that's all for us tonight. going to anderson cooper i'd imagine has a rather extended

ridiculist tonight. breaking news everyone. tonight right now in that building over on the senate side according to democrat harry reid who spoke last hour, nothing is going on. the senate is now adjourned. but the clock is still ticking and the government is running out of money to pay the bills at this moment because the debt limit was not raised back in may, the united states treasury has less cash on hand than apple computer. on wednesday the government will have $23 billion in social security checks to send out and not enough cash to cover them unless it doesn't send out a whole lot of other checks. now, earlier this evening after a string of delays the house narrowly passed speaker john boehner's version of a debt reduction bill. >> i stuck my neck out a mile to try this. to get an agreement with the president of the united states. i stuck my neck out a mile. and i put revenues on the table. in order to try this. to come to an agreement to avert

us being where we are. a lot of people in this town can never say yes. a lot of people can never say yes. this house has acted. and it is time for the administration and time for our colleagues across the aisle, put something on the table! tell us where you are! [ cheers and applause ] >> well, the bill which had new language requiring congress to pass a balanced budget amendment before the debt ceiling is raised was quickly rejected on the senate side. then lawmakers took up majority leader reid's debt proposal after a question from minority leader mcconnel senator reid try this. ed to get a vote on it tonight by a simple majority. minority leader mitch mcconnell refused meaning that nothing happens until sunday. >> it really is the worst possible time to be conducting a filibuster. they're forcing us to wait until tomorrow morning at -- let's

see. today's still friday? until sunday morning at 1:00 a.m. to have this vote. our economy hangs on the balance. and for the first time in the history of our country, unless there is a compromise or they accept my bill, we're headed for economic disaster. >> harry reid accusing senator mcconnel of using obstructionist tactics. some republicans accusing senator reid of game playing trying to jam his bill at the last minute. the time it takes the senate to do anything means that this is all coming down to the wire. the markets don't like it one bit. the dow industrial shedding nearly 100 points today. newly revised numbers on show the recession was much worse than believed. jessica yellin is at the white house tonight, john king in our washington bureau along with chief political analyst gloria borger. here to help me explain the ins and outs of your money is alley velshi.

john, what is the latest? is nothing actually happening at the capitol right now? >> we talked a bit about this last night. and we are making progress if you view planting the flags as progress. the house finally had the vote today. the proposal went to the senate. it is now dead. leader reid is going to have his proposal. forgive me. i'm not criticizing senator reid but he's now doing exactly the same thing house republicans did. he knows his plan cannot be the final plan yet he is going to have the motions. we're going through a debate over the weekend. if you considerate least moving the ritual forward we're making some progress. are they negotiating behind the scenes? i was having conversation, with democratic and republican aides who said not yet. they expect those conversations to start over the weekend. there is still a sense of optimism, not bubbly optimism, that they'll figure this out over the weekend. but anderson, this is not a process you would like to teach in your civics class. >> john, i kind of note answer but i'm going to pretend that i'm naive here. why not?

why should senator reid go through the motions on a bill he knows isn't going to pass? why not start negotiations tomorrow? >> i think they will start the negotiations tomorrow. let's be clear. i think once the senate comes in tomorrow they'll start to feel each other out. the republicans passed their bill. now the democrats want to make the republicans stand up and oppose the provisions of their bill. part of the ritual to get a compromise unfortunately and both parties have done this. not criticizing the democrats here, the republicans. this is the game washington always plays. keep everybody in over the weekend. get them tired, finally convince people figure this out. i was on capitol hill all day. i talked to a number of people in both parties, some of whom were defending these votes, defending the parties drawing the lines. but then in the next breath under their breath saying we need to figure this out over the weekend. and we think, think we will. >> and jessica, no doubt john is right using the word games here that are being played when people at home are probably watching this getting just boiling mad that they're playing games at this late hour.

what's the latest you're hearing from the white house? >> reporter: the latest little bit of news i can report is that sources are telling me that senate minority leader mitch mcconnell, sort of the lynch pin now, the republican in the senate to cutting a deal, is insisting the white house be present in any negotiations to raise the debt ceiling. so expectations were that perhaps he might negotiate directly with harry reid, the senate majority leader. but sources again telling me he wants the white house in the room if there are any negotiations. clearly from one perspective so that the white house -- so that they clearly have a deal locked in. from another perspective you could say so that everybody owns the political fallout from whatever comes. so clearly this is an ever-expanding politically complicated story when as you point out the economic ramifications are what most americans are thinking about. and everybody's scratching their head why is washington playing so much politics with this? >> gloria, what do you make of all this? >> reporter: well, have you ever

heard the expression fiddling while rome burns? you know, that's exactly the situation i think we're in. and i think in a way you could look at what the house did today and say that republicans in the house moved further from compromise because john boehner had to give them a guaranteed balanced budget amendment passage in order to get their votes. so i think it's clear those people -- and that would mean most of the freshmen republicans, one would presume, if not all of them, are not going to vote for any compromise. on the other hand, going to what john was saying, now that this dance is sort of getting finished, the outside game if you will, i do think that the white house and mitch mcconnell and harry reid and whoever else wants to sit at that table can finally get together and come up with a deal. and by the way, there is a way out of it. there's kind of -- if you look

at these two proposals, it's kind of obvious how they get out of it. it's not -- it's not rocket science. >> and that is? how? >> reporter: well, they could come up -- you want the gloria borger solution? they could come up with a couple trillion in cuts, which has no tax increases. they get a vote on the balanced budget amendment but it doesn't have to be guaranteed to pass. you get a debt ceiling that is sort of automatically approved in six months. and you get a trigger for cuts if congress can't do its work. how's that? >> all right. ally, is there any way to know how much this has already cost the united states? >> reporter: well, we haven't seen many interest rate increases. i was watching the mortgage rate this week. it went up by.001%. everybody is betting it's going to work. the stock market, the dow was down 4.2% this we're week. the s & p 500 which reflects your 401 k down 3.9%. $700 billion in the market capitalization of u.s. companies

has been lost this week. a lot of that as these new numbers came out on the gdp which indicate this recession was worse than we thought it was and our growth is not as strong as it is. but much of that, five out of the last six days where we've seen down markets is because of this indecision in the stock market. we have 48 hours before asian markets open up for the trading week. and you know. this we've been through this anderson together. you see what happens in those asian markets goes through to europe and follows through to us on monday. these losses could be substantially bigger if we are talking in 48 hours and there is not significant progress on this. >> and at what point would we know whether our credit rating, our credit score, has been downgraded? >> reporter: that could happen either way. it's not likely to happen on the weekend but that could happen at any point from moody's or s & p. a downgrade they might give us now because we're not handling things properly is a downgrade from from aaa perfect. if we don't make any more payments that's a much serious issue.

that doesn't drop you one notch but several notches. then interest rates go up. credit cards, mortgage rates, auto loan rates. you mentioned august 3rd, that big social security payment? according to many republicans, unless we default on an actual debt we don't have to get our debt downgraded. according to s & p and ben bernanke, if you default on any payment you're supposed to make, even if it's not to a bond holder you could face that. >> republicans who say, look, i don't buy it's this big catastrophe waiting to hit after august 2nd. >> reporter: they absolutely could be right. but anderson, you and i were together on september 15, 2008 after they decided a lot of smart people decided to let lehman brothers fail thinking it's not that big of a deal. i don't know which way it's going to go. i don't know if we should be playing with fire like this. >> john, what do you make of jessica's reporting that she's hearing mitch mcconnell is wanting president obama to be at the table in any negotiations? >> as a couple of political reasons for that in the sense

that then you can't cut a deal then the white house will say we're going to try this. to move the goal post. the white house denies it. the republicans say they had a deal, speaker boehner had the deal and the president moved the goal post. everybody in the room, everybody has signed onto it and -- in other words if you get a compromise now it would be a final deal. that still does not mean if leader mcconnel, leader boehner -- i mean leader reid and the white house cut a deal you still have the house involved. to gloria's point, the calculation is that they know the rough outlines of a deal. the question is when it goes back to the house is speaker boehner willing to bring to the floor a deal which might pass the house but he as the republican leader the speaker of the house might lose a majority of his members? that's always embarrassing for a speaker to lose a majority of your people on a final vote. if you look at the vote today, if it comes back without a mandatory pass the balanced budget amendment, spending cap, triggers to cut spending, vote on a balanced budget agreement but not a promise it has to pass? speaker boehner is likely to

lose a majority of his people which would be a painful pill to swallow. >> reporter: it doesn't have to be president obama i'm told but it could be a proxy for him. but there's also a willingness here to add a meeting this weekend if that's necessary. so we're all on stand by for that. >> good for the clarification. john, gloria jessica, aly, still around. let's turn next to one of the republican congress members holding out for balanced budget language. georgia congressman phil gingry. a lot of tea party groups and conservatives are pretty upset with members who did change their vote. you did. why did you back the boehner bill? >> well, anderson, the speaker was willing to listen to us, those of us who were very committed in cut, cap and balance, especially for the balanced budget amendment. and he listened to us. he called us. in we sat down. we pressed our point.

