initially said the footage should not have aired in this context. in this context? this was nothing less than a carefully choreographed fraud. wpri later apologized to viewers for confusion and said they had a lack of judgment. that's it for this edition of "reliable sources." i'm howard kurtz. join us next sunday for another critical look at the media. "state of the union" with candy crowley begins ritd now. it's down to the wire, and a deal on the debt ceiling could be near. today as negotiations wall at the white house continue, where were three of the key players? the man who could cut the final deal, leader of the senate republicans, mitch mcconnell. the democrats' chief message maker chuck schumer and the president's lead economic adviser, gene sperling. then moody's chief economist mark standi to tell us whether a

deal would save the u.s. credit rating. i'm gloria borger in for candy crowley. and this is "state of the union." we're just an hour away from a vote in the senate on a democratic plan to raise the debt limit, but the real action is between the president and the republican senate leader mitch mcconnell. i spoke with him earlier, and he was optimistic about getting a deal. let me get right to it. can you announce this morning that a plan has been reached, there's a deal? >> we're very close. we had a very good day yesterday, both the president and the vice president called me, and the president talked to the speaker, as well. and they understand that with a republican majority in the house and a very row bous republican minority in the senate we have to come together. i think we've made dramatic progress in that direction since april, for example, when the administration, gloria, was asking us to raise the debt

creeling with no spending reductions at all, nothing, just a clean debt ceiling. now i think i can pretty confidently say this debt ceiling increase will avoid default, which is important for everybody in america to know. we're not going to have a default for the first time in our 235-year history. we're not going to have job-killing tax increases. we're going to deal with the problem, which is that the government has been spending too much. we don't think they have this problem because we've been taxing too little. we've been spending too much. i think we're very close to being in a position where hopefully i can recommend to my members they take a serious look at it and support it. >> and get it done when? >> soon. >> today? >> soon. >> okay. >> we're aware that august 2nd is a date of some significance. >> right. let me walk you through an outline of this potential deal. there's been an awful lot of reporting from cnn and elsewhere about what it contains. first the size of the package. over $2 trillion.

yes? >> the entire package? >> the entire package. $2.4 trillion. >> what we're looking at is a $3 trillion package, a combination of discretionary cuts, both cuts now, caps over the next ten years, the whole spending in line, and then we're also going to be voting on a constitutional amendment to balance the budget. now, that is important for the future because it will put some constraints on our spending habits here in washington. also, let me emphasize the joint committee -- in the early stages of this discussion the press was talking about another commission. this is not a commission. this is a powerful joint committee with an equal number of republicans and senate -- equal number of republicans and democrats to not only look at entitlement changes but to make a recommendation back to the senate and house by thanksgiving this year for an up-or-down vote. think of the base closing legislation we passed a few years ago. >> right. >> an up-or-down vote in the

house and senate. >> and we are breaking away from that interview with senator mitch mcconnell to listen to the senate majority leader, harry reid. actions are move so quickly today. let's listen to what he says about the upcoming vote. >> -- ask about military strategy or how a troop drawdown in afghanistan would affect them. no. they ask whether they would pay for republicans to force the united states government to stop paying its bills. a region that has been rocked by violence and plagued by suicide bombers this month and wondered how they would take care of their families if the checks stopped coming next month. let me read a little bit of that that came out yesterday. "half a world away from the capitol, capitol hill deadlock, the debt crisis weighs heavily on troops in afghanistan. and the top question on their minds saturday, even as bombings rocked the city around them, was

one a top united states military officer couldn't answer -- will we get paid?" admiral mullen went on to say, "i don't know the answer to that question. but either way, those soldiers, all of you must continue to work every day." this is really unacceptable. a country as rich and powerful as ours, men and women with bombs going off arnold them, shouldn't wonder if this country would leave them high and dry. this afternoon i've asked those who have said they will never compromise on any terms will think about who their stubbornness will really hurt -- seniors, soldiers, and others. i spoke to the vice president this morning, in fact, a couple of times. he's hopeful. of course we have to be hopeful that we're close to an agreement with republican leaders. the framework of this agreement is based on new ideas and old ideas. after speaking to republican leader mitch mcconnell this

morning, we are cautiously optimistic. there are a number of issues yet to be resolved, and we must understand them. there's no agreement that has been made. but we're optimistic that one can be reached. but we're not there yet. optimism in days past has been really stomped on at various times. major issues still to be resolved, ongoing discussions are something we have to resolved in the next few hours if they're going to be resolved. each of them must be resolved before we have a final agreement. and as we know, one problem can stop the whole agreement from going forward. we must get something done as quickly as possible. i believe all sides are aware of this urgency. it's unfortunate that the house of representatives wasted all last week on legislation they knew would never pass the senate. and, in fact, barely passed the house. it passed the house with only republican votes.

