then larry kudlow discusses the process involved in raising the debt ceiling. and later, jay powell from the policy center, examines the treasury department's emergency plan to prioritize payments and avoid default if the federal borrowing limit isn't raised by tuesday. "washington journal" is next. >> there are still some very important votes to be taken by members of congress, but i want to announce that the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default. host: president obama at the white house last night, announcing news of a deal to raise the debt limit. welcome to "washington journal" on monday, august 1, 2011. there's just one day till the nation risks defaulting on its debt, but the president and congressional leaders say they've agreed to raise the

amount of money the country can borrow. their deal includes spending cuts, but no new revenue. congress is expected to move forward with a vote today. we'd like to hear your reaction to this deal. democrats, 202-624-1111. republicans, 202-624-1115. independent callers, 202-624-0760. you can call us email us, journal@c-span.org. and we're on twitter, twitter.com/cspanwj. you can also find us on facebook at facebook.com/cspan. we can also read commepts you leave there. let's look at the coverage of this news that emerged last night after 8:00 p.m. eastern time. leaders strike debt deal is the headline in "the washington post," and they broke it into different sections, the talks, how it came about, the agreement, what it includes, and then what's next. what's next is quick votes are

expected, but the house passage is still uncertain as hours tick down. they report -- host: we've got phone calls coming in, so let's get right to the line. our republican line in florida, good morning. caller: hello? host: hi, alvin.

caller: no, this is -- my name is sam. host: sam, welcome to the program. go right ahead. caller: ok. i'm on the republican line, right? host: are you a republican? caller: yes, ma'am. host: great. where you calling from, sam? caller: i'm calling from south carolina. host: so what do you think about this debt deal? are you hearing details at this point? caller: yes, ma'am. host: what do you think? caller: i've got several comments. hope i don't get cut off. anyways, well, i've wanted this thing throughout. i'm a shut-in person, so i might not come across as good on tv, but i'm very interested, and my take on it is that i watch most all these tv stations and the publicity that the tea party republicans in the house are taking, and thee taken a lot of name calling

from senator to senator that's been there forever and everything, democrats, and i think -- i think it's downright despicable the way they are being treated because, for my money -- and i'm on social security and everything, and i get $630 a month -- but they have got more principle than some of them people that's been in there for 30 or 40 years, because they are basically trying to do the right thing for this country, because they see it going down the tubes with this president. and i'm not -- i'm not one of them southern white bigots that anybody from the south is made out to be. president obama is the most dangerous person that's ever come down the pike, in my lifetime. host: let's take a look at the influence from the tea party since you think that's been significant in this process. "the wall street journal" reports the deal bears the stamp of g.o.p. leverage, if not the entire party's support.

host: betty joins outs democrats line from illinois. what city are you calling from, betty? welcome. what do you think about this deal? caller: it amazes me how one group of people could hold america hostage like that. but being a 72-year-old african-american born in the south, greenville, south carolina, my recollection of that was so terrible, i won't even go back. so when i saw the tea party when they first created, the

signs that they carried showing the president, i knew that they would be treacherous for the company. thank you so much. have a good day. good to see you. host: let's look at some of the details, this from "the washington post." the highlight of the deal, the debt ceiling increase, what this all hinged upon. the deal allows the debt ceiling to rise by as much as $2.4 trillion, giving the government borrowing power into the year 2013. it includes about $400 billion immediately, and the rest subject to congressional vote. so the future increases would be assured unless they were rejected by 2/3 of congress. discretionary spending, about a trillion dollars in savings over a decade from discretionary cap. it does not assume savings from winding down the wars in iraq and afghanistan. that was part of the reid plan that was in the works last week. as far as tax cases, there are none in this immediate deal. this plan would create a special committee to identify

additional savings. it would be bipartisan, joined from the house and senate. 12 lawmakers would report their deficit reduction legislation by thanksgiving. that's the end of november. their mandate would be to make recommendations to meaningfully improve short and long-term fiscal imbalance. their goal would be to cut deficit to match dollar for dollar future increases in the debt ceiling with a goal of $1.5 trillion to match future debt ceiling increases. and the recommendations are guaranteed to receive an up or down vote under an expedited parliamentary process. here are the enforcement mechanisms -- if the congress committee fails to result in an approval of at least $1.2 trillion in deficit reduction, there would be automatic, across the board cuts of $1.2 trillion, and that would be enacted in agency budget, split half between domestic programs and half between defense. programs for the poor, including medicaid and social security, would be exempted. but medicare payments to

providers could be hit. and "the washington post" says there would be a vote held on a balanced budget amendment to the constitution, but the deal would not require that the amendment receive the 2/3 vote necessary to send the amendment to the states for ratification. in ohio, jerry on our independent line. good morning. caller: good morning. host: hi. caller: i just want to make a comment on the new debt deal. i think it's a good start. but the study of what to do next in october, we really need some revenue enhancements. and we need to do something about the entitlements. and my feeling is that we should take social security money that's paid in and separate it from the general funds so nobody can borrow from it anymore, and in that sales

tax, that will make up the difference between what's being paid in at this time and what's being paid out, so social security would be self-sustaining, and that will relieve the government of making payments on the $2.5 trillion that they also have, which will help them out and keep social security safe for the future, because if you ask them, it doesn't pay them enough money, and by golly, we can raise it or lower it or whatever, you know? and also, people in congress who have sworn allegiance to this guy should remember the stars and stripes is what we should say our allegiance to, would be loyal to america. thank you for listening to me. host: we'll talk about the influence of grover nor quist in just a moment as we look at

how some of the analysts are declaring winners and losers at this point in the game of course but let's first look at "usa today's" headline, leaders reach a debt deal. but there is a piece that says the political damage is done. lasting consequences for obama, boehner, and others. the last-minute deal that was taking shape sunday is a little like the fire department trucks arriving at a home's roof has been engulfed by flames. it's good they made it, but some real damage has already been done.