and he pulled the bill back and actually put that provision in there not just a vote but as you know before any second traunch 1.6 trillion additional increase in the debt limit, we would have to take a vote on a balanced budget amendment, pass that and submit that to the states. so that got me there. i mean, i certainly felt that it was necessary to press that point. the last time we had a -- >> what happens now, though? is there any way you could back a compromise bill that does not include some provision for a balanced budget amendment for passing one? >> anderson, i could not. i absolutely could not do that. >> what about just a vote on such an amendment? >> no, no, no. i've been listening to you and gloria about different scenarios. you may end up being right. that may be exactly what plays out. but this member who made that pledge cannot support it without a balanced budget amendment in there that passes both the house and the senate and is submitted

to the states. you know, in '96 we failed by one vote, didn't we, in the senate? and since then, the debt in this country has gone up $9 trillion. $9 trillion in 15 years. so if that doesn't tell the american people and members of congress that we cannot do the fiscal things that we need to do in this country unless our hands are tied by a balanced budget amendment it's absolutely necessary. 49 out of 50 states have it. we need it here in washington. >> do you believe august 2nd is a real deadline, that there are catastrophic as some people say consequences after that? >> well, i do. i mean, give or take a few days. and certainly we anticipate taking in maybe $175 billion in tax revenue in the month of august. but we come up $130 billion short at the end. yes, we can pay the interest on the debt. we can renew the $500 billion worth of bonds that are coming due.

we can mail out our social security checks. we can make sure those medicare claims are honored. we can pay our military. we can protect our veterans. but when you get beyond that the soup gets a little thin. so i'm not ignoring that. and nobody in my party and especially our leader speaker boehner has said months ago, we don't want and we'll do everything in our power not to let that happen. >> congressman, i appreciate your time. thank you very much for staying up with us tonight. i know it's been a long day. >> glad to be with you. >> we're on facebook. follow me on twitter @ anderson cooper. up next, a surprising debate on this from the left and the right about who's playing games, who's handled this well and who hasn't and who gets hurt in the end. james carville and eric erickson join us as you our breaking news coverage continues. ok. [ cellphone rings ] hey. you haven't left yet. no. i'm boarding now... what's up? um...would you mind doing it again? last time.

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breaking news tonight. the senate is now taking up debt reduction having rejected the house bill senate republicans are blocking action on majority leader harry reid's bill. debate may not even begin now until early sunday morning and it could take 30 hours. house republicans have scheduled a vote tomorrow on a new bill with language identical to senator reid's bill just so that they can be on record rejecting it. does that make sense? well, it's happening. of course the clock is ticking.

i spoke about all of it just before air time with democratic strategist james carville and erick erickson editor in chief of red state.com. >> james, what do you make of what we've seen happen tonight in the house? >> well, i mean, what i make of it is that -- he didn't have the votes and have to vote on the balanced budget amendment again, the second time they've done it. i think that's a cover that some of these house republicans figured they needed a vote on this. what i really want to make imake of it is, i have no idea what can come back to the house that can pass the house of representatives. i see this thing as far away from the resolution now as any time before. >> erick, what can pass especially the conservatives in the house? >> listening to several of the congressmen speak today and several of the solid conservative congressmen and phone calls i've had from them and their staffs, they realize that something's got to pass. what they're saying to me at

least, and maybe it is naive in washington, but we'll give the president a completely clean debt ceiling increase if he will send our balanced budget amendments rally the democrats to send it out to the states. the states don't even have to pass it. we want it to get out of congress and they'd do it. >> but that's not going to happen. >> go ahead, james. >> it's not going to happen. so i mean, we're living in a real world. and as i say, i'm sure that they believe that. and i'm sure that that's their position. and that's why i'm saying i just don't see the resolution of this. >> i agree with you. i would completely agree with you on that, james. i see what you're saying. but at the same time these guys are saying their compromise is to raise the debt ceiling. all they want is the balanced budget amendment to go out. >> you know, again, it's not going to -- first of all it takes two-thirds of votes in both houses. it's not going to happen. and a constitutional amendment is something that comes along very, very rarely.

and a lot of people think this is just horrific policy. but at any rate, i'm not here to argue with you. it's not going to happen and i don't really see anything any closer than it's ever been. >> erick, isn't compromise at some point at some hour essential? >> i'll tell you what's going to happen is by monday afternoon there will be a panic. we saw this with the t.a.r.p. vote. the democrats will come together on a plan. john boehner will get about a third of the conservatives. the conservatives won't vote for it in the house. it will go back to the senate. senate won't pass it. goes to the president. then this hurts john boehner. no child left behind was the vote that radicalized a lot of conservatives against george bush and he started having a harder and harder time getting republicans after that in congress to support some of his plans. and that's probably going to

happen to john boehner. he should have never done this boehner plan. he should have made cut, cap and balance whether you like it or not make that the starting point. at least it had democratic votes in the house. >> where do you see the possibility for some sort of a deal? where do these john boehner republicans meet up with the democrats? >> they'll hold their nose and vote for something like the mcconnel-reid plan that was floated a couple weeks ago to let the president do it and then they gave vote of disapproval. ultimately when they get down to the last 30 seconds on the clock they'll take a deal like that, some of them. >> james, are you confident of that? >> you know, i was. i'm a little less sure today. i suspect that the speaker's going to have to go and is going to have to go and get something with some democrats here, probably a lot of democrats, to get anything through. and i'm sure that people are back channelling everything right now. and i hope erick is right. but there's a lot of republicans that believe that there's

nothing magic about august 2nd, that there's nothing particularly catastrophic about a partial default, that there's plenty of money there. and they don't feel any pressure whatsoever to do this. they say that this is -- it never sort of happens. there just are not 218 republicans that can vote for a bill that the senate can pass. that is abundantly clear to me and i think erick is saying the same. i think one of these rare instances where we kind of agree. >> so erick, what are the politics that you think the democrats are playing with this? there's obviously political calculations on both sides of the aisle. people don't like to talk about political calculations for their own party. erick, what do you think is the political calculations that democrats in the senate have been playing? >> well, running out the clock to a degree. i think historically we've seen in just the past five years with a will the of the republicans there, even george bush was able to do it with the republicans is get them down to the last few minutes on the clock and they'll fold over and do most of what you want.

and the senate democrats i think by and large are playing a lot smarter game than the house republicans. >> and james, what kind of politics do you think the republicans have been playing? and what is their angle on this? >> look at, i think -- look. i think that these tea party people are doing exactly what they said they would do. i mean, look. and i think that they wouldn't vote for this. it's a kind of foreign thing to me. but it's not like there's any false advertising going on here. i mean, i'll give them that. they don't want to compromise. >> i had a couple of freshmen congressmen e-mail me and point out, they say, we really view the way we got into congress as beating people who were willing to lose to support obama care. we're willing to lose to support this. to a degree there's no negotiating with people whose mindset is that whether you agree with them or not. >> i agree with you. i'm not disagreeing with you at all. i hate to tell you.

>> it's kind of nice to see some guys who won't take back door deals. >> well, you know, the only thing more dangerous than a politician who this about re-election is a politician who doesn't think about re-election. that's the dangerous person. >> that i can agree with. >> erick, appreciate it. james carville, thanks. >> thank you. >> a lot more breaking news tonight. a question, is the tea party following through on its pledge to change the way washington does business as erick said and james said actually or is it holding the country hostage? i'll talk to a tea party congressman who voted no on the boehner biyou're just tuning in [ male announcer ] get ready for the left lane. the volkswagen autobahn for all event is back. right now, get a great deal on new volkswagen models, including the jetta, awarded a top safety pick by the iihs. that's the power of german engineering. hurry in and lease the jetta s for just $179 a month.