not a single democratic vote. democrats have said all along that we would never agree to a short-term arrangement that would put our economy at risk and force congress into another debt ceiling showdown in a few weeks. we have to move on. debt ceiling for five months. august, september, october, november, and december. five months. we would be back in this same debate in a matter of weeks. we could not allow that to happen. so any agreement has to have a long-term approach. the long-term approach we've taken in the senate, forced here in the senate is absolutely necessary. we must give financial markets confidence this country won't shed its obligations now or in the future. i know that the compromise being discussed at the white house adopts the senate's long-term approach which would give the economy the certainty it needs.

take us past the year -- past january 2013. that has to be done. and that will be done if an agreement is reached. it's also crucial the agreement being crafted set us on the path to fiscal restraint. mr. president, there are still elements to be resolved, and we're watching them very closely. it must include thoughtful continue stranlts on spending. we know that. the 12-member commission i conceived and recommended debt reductions this year will be a fee kooe to that effort. i stay to my friend, the republican leader, i appreciate him wrapping his arms around this and being such a cheerleader for this idea. it's a good idea. it's an idea that congress itself would solve. it would be a joint committee that would move forward, and there would be a trigger that if they didn't resolve this then something else would happen. and based on past experiences, i

think there would be tremendous incentive not to let that certain thing happen and the trigger kick in. so senator mcconnell and i agree the commission owns responsibility to set this country on the path to fiscal accountability. the joint committee, there are no constraints. it can look at any program we have in government. any program. and it has the ability to look at everything, and that's what needs to be done. the commission will ensure we undertake that responsibility. when i thought of this idea about the commission, i knew that it was important it achieve real results. and it will be essential to choose members willing to consider any option, even when the options are tough pills to swallow for both parties. so, mr. president, cooperation is the only way forward. compromise is the only way forward. this is what andrew carnegie said about the virtue of

compromise -- "i shall argue that strong men" -- and since the senate has changed so dramatically -- and strong women, that's me, i stuck that in -- "i shall argue that strong men know when to compromise and that all principles can be compromised to serve a greater principle." andrew carnegie. but perhaps president abraham lincoln said it best when he said this, and i quote, "determine that the thing can and shall be done and then we shall find a way." that's where we are today, mr. president. we must determine that the thing can and shall be done, and then we need to find that way. that's president abraham lincoln. let the chair announce the business for the day. >> under the previous order the leadership time is reserved. under the previous order the senate will resume consideration of the house. >> there we have the senate majority leader harry reid and with me now is wolf blitzer.

you just heard that harry reid said "we are close to an agreement, we are cautiously optimistic." that's what i heard earlier from senator mitch mcconnell. what do you make of it? >> i think harry reid and mitch mcconnell now seem to be on the same page. yesterday at this time they weren't. but they look to be on the same page right now. we still have to hear from the republicans in the house of representatives. speaker john boehner, nancy pelosi, of course the democratic leader, if this is going to pass, whatever they work out, and there's no deal until all aspects of the deal are put together. if it passes, they will lead a majority in the senate and a majority in the house of representatives. a lot of democrats will vote for -- if president is for this, a lot of democrats, most of the democrats, will vote for it in the house, but they'll still need a whole bunch of republicans. i don't think they'll get a majority of the republicans. even if they get a third of the republicans i think they could pass this and the country could move on. >> you heard harry reid talk about a long-term approach through 2013, which is clearly

what the president wanted. but also a committee that seemed very important to mitch mcconnell, and hopefully we can run some more of that, this committee that would provide fiscal restraint for the congress. in other words, forcing the congress to act eventually. >> major cuts, further cuts in spending, potentially cuts in entitlement spending -- medicare, medicaid, social security -- tax revenues potentially could be on the table. tax reform if not complete tax rate hikes. all of that could be on the table if this committee -- and they differentiate a commission like the erskine bowles, al lan simpson commission. this would be a committee, equal number of democrats and republicans from congress that would come up with the recommendations. there would have to be a take it or leave it up-or-down vote in both chambers. if for some reason it didn't pass, mandatory across the board cuts in the military spending, domestic spending, all sorts of spending would go into effect.

