you have not fixed the real problem. i thought i would spend some of my time trying to find 9 trillion dollars. we have to cut 9 trillion dollars over the next 10 years. what nobody is talking about the reason we are in trouble today is that they have been kicking the can. after being home of the weekend, i said i thought we are at an impasse, dick, in he said he thought we were, too. i said i thought we would take a break, so i went and talked to warner and the other guys, and i said, "let me take a break from this.

maybe you all can do something without me. i am not the easiest guy to work with in the world, and i realize that. i cannot speak for them. i have not been going to the meetings. that asset value is going to be debased. it is the worst on middle income and americans. congress does not make the hard choices. everybody in america will

suffer. the wealthy will suffer, as well. it will not just be as impactful on their lives, but the middle class, their savings, their future will evaporate through the net earnings. inflation will be greater than what you can earn, so that is the real risk. >> one of the reasons the gang of 6 was so were the is that you have people willing to sort of but the party establishment, and there were some conservatives. new revenues have to be part of the equation, and you have a lot for that. .can you talk about that? >> sure. look where we are historically. we are less than 16%. a good portion of that is associated with our economic difficulty that we have had.

we have not quite gotten to where we were in terms of gdp before the recession started, and yet, the tax revenues are still not coming from that, and that is for two reasons. one is that we have not established confidence in the business community that they will go out and spend. there is $3 trillion sitting on the side. the banks will not alone. we still have this inability to create. there is something known as the trust phenomenon, and it has been tested in a number of years, and what it says is you can reach a certain peak at which you tax people, and then you will not collect the tax dollars. they will yvars -- either moved offshore, or they will not invest it. around 20% in 2000 when we have the tech bubble, and we had all of the capital gains. that is one of the reasons we

have a surplus. but is a truism. you're never going to get 20% net taxes. they are not going to do it. it has never happened, and it is not going to happen. that does not mean that is not a case for increasing this. to have people to say you can never do that, even if the lifeblood of our republic depends on it to get a compromise, we will never get the changes we need in the mandatory programs by giving something, and we have to give the revenue. how you do that is important, as well. you can tax everyone aware of $250,000, and it will not help. but you do not want to do is with any revenue increase decrease the investments in the economy more than it has already been. we actually do not help

ourselves. the revenue actually may even go down. but if you change the tax code, where you incentivize capital formation, what you can get is a dynamics or that were sure you can raise somewhere between $750 million to $2 trillion more because people see a fair tax cut was less deductions. >> we were going to have a situation where you reached the agreement that you would have had, i believe, more democrats embracing it been republicans, because republicans, with the exception of a handful of people, they are just less willing to give on the question of revenues now. >> i do not think that is true. i think that is the typical fought in washington. i think the republicans want to

fix our problems just as much as anybody. first of all, they have been burned. you give the revenue increases, -- we have got a deal where we were going to get spending cuts, so i am not worried about that, but the point is, i think a lot of republicans will go there if they think it really solves the problem, and i will go there, but it has to really solve the problem, which goes back to where we have an impasse. significant mandatory programs in a way that is going to create significant savings, you know, everybody is comparing the baseline, and that is fine, but if you break it all out and say here we are today, it is only one to do about half of what people are talking about. it is only about $2 trillion. that does not by as anything. >> before we move to the

question of the mass welfare programs, which is a critical part of the program here, sticking with taxes for just one moment, the deficit over the next 10 years. what is an appropriate level of taxation? 21% of gdp, right now of the historical average 18, regional and >> it is actually about 18.6. the question is, can you put in tax policies that did you above that, and the answer is is if you go back and look of the history, you cannot get above that. there is a whole other group of thought. there have been oversight hearings on all of this waste, the in compensate. the real answer is that we are into things that we should not be doing. we do about the constitutional authority to do that. >> i want to ask you about your

most recent report. thinking of taxes for just a moment, i think this is a critical question. forget about economic growth. they want to see a tax structure that actually raises additional revenue, recognizing the aging population and the retirement programs. can you and your republican colleagues go for the tax reform proposal that does, in fact, increase revenue? >> we have already said that. >> what do you think is appropriate? >> if you get the economy going, you can get to that 18% to 19%. you cannot get to the 20%. to go back to what i said, behavior's change. they will split. they will go where they can predict -- protect that income.

paul sunset the tax code, put in a flat tax for everybody, put in an exception for the very poor and then say we are done with this game. we should do that and put that somewhere between 18% in a 20% to which we can actually of revenues. we are spending 1/40 $1 trillion paying our taxes every year now, and nobody knows whether they are paying them or not. even the irs does not know if you are paying them or not. what we should do is sunset the code and say this is a flat tax. everybody pay at this rate, period, and if you are below this income, you get a rebate. we'll let everybody created the same, and we will have a simple system. it creates pings fair in terms of investment. we cannot get people to let go

of their money now for investment because they do not have any confidence. i think there are all sorts of ways to get that revenue up, but i do not think there is a way with the present tax code, because we have not been able to do that, other than one time. we had 20%, when we had this technology boom where they paid in one year. i will go through and will look at this. i would much rather have a smaller government. not everybody would. but i know we have to pay more for what we have if we're ever going to get reforms. it is called the compromise, so we are going to have to give some on revenues in order to do that. >> your comments on the new york special election this week and whether or not they will get any effect. >> i do not think so.