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>> if you're just tuning in here's the latest. around 8:20 this evening the senate voted down the debt reduction bill the hoss had passed. house speaker speaker boehner had to cancel the vote last night because he didn't have the support. tonight it passed by a narrow margin. senate leader harry reid said it would be dead on arrival. the senate killed it. now he mcconnel is blocking debate on reid's bill. republicans have scheduled a vote tomorrow on a bill with identical language to reid's bill so they can be on record as being against it. i spoke to congressman king. >> the bill that's been put forward by speaker boehner in the past makes more than 1 trillion in discretionary spending cuts. it doesn't raise taxes. it's got provisions for finding more spending cuts down the road and it calls for a balanced budget amendment, all of which

is in line with bedrock prince of conservative republicans. so why did you vote against it? >> the only thing we can count on is what we can control in this next upcoming fiscal year of 2012. it takes the $31 billion in cuts from the ryan budget and reduces them down to $7 billion is all. when you project that out over the period of the next decade, you can see that our national debt would have grown to only 24 million under this proposal as opposed to 25 million otherwise. it doesn't get us much. it's a very short-term fix. it dials it down rather than up. the ryan budget isn't enough. it doesn't balance for 26 years. this is less pts. and what it does it takes away some of the arguments of the ryan budget. so we're worse off how we project the cuts that we need to do to get the spending under control. another six months goes by and we have failed to address the problem adequately. >> so what happens now?

i mean, is there anything that any bill that the senate can come up with that you would, if it comes back to the house, that you would agree is an okay compromise? >> well, i would just row mind you that this boehner bill did pass, 218-210. so it isn't so much what i would agree. to but here's what i would like to see. i would like to see a balanced budget amendment goes to the states. >> that's not going to happen. it's not going to get out of congress. >> here's the argument. whatever i propose that's going to be logical and actually solve the problem, i'm going to hear just that rebuttal. i've heard it over and over again in these halls. it's not going to happen because the president won't go along with it or because hare reid and the senate democrats won't go along with it. logical solutions can't be applied because illogical people won't go along with it. >> what do you have to say to the people who worry that on august 2nd the government defaults on its debt. social security checks won't go out, interest rates will go up and ordinary americans suffer? do you think this date is real

and do you think the results of defaulting will be as cataclysmic as some people say? >> i don't think it will be as cataclysmic at all. i think there's been a real effort on both sides of the aisle to take this subject matter of default, which let's just define default. that would be in the very rare and extraordinary event that united states would decide not to service its debt, not to take the first dime of each dollar coming in and apply it to service our debt. that's all it takes. 20 billion out of each 200 billion per month. if united states decided not to do that that would be a willful act on the part of the president. be malicious for him to do that. so we're not going to default on our debt. but if we get past august 2nd then some very serious priority decisions have to be made. and i wanted to pass priority legislation. i still think we should pass prioritization legislation. and i think we've got two or three months that we could go through this debate. it's going to take brinksmanship. we're in the middle of it.

i regret the american people see this as a business deal that each side needs to get done with and move on. it's a political agreement that requires brinksmanship. the pressure isn't great enough to resolve this yet. >> bottom line in the final hours do you think there will be some sort of compromise between some republicans, probably not yourself, and democrats to get something done by that date? >> i think something is going to be. it's going to be resolved. and i've never taken the position that debt ceiling will not be increased. i think that more pressure we have, the more responsible we're going to be with the decisions we make on our budget and the closer we get to solving this problem. but i think something gets worked out, maybe not over this weekend. if we get past august 2nd and people understand that it's not a cataclysmic event as you described it, then maybe saner heads apply and maybe we can keep a balanced budget alive. i might just challenge the president and the democrat. are you opposed to a balance budget? it's what it takes to get this congress responsible. i want to keep that idea alive and keep the full faith and credit of the federal government

in place. and i want to take care of our seniors and our military in particular, anderson. >> congressman king, appreciate your time. thank you. >> thank you. we'll talk about this with our panelists. the boehner bill passed 218-210 only after the speaker spent the day arm twisting tea partiers fareed zakaria, you say the tea party is anti-democratic at this point. how do you say that? >> if you think about what's going on, the tea party is try this. ing to pass a particular agenda, which is basically a balanced budget or this all cuts budget. it cannot get it through the congress of the united states. it cannot get it through the political democratic process that we have which is that congress passes something and the president must sign it. that's the normal workings of

democracy. so instead of accepting some compromise that can get through the democratic process, what they're saying is we'll blow up the country if you don't listen to us. we'll hold hostage the credit of the united states, the good standing of the united states, and we'll blow it up. now, that is why even charles krauthammer, from the "washington post," fire-breathing conservative urged today in his column in the "washington post" not to go down this path because he called it counter constitutional. in other words, they are not acting in the way that constitutional democracy expects you to act. you are meant to respect the democratic process. you try this. your best to convince to get a majority in the house, a majority in the senate and the president to sign it. but if you control just one of those three branchs of government, you can't hijack the entire system and say i'm going to blow the country up unless you listen to me. they have only won one election to one house once. >> they're saying they're not

holding anybody hostage. they're saying this is what we said we would do to get elected. we've been elected. this is what people elected us to do. >> well, unfortunately as i say i think they don't understand the workings of democracy. they have not been elected as dictators of the united states. they have been elected to one house in one branch of the american government. the only way you can translate your wishes into public policy in america is if you can convince your branch and the other one, the senate and the white house, to go along with it. if you can't you've got to figure out amongst yourself what you can agree on. this is why it is fundamentally apartment democratic, counter constitutional in the words of charles krauthammer to be trying to do this. it's just an extraordinary act of hostage taking on the part of the tea party. it is holding the country hostage. and it has already damaged the good standing of the united states.

our debts -- it's very important to understand that tea party talks a lot about morality. in a capitalist framework, the obligation you owe in terms of repaying your debts is a moral obligation. when the visa bill comes you can decide that stuff you bought is stuff that you don't want. you pay the bill. then you can have an interesting conversation about how to reform your spending. but you can't reneg on your debts. >> what do you think is going to happen now? >> it seems very difficult to see how the kind of people you were talking to, anderson, are going to accept some kind of compromise. it seems to me you have to accept that 300 million people in this country, not all of them agree with you. and so you make your best case, you take as much as you can. they had a deal. john boehner provided a deal with $3 trillion of spending cuts for $1 trillion in revenue enhancements. all of it through closing tax loopholes, none of it through raising rates. now, if that's not acceptable, i really don't know where you go.

and my sense is, i hope that president obama is seriously exploring the possibility of invoking the 14th amendment. >> really? you think that's a valid option? >> and saying that he has the legal authority to simply raise the debt ceiling himself. i think that president bill clinton thinks that it is a viable argument. i'm not a constitutional lawyer. but i think we have reached a level of disfunction here that this is the kind of national emergency almost like a war. and if the president were to invoke that and if it were to go to the supreme court, i have a feeling the court would as it does with war powers issues say this is a political issue. we're not going to get involved. and the president's writ would stand. >> fareed, to the republicans who say well look this august 2nd is not really going to be cataclysm that people talk about? >> it may not be august 2nd. it may be august 4th. nobody doubts we have to borrow more money. is this how the greatest economy

in the world should be run that we should be saying, well, we can first pay the -- we'll take the first 20 cents out of every dollar and pay the debt but we won't pay the veterans and we won't -- and if you listen to what the congressman said to you, anderson, he said i don't want any tax increases. no closing of loopholes. i want to pay the interest on the debt. i want to look after our seniors. that's medicare, social security. and then i want to look after the army. well, you know, i've got news for you, congressman. there ain't much money left. if you aren't willing to cut any of those things and not willing to raise tax revenues then you're going to have to rely on magic to somehow balance the budget. that's all the big money. that's where it is. it's not in some mythical waste fraud abuse. the bulk of the money is in social security, medicare, the military, interest on the debt. you can abolish the space shuttle program and the department of education and that's going to get you four days' worth of money.