>> including entitle ms. the big question we have is where are revenues in all this? we can talk about that in a minute. let's take a quick break. we'll be right back. >> the clerk will call the roll.

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we're taking a look at the picture of the senate floor. the senator from maryland is speaking right now. we just heard from the senate majority leader, harry reid, who told us that he believes they are close to an agreement, which is something that senate mitch mcconnell told us earlier today. i'd like to play for you now, while we're waiting to hear from senator mitch mcconnell on the senate floor, something gene sperling, the director of the national economic council, told me. he said that tax cuts are not on the table for about a year and a half. let's take a listen. thanks for being with us this morning. >> thanks for having me. >> i know you're working around

the clock here. you just heard senator mitch mcconnell, who was talking about $3 trillion deal and absolutely no revenues as a part of it. is that the deal you're working on? >> well, it's not going to surprise you that i'm not going to negotiate here, as much as i'd like to. >> that's too bad. >> or give the exact details. let me tell you what the president believes are the three principles for a compromise. one, that we have a significant down payment on deficit reduction. and as part of his willingness to compromise, he is fine with that being just spending cuts that are mutually acceptable. that second, we come back for a more significant effort at deficit reduction. that would include entitlement reform and tax reform that raises revenues. and, three, that whatever agreement we have, it has to lift the cloud of uncertainty off our economy, off our job creators that has been created not just by the threat of default now but the idea that we would just kick that threat down the road and go through this

whole mess again around the holidays. >> well, you know, it seems to me from talking to both of these senators that there seems to be a deal that has been reached to essentially allow an automatic approval of -- virtually automatic approval of the next installment on the debt ceiling with a vote of disapproval, say, coming from the congress necessary, a super majority. so if that's the case, then you get to the second phase of this, and the second phase of this is the question we've been talking about all morning, which is how do you guarantee that this commission and that congress actually does the job it's supposed to be doing on cutting the deficit? how do you guarantee what the president has been talking about and wants, between revenues and spending cuts? >> i think senator schumer said it well. you want to have an enforcement mechanism, and what that means

when you get a bipartisan group together to aim for deficit reduction you want to make it hard for them to walk away and wash their hands, and you want them to say if nothing happens there will be a tough degree of pain that will take place -- >> sounds like you are talking to your children i might add, but never mind. >> but the important thing that senator schumer said, which is correct, what matters is that enforce m mechanism be an incentive on both sides to compromise. both sides have to fear that enforcement mechanism enough they are willing to come to the table and compromise on an agreement. that happened in 1990 with president bush to avoid an enforcement mechanism, and they came together for a balanced approach. there's no question, the president has been very firm on this, that he's not going to ask in a big deal for all of the burden to go on seniors, on children, on students, on the

middle-class families and then ask nothing of those who are most fortunate in our society. >> so why wouldn't there be a stalemate? >> let's note a couple of things. first of all, nobody is talking about raising any revenues over the next year and a half. in fact, the president, as you know, has been pushing very hard to cut taxes with the payroll tax cut extension for next year, because we want to make sure we're giving this economy as much momentum as possible. but you've also seen a lot of bipartisan consensus, more than is often reported, that you can do a form of tax reform that lowers rates and still raises revenue, contributes to the deficit reduction, and this president believes can be done in a way that asks those who are most fortunate to contribute, not because you're trying to do class warfare but because you want shared sacrifice. and you just simply cannot ask sacrifice from seniors, from middle-class families and not ask the most well-off americans to be part of that. in fact, if you don't, then the

sacrifice on everyone else becomes deeper. that's the message the president will take to the american people in the coming months. >> i just heard you say no revenues for the next year and a half. >> that has always been the president's position. >> wolf, that has been the president's position, correct? no revenues in the short term. >> he said at that news conference a couple weeks ago that even if there were going to be tax reforms and tax increases they wouldn't take effect at least until 2013. in other words, if they raised the tax rate for the highest income earners, those families earning more than $250,000 a year, going back to the clinton rate of 39.6% from the bush rate of 35%, that wouldn't start until 2013. now, there's a lot of republicans and some democrats who will oppose that even in 2013. >> i guess the big question here for the white house and for the democrats is how can they guarantee that in this second round of budget cutting that republicans will sign on to some kind of revenue increases to get