look. it is a lie to tell people that medicare is going to be the same five years from now. it is not. it is a financial in probability. you do not have to like what paul ryan did, but where is the option? the default option is you're going to have your doctors, less medical care, less procedures, and those decisions are going to be made by boards, not you. >> making the case for the public. >> they have not made that case. that is why i am making it right now. that is what i will do. it is dishonest to tell seniors that the default position is you can have what you can have today. it will not happen. we are at 3.3 million new people per year, my generation. it is an impossibility. the hospital trust fund is estimated to go bust in tenures, right?

it is going to go faster than that. the closer we get, the faster we separate towards no funds. in excess of $100 billion out in the market from the chinese to pay for medicare now. so for people to say, to scare them to say "your medicare is going to go away," it all the way to save this is to change the system, because the default position says somebody in washington is going to tell you what you would get, what technology you will get, and you will not have a doctor who is willing to do it. the only way they can solve it is to cut reimbursement. how many doctors right now. they will reimburse doctors less for medicare than the arabian burt -- reimburse them for medicaid.

it seniors think they want to reimburse their providers at a lower rate than medicaid, they will accept the argument that there will be those who will take less. allowing access for health care. >> we can give you credit for working out the plan and being part of the gang of 6, but it seems clear that the leadership of your party in the democratic party in the senate is not very eager to take on the sort of big issues right now as we're gearing up towards the presidential campaign. you wrote a rather scathing editorial in the newspaper which basically says whistling past the graveyard, and it sounded like you were almost throwing up your hands. >> how do you change things in

america? one of the ways to change things in america is make sure that the american people see it. when you do not have a debate, you do not inform the public, and a great thing about our founders of the senate is that they had great debates about the issues of our data are important to everybody, and now, with c- span, so many people get to read about it and hear about it that you can influence the public understanding, but not having the debate is not an option. versus the first two years we were here, we are at 1/4, and our problems are gigantic compared to seven years ago, and why are we not having a budget? tell me why it is ok for the senate to not have a budget? been going back, the majority leader does not want the votes,

and the minority leader does not want the votes. they are sitting there thinking, "how do we maintain our positions, how we maintain our majorities? and the fact is, it should not matter to the american people who runs the senate as long as there fixing problems, and to not fix the problems sticks a knife into the heart of america. you do not educate the american people on what the problems are. like the new york race. who can spin it for the next election, and that is the real fought in washington. people are more interested in the next election than they are in the long term future of the country. why would i take them on? because it is the right thing to do to save our country. who cares if i do not get reelected? who cares? >> when you left the gang of 6

though, you sort of rocket of a lot of its credibility. >> it does not have credibility if it does not fix the real problem, and that is my problem. if you are not going to fix some of the real problems -- unless you are really willing to address medicare changes or social security changes or medicare changes, that is where 70% of our money is going to go, that and our interest, you are not going to fix the problem. >> this does not have everything i like. i want it to do more. >> the question ought to be asked, opening it for amendments, we have not done that either. in other words, i am not changing my viewpoint. we need to do something.

but i thought where we were going was not going to accomplish that. when i am 63 years of age, when i beat my head against the wall for a. of time, i decide to go do something else. these guys all negotiated in good faith. my position is i do not care what the politics are. i have been just as vocal supporting revenue increases after a left the commission as before. i am not opposed to that, because i think that is the only way to solve our problems and build a consensus in the senate for some of these changes, but i am not want to go for revenue increases if we are not want to fix the problem, so i put this out there for people to shoot at and be critical of. it is like the report we put out today.

it can do about 12% or 13% better every year, and every agency can. that is what congress has failed to do. we create a new program rather than fix the programs that are broken, and we have many during the same thing. i want to fix the problem, and that is hard, and that means you alienate the people who are behind the programs, to make everybody mad but to fix the problem in this country. >> we only have about six minutes left. focusing attention, i'm curious whether you think the joe biden talks are born to produce anything? >> it remains to be seen. the gang of 6 came out with a program, and here is the heir to

that question. it does not matter where we get answers as long as we get answers, so biden and kyl and cantor, we have got to fix the problem. not fixing it, this whole idea of playing chicken, only things happen when you're up against a deadline, and all this says is that that is terrible leadership, it gives you cannot lead based on that. the whole point is, again, everybody is looking past the problem, and i think democrats, independents, and others are sick of that. they are worried about our country. they know we are not meeting the task now. both sides. we are not doing it, and we need to. >> this is totally my

speculation, but it seems as though there has been a decision made where you can only do so much right now. we cannot do $9.70 trillion in deficit reduction. what is politically realistic? >> we have falsely low interest rates today. we are buying them by stealing that from your future assets, and that is $150 billion per year in costs that gives us nothing for every 1%.