host: north carolina, karen on our republican line. good morning. caller: good morning, and thank you so much for c-span. host: thanks for calling. what do you think about this, karen? caller: i think it just stinks. i think it all stinks. host: why? caller: because nobody up there can do anything. here's my idea for deficit reduction. leave out the freshman class, because they had nothing to do with it. everybody else up there that's worth more than a million dollars, we confiscate their wealth. they get up there in washington, they make millions of dollars. we're all here suffering. and they're running around in private jets that they keep demonizing. they need to have some skin in the game, and maybe if they realized that their wealth was going to be confiscated, money they made off of our backs, then maybe they would think about what they're doing twice.

if they had listened to us two years ago and stopped the spending then, we wouldn't be in this mess. it doesn't matter what party you're in, all of them there have got this on their heads. and i'm tired of it. we're working two jobs. i'm ill. i can't take my medications the way i need to. all because they keep talking about more taxes, more taxes, more taxes. we can't pay any more taxes. thank you. host: karen, if you can stick with me here, what about the richest americans, people making over a million dollars -- caller: oh, you mean like jeff immelt, our jobs czar that is shifting jobs to china? and the $6 billion in taxes they didn't have to pay? maybe they need to start looking at what they're doing. this man has no business being our job czar when he has, worldwide, cut 50,000 jobs. they should have paid that $6

billion in taxes last year, but yet he's getting off scot-free. host: so you would like to see the loopholes closed for companies like g.e.? caller: they need to be paying their fair share, and they're not. host: let's go to ohio, jim, democrats line. good morning. caller: good morning. thank you for taking my call. i was very disappointed in when we didn't get hillary clinton, who called the ultraconservative ball, i knew we were going to need a fighter, and we didn't get it with the president. i like him personally, but he's not a fighter. karen sounds more like a democrat than a republican. the republicans are the ones who took the loopholes off the table. did i get all that in? host: got it all in. let's get a comment from twitter. jim writes, no one can get a

deal where they want, so craft a deal where nobody gets anything they want. do you find this deal to be favorable? are you glad it looks like there's something in the works to avoid defaulting on the debt? bill on twitter writes, a reminder here, he says the house has not spoken. a lot of the reporting this morning emphasizes that while the congressional leadership and president obama say there is a deal that's been brokered, it's up to the rank-and-file to actually vote. there is a question at this point of how the house will weigh in. let's look at how the markets are reacting to this news. from singapore, the associated press says world stock markets jump monday after the president announced a last-minute agreement to raise the debt limit and avoid a default. it says that early in europe, the ftse 100 index of leading british shares rose 1%. u.s. stocks looked set to rise strongly this morning. the dow jones industrial futures were up 1.2% in the broader standard & poor's 500 futures climbed 1.1%.

japan's nikkei 225 stock average closed up at 1.3%, and also in south korea, the stock market gained there. florida, i understand pen line. good morning. caller: good morning. host: hi. caller: hi. i've got one thought, and that is -- well, more than one thought. but at this point, i agree with the lady that spoke earlier. the folks that have been inside the loop for the last 30 years have had a lot to do with creating the problem, but i also think, on both sides of the aisle, it is unconscionable some of the name calling and the fear mongering that has been going on, there was a lady that called in a couple of days ago saying that her 93-year-old mother, her health was significantly impacted by the threats of the social security

checks not going out and the disability checks not going out. i think it's kind of interesting that nobody goes back and looks at it from a historical standpoint. when f.d.r. first set up social security, he promised that the participation would be voluntary, that it would only be 1% of their annual income, that the participation or the money that was deducted was going to -- they would get a deduction from their income taxes for that purpose, that it was to be set up as a trust fund independent from the general operating fund and that payments to retirees were never to be taxed as income. yet in 1958, congress, not the president, removed the funds from social security to the

general fund so that congress couldn't spend them. back in -- host: joyce, because we need to move on, what's your takeway from this? caller: my takeway from this is quite simply this is a problem that has come to a crisis point , but has been a long time in developing. host: let's look at a comment on facebook. you can find this at facebook.com/cspan. brian writes, i think the president did a good job of keeping from us default and using partisanship to get the job done and unite congress on a compromise deal. john weighs in on twitter and writes, when a nation rejoices because its leaders have approved borrowing its budget from foreigners, the end is clearly in sight. he does not like the idea of what's going on right now. let's get to michael, republican from south carolina. good morning.

this is all just a dog and pony show. it's been one from the start. they know the outcome before they ever start. it's all for the america people. it's all smoke and mirrors. this is nothing. host: so what do you make of that, michael? caller: i think government is doing just what it's done for the past 50 years, and that is kicking the can down the road. it's for mother congress, it's for the senate. we're headed -- and we're fast on the way. used to be, it was only a little increase. if you look at the debt ceiling, it's been raised 77 times in the past 50 years. host: enrique writes on twitter, no revenues, republicans get their way again. obama appeased them from day

one. this is the result. richmond, virginia, kevin, democratic caller. good morning, kevin. caller: hi. how y'all doing? this is crazy. we voted these people into office to go to d.c. to help the american people, and you sit here and you wait till the last minute -- the reason i'm saying that is because i'm disabled, and by to school, and i'm trying to take care of my mom. my mom is disabled. and then you going to go down there and basically make us feel like we're nothing. you're not speaking, you're acting like children. host: kevin, what would you like to hear that would signal to you that congress is being more responsive? what is it -- caller: this came about, the congress should have came together at first. why are we sitting here waiting until the 12th hour to make a vote for something that's been going on for years and has been