a balance? is that where tax reform comes in? >> well, you know, it depends on what your definition of tax reform, because if they eliminate some outrageous loopholes or subsidies that benefit very, very select, you know, oil industry executives or whatever, they might be able to do that. but at the same time, they're going to have to reduce some corporate profit rates and stuff like that. so they'll finesse it, but it's not going to be easy by any means, especially if you have an equal number of conservative republicans and liberal democrats. for them on this committee to come up with something that they could all accept and recommend it for an up-or-down vote in the house and the senate, it won't be easy. but if they fail, the trigger will be let's say a 4% cut across the board, military spending, domestic spending, and that's very painful far lot of people. >> there has to be something in this for everyone to hate. >> exactly. >> stay with us. we'll be right back. we're looking for live coverage

from the senate floor. we're waiting to hear from senator mitch mcconnell. we've already heard from the senate majority leader, harry reid, and it looks like things are moving along. didn't like high school. and then i met my teacher, mr. mccooey, and that click happened. i would never have even thought about going into the engineering field if it wasn't for these ap classes, these teachers and them helping me realize that this is a major calling in my life. ♪ i didn't always know that i would like math, but now i think it'll change my life.

the chief economist for

moody's analytics was upbeat about how a deal would affect the economy and the marks. i spokeearlier. he was in san francisco. i have to ask you right off the bat, you've been listening this morning. what's your reaction to what you're hearing from mitch mcconnell and senator schumer? >> yeah. great news. i mean, this sounds like we're going to avoid a crisis. $3 trillion in deficit reduction over the next ten years is more than i would have expected. so if they actually follow through on that, i think that's great news. that gets us pretty close to what you might call fiscal sustainability. that's our bogey. that's what we need to to restore sustainability in our fiscal situation. i'm quite excited. if they can pull this off, i think they'll be in good shape. >> how do you think the markets are going to react? >> very positively. i think the marks fully expect they get some kind of deal, that they push the debt creeling to the other side of the election. i think that was the minimum the

marks expected. but this sounds like it's going to go beyond that. and i think this idea of a congressional committee with some teeth and some real pressure to come to an agreement is a very positive step. so i think the markets will react very positively. >> does this pressure, these enforcement mechanisms, triggers, as they're called in washington speak, would that give business markets some sense of certainty that we were going to head on a downward trajectory with the deficit? and is that enough for them to feel certain about their business in the future and how they can operate? >> yes. i think so. obviously, it depends on the details and how they're going to structure this and whether it actually does have teeth and merit. but just listening to the senators, it sounds like they're working to something that's going to be substantive. and i think that will provide enough certainty to businesses.

by the way, that's very important. in my mind, the key reason why this economy really hasn't gotten going and why businesses aren't hiring is because they can't construct a naryive in their mind with respect to how policymakers are going to do this. and i think if they get this narrative this should be very helpful. i think it will be very positive. >> i know you're not a credit rating guru, but do you think this is also enough to kind of avert a downgrade from our aaa status right now? >> well, yes, of course, you know, i'm not in the rating industry. i can't speak for them. but listening to what they have to say i think this would be sufficient, yes. you know, all the rating agencies have different opinions. some may go down a different path. but i think broadly speaking this is -- if it comes close to what they're talking about now, this is substantive and i think it should avoid a downgrade. >> and has all of this spectacle

and endless squabbling already hurt the economy to a certain degree? i mean, has it set us back? >> yes. i think it has. i think one of the reasons why we're not getting the kind of job growth that we need is, you know, businesses are just shell-shocked. you know, i talk to a lot of business people and lots of different industries all over the country. and to the person they are extraordinarily nervous about this. and i think -- you know, they don't lay off workers because of this, but they certainly don't hire workers. and that's what we need. so if they get any kind of clarity on this issue, i think given their profits, given their strong balance sheets, we're going to see them start to step up and more job growth and the economy will star to kick in. this would be very positive. >> you think as a result of this deal, if a deal is indeed reached in the near future, that it will have the effect of creating jobs? >> absolutely. you know, i think the uncertainty of this has been a

pall over the entire economy, and if we lift it, a few months down the road we'll see a much better economy. >> and, wolf, you just heard mark zandi, big difference in the economy, will create jobs, businesses will start to invest. if only they could get this deal. >> he's very upbeat. he says if there's a deal and if you believe mitch mcconnell, and we're wait ing ing to hear from on the senate floor and what he told you earlier, he's optimistic, now harry reid, the majority leader, he says basically the same thing. they're very close, cautiously optimist optimistic. all the details are wrapped up. they still have some work to do. that could be done today or tomorrow. they could obviously get this done. but the most important thing that mark zandi said is if they look like they have a deal, he thinks america's aaa credit rate willing hold firm. >> absolutely. so we're going to stick with this, wolf, and we'll be back in

a minute and watching the senate floor and bring you senator mitch mcconnell.