>> fareed zakaria, appreciate it. thanks very much. >> thanks. >> much more ahead in our breaking news coverage of the stalemate. we'll check back in with our reporters and chief political analysts and what's likely to happen now. also more about this balanced budget amendment you hear a lot of republicans keep talking about and insisting on. also tonight, news on polygamist leader warren jeffs breaking his silence in court, getting combative. he read aloud a letter he read claims came from god calling for an end to the trial. coming up. the chevy cruze eco offers an epa estimated 42 miles per gallon on the highway. how does it do that? well, to get there, a lot of complicated engineering goes into every one. like variable valve timing and turbocharging, active front grille shutters that close at high speeds, and friction reducing -- oh, man, that is complicated. how about this -- cruze eco offers 42 miles per gallon. cool? ♪

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and back with the breaking news coverage. the battle over the debt ceiling tonight.

house approached speaker boehner's plan by a razor thin majority and the senate killed it and the plan put forward by senator harry reid has yet to come up with debate. that's not going to happen until sunday. back with jessica yellin, kate bolduan, gloria borger and ali velshi. >> have congressmembers left fortnight or are there back door meetings going on? >> reporter: the houses back in at noon tomorrow and the senate around the same time. but other than the very symbolic vote that you've been talking about, anderson, where the house is going to take up harry reid's bill and block it to prove it can't pass in the house, other than that action on the floor the action's not going to be on the house or senate floor. it's going to be in these back room, behind the scenes conversations between leaders if there is going to be a compromise reached it's going to be between them. but as we've been talking about that hasn't started yet.

>> and jessica, at the white house any word tonight on what happens next from their perspective? i mean, how involved are they going to be over this weekend? >> reporter: there are no plans anderson yet for any kind of a meeting. but i believe that if they decide it's necessary the president will sit down with these leaders. i do suspect at some point we will probably see the president over the weekend. look, this is the weekend when something has to happen. so whatever he needs to do he's got to do it now and they know that. i also know that in the treasury building which is behind me they will be making preparations over the weekend for alternative plans. what checks will go out, what won't go out if we don't hit that deadline. and then there are also talks about possible mini extensions. three-day, four-day extensions if negotiations have to go just a little bit longer in congress. that is something that white house has made clear that they would be open to, that kind of very short, short-term extension. >> gloria, getting some tweets from people asking about the whole balanced budget amendment

idea. and republicans saying that is what they want, many conservative republicans saying that is what they are insisting upon. you heard james carville say that is just not going to happen. can you explain to our viewers? >> reporter: it's interesting. because what erick erickson said before is what a lot of republicans want, a clean vote on a balanced budget amendment that says you cannot raise taxes to balance the budget. if they got that they would be very happy. the balanced budget amendment that is contained in the boehner bill says you have to get that through the congress in order to raise the debt ceiling. democrats are generally opposed to a balanced budget amendment because they think it puts the country in a fiscal straitjacket, that if you have an emergency like a huge recession as we had in 2008, that you have to be able to spend the money to get -- to help get yourself out of it, to pay those unemployment checks. you have to be able to have leeway to fund wars, et cetera, et cetera. if there's a vote on a balanced budget amendment, i think

generally that doesn't have to pass, i think that's one way to compromise on this. i don't see why democrats in either chamber should react against just voting on it. but don't forget. a balanced budget amendment has to pass with two-thirds of the how, two-thirds of the senate, then it has to be ratified by 38 states. so we're talking about a process that all in all could take a decade or more. so not likely to happen in the short term. >> a ali, a lot of economists, even deficit hawks are saying this is exactly the wrong time to cut spending. >> reporter: gloria just made the point what you need the freedom to do, when you have a recession, companies stop spending and individuals stop spending. if government stops spending everything grinds to halt. it feeds on itself and more people lose their jobs. so even deficit hawks, those who understand the economy of which there is a shortage in washington right now, are saying you cannot when you have economic growth in the second quarter as we found out this morning of 1.3%. >> worse than we thought.

>> reporter: much worse than we thought. and the first quarter was .04%. in our effort to placate conservatives what we're forgetting this is economically unsound to pull back on spending at the rate that they're try this. to if you want to balance the budget, i got no philosophical objection to that. got to do it with raising taxes. >> republicans say don't raise taxes, raise taxpayers. >> reporter: it's a great way to say it. reagan raised taxes in a recession. clinton raised taxes in a recession. neither one of them put us into a second recession as a result. it's just false hood out there that raising taxes in an unfair tax system which is what we have in the united states would send us back into a recession. they just keep saying it and it doesn't become real because you keep saying it. >> ali, appreciate it. kate bolduan, jessica yellin, gloria borger as well. more breaking news on capitol hill. also ahead, crime and punishment. fascinating day in this trial, polygamist prophet, so-called

prophet i should say warren jeffs had a courtroom tirade. he fired his own defense team yesterday. plus tropical storm dawn making downfall tonight. forecast on the amount of rain it will dump. detail in a moment. well-being. we're all striving for it. purina cat chow helps you nurture it in your cat with a full family of excellent nutrition and helpful resources. purina cat chow. share a better life. got the mirrors all adjusted? you can see everything ok? just stay off the freeways, all right? i don't want you going out on those yet. and leave your phone in your purse, i don't want you texting. >> daddy... ok! ok, here you go. be careful.

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firmly believes in poig. he's accused of sexual assaulting two girls. gary tuchman joins us from san angelo, texas. what were the threats from warren jeffs today in court? >> single strangest day i've ever spent in a courtroom after he repeatedly interrupted court proceedings. the judge send the jury out. the jury couldn't believe what he was saying about polygamy and why his religion is so great. then after the jury left, warren jeffs who says he's a prophet, the closest man on earth to god, said he had received a letter from god and wanted to read it to the judge. "i the lord god of heaven ask the courts to cease the prosecution of my holy way. there will be a judgment against all who prosecute the church. i shall let all people know of your unjust ways. i will bring sickness and death. let this cease". now the judge as you might expect took that as a threat and she said if you say that when the jury is here i will kick you out of the courtroom. he said i'm not issuing a threat. this is just a message i received. >> was this that an actual letter from god?

or did he transcribe it? did he explain how he got a letter from god? >> well, no. but i will tell you that some courtroom observers and some flds supporters, particularly the flds supporters, say that was written directly by god and somehow given to warren jeffs. at least that's what warren jeffs has said to his followers in the past. >> so what happens next in the trial? >> reporter: well, the trial is expected to last about a month. but because warren jeffs is now his own attorney and not doing any cross-examination, the prosecution announced today it believes this case could go to the jury as early as this tuesday. next week the prosecution plans to play an audio tape in which it says you can hear warren jeffs having sex with a 12-year-old girl. but there's a big wild card here, and that is warren jeffs. if he keeps talking as much as he did today, this trial could last a lot longer than tuesday. >> just when you think it couldn't get any more bizarre. tom for man following our stories for us tonight. tropical storm don made

landful tonight along the texas coast between corpus christi and brownsville. texas is suffering its worst drought in recorded history at his arraign ant, a defiant army private accused of planning aattack on fort hood soldiers yelled the name of major hasan. nasser abdo was charged today of possession of an unregistered destructive device. the prosecutors say more charges are likely. he's being held without bail. in oslo a memorial service for those killed one week ago in norway's twin terror attacks. the first funerals were held today as well. meantime, another person injured in the attacks has died raising the death toll to 77. and something to chew on as the debt ceiling battle rages, as you mentioned at the top anderson, tech giant apple now has more cash on hand than the u.s. treasury. apple signature on $76.2 billion, about 2 billion more

than uncle sam at this point. >> that's amazing. >> that's a lot of money. >> tom, thanks very much. a lot more ahead at the top of the hour. breaking news tonight, senate debate on a bill to end the debt crisis on hold until sunday. house bill to do it rejected tonight. details ahead. i love that my daughter's part fish. but when she got asthma, all i could do was worry ! specialists, lots of doctors, lots of advice... and my hands were full. i couldn't sort through it all. with unitedhealthcare, it's different. we have access to great specialists, and our pediatrician gets all the information. everyone works as a team. and i only need to talk to one person about her care. we're more than 78,000 people looking out for 70 million americans. that's health in numbers. unitedhealthcare.