voted on more than one time as long as the president has been in office? bush got it done. go to reagan. he got it done. now obama's in office, and you want to act like children. host: let's go to california. steve on our independent line. good morning. caller: yes, hi, good morning. host: hi there. caller: the biggest thing i'm concerned about is this new sub committee. some people are calling it the super congress, because, to me, it violates basic principles of democracy by putting so much power in this special gang of congress. the president made a quote on the huffington post i'd like to briefly read, he said, what is a super congress? we have an example of similar bodies. the bureau of the ussr. the bureau was made up of the

top members of the central committee. it was responsible and its members subject to the committee. in reality, it was a self-perpetuating body that served as the executive branch of the soviet union and its decisions were forced upon as law. you wind up with this group of 12, and what is the purpose of the rest of them? i believe we need to look at this long-term procedural change that has been pushed through, and i hope you'll do a special show on it. it reminds me of a book, "shocked capitalism." host: let's listen to exactly what steve is talking about. here's the president weighing in on this committee, this group that's going to look for other ways to make cuts or reduce spending or raise revenue. >> establishes a bipartisan committee of congress to report back by november with a proposal to further reduce the deficit, which will then be put before the entire congress for

an up or down vote. in this stage, everything will be on the table. to hold us all accountable for making these reforms, tough cuts that both parties would find objectionable would automatically go into effect if we don't act. hoip president obama speaking last night from the white house briefing room about this deal that's been brokered. at the same time that was going on, house speaker john boehner was addressing his republican caucus in a teleconference, and there are interesting details emerging from that. here are some of the comments that he said. this is from the speaker's office. he said --

host: the speaker said to the conference, now, listen, this isn't the greatest deal in the world, but it shows how much we've changed the terms of the debate in this town. a republican in tennessee, carrie, what do you think? caller: well, i didn't vote for president obama, but the thing is, you know, this stuff's got to stop. wondering what to blame. as far as this deal with the tea party members, i myself, if i was a speaker, i would separate the tea party members from the republican party. you know, they want to represent theirself as a certain brand called the tea party. well, let them take that

designation like independents, like democrats, you know, get them out of the republican caucus and let it go from there. because all they're doing is working down the republican party. you know, ear you got a certain group of people that personally i don't think they have a clue. host: let's look at a power point presentation by the speaker's office. here's one of the details, no tax hikes in this agreement. the framework includes no tax hikes. under the framework, the joint committee of congress will work off a current law baseline as required by the 1974 budget act, effectively making it impossible for the joint committee to increase taxes. florida, judith on the democrats line. judith, what do you think of the democrats? there's a bit of coverage today saying that liberals are not happy with this deal, they did not get what they wanted. caller: i think the democrat

party is looking back and saying, where do we want our country to go and what we want our country to be? our country seems to be all for defense. there's nothing for the american people. they're not taking care of the american people. and if we don't do something, we're going under. if all we've got to do is pay $55 billion for a self bomber and they can't pay to take care of the i understand gent and the people that -- indigent and the people that can't do in this country, something is wrong. how many bombs did we blow up in iraq? host: let's look at this comment coming to us over email, so no one is talking about the 500-pound gore ale in the room -- rather, that's not in the room, the lack of jobs. our manufacturing base is gone. we need to change the fair trade deals, increase tariffs, increase jobs. you can submit your comments by

email to journal@c-span.org. robert writes, no man ever gaped a fortune by being robbed and caving in to the bully gives incentive to do more. those fear sharing cralms with their neighbors while giving their leaders the whole pie. let's look at some of the details about this panel, this committee that will work together, the bipartisan congressional committee. here's a piece from "the wall street journal," it says the panel will be a test of political will. john writes, will this time be different?

type folks are saying that this committee would be sort of like a brass commission, and here's mckinnon weighing in on that -- host: virginia, bob on our independent line. good morning. caller: well, i'm disappointed again that the democrats have been over and let the republicans have their way. host: bob, let's keep it clean, but tell us what you don't like about it. caller: well, they're not going to tax the wealthiest people in this country or the big corporations or mega corporations, and that's just the way it is. i mean, main street is just falling to pieces down here, and all they want to do is cut,

cut, cut the social security. it's not right. but here's my opinion. i think that they ought to take the oil companies and let the government run them and take off, find all the white collar workers and keep the blue-collar workers, use the profits to keep this country in the shape that it would be the best country in the world, and we wouldn't have to worry about not having enough money for the elderly and everything else. the greediest corporations in the world are the oil companies , and the only thing main street can do is baseball bats and bullets to get them crooks out of warbesdz. host: let's take a look at comments that minority leader mitch mcconnell in the senate made yesterday evening discussing the deal. >> this is an important moment for our country. i appreciate majority leader's comments and want to say a few words to our colleagues who've been so patient over the past several days. and whose ideas and encouragement have been so

helpful in getting us to this point. first of all, let me reiterate before my agreement is reached, republicans will meet to discuss the framework that the white house and congressional leaders in both parties think would meet our stated efforts to cut spending more than the president's requested debt ceiling increase, prevent a national default, and protect the economy from tax increases. and to that end, i'd like to say to my republican colleagues that we'll be holding a conference meeting in the morning to discuss the framework and to give everyone a chance to weigh in. but at this point, i think i can say with a high degree of confidence that there is now a framework to review that will ensure significant cuts in washington spending. and we can assure the american people tonight that the united states of america will not, for the first time in our history, default on its obligations. host: senate minority leader mitch mcconnell.

let's take a look at how the minority leader in this house is weighing in. nancy pelosi, this is from the state column website -- host: definitely not praise for this deal coming from minority leader nancy pelosi. here's how rose weighs in over email. she says, i'm so disgusted that the democrats didn't get any revenues added in that deal. it seems like the republicans have won this fight. to me, cuts, along with some revenue, would have been a better compromise. i really feel for president obama. i wouldn't want his job for all the money in the world. let's go to oklahoma.