welcome back to "state of the union." we're monitoring developments

that are very fast moving on the senate floor today. and while we watch that for you, we're going to play for you some of senator mitch mcconnell, who was with me earlier this morning on "state of the union" and had some important news to tell us about the state of the debt limit negotiations. take a look. okay. well, let me walk you through this in stages, and i want to get to that deficit commission, because there are discussions about committee. there are discussions about what would happen if it doesn't do it -- doesn't work. first things first, though. one sticking point has been that the president wanted an absolute guarantee, that we wouldn't go through this kind of a showdown six months from now on the debt ceiling. >> mm-hmm. >> has he gotten his wish on that? is there a way for the debt ceiling to come up again in six months and he gets guaranteed approval of it? >> well, you know, the president has been pretty candid that he was concerned about not having to do this again before his

election. frankly, my members were a little more concerned about getting the job done properly for the american. >> what's the deal? what's the fix? >> you'll see that this is a process that could get him past the election. we're working on the combinations that will get us there. >> would it be a vote of disapproval? in other words, he could just propose it and it would need a super majority to -- >> well, the mechanism for getting a debt ceiling to be increased obviously would be the resolution of disapproval. but, look, we're still working on the parameters of it. we're very, very close to being able to recommend -- i am to my members -- that this is something they ought to be able to support. >> essentially, then, the president gets the ability not to have another showdown. >> i'm very close to being able to recommend to my members that we have an agreement here that i hope they'll consider supporting. >> then the next big area is this debt committee, as you call it. and the question is how do they

guarantee absolutely that you get the kind of deficit reduction you are looking for? because we have had, with all due respect, committees in the past, and they haven't done so well, one very recently. so how do you hold their feet to the fire? there's talk of these triggers to make sure. if they don't do their work, congress will be forced to cut. >> first of all, we haven't had anything like this before. this is a joint committee of congress. it is not a commission that consists of outsiders. a joint committee of congress with an equal number of republicans and democrats. >> right. >> under enormous pressure from the american people, from the markets, foreign countries looking at us to see if we're going to get our house in order, to come up with significant additional savings over and above the initial ones that we will approve before the end of this year and entitlement reform

is absolutely critical. for example, the trustees of the medicare and social security system appointed by the president have said repeatedly, both of these very, very important and essential programs are in serious trouble. >> well, so my reporting is, and i'd like you to talk about what's going on inside the room you're in -- >> i know you'd like for me to do that. >> -- is the question of how do you absolutely guarantee that these cuts come? and as i was saying, there are these triggers people are talking about so that if, for example, they can't agree, let's just say that, then there's talk of across the board spending cuts of as much as 4% in areas like medicare and defense spending. can you talk about these sort of fail-safe mechanisms that would enforce -- >> well, my view is that there

is a mathematical possibility, obviously, that the committee could deadlock. a mathematical possibility. and there has been a lot of discussion with the white house. you're having one of their folks on i think later to talk about it. a lot of discussions over the last week about what do you do if the committee deadlocks. i think it's highly unlikely that will happen, and that something we've been discussing over week and i hope we're on a path to resolving. >> what if? >> we'll let you know. >> i'm going to try again, because the big concern of the democrats, like gene sperling, have been that if the committee deadlocks and you have to come up with these deficit reduction, they want to see a balance. they want to see revenues and spending cuts. is there a way that you can guarantee that revenues would be a part of any kind of overall big second phase of this? >> well, at the risk of frustrating you, let me say

