very influential investor who had a chance to sit down with s & p. he said the reason, he was suggesting is that. it is unclear what they would actually do but suggesting that they felt this way, it was really about the size of the plan. not what is in them. i think it is important to emphasize that most people think both of the plans are really band aids and don't deal in any significant way with the spending and cost issues in the country. the issue was that speaker boehner's plan does not cut enough spending right away. harry reid's plan would cut about $2.7 trillion. just because it is bigger than speaker boehner's plan is really the reason the boehner plan may trigger a downgrade. as we indicated, some investors, and this is a very subjective

view of what would happen. think you could see the increase of a quarter percent to a half percent. if you remember, a year ago, when california had to issue those ious, california' rates go up half a percent to a percent. that a big increase and that happened even when they stopped paying the ious and stopped paying cash again. the long term implications stay with us even if the downgrade is very short. >> that translates into real money when all is that and done. glory yark you're getting more information on what we might be hearing. >> one of the interesting things coming from the administration to erin's point, they believe there is a possibility of a downgrade. not only because boehner's plan doesn't have as much deficit reduction about it means you have to come back again to this same debate six months down the line to have the question of whether you rayed the debt ceiling. that of course cause as lot of

uncertainty. what i'm hearing from senior administration officials is that tonight, the president really wanted a larger audience. i was told that he wanted to frame the week. we know he spoke, for example, last friday. it wasn't prime time. it wasn't this kind of an address and i was told that they believe it will raise the bar for all of the members of congress to get something done. >> the pressure, he's trying to put appreciate our ti pressure . ? he is. it appears the president wants to score points against boehner and boehner wants to score points against the president. i think most american are saying what are you going to do to solve the problem together? they realize it will take both sides to get there. the administration officials, i know some who think that we face a real threat from the standard & poors and the credit rating question regardless which of plan is embraced. there is no plan that