christina, republican. hi there. caller: hi, i am a republican, but i think i feel like the rest of the country. most respects want absolutely nothing to do with -- most republicans want absolutely nothing to do with all of this tea party nonsons. my husband served a tour in iraq, and he's over 100% disabled because of his service. i have two brothers with 15 years combined service in the army. one of them received a purple heart after being hit with shrapnel. for all the nonsense and the games that the politicians and this joke, they turned an active government into a common circus, and how dare they play these games and leave the soldiers wondering if they're going to have money, if their families are going to be taken care of, if their children are going to be taken care of. that's disgraceful. they think that they saved the day by coming in at the last hour and making a vote, and now everything's going to be fine.

and that is not the case. they should all be ashamed of themselves for putting one ounce of worry or stress on their shoulders. they talk about what they're going to give to this department or that department or cut here or cut there. all of the soldiers i know give every day. they stand up for their responsibilities, they answer the calls. maybe, just maybe, half these politicians could stand back and take a lesson. what they require of their soldiers, they can't even manage to do themselves. all they talked about was budget and cuts and things that needed to be accomplished. how many times was it said that it was over 800 days without a budget and nobody decided that that wasn't important enough to do something? they wanted to wait until the last minute and play very dangerous -- i don't know how anybody in this country could be pleased with what they're claiming to accomplish. host: here's a comment that echos what you're saying. jim writes, the only way this is going to get resolved was for both sides to be disappointed in the deal.

coming out this morning on "washington journal," we'll talk with jay powell, bipartisan center. we'll also hear from a roundtable of reporters. that's coming up next, weighing in on what this all means and giving us the latest news. we'll also this morning hear from larry kudlow about some of the economic implications of what's going on. we'll be right back.

>> my term as f.b.i. director is due to expire later this summer. however, in early may, the president asked if i would be willing to serve an additional two years. >> for the first time since the death of j. edgar hoover in 1972, congress approved and president obama signed into law legislation allowing f.b.i. chief robert mueller to remain in his post an extra two years. congress limited terms to 10 years after hoover led the f.b.i. and its predecessor for 48. learn more about j. edgar hoover, the f.b.i., and robert mueller online at the c-span video library. search, watch, clip, and share. it's washington your way. >> that figure that's moving the veil of ignorance from human understanding, that's an american invention. it's sort of classical for what it really is all about. >> if you missed the latest

documentary, "the library of congress," there's a preview right now c-span's youtube channel. become a subscriber. it's free. be notified of all the latest videos poor posting, and watching the entire library of congress documentary and hundreds of other timely videos online at youtube.com/cspan. with titles like "flander" "godless," "guilty," and demonic," ann coulter has something to say. subpoenaed, your chance to talk to, email, and tweet the "new york times" best seling author and columnist, "in depth" live on book tv on c-span2. the supreme court is now available as a standard and enhanced e-book and tells the story of the court throughout eyes of the justices themselves. 11 original c-span interviews with current and retired justices this. new addition book includes an interview with the newest justice, elena kagan, and with the enhanced e-book, add to

your experience by watching clips from all the justices. c-span's "the supreme court," available now wherever e-books are sold. "washington journal" continues. host: carrie budoff brown is here, and larry lerer is a bloomberg news staff writer, both joining us to talk about the debt compromise that was reached. where were the two of you last knit as this was being worked on? guest: i was at the white house waiting all day, figuring that something would happen a little bit sooner than it did. we were held up for quite a bit of time. lisa can actually speak to this. you might have been on the other end. guest: i was on the hill waiting all day as well. and, you know, sort of a lot of waiting for them to come out of meetings and seeing who was going into whose offices and where was john boehner and sort of watching the final negotiations as they racesed to hash it out. caller: carrie, the president came out and gave comments after 8:00 last night. was that really the first

moment that it seemed like progress had been made, so to speak, that a deal was really in the works? guest: honestly, it was definitely earlier in the day when we started hearing that the leaders, every leader exetcht john bane her signed off on this deal. we thought that maybe mid-afternoon. but i think we would have expected something to happen just a little bit quicker, so once a couple of hours had passed and the speaker still had not signed on, there was still not a conference call, there was some concern that was raised within the west wing that something was holding it up. and then, you know, maybe only around half an hour before it came out was it clear, harry reid saying he supported it, that, you know, we would be hearing from the president pretty quickly. host: and here are pictures that describe the scene you're talking about. here's mitch mcconnell walking to the senate floor talking about a deal, and he's surrounded by reporters. we have other pictures from

"the washington post," i'll throw this one up, that shows a similar scene here. senator dick durbin, democrat of illinois, surrounded by reporters as he's going through the capitol hill. so there must have been a sense of a lot of interest. and how are you getting information about what was going on? was it when people were coming out of meetings? how were you learning about deals or things happening and in the works? guest: well, it wasn't all that different from any kind of reporting. it was just faster and more condensed. i was talking to aides or getting reports from the meetings, grabbing lawmakers as they came in and out so. about what exactly wast-lipped on, and i think it's for the reasons that carrie was pointing out, that they were all waiting until things were finalized. because i think this is a high-stakes political game for both parties, and i think both democrats and republicans knew that there would be a bit of a backlash from their own members, and they want to make sure they had all their ducks in a row before they confronted

that wave of anger. host: lisa lerer has this piece today, party leaders confront skeptics among the ranks in the debt deal. you say the leaders in the democrat and republican ranks have finally reached an agreement, but now they must sell it to their parties and quickly, recognizing there's plenty of members -- rather, there's pleasant that i members won't like about the plan. who is it going to be hardest to sell this to? guest: i actually think it might be hardest for democrats. i think republicans went into this stage of the debate saying, ok, there's a certain number of our members that we know we're just not going to get, guys who are really, you know, strong tea party folks. people like michele balkman who don't want to vote for any increase in the debt ceiling. it's hard to find a deal that she's going to support when she doesn't to want raise the debt ceiling. for democrats, there's really a sense among liberal groups and among democratic lawmakers that they got a bit rolled on this deal, and that president obama didn't quite go to the mat for them as hard as they would like, and their big gripe, of