again that the trigger issue has been the one that's locked us in extensive discussions. i thought we had an agreement or were very close to an agreement a week ago today. and then we went off to our separate corners and in my view kind of wasted a week firing volleys back and forth across the capitol. but now i think we're back in the right place, and the trigger issue is one we'll let you know we've agreed to when we've agreed to. >> what's something you want, though? >> we'll let you know what we've done on the trigger announcement when we have it. >> clearly this is the sticking point. can you say the triggers are the sticking point? >> that's been an item of outstanding discussion for over a week. >> and let me go to something you mentioned earlier, which has alleges been a point of some contention, and that is the question of the balanced budget amendment. the people in the house and the speaker's plan wanted a guarantee of passage of the balanced budget amendment. would that be in any deal, or would there just be a guarantee

of a vote on the balanced budget? >> we intend to be voting on the balanced budget amendment in the senate and we'll let you know when that's scheduled. >> as part of this plan? >> we're going to be voting on the balanced budget amendment in the senate. i hope it will pass because that's a good -- >> you're not talking about a guarantee of passage. >> that's an important restraint long term on the government of the united states, which is certainly demonstrating many the last decade it can't get its financial house in order unassisted. >> let's say you have this deal and you get through the whole trigger question. how much of his caucus does john boehner have to deliver? >> you'll have to ask him that question. >> would you xp that he would need to deliver half, though? i mean, looking at the politics of -- >> the best i can tell you is i'm hoping very soon to have an agreement that i can recommend to my members, and we're hoping that we'll have a significant percentage of them support it. >> why would conservatives who want a guarantee of passage of the balanced budget amendment, not just a vote, as you're talking about, but passage, and

deeper cut, why would they sign on to this kind of a deal? >> well, i think conservatives want to cut spending. and at the risk of repeating what i said earlier, back in april, the administration was asking us to raise the debt ceiling cleanly with nothing attached to it at all. we've come a long way. i think this agreement is likely to encompass up $3 trillion in spending reductions, no tax increases that we know will kill jobs, the president made that argument last december when he passed a bill to extend the kurp tax rates for two more years. he understands that tax increases are a job killer, particularly when you have over 9% unemployment. that certainly is not going to be a part of this. >> can you guarantee to conservatives that no tax increases will be a part of this deal. >> we're not going to raise taxes in this deal. i just said that. i'll say it again. there are no tax increases in this bill. >> even if there is tax reform

and closing loopholes, do you consider loopholes -- >> there will be no tax increases in this proposal. look -- >> why do democrats sign on to this then? >> we have over 9% unemployment, gloria. over 9% unemployment. the vast majority of the democrats back last december voted to extend the current tax rates, not to raise taxes on anybody. they understood then, the president understood then it was a job killer to do that. we don't intend to start doing that. that's not what this is about. the government spends too much. it doesn't tax too little. >> why would democrats sign on to a compromise that included potential entitlement cuts but no tax increases? >> you'll have to ask them. if we get an agreement, the president will be supporting it and he will be making the arguments in favor of it and you'll have to ask the democrats about what their motivation might be. >> and we're going to ask that in a moment to senator chuck schumer. one last question. what's it been like to deal with the president and the vice president on this sflefl. >> i like them both. i've had a lot of dealings with

them over the last couple of years. and i'm particularly appreciative we're now back talking to the only person in america who can sign something into law. and that's the president of the united states. >> well, thank you so much, senator mitch mcconnell. thank you for being with us. >> glad to be here. >> maybe next time you'll be able to tell us exactly what deal is. thank you very much. wolf, he didn't tell us exactly what the deal is but he certainly gave us aen ian indication of where they're coming from right now. it looks like the republicans are getting an awful lot of what they wanted. >> the senate republicans are going to be on board, reeld reed is going to have a lot of republican support in the senate. the problem is going to be in the house of representatives where there's going to be a lot of opposition. there were more than 20 house republicans who voted against what the speaker john boehner proposed last week. and there going to be a lot more republicans voting against any

deal that comes forward this time. here's the key difference. most of the democrats will vote in favor of what the president supports. >> so the question is going to be what does the balance have to be between democrats and republicans. john boehner does have moderate republicans -- >> he'll have at least 30 or 40 moderate republicans. he was meeting with that first tuesday group yesterday, the moderate, the centrist republicans in the house of representatives. they will be on board with mitch mcconnell and the president of the united states. but a lot of conservative republicans won't. and normally the speaker doesn't like to have a vote unless he's guaranteed or she's guaranteed more than a majority of their own caucus, 50%. he might not get it, but he's going to have more than enough democrats to get this passed in the house if it comes down to that. >> and that's what gives nancy pelosi a little bargaining power here, as "the wall street journal" pointed out this week, that some of these tea party house republicans were actually giving nancy pelosi more leverage in cutting a deal

because they need her votes now. >> yeah. and they'll get a lot of democrat who is will support -- if the president of the united states, not only the commander in chief but also the leader of the democratic party, if he comes out on television at some point today or tomorrow -- >> so one would have to assume, then, that the senator from illinois believes that the last stimulus package was successful, which was counting interest over a trillion dollars, the senator from illinois and others who advocated the, quote, stimulus package said that we pass this, if we pass this, unemployment will be a maximum of 8%.