if you only do two trillion dollars and that pops in the next year and a half, once you are borrowing money to pay interest on interest, you are in trouble, you know? you cannot get out with a credit card. there is not going to be another credit card company that is going to come to us, and all you have to do is look at the changes in who is buying our debt. look and hal geithner has change in interest rates by changing the maturity, which is very low, to refinance all of that. you are not talking one point or two points. you are talking 3 points or more. some insurance that buys us time to fix the problem. we cannot get $9.70 trillion. i think if the american people understood the waste in the federal government and in the system we have to say no that we can get $9.70 trillion from

that, it does not matter what political party, you would agree with that. >> ok, senator, we need to ask you about something else. it a few weeks ago, one senator was forced to resign. have you tried to convince the senate to stop the affair, and then there was a question about whether or not you were an intermediary or have to get mr. hampton out and whether there should be compensation. >> no, that is a totally inaccurate characterization of what happened. i got a phone call one day, in hampton said if i could communicate a miss in -- a message. i called john, in he said yes. that story is not an actor reflection of what happened. >> ethics complaint has been

filed against it. have they talked to you about that? >> i have testified before the committee. i have no worries. what i did, i would do the same way again. we put two families back together with children, and both families are stable right now. i am proud of the way that i did it. this stories are just stories to be able to try to take away from what the real problems of our countries are. i have no problem with what i did or how i did it. >> senator, we are out of time. "newsmakers" is back. what did you learn? >> i think one of the

significant things we have learned is that he is willing to go and raise taxes. they have been very careful to say they want to reform the tax system, but they want to raise more money for economic growth, but what dr. colborn said today is that that is not going to be enough. i am willing to increase a portion. that is a big change. >> they are calculating a majority position in the senate next time around. >> one of the things he said today, and this is something that everybody knows to be true, if you have a divided government, with a democrat in one and eight " republican in another, it is going to involve taxes and spending cuts, and we go to these budget briefings all of the time, and everybody

assumes that to be true, except for the minority leader and the majority leader of the senate, and various people are hiding behind their political positions, and at least coburn, to his credit, is willing to stand up and take the heat for stating what a lot of people think it to be true. >> the clock ticking on the debt limit. we have the gang out of five. do you see this as some sort of plan? what about this deadline in front of us? >> the way i am reading this signals from others on the hill is that the grand bargain that the gang of 6 was trying to engineer is not a favorite course of action. what people are looking for is a way to get through this debt limit debate, and to do that, they have got to convince a good number of conservatives in the

house that they are tackling the debt problem, but nobody has the stomach now, as we saw in the new york collection, for medicare reform at large, so i think there would to try to get around $1 trillion in spending cuts, as vice president biden said the other day. they are going to look for ways to bring in medicare spending without having to do a total overhaul, and they're going to have to figure out how to deal with this factor of revenue, and they are going to need something. >> why are the democrats -- a victory for their position on medicare, 47% of the vote, and others chose republicans or the tea party, which are even harder on that? >> this is as conservative a

district as you can find in new york state. the republican congressman who was forced to leave office got 73% of the vote and went for mccain, so if you add another 1% for the green party, that is outperforming anything the democrats should have been able to accomplish in that district. >> and medicare was the major issue. >> they were flooding with medicare adds, and in all honesty, the republicans want to and medicare as we know it by turning into this program. it is a lot easier to communicate than the republican message, which is basically if we do not want to do something now, it is unsustainable, and it is going to crowd out -- republicans have not done a good job of communicating that to the average vote.

>> and the conversation with the senator, he has said that the news media is contributing to the revolution in the country because they are focusing on the differences. what is your thinking? >> i think that is true. i'd think this is why everyone believes that once the presidential campaign begins, it is going to be difficult to make progress on these issues. , jewelry this guy bought his wife, whatever, it becomes much less about the issue and more about the individual, and i think this time around, there ought to be a commitment by the news media to explain this. president obama laying out a program for dealing with this debt program. he is committed to that. this is probably an election

where journalists ought to be focused on explaining to people what the problem is and their realistic ways of solving it. >> just a final question. a discussion on what would happen if we reached an impasse when the country defaults, a large effect on the middle- class. do the public understand the ramifications, and accurate is the senator's description? >> i think a lot of people agree with him that it would be really bad if you do not address the debt. as far as the public, they are schizophrenic. they say, "yes, cut spending," but then that is maybe not getting social security until you're 69 or having a smaller benefit than you would otherwise reiv