course, is the deal includes no tax revenues. that's a big problem. i think carrie can certainly speak better to this than i could, but i think the president is really going to have to sell this. guest: he is, and part of yesterday, democrats were coming out very strongly against it, and the white house aides were saying this is based on incomplete information, faulty reporting, really, from some information that had come out the night before. and they they felt when they briefed us last night that once democrats learned the details of this, they would become more comfortable. and there are certain things we're going to hear them talking about. they're going to say, we protected social security, medicaid, any programs for low-income families. if there is a trigger that kicks in for automatic cut for medicare, it will hit providers, not beneficiaries. that called some nerves yesterday on the hill, the fact it was not going to be beneficiaries. and they'll argue there's equally -- the tax cuts expire for the wealthy around the same

time that the cuts, if they're triggered, those would hit. the administration thinks there's an incentive there that forces congress to look at this as a global problem when the committee convenes later this year. he'll still have a lever to use. thunderstorm their rationale. even though, this is a tough road selling this. guest: yeah, certainly by the response to the plan by nancy pelosi in the house, she released one statement, or maybe a two-statement response, it was pretty terse and didn't seem all that happy. this is right after harry reid had come and mitch mcconnell had said everyone's signed occupy this, and she comes out with a two-sentence response. i think there will be griping, and we'll be there to get it. host: carrie budoff brown wrote this in a piece. at 4:45 this morning, that's when it was filed, you guys have been burning the midnight oil, you wrote that obama

appearing sunday night in the white house briefing room seemed more disgusted than delighted. let's take a listen to president obama and the comments he made last night. >> despite what some republicans have argued, i believe we have to ask the wealthiest americans and biggest corporation toss pay their fair share by giving up tax breaks and special deductions. despite what some in my own party have argued, inning we need to make modest adjustment toss medicare to ensure they're still around for future generations. host: that was president obama speaking last night. carrie, what was it about the president's demeanor that made him seem more disgusted than delighted? guest: this was not an easy process for him. today give out a lot along the way. he had to renege on some things, and i really think he was very disenchanted by what happened with speaker boehner a few weeks ago with the grand

bargain, how they weren't able to close the deal. this is as good of a deal they could have gotten, but this is not where the president in august the year before re-election, where not the issues, this is maybe going to help him with independents, but he knows the blowback he's going to receive from democrats, the selling job he has to do. officials will indicate he will have to travel, try to sell this beyond washington. it's been a difficult road for him. you could see it on his face last night. host: let's hear from richard from act con, ohio. good morning. caller: good morning. how you ladies doing? host: we're well, thanks. go right ahead. caller: awesome. the reason why i'm calling is to let the american people understand that president obama is really trying to get it

right. and the republicans are just showboating and shame on them. because where were they when -- they were trying to get fiscally correct now. where were they when president bush was spending like crazy? they weren't financially responsible then. what makes the difference now? host: richard is saying who wins and loses politically in this? what is the white house's concern of how the president learning? guest: the caller speaks to the frustration the white house has had, which is they feel -- even though they've contributed to this debt, accruing this debt the last few years, george bush bears equal burden, and they've been frustrated that he's the one that is now having to deal with this. in terms of who wins and loses, i think the president, politically for him, it is --

the conventional wisdom is that it's a win for him. deficit reduction plays well with independents, and getting -- being fiscally responsible plays well with independents. less him to a certain extent in the november election, this may help them bring that back. however, you know, there's a real threat of disenchantment with the liberal base and the fact that there's still murmurrings of a primary challenger to him. nobody knows who that would be, how that person would fare. no one thinks that person would actually beat barack obama, but it's enough that -- you have examples from history, jimmy carter and ted kennedy weakening the candidates and the white house has been furiously trying to lock down their base in recent weeks, paying more attention to them private until conference calls, outreach, hoping to tamp down any kind of blowbacks they're going to leave.

host: lisa, what is the political calculation on the hill as far as who are the winners and losers? guest: this debate over who's responsible is definitely going on, and we did a piece at bloomberg that shows that if you take the wars, the bush tax cuts, tarp, and the changes to prescription drugs, republicans contributed $3.5 trillion to the deficit. republicans, of course, democrats love that number. they jumped all over that number. republicans, of course, argue that, if you look at the percentage of spending under president obama, it went up dramatically. so the truth is both sides are to blame for this increase in the debt, this dramatic increase in the debt. i think people realize that. if you look at polling numbers for congress, really nobody comes out ahead, and congress' approval ratings, which were already pretty low, are lower now. i don't know that anyone looks particularly good on capitol hill when these negotiations stretch out and take them to the very last minute. and certainly from an investor standpoint, investors i've been speaking with have said, well, you know, we expect that

something will get done, we just know how congress operates and we think it's going to be happening at the very last minute. they were pretty much right. i think that that kind of way of handling these crises, and there seems to be one every couple of months, i think people are getting pretty fed up with that. host: the winners, the republican party on substance, they won this debate. they came, you know, if you just look at what the president said, six months ago he wants the vote, he has to have tax revenue, john boehner says i want dollar for dollar for the cuts and debt limit increase. republicans changed the debate. earlier the president wanted to talk about job creation, investment. that's not happening. it's on the republican terms. they really did change that debate in washington. and, you know, probably for the next year and a half. host: let's go to san francisco, where tim is on our independent line. go ahead, tim. caller: hi. thanks for taking my call. i was actually going to say very similar points to what you