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breaking news, everyone. tonight right now, in that building over on the senate side according to democrat harry reid who spoke last hour, nothing is going on. the senate is now adjourned. but the clock is still ticking and the government is running out of money to pay the bills at this moment because the debt limit was not raised back in may, the united states treasury has less cash on hand than apple computer. on wednesday the government will have $23 billion in social security checks to send out and not enough cash to cover them unless it doesn't send out a whole lot of other checks. earlier this evening after a string of delays, the house narrowly passed house speaker john boehner's version of a debt are reductions bill. >> i stuck my neck out a mile to try this. to get an agreement with the president of the united states. i stuck my neck out a mile. and i put revenues on the table. in order to try this.

to come to an agreement to avert us being where we are. but a lot of people in this town can never say yes. a lot of people can never say yes. this house has acted. and it is time for the administration and time for our colleagues across the aisle, put something on the table! tell us where you are! [ cheers and applause ] >> the bill requiring congress to pass a balanced budget amendment was quickly reject on the senate side. then lawmakers took up majority leader reid's debt proposal after a question from minority leader mcconnel senator reid try this. ed to get a vote on it tonight by a simple majority. minority leader mitch mcconnell refused meaning that nothing happens until sunday. >> it really is the worst possible time to be conducting a filibuster. they are forcing us to wait

until tomorrow morning at -- let's see. today's still friday? until sunday morning at 1:00 a.m. to have this vote. our economy hangs on the balance. and for the first time in the history of our country, unless there is a compromise or they accept my bill, we're headed for economic disaster. >> harry reid accusing senator mcconnel of using obstructionist tactics. some republicans tonight accusing senator reid of game playing, try this. ing to run down the clock and jam his own bill through the house at the last minute. the time it takes the senate to do anything means that this is all coming down to the wire. the markets don't like it one bit. the dow industry also shedding nearly 100 points today. new research reveals the economy is worse than we believe today. jessica yellin is at the white house tonight, john king in our washington bureau along with chief political analyst gloria borger. here to explain thes in and outs of your money is our own ali velshi.

john, what is the latest. is nothing actually happening at the capitol right now? >> we talked a bit about this last night, and we are making progress if you view planting the flags as progress. the house finally had the vote today. the proposal went to the senate. it is now dead. leader reid is going to have his proposal. and forgive me. i'm not criticizing senator reid but he's now doing exactly the same thing as house republicans did. he knows his plan cannot be the final plan and yet he is going to have the the motions, go through a debate over the weekend. if you considerate least moving the ritual forward we're making some progress. are they negotiating behind the scenes? i was having conversations with democrats and republican aides who said not yet. they expect those conversations to start over the weekend. there is still a sense of optimism, not bubbly optimism they'll figure this over the week. but this is not a process you would like to teach in your civics class. >> john, i kind of know the answer but i'm going to pretend

i'm my i've here. why should senator reid go through the motion, on a bill he knows isn't going to pass? why not start negotiations tomorrow? >> i think they will start the negotiations tomorrow. let's be clear. i think once the senate comes in tomorrow they'll start to feel each other out. but republicans passed their bill. now the democrats want to make the republicans stand up and oppose the provisions of their bill. part of the ritual to get a compromise unfortunately, and both parties have done. this not criticizing the democrats here, not criticizing the republicans. this is the game washington always plays. keep everybody in over the weekend. get them tired, finally convince people figure this out. i was up on capitol hill all day and i talked to a number of people in both parties, some of whom were defending these votes, defending the parties drawing the lines. then in the next breath under their breath saying we need to figure this out over the weekend. and we think, think we will. >> jessica, no douse john is right using the words games here that are being played when people at home are probably watching this getting boiling mad that they're playing games at this late hour.

what's the latest you're hearing from the white house? >> reporter: the latest little bit of news i can report, sources are telling me that senate mine in other words leader mitch mcconnell the lynch pin now, the republican in the senate to cutting a deal, is insisting that the white house be present in any negotiations to raise the debt ceiling. so expectations were that perhaps he might negotiate directly with harry reid, the senate majority leader, but sources again telling me that he wants the white house in the room if there are any negotiations. clearly from one perspective so that the white house, that they clearly have a deal locked in, from another perspective you could say so that everybody owns the political fallout from whatever comes. so clearly this is an ever-expanding politically complicated story when as you point out the economic ramifications are what most americans are thinking about. and everybody is scratching their head, why is washington playing so much politics with this? >> gloria what do you make of all this?

>> reporter: well, have you ever heard the expression fiddling while rome burns? that's exactly the situation i think we're. in and i think in a way you could look at what the house did today and say that republicans in the house moved further from compromise because john boehner had to give them a guaranteed balanced budget amendment passage in order to get their vote. so i think it's clear those people -- and that would mean most of the freshmen republicans, one would presume, if not all of them -- are not going to vote for any compromise. on the other hand, going to what john was saying, now that this dance is sort of getting finished, the outside game if you will, i do think that the white house and mitch mcconnell and harry reid and whoever else wants to sit at that table can finally get together and come up with a deal. and by the way, there is a way out of it.

there is kind of -- if you look at these two proposals, it's kind of obvious how they get out of it. it's not -- it's not rocket science. >> and that is how? >> reporter: they could come up -- you want the gloria borger solution? they could come up with a couple trillion in cuts which has no tax increases. they get a vote on the balanced budget amendment but it doesn't have to be guaranteed to pass. you get a debt ceiling that is sort of automatically approved in six months. and you get a trigger for cuts if congress can't do its work. how's that? >> all right. ali, is there any way to know how much this has already cost the united states? >> reporter: well, we haven't seen many interest rate increases. i was watching the mortgage rate this week. it went up by .001%. everybody it betting this is going to work. but the dow was down 4.2% this week. the s & p 500 which reflects your 401 k down 3.9%. $700 billion in the market

capitalization of u.s. companies has been lost this week. a lot of that is these new numbers that came out on the gdp which indicate that this recession was worse than we thought it was and our growth is not as strong as it is. but much of that, five out of the last six dates where we've seen down markets is because of this indecision in the stock market. and we have 48 hours before asian markets open up for the trading week. and you know. this we've been through this anderson together. you see what happens in those asian markets, goes through to europe and follows through to us on monday. these losses could be substantially bigger if we are talking in 24 hours -- in 48 hours and there is not significant progress on this. >> at what point would we know whether our credit rating, our credit score, has been downgraded? >> reporter: that could happen either way. it's not likely to happen on the weekend but that can happen at any point from moody's or s & p. the problem, a downgrade they might give us now because we're not handling things properly is a downgrade from aaa, from stellar, perfect, to one below that. a downgrade as a result of a default if we don't make any payments that's a much more

serious issue. that doesn't drop you one notch but several notches and then interest rates really do go up. that falls into your mortgage rates, credit card rates, auto loan rates. you mentioned august 3rd that big social security payment? according to some people, many republicans, unless we doe fault on an actual debt we don't have to get our debt downgraded. according to s & p and according to ben bernanke, if you default on any payment you're supposed to make, even if it's not to a bond holder you could face a downgrade. >> republicans who say look i don't buy it's this big catastrophe waiting to go hit after august 2nd. >> reporter: they absolutely could be right. but you and i were together on september 15, 2008 after they decided -- a lot of smart people decided to let leeman lehman brothers fail thinking it's not a big deal. i don't know which way it's going to go. i don't know if we should be playing with fire like this. >> john, what do you make of jessica's reporting she's hearing mitch mcconnell is wanting president obama to be at

the table in any negotiations? >> well, there's a couple of political reasons for that in the sense that then you can't cut a deal then if the white house says we're going to try this. to move the goal post the white house denies it. republicans say they had a deal, speaker boehner had a deal and president move the goal post. if you have everybody in the room everybody signs onto it. in other words if you get a compromise now it would be a final deal. that still does not mean if leader mcconnel, leader boehner, i mean leader reid and the white house cut a deal you still have the house involved. to gloria's point, the calculation is that they note rough outlines of a deal. the question is when it goes back to the house, is speaker boehner willing to bring to the floor a deal which might pass the house but in which he as the republican leader, the speaker of the house, might lose a majority of his members? that's always embarrassing for a speaker to lose a majority of your people on a final vote. and if you look at the vote today, if it comes back without a mandatory pass the balanced budget agreement, just with spaending cap, triggers to cut spending, vote on a balanced budget amendment, speaker boehner is likely to lose a

majority of his people which will be a painful pill to swallow. >> reporter: it doesn't have to be president obama i'm told but there could be a proxy for him. but there's also a willingness here to add a meeting this weekend if that's necessary. so we're all on standby for that. >> good for the clarification. john, gloria, jessica, ali, thanks. stick around we'll talk to some of you coming up next to one of the congress members holding out for balanced budget language. george congressman phil gingrey, appreciate your taking time for us tonight. a lot of tea party groups and other conservatives are pretty upset with members who did change their vote. you did. why did you back the boehner bill? >> well, anderson, the speaker was willing to listen to us. those of us who were very committed and in cut, cap and balance, especially to the balanced budget amendment. and he listened to us, he called us. in we sat down, we pressed our point.