this will stimulate our economy and create jobs. and you know what the senator from illinois and others are saying now, it was not enough, that it was not enough, that we didn't spend enough, that we didn't make -- that we didn't make the deficit larger, because certainly nothing in the stimulus package was paid for. so i hope that the senator from illinois understands the american people understand that just spending more money has failed and failed miserably. when you look at the latest news, and it's on the front page of the "wall street journal" and "the washington post" and "the new york times," that our economy is staggering back into a situation of stagnation. i'll be glad to let you respond. the answer on the other side is let's have more spending and let's raise taxes. let's take some more money out

of the taxpayers' pockets in the form of spending more money, their money. it's not the administration's money. it's not the senator from illinois's money. it's the people's money. take more money of theirs. this is the nobel prize -- i won't -- anyway, take more money in taxes and more out of taxpayers' pockets and that will be the answer to our problems. i'd be glad to hear the senator from illinois's response. >> first, i want to thank my colleague from arizona. for those who are witnessing this, this is almost a debate in the united states senate and it rarely happens. i thank you for coming to the floor. and i'd like to -- >> may i say that rather than having you use all our time i thought i would engage in a colloquy. >> i enjoy doing this. go ahead, please. >> first, during the course of your presidential campaign, mark zandi, your economist, helped you form late some positions. his opinion of president obama's stimulus is that it stopped a precipitous decline in our economy. it achieved all we had hoped

for? no. >> can i just interrupt one second on that particular point. mr. zandi was one of many advisers to my campaign. the key adviser was douglas, who, as you know, former head of the cbo, you know him well, who had no really brief whatsoever for that proposal. please go ahead snop the second point i'd like to ask the senator from arizona, i think one of the real bedrock beliefs among republicans is that if you cut taxes, particularly on the wealthiest people in america, the economy will prosper. we hear that over and over again. didn't we try that experiment under president george w. bush? didn't the debt of the united states double under the president and he left a shambles behind him? 2.3 million jobs lost in the first three months of president obama's administration because of this failed economic policy which you continue to espouse, that if we cut taxes on the rich, america is going to get wealthier? haven't we tried it? where are the jobs?

>> could i take a trip down memory lane with my friend from illinois, who i had the great privilege of many years ago, i don't know if i should mention, we came to the house of representatives together, and might recall one of his own, a democrat congressman from texas, got together with president reagan, and guess what we did? we cut taxes, and guess what? we had one of the strongest recoveries in recent history in this country. could i just -- because we didn't start spending and add spending without paying for them. i would say to the senator from illinois, he is correct. the spending that went up in the previous administration was not acceptable and let to the deficit. let me just finish. >> i would also say speaking for myself, i voted against the medicare part d because it was not paid for. i voted against the earmark and pork barrel spending which were abundant as every appropriations

bill came to the floor and dramatically increased spending in the worst way. wasteful and corrupt way i will say. and i'm proud that at least some of us said if you don't stop this spending and get it under control, then you're going to face a serious problem. what i would also mention, and you've seen the char, it's gotzen a lot worse, gotten a lot worse since the last election. and you can't keep biob -- you can't keep up blaming it on bush. go ahead. >> i'd like to respond to my colleague through the chair. does he recall what happened with the reagan tax cuts? because what happened was we tripled the national debt during that period of time, and president reagan came to congress 18 times to extend the deceiling. he holds the record. so to argue the reagan tax cuts led to great long-term prosperity is i think seriously in doubt if you're going to use the deficit as a measure. >> if i could say we believe and

reagan believed cutting tax cuts would restore our economy, which was in the tank thanks to the administration before him. and reagan presided over probably one of the greatest job creation periods in the history of this country. and those are number that i would be glad to insert in the record. compare that with what has happened since this administration took office with the promise that if we passed obama care, if we passed t.a.r.p., all these others that the economy would then be restored and grow. again, it's hard for my dear friend from i'll toil refute the fact that the categorically stated that if we pass the, quote, stimulus package, that unemployment would be at a maximum of 8%. unemployment today is 9.2%. and if you look at any indicator, whether it be housing