were just saying about how the republicans came out on top on this one with no tax revenue and then, of course, the increase in the debt limit. i was just kind of confused by the whole argument. i feel like the media missed the idea that the size of the u.s. economy is going to keep growing and that the debt ceiling will have to be lifted in the future again, where it's at the same point as far as percentage to g.d.p. i think it's definitely an inflexion point. i think it's a time for the u.s. to kind of rehash the way that it collects taxes and sets up its codes, and i think in the future we're going to get back to the same point and probably end up with another boiling point as far as trying to cross another consensus as far as the debt limit and trying to appease our world investors. host: let's go to lisa. caller: that's definitely people on capitol hill have been talking about, it's the new normal. the debt ceiling has been

raised many, many times, without this much drama and conflict surrounding it. is this what we're going to see every time? because we are going to have to raise the debt ceiling again. a lot of issues tim is pointing out, the hill is anticipating tax reform or something like that. but on the republican point, what's interesting to me about that, certainly a lot of people view this deal and say the republicans came out ahead, and i think that's right. i think they have changed the conversation here in washington. but what's interesting is that many in the base don't think so. there's a lot of republican groups and republican voters, tea party groups unhappy with this deal. i think that's because this class came in with such big promises and such big expectations. we'll have to see whether voters feel they meant that, even though democrats are very unhappy with the deal. host: let's go to the latest news from the a.p. john mccain says he'll vote for compromise legislation averting a government default, although "i'll probably have to swallow

hard." the arizona republican says he's concerned about the impact of the deal on defense spending. tell us about defense spending, lisa. guest: this is a major, major issue for the republicans, and it's in part what held up the deal for those last few hours yesterday. speaker john boehner was really worried about the level of defense spending. defense spending cuts are a trigger in this, so if the committee that's set up can't get the deficit reductions that they have required in order to raise it again in the fall, if that doesn't happen, they'll make deep cuts. and that concerns a lot of people, particularly on the house, a lot of republicans. guest: and that will be a big issue on the senate side, too. the one thing that the republican party -- there is a faction in the republican party that is willing to make defense cuts. so it's not as much of a sacred

cow as it was 20, 30 years ago. there's a lot of folks who think there's a lot of fat in the defense department, in the pentagon. there's some concern with democrats yesterday that is defense really the kind of trigger that's really going to scare republicans back to the table like it would have 25 years ago? i think the reaction and the holdup yesterday in the house republican conference kind of answer that is question to a certain extent. republicans do view it as something they have to go to the mat for, so it may have been the right trigger, at least to get conservatives back to the table and cut a deal. host: let's look at some of the details of this debt deal that was hammered out yesterday, and this is coming to us from the white house, a fact sheet from the white house. it would increase the debt limit by at least $2.5 trillion. sources are saying that number could be $2 trillion. nearly $1 trillion in cuts over a decade, and that includes defense and nondefense spending. it creates a committee to find $1.5 trillion more in either savings cuts, including

entitlements and tax reform. the committee has to rereport the legislation by thanksgiving. if the committee fails, the enforcement mechanism kicks in, triggering reductions in 2013, and that would be half of domestic and half defense spending. what is protected, not on the table at that point if this mechanism kicks in, social security, medicare, and low-income programs. tim, republican in alabama. good morning. caller: how y'all doing? i've been watching this show and i've been trying to get in on this show a whole lot, and i watch a lot of people say things such as, oh, how bad the tea party's done. y'all,y really been impressed with them boys. they finally got things brought out, they finally got things done. you can actually see -- and

even though the bunch that's been there so long don't like change worth a crap, i've been impressed with them. i like what they're doing. i hope everybody's up for election in 2012 and gets ousted by somebody like them. it's the best thing that's happened to this country. host: tim, did you want to see the debt ceiling raised or were you willing to let default happen? caller: i was really affected more by what's happening in the stock market than i am by a job. you hear me saying this right here. they're spending way too much money. they talk about bush. bush spent $1.37 trillion, that's a heck after lot of money, and that's something the ordinary person couldn't fathom as far as looking at that much money. guest: i think the caller speaks to the point that i was

making earlier. the change in the conversation in washington is just -- it's so stark from where it was eight months sexag where the president was when he gave his state of the union address, he did not enforce the official recommendations. i did the story a couple of months ago, talking to white house aides, explaining they were not explaining the report. this is back in march. they were saying, listen, americans are concerned about jobs, washington is concerned about the deficit. we're going to say concerned on what americans are focused on, jobs. well, the two things -- they couldn't sustain that line of argument, in part because there's a block of republican in the white house and in the senate who ran on not raising the debt limit. they stuck to it. and that's what they ran on, people knew what they were coming here to do, and they did it. so that forced the president. united states to change tack and embrace deficit reduction. unless the tea party was there

saying what they were doing, i'm not sure that this deal would have happened in the magnitude it did. join joe writes, he thinks it's crazy they're not experiencing a tax raise as part of this deal. they just make more money and don't pay taxes. really odd. guest: lisa, taxes are not on the table with this. how big of a blow is that to liberals and to the prospect of seeing that happen at any point in the neck couple of years? >> well, liberal are certainly treating it like that. there's a lot of outcry by that particular issue. they felt the president had say from the beginning that he thinks that we need to raise revenues and it has to be part of this equation. that was something that republicans, particularly the tea party members, really united against. it's been a big blow for them. the question is what happens when the bush tax cuts expire, and that will give the white house an opportunity to raise

taxes and to get the revenue increases that they've been seeking. it will be after the election, expires after the election. guest: there was some debate several weeks ago as to whether the committee would even be able to tax reform or brakes. there are no restrictions, tax t this could be part of the equate, and the president has been clear privately, as follows publicly, that he's not happy about the tax revenue being not being a part of it and feels as if he needs to have tax revenue sooner or later. so, i mean, this debate over taxes is like in no way settled today. it is only going to continue, and it is going to be a huge, huge, huge issue as this committee works through. you're going to have democrats who are going to double down, and it's going to be a clash just like we've seen. guest: the bush tax cuts are