and he pulled the bill back and actually put that provision in there, not just a vote but as you know before any second traunch, the 1.6 trillion additional increase in the debt limit, we would have to take a vote on a balanced budget amendment, pass that and submit that to the states. so that got me there. i mean, i certainly felt that it was necessary to press that point. the last time we had a balanced -- >> what happens now, though? is there any way you could back a compromise bill that does not include some provision for a balanced budget amendment? for passing one? >> anderson, i could not. i absolutely could not do that. >> what about a vote on a balanced budget amendment? >> no. i've been listening to you and gloria about different scenarios. you may end up being right. that may be exactly what plays out. but this member who made that pledge cannot support it without a balanced budget amendment in there that passes both the house

and the senate and is submitted to the states. you know, in '96 we failed by one vote, didn't we, in the senate? and since then the debt in this country has gone up $9 trillion. $9 trillion in 15 years! so if that doesn't tell the american people and members of congress that we cannot do the fiscal things that we need to do in this country unless our hands are tied by a balanced budget amendment is absolutely necessary, 49 out of 50 states have it. we need it here in washington. >> do you believe august 2nd is a real deadline, that there are catastrophic as some people say consequences after that? >> well, i do. i mean, you know, give or take a few days. and certainly we anticipate taking in maybe $175 billion in tax revenue in the month of august. but we come up $130 billion short at the end. yes, we can pay the interest on the debt. we can renew the $500 billion worth of bonds that are coming

due. we can mail out our social security checks. we can make sure those medicare claims are honored. we can pay our military. we can protect our veterans. but when you get beyond that, the soup gets a little thin. so i'm not ignoring that. and nobody in my party, and especially our leader speaker boehner has said months ago, we don't want and will do everything in our power not to let that happen. >> congressman, appreciate your time. thanks for staying up with us tonight. >> thank you. glad to be with you. >> we're on facebook. follow me on twitter @ anderson cooper up next, a surprising debate on this from the left and right about who's playing games, who's handled this well and who hasn't and who gets hurt in the end. james carville joins us along with eric air erickson as our breaking news coverage continues. excuse me? my grandfather was born in this village. [ automated voice speaks foreign language ] [ male announcer ] in here, everyone speaks the same language. ♪

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i spoke about all of it just before air time with democratic strategist james carville and erick erickson editor in chief of red state.com. >> james, what do you make of what we've seen happen tonight in the house? >> well, i mean, what i make of it is that -- what i -- he didn't have the votes and to vote on the balanced budget amendment again. i think some of the house republicans figured they needed to vote on this. what i really make of it is, i have no idea what can come back to the house that can pass the house with republicans votes. erick maybe can help me on this. but i don't see this closer than anytime before. >> listening to several of the congressmen speak today, several of the solid conservative congressmen and some of the phone calls i've had from them and their staffs, they realize that something's got to pass. what they're saying to me at least, and maybe it is naive in

washington, but we'll give the president a completely clean debt ceiling increase if he will send our balanced budget amendment so rally the democrats to send it out to the states. the states don't even have to pass it. we want it to get out of congress and they'd do it. >> that's not going to happen. >> go ahead, james. >> yeah. i mean, it's not going to happen. i mean, we're living in a real world. and as i say, i'm sure that they believe that. and i'm sure that that's their position. and that's why i'm saying i just don't see the resolution to this. [ overlapping speakers ] >> i agree with you. i would completely agree with you on that, james. i see what you're saying. but at the same time these guys are saying their compromise is to raise the debt ceiling. and all they want is the balanced budget amendment to go out. >> you know, again, it's not going to -- first of all it takes two-thirds votes in both houses. it's not going to happen. and a constitutional amendment is something that comes along very, very rarely.

and a lot of people think this is just horrific policy. but at any rate, i'm not here to argue with you. it's not going to happen, and i don't really see anything any closer than it's ever been. >> erick, isn't compromise at some point, at some hour essential? >> well, you know, i'll tell you what's going to happen, is by monday afternoon there will be a panic. we saw this with the t.a.r.p. vote back in 2008. there'll be a panic. the democrats will come together on a plan, john boehner will be able to get about a third of the republicans. they'll come together. they'll pass it. the conservatives won't vote for it in the house. it will go back to the senate. the senate will pass it. it will go to the president. then this hurts speaker boehner. for example, no child left behind, that was the vote that radicalized if you want to use that word for lack of a better term, a lot of conservatives against george bush. he started having a harder and harder time getting republicans after that in congress to support some of his plans. that's probably going to happen to john boehner.

he should have never done this boehner plan. he should have made cut, cap and balance whether you like it or not make that the starting point. at least it had democratic votes in the house. >> where do you seat possibility for some sort of a deal? where do these john boehner republicans meet up with the democrats? >> they'll hold their nose and vote for something like the mcconnel-reid plan that was floated a couple weeks ago to let the president do it and then they give a vote of disapproval. ultimately when they get down to the last 30 seconds on the clock they'll take a deal like that, some of them. >> james, are you confident of that? >> you know, i was. i'm a little less sure today. i suspect that the speaker's going to have to go and is going to have to go and get something with some democrats here. probably a lot of democrats to get anything through. and i'm sure that people are back channelling everything right now and hopefully -- i hope erick is right. but there's a lot of republicans that believe that there's

nothing magic about august 2nd, that there's nothing particularly catastrophic about a partial default, that there's plenty of money there. and they don't feel any pressure whatsoever to do this. they say that they always say this and it never sort of happens. and they're just not 218 republicans that can vote for a bill that the senate can pass. that is abundantly clear to me. and i think erick is saying the same thing. i think one of these rare instances where we kind of agree. >> so erick, what are the politics that you think the democrats are playing with this? there's obviously political calculations on both sides of the aisle. people don't like to talk about political calculations for their own party. so erick what do you think the political calculations that democrats in the senate have been playing? >> >> running out the clock to a degree. historically we've seen in the past five years with a lot of the republicans there, even george bush was able to do it with the republicans is get them down to the last few minutes on the clock and they'll fold over and do most of what you want.

and the senate democrats i think by and large are playing a lot smarter game than the house republicans. >> and james, what kind of politics do you think the republicans have been playing? and what is their angle on this? >> i mean, look at, i think that these tea party people are doing exactly what they said they would do. i mean, look. and i think that they wouldn't vote for this. and it's a kind of foreign thing to me. but it's not like there's any false advertising going on here. i mean, i'll give them that. and they don't want to compromise. >> i had a couple freshmen can gomen e-mail me and point out say we really view the way we got into congress as beating people who were willing to lose to support obama care. we're willing to lose to support this. to a degree there's no negotiating with people whose mindset is that whether you agree with them or not. >> i agree with you. i'm not disagreeing. i'm not disagreeing with you at all.

i hate to tell you. >> it's nice to see some guys that won't take back door deals. >> well, you know, maybe -- the only thing more dangerous than a politician who this about re-election is a politician who doesn't think about re-election. >> having been one of those i can agree with you. >> erick appreciate it. james carville, thanks. >> thank you. a lot more breaking news tonight. and a question, is the tea party following through on its pledge to change the way washington does business as erick said and as james said actually or is it holding the country hostage? i'll talk to a tea party congressman who voted no on the boehner bill and to fareed zakaria who also joins me next. ♪ ♪ ♪ look at that car, well, it goes fast ♪ ♪ givin' my dad a heart attack ♪ [ friend ] that is so awesome. ♪ i love my car [ engine revving ] [ male announcer ] that first chevy, yea,