starts, whether it be the deficit, whether it be unemployed, whatever it is, it's gotten worse since the stimulus package was passed rather than better. please go ahead. >> would the senator yield for a question? >> i'd be glad to just hear your comment. >> i'm going to give you a chance to speak again. does the senator believe that defaulting on our national debt for the first time in our history, which has been the threat looming over us from the house republicans and others for a long period, is good for america's economy? one of his colleagues on the floor here from the state of pennsylvania has come in and said, listen, defaulting on the debt is not that big a deal. it can be, quote, in his words, easily managed. does the senator from arizona agree with that thinking? >> as the senator may know, i came to the floor a couple days ago and made that comment and that the senator from illinois and i are in agreement. point number one. you can prioritize -- i think the senator -- and every

economist i know would agree. you can prioritize for a while where up what remaining is left. but the message you send to the world, not just the marks but the world, that the united states of america is going to default on its debts is a totally unacceptable scenario and nee a great nation. we are in agreement, number one. >> amen. >> number two is that to insist, to insist that any agreement is based on the passage through the united states senate of a balanced budget amendment to the constitution of the united states, as i said before, is not fair to the american people because the terrible obstructionists on this side of the aisle, their flawed philosophical views about the future of america is not going to allow us to get 20 additional votes from your side assuming that you get all 47, since it

requires 67 votes to pass a balanced budget amendment under the constitution. not only a wrong assessment, it's not fair to the american people to say we can pass a balanced budget amendment to the constitution through the senate at this time. now, maybe after the senator is defeated in the next election and we get rid of a lot of -- maybe that will happen. but certainly let's not tell the american people that that is a possibility today, because i think it raises their expectations in a way that's not fair to them and frankly detracts from what i think is being done as we speak between the leaders, the president, democrat leaders and republican leaders, which is in a very shor time frame. go ahead. >> i would just say it pains me to say that i agree with the senator from arizona, but i do. we both feel that threatening the debt creeling is not in the best interests of the united states, an both of us feel that holding out the threat that if you dope pass a constitutional amendment, you can't let the

economy continue, is really not a good-faith barer gain. i wish senator byrd were here to respond to that particular suggestion. as for my prospects in the next election, i thank the senator from arizona for campaigning against me last time. when he did, limb got 60% of the vote in illinois. i welcome you back to the land of lincoln any time you'd like to come. >> i'd love to come out. i did so well in the presidential campaign in the land of lincoln i'm not so surprised i had such a dramatic impact on the senator from illinois's election, as well. could i just say this kind of discussion i think is important, number one. number two is we should have this national debate on other forums just besides a sunday show and perhaps the floor of the senate is the best place to do that. i want to continue to engage with the senator from illinois. but i hope that this agreement, i hope that this agreement will assure the american people that we will meet our obligations,

that we will meet our obligations not only physically but -- fiscally but also meet our obligations to them to govern. to govern. because they did send us here to govern. i think the senator from illinois would agree with me, the last approval rating of congress i saw, both sides of the aisle was about 16%. and i have yet to encounter anyone in that 16% category in my travels back to my state. and by the way, i would like to note the presence of the budget committee chairman here, senator conrad, who i think has made enormous good-faith efforts to reach an agreement on some of these issues. and i thank him for his work, and i want to assure him his reward will be in heaven, not here on ert et. -- on earth. does the senator from illinois have -- >> i would also like to thank

the senator from arizona for the few minutes we've shared on floor. i really hope more members will do this rather than just taking turns giving speeches. these exchanges, even when we disagree, are valuable. but at the end of the day, i completely agree. we cannot allow our economy to lapse into this default. it will be devastating to a lot of innocent families and businesses across america and it will cost us dearly in terms of our national debt. let us hope we can find this bipartisan agreement that people are working on even at this moment. i hope we can do that soon. incidentally, for the record, former senator allan simpson on the bowles simpson commission said, "ronald reagan raised taxes 11 times in his administration. i was here. i was here. i knew him better than anybody in the room. he was a dear friend and a total realist as to politics." mr. president, i yield the floor. >> could i just remind the senator from illinois that in retrospect the one thing that president reagan said he