set to expire right after the 2012 election. if they expire, it would raise taxes for a lot of americans, like last year, letting them expire for a certain bracket or perhaps that would be a negotiating point for taxing the wealthiest. guest: it's something republicans had a lot of concerns with. when john boehner last night briefed his members on a conference call -- and this was something that came up quite a bit. a lot of people asked, well, what if this committee decides to look at revenues, and they anticipate that's something democrats will want to do, and republicans don't want to be put in a political position of either voting for the tax ref that he says recommended by this committee or facing the deep defense cuts. they feel that would be tough. so they were not very happy about that outcome. host: robert on our line, good morning. caller: yeah, good morning. go ahead, sir. caller: people better wake up

and see what's going on. this republican party is not interested in nothing but one thing, holding taxes down in order to try to make obama look bad come 2012 so they can get re-elected, because they got on tv and lied during the 2010 election, but they going to pull the plug, force you to go to some other dock, and where are the fogs? they fish long enough that the republican party going to get in there and create jobs, but they are not intending to create any jobs until the election time. and then here we go again all over again, same identical thing, and people are dumb enough to fall for their tricks. caller: carrie? >> yeah, the jobs issue, this is a big reason which republicans spoke to, it's a big reason why the president was so adamant about getting this done tuesday. i mean, talk of the 14th amendment, invoking that, short-term extensions, it was just not where the white house

is wanting to go, because quite frankly, they needed to get this over with so he can move on to talk about swrobs and the economy. the wall street reform bill, it was the year anniversary two weeks ago. the alleged miss couldn't even talk about it. they didn't even try to talk about it. that was considered a big win for them, and they couldn't even talk about it. so that's the kind of stuff that has been preventing this president from kind of moving on. so, like, tuesday was just so important to them to get to that because of exactly what the caller is talking about. his re-election next year will depend on whether jobs are being created, the economy is moving along, and there are a lot of people who don't believe what happened today is necessarily going to help with that. guest: i do think he's in a tough position on jobs, but for republicans, and although there's no question that they won this debate and the tea party came out as a pretty potent force, there is a question how that plays in the elections. when you look at polling,

people say, oh, we want cuts, we want to cut government spending, we want to reduce the deficit. but when you ask what types of reductions, they would like to see, people don't want entitlement programs like social security or medicare cut. they don't want funding for alzheimer's cut. they don't want regulation of food and drugs cut. so i think there is going to be this question of whether people really want the results of this. when their schools start falling down, bus service, local jurisdictions can't afford to keep street let's on, who's going get blamed for that, and could that backfire? that's something that everyone's watching to see when they get to the elections or close to them. >> she has covered campaigns in congress. she also worked for forbes dot com.

she also worked for political covering health care and national politics. her experience includes time at the philadelphia inquirer. when you have been talking to members of congress over the last week or two, what about reaching the debt ceiling and a not going over the debt limit? and who are you hearing from? some republicans are very concerned that they were separating themselves from the tea party message a. guest: the democrats are concerned.

some members feel that it does not have to be raised. some felt that you could go a week or so beyond the deadline and everything would be ok. there were some members with a very strong financial services industry that it did not want to go past this deadline or be at risk. it was tough for speaker boehner to get the votes. and john mccain on the floor of the senate quoted an op ed. host: there is an op ed piece in

the "washington post" today. he says what a difference a week and makes. he says it is winning the battle of ideas. how does the white house fight against that? guest: they have gone in full fighting mode. they have their officials out. look at the record. he looks at the details of the agreement. the social safety net not being damaged, so security, medicare. democrats have had an issue with

the way this debate has developed. the economy is fragile. it is sputtering along. state governments will be hit hard as the stimulus retracts. it will only get more gramm in the view of democrats, now that we have this package in place. host: florida, independent line. caller: i am 77 years old. i was a lifelong democrat. i am an independent now. i am wondering why the writers and even c-span, but when they re tobama's speech on thei

support this and not one reporter went behind that with his speech he made in 2006 condemning george bush for raising the debt limit. that is why we do not trust anybody in washington, d.c. anymore. guest: i do not know anybody that looks at this debate and thinks it is good. people are frustrated. it went down to the wire. it is not looking very good. i heard this last weekend. [inaudible] people were blaming washington

in general. maybe there were more frustrated with republicans or democrats, but everyone was frustrated. people are really struggling out there. they are losing their jobs. they are not saying congress and this president deal with that. the frustration will come even louder. guest: especially with the 2006 vote. the white house said it was a mistake and he voted against the debt limit. is this the new normal in washington? if a republican to expect the white house in 2013 -- i do not think anybody should be surprised if the democrats use that as leverage in a similar way.

it is a tit-for-tat town. this may be the new normal as long as spending is a concern and job recovery is a concern. they may use the debt limit to extract things out of it. guest: it is sad for both parties. there are many people on both sides of the aisle that flip- flop. guest: when the democrats are in power, republicans vote against it and vice versa. guest: i spoke to one person that said he voted this appleton's not to raise it. is that typical? guest: yes. caller: he played a tape of the

president earlier in the show and he suggested that the rich should pay their fair share. i am wondering if you could enlighten us as to what the breakdown is in terms of contributions to the taxes of the federal government's from the different classis. the poor, the middle class, and the rich. thanks. guest: i do not expected to have all of the facts in your head. who are we talking about when you mention the richest americans? the debate seems to be more about millionaires and billionaires. has the target shifted? guest: the president made a campaign promise that he would not raise taxes on anyone who made less than $250,000.

there are towns like new york city, washington, d.c., where two. household incomes made that, but it is not considered rich. guest: the problem is regional in a lot of ways. in metropolitan areas, there are certain promises people are expecting. sending your child to college, those costs have skyrocketed. buying a home, that was very high for a while. saving for retirement, people to not feel that social security will be there for them.