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breaking news out of d.c. hour's the latest. around 8:20 this evening the senate voted down the bill passed in the house. house speaker boehner had to can sell a vote last night because he didn't have enough support. it passed by a narrow margin. senator reid said it would be dead on arrival. he killed it. now republicans are blocking doe bait on reid's bill which he introduced to kill boehner's bill. house republicans have scheduled votes tomorrow on a new bill with language identical to senator reid's bill so they can be on record rejecting it. a short time ago i talked to congressman steve king a member of the tea party caucus who voted against the boehner bill in the house. >> congressman king, the bill that's been put forward by speaker boehner in the past

makes more than 1 trillion in discretionary spending cuts, doesn't raise taxes, got provisions for finding more spending cuts down the road and calls for a balanced budget amendment all of which is in line with bedrock principles of conservative republicans. so why did you vote against it? >> the only thing we can really count on is what we can control in this next upcoming fiscal year of 2012. what it does it takes the $31 billion in cuts from the ryan budget and reduces them down to $7 billion is all. and when you project that out over the period of the next decade, you can see that our national debt would have grown to only 24 million under this proposal as opposed to 25 million otherwise. it doesn't get us much. it's a very short-term fix. it dials it down rather than up. the ryan budget isn't enough. it doesn't balance for 26 years. this is less. and what it does it takes away some of the arguments of the ryan budget. so we're worse off how we project the cuts that we need to do to get this spending under control.

another six months goes by and we have failed to address the problem adequately. >> so what happens now? i mean, is there anything that any bill that the senate can come up with that you would, if it comes back to the house, that you would agree is an okay compromise? >> well, i would just remind you that this boehner bill did pass, 218-210. so it isn't so much what i would agree. to but here's what i would like to see. i would like to see a balanced budget amendment go to the states. >> that's not going to happen. >> and anderson, here's the argument. whatever i propose that's going to be logical and actually solve the problem, i'm going to hear just that rebuttal. i've heard it over and over again in these halls. it's not going to happen because the president won't go along with it or it's not going to happen because harry reid and the senate democrats won't be go along with it. so logical solutions can't be applied because ill lodge kalg people won't go along with it. >> what do you have to say to the people who worry that come

august 2nd the country will defatal on its debt, either social security, medicare payments won't go out, interest rates will go up and ordinary americans will suffer? do you think this date is real? and do you think the results of defaulting will really be as cataclysmic as some say? >> i don't think it will be at all. i think there's been a real effort actually to some degree on both sides of the aisle to take the subject matter of default -- which let's just define default. that would be in the very rare and extraordinary event that united states would decide not to service its debt, not to take the first dime of each dollar coming in and apply it to service our debt. that's all it takes. 20 billion out of each 200 billion per month. if the united states decided not to do that that would be a willful act on the part of the president. be malicious for him to do that. so we're not going to default on our debt. but if we get past august 2nd then some very serious priority decisions have to be made. and i wanted to pass priority

legislation. i still think we should pass prioritization legislation. and i think we've got two or three months that we could go through this debate. it's going to take bringsmanship. we're in the middle of brinksmanship. i regret the american people see this as a business deal that each side needs to get done with and move on. it's a political problem that requires brinksmanship. >> final hours do you think there will be some sort of compromise between some republicans, probably not yourself, and democrats to get something done by that date? >> i think something is going to be. it's going to be resolved. and i've never taken the position that debt ceiling will not be increased. i think that more pressure we have the more responsible we're going to be with the decisions we make on our budget and the closer we get to solving this problem. but i think something gets worked out, maybe not over this weekend. if we get past august 2nd and people understand that it's not a cataclysmic event as you described it, then maybe saner head apply and maybe we can keep a balanced budget amendment alive.

i would challenge the president and the democrats, why are you opposed to a balanced budget? it's what takes to keep this congress responsible. i want to keep that alive and keep the full faith and credit of the united states in place and take care of our military and seniors. >> appreciate your time. we'll talk about this balanced budget amendment idea with the panel. the boehner bill passed 218-210 only after the speaker spent the day arm twisting tea partiers. fareed, you say the tea party is anti-democratic at this point. you talk about the polarization that is occurring. how can do you mean that they're anti-democratic? >> anderson, if you think about what's going on, the tea party is trying to pass a particular agenda, which is basically a balanced budget or this all-cuts budget. it cannot get it through the

congress of the united states. it cannot get it through the political democratic process that we have, which is that congress passes something and the president must sign it. that's the normal workings of democracy. so instead of accepting some compromise that can get through the democratic process, what they're saying is, we'll blow up the country if you don't listen to us. we will hold hostage the credit of the united states, the good standing of the united states, and we'll blow it up. now, that is why even charles krauthammer, columnist for the "washington post," fire-breathing conservative urged today in the "washington post" not to go down this path because he called it counter constitutional. in other words, they are not acting in the way that constitutional democracy expects you to act. you're meant to respect the democratic process. you try this. your best to convince to get a majority in the house, a majority in the senate and the president to sign it. but if you control just one of those threes branchs of government, you can't hijack the entire system and say i'm going

to blow the country up unless you listen to me. they have only won one election to one house once. >> they're saying they're not holding anybody hostage. they're saying look this is what we said we would do to get elected. we've been elected. this is what people elected us to do. >> well, unfortunately as i say i think they don't understand the workings of democracy. they have not been elected as dictators of the united states. they have been elected to one house in one branch of the american government. the only way you can translate your wishes into public policy in america is if you can convince your branch and the other one, the senate and the white house, to go along with it. and if you can't you've got to figure out amongst yourself what you can agree on. this is why it is fundamentally anti-democratic, counter constitutional in the words of charles krauthammer to be try this. ing to do this. and it is just an extraordinary act of hostage taking on the

part of the tea party. it is holding the country hostage, and it has already damaged the good standing of the united states. our debts -- it's very important to understand that tea party talks a lot about morality. capitalist framework, the obligation you owe in terms of repaying your debts is a moral obligation. when the visa bill comes you can't decide that stuff you want it stuff you don't want. you pay the bill. then you can have an interesting conversation about how to reform your spending. but you can't reneg on your debts. >> what do you think is going to happen now? >> it seems very difficult to see how the kind of people you were talking to, anderson, are going to accept some kind of compromise. it seems to me you have to accept that 300 million people in this country, not all of them agree with you. and so you make your best case and you take as much as you can. they had a deal. john boehner provided a deal with $3 trillion of spending

cuts for $1 trillion in revenue enhancements. all of it through closing tax loopholes, none of it through raising rates. now, if that's not acceptable i really don't know where you gomt and my sense is, i hope that president obama is seriously exploring the possibility of invoking the 14th amendment. >> really. [ overlapping speakers ] >> and saying that he has the legal authority to simply raise the debt ceiling himself. i think that president bill clinton this is that it is a viable arg yumt. i'm not a constitutional lawyer, but i think we have reached a little of dysfunction here that this is the kind of national emergency almost like a war. and if the president were to invoke that and if it were to go to the supreme court, i have a feeling the court would, as it does with war powers issues say, this is a political issue we're not going to get involved and the president's writ would stand. >> and fareed torque the republicans who say, look, this august 2nd is not really going to be the cataclysm people talk about?

>> it may be august 4th. nobody doubts we're running out of money. whether it's august 2nd or 5th or whether you can go through some ledger -- is this how the greatest economy in the world should be run? that we should be saying, well, we'll take the first 20 cents out of every dollar and pay the debt but we won't pay the veterans and we won't -- and if you listen to what the congressman said to you, anderson, he says, i don't want any tax increases, no closing of loopholes. i want to pay the interest on the debt. i want to look after our seniors, medicare, social security, and then i want to look after the army. well, you know, i've got news for you, congressman. there ain't much money left. if you aren't willing to cut any of those things and not willing to raise tax revenues then you're going to have to rely on magic to somehow balance the budget. that's all the big money. that's where it is. it's not in some mythical waste, fraud and abuse. the bulk of the money is in

social security, medicare, the military, interest on the debt. you can abolish the space shuttle program and the department of education, and that's going to get you four days' worth of money. >> fareed zakaria, appreciate it. thanks very much. >> thanks. >> much more ahead in our breaking news coverage of the stalemate. we'll check back in with our reporters and chief political analysts and what's likely to happen now. also more about this balanced budget amendment you hear a lot of republicans keep talking about. male announcer: be kind to your eyes with transitions lenses.

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back with the breaking news coverage. the battle over the debt ceiling

tonight, house approved speaker boehner's plan by a razor thin margin but a short time later the senate killed it and plan put forward by senator leader harry reid will come up for doe bait on sunday. jessica yellin, kate bolduan, gloria borger and ali velshi. kate, have members of the congress left for tonight or is there still some kind of back room meeting going on? >> reporter: it seems they have call it a night at least for this evening. the house is back in at noon tomorrow and the senate's back in around the same time. but other than the very symbolic vote that you've been talking about, anderson, where the house is going to take up harry reid's bill and block it to prove it can't pass in the house, other than that action on the floor, the action's not going to be on the house or the senate floor. it's going to be in these back room behind the scenes conversations between leaders if there is going to be a compromise reached it's going to be between them. but as we've been talking about,

that hasn't started yet. >> and jessica, at the white house any word tonight on what happens next from their perspective? i mean, how involved are they going to be over this weekend? >> reporter: there are no plans, anderson, yet for any kind of a meeting. but i believe that if they decide it's necessary the president will sit down with these leaders. i do suspect at some point we will probably see the president over the weekend. look, this is the weekend when something has to happen. so whatever he needs to do he's got to do it now and they know that. i also know that in the treasury billing which is behind me they will be making preparations over the weekend for alternative plans, what checks will go out, what won't go out if we start to -- if we don't hit that deadline. and then there are also talks about possible mini extensions, three-day, four-day extensions if negotiations have to go just a little bit longer in congress. that is something that white house has made clear that they would be open to, that kind of very short, short-term, tension. >> gloria getting tweets from people asking about the whole balanced budget amendment idea. and republicans saying that is

what they want. many conservative republicans saying that is what they are insisting upon. you heard james carville saying that's just not going to happen. can you explain why to our viewers that won't happen? >> reporter: it's interesting. because what erick erickson said before is what lots of conservatives want, they want a clean vote on a balanced budget amendment which says that you cannot raise taxes to balance the budget. if they got that they would be very happy. the balanced budget amendment that is contained in the boehner bill says, you know, you have to get that through the congress in order to raise the debt ceiling. democrats are generally opposed to a balanced budget amendment because they think it puts the country in a fiscal straitjacket. that if you have an emergency, like a huge recession as we had in 2008, that you have to be able to spend the money to get -- to help get yourself out of it, to pay those unemployment checks. you have to be able to have leeway to fund wars, et cetera, et cetera.

if there's a vote on a balanced budget amendment, i think generally that doesn't have to pass, i think that's one way to compromise on this. i don't see why democrats in either chamber should react against just voting on it. but don't forget. a balanced budget amendment has to pass with two-thirds of the house, two-thirds of the senate, then it has to be ratified by 38 states. so we're talking about a process that all in all could take a decade or more. so not likely to happen in the short term. >> and ali, a lot of economists, even deficit hawks, are saying this is exactly the wrong time to cut spending. >> reporter: gloria just made the point what you need the freedom to do when you have a recession, companies stop spending and individuals stop spending. if government stops spending everything grinds to a halt. it feeds on itself and more people lose their jobs. so even deficit hawks, those who understand the economy of which there is a shortage in washington right now, are saying you cannot when you have economic growth in the second quarter as we found out this morning, of 1.3% --

>> worse than we thought. >> reporter: much worse than we thought. the first quarter was .04%. in our effort to placate conservatives what we're forgetting is this is economically unsound to pull back on spending at the rate they're try this. to you want to balance the budget, i got no philosophical objection to that. got to do that with raising taxes. >> they're saying don't raise taxes, raise taxpayers. >> reporter: it's a great way to say it. reagan raised taxes in a recession. clinton raised taxes in a recession. neither of them put newt a second recession as a result. it's just falsehood out there that raising taxes in an unfair tax system which is what we have in the united states would send us back into a recession. they just keep saying it and it doesn't become real just because you keep saying it. >> ali, jessica, gloria, kate, appreciate it. we'll see what happens over the weekend. we'll be right back our coverage continues more on the breaking news on capitol hill. also ahead, crime and punishment, fascinating day in this trial, polygamist prophet

so-called prophet i should say warren jeffs had a courtroom tirade. he fired his own defense yesterday. now he's acting his own attorney. now tropical storm don making landfall tonight. forecast on the amount of rain has changed. details in a moment. ♪

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quick crime and punishment, combative moment in the courtroom today during the trial of warren jeffs. he changed his tactics, made sure he was heard loud and clearly as opposed yesterday when he remained silent. today he repeatedly interrupted the testimony of prosecution witnesses and said his religious freedom was being violated. he's representing himself. he's the leader of the fundamental aft mormon sepgt that firmly believes in polygamy. he's accused of sexual assaulting two girls. gary tuchman was in the courtroom today. he joins us from san angelo, texas. what were the threats from warren jeffs today in court? >> reporter: single strangest day i've ever spent in a courtroom after he repeatedly interrupted court proceed lgds. the judge sent the jury out. the jury was open mouthed. couldn't believe what he was saying about polygamy and why his religion is so great. then after the jury left warren jeffs who says he's a prophet, closest man on earth to god said he had received a letter from

god and he wanted to read it to the judge. the letter said "i the lord god of heaven ask the courts to cease the prosecution of my holy way. there will be a judgment against all who prosecute the church. i shall let all people know of your unjust ways. i will bring sickness and death. let this cease." now, the judge as you might expect took that as a threat. she said if you say that when the jury is here i will kick you out of the court room. he said i'm not issuing a threat. this is just a message i received. >> was that an actual letter from god or was that -- i mean, did he transcribe it? did he explain how he actually got a letter from god? >> well, no. but i well tell you that some courtroom observers and some flds supporters, particularly the flds supporters say that was written directly by god and somehow given to warren jeffs. at least that's what warren jeffs has said to his followers in the past. >> so what happens next in the trial? >> reporter: well, the trial is expected to last about a month. but because warren jeffs is now his own attorney and he's not doing any cross-examination, the prosecution announced today it

believes this case could go to the jury as early as this tuesday. and next week the prosecution plans to play an audio tape in which it said you can hear warren jeffs having sex with a 12-year-old girl. but there's a big wild card here, and that is warren jeffs. if he keeps talking as much as he did today this trial could last a lot longer than tuesday. up next, a community crusaded in these tough economic times. he's a lifeline for people in need by answering their letters pleading for help. meet this week's cnn hero when we continue.

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these tough times a lot of americans are jobless, broke, with bills piled high many for those struggling, one wisconsin community there is a safety net. and he's this week's cnn hero. meet sal benaceli, the dear be an abby of the down and out. >> when i go through suburban america with the small towns everybody is trying to hold their head up with pride. >> you've been looking for work? i know it's tough in a recession. >> i went and sold all my jewelry yesterday. >> these people behind closed doors, they tell their neighbors are fine. they'd soon go in the house and starve. >> gas bill i owe about $800. >> i find the situation is getting worse. they need food. or they need help with their utilities. this is 2011 in america? we should be helping each other.

i'm sal dimiceli and my mission is to help my fellow americans who have fallen on hard times. in a week i'll receive 20 to 30 letters. >> me and my family are in desperate need of hem. we don't want to homeless. >> i want to verify it's accurate. i want to get them as quickly as possible. >> i tell them how i grew up in poverty and how i understand. >> here's $100 for gas. >> i help people with necessities of daily life. and at the same time, i get them together to do a budget so they can continue to survive. >> i brought this for you so you can go get your wedding band back. >> i want them to feel free of their pain. >> i'm so happy. thank you. >> i want them to feel the compassion that we're trying to share with them, to wrap our arms around them and say, come on. i have a little extra strength i want to share with you. let's get you back on your feet. >> sal and his wisconsin