in certain areas, they say it is not that much, but other parts of the country say it is a lot of money. host: do you sense retraction when it comes to taxing the wealthiest americans? guest: a lot of people support that. it is an issue -- democrats struggle. if they have a winning issue, they are reluctant to go down that road. the president accepted tax cuts to the wealthy and middle-class. he said it clearly that he will not support it for the high- income americans and will veto that bill. why are people supposed to believe you, when he said that

the last time? the economy was different back then. it will be different from a year from now. guest: no new tax increase pledge, which put some in a tough spot. if they do, they will be hammered by conservative groups. it is a tough spot for them. host: editor and publisher of the "nation" magazine. the debt ceiling debate has lasted long enough for most americans to start paying attention and realize how to force both parties are from basic common sense.

this is a liberal magazine. she also writes that whatever the terms of the original agreement, we know they will be remarkably cool, in the sense that they will cut programs for the most vulnerable in our society. has there been a lot of discussion about where these cuts will come from and what they will look like a ta? guest: we have not seen details of the first dollars trillion -- trillion dollars. it will be right over 10 years. the cuts will not go into effect for a number of years. if we do not really know where these cuts are coming from it will be in discretionary spending.

guest: it is a disproportionate amounts for the epa. it is expected to get another hit. host: maria, a democratic caller. caller: i would definitely check for obama. he did not lose his cool. i could see bush or clinton come out and saying he would exercise the 14th amendment, which probably would have store -- stirred up more drama. they see through the republican party.

congress gave them a raise. they can give themselves a $3,000 raise. i think people are beginning to see through, that is why i would vote for obama again. guest: that wanted the president to be portrayed as the adult in the room. he ran on the idea that he could bring together warring factions and come out with a compromise. that is his brand. he was unable to accomplish this. it is perceived that way to some people. in the end, he got a deal that

is not small but the big. that perception -- it happens politically. guest: he does. tried to rise above the fray. he did not want to get sucked into that for sure. we will see what happens now that everything had is almost settled. the issue what happens to the democratic space, the people that voted for you and gave small, but -- contributions.

will they still go to grass roots organizing in ohio or florida? that will be a big issue. guest: he runs the risk in what does he stand for? we do not really know what narrative is going to dominate. what will dominate about him. or is he the guy that will cut a deal no matter what. guest: part of it will depend on the presidential nominee. host: lisa lerer a staff

writer with bloomberg news. we are speaking about raising the debt ceiling in cutting spending. is this a done deal? we do not know how the house will vote. guest: it looks pretty good in the senate. house republican leaders newt is certain number of their caucus -- it it did not matter the deal. nothing that democrats would agree to -- the republicans on the democratic side, there are a number that are frustrated and camel while details were emerging. -- came out while details were

emerging. i suspect it will come for. in the end, there are enough people in congress worrying about what will happen. the trick is getting half the republicans to vote for it. it will put him in a good spot politically. guest: they do not have many other options. host: utah, good morning. caller: i am 57 years old and worked in politics for quite a few years. i got out of it about 12 years ago. i feel like the one thing the medium, not c-span. i love this forum, because it gives people a chance to get their ideas out.

mainstream media has been allowing senators to go on tv, make charges about this or that and does not make them back it up. i think i remember when i was younger, news anchors have a perspective of history and talked about a bill for an amendment and what happens in a depression when thomas jefferson insisted we pay our war debt or when president lincoln decided to pay a reward debt. debt.rd deb we have a fraction of the country that believes that they are just mad because everything

caved in 2008. george bush was putting us through two wars off the books. in 2000, when bill clinton was moving his impeachment. and when they passed certain trade with china -- if those things would be reminded daily for the people of america -- i think we would have a better educated society, and we would not have people picking up things on this website or that website. guest: i think the media did the best job they could.

it is a pretty complicated debate. people are feeling a lot of stress right now. there is a question about how closely people are paying attention to this. it is something we will have to see. there is no question that people are frustrated and angry about the lack of jobs. it is tough out there for a politician. host: when folks go home for congressional recess in august and the president goes out to sell this plan to the american people, what will they meet when they go home? guest: i do not think we know yet.

whenever he was speaking, he gave plans. he was getting applause when talking about closing loopholes and tax cuts for the wealthy. he will not be able to go out there and say that stuff. what he is going out to sell does not necessarily play well with some people. guest: we have heard a lot about the debt limit. host: what about the level of the education of the american public and is it changing congress as they have to go home

and talk about it? i do not know if everyone knew what the debt ceiling meant. guest: i was out with a member of congress last week in illinois. the debt ceiling question dominated the meeting. there is a higher level of education about it. there was a number of people that said i do not believe what the treasury department has said about what would happen if we went past this. the claim has been pushed out of there. host: republican in hanover

massachusetts. caller: you are beautiful. host: what about carry? she does not give a compliment to? caller: [unintelligible] they needed to set the term limits. boehner needs to go. negotiating is what got us in the mess. we are trillions of dollars in debt, but we are only going to pay one or two over the next 10 years? guest: there is concern in the

speaker's office that that concern would be echoed around the country. guest: this is the point where everybody is watching to see if john boehner can have his members behind him. there are concerns about cuts. the speaker and others have come out to say there are a certain number of cuts. the cats were significantly lower. boehner made a much bigger effort to keep his partners involved and brief. he said he would not have any deal until he spoke with them.

guest: he backed the deal before he talked to them. guest: he did, but not publicly. host: the president spoke with the leaders. guest: today were on the call when the president was speaking. we got reports saying, i need to speak with here. your view on this is important. host: john, venice, florida. caller: i am a member of the democratic club. i have seen barack obama twice. [inaudible]

i have been on social security. i listen to c-span to very often and bloomberg. i support one person, who is a very good speaker. what is your comments pertaining to social security checks that will be going out on the third of august? what are your comments about that? guest: there are bills to be paid in the next couple of days. have we averted that now or is there still talk about how this

will pan out over the next couple of days? guest: everything will go out. there is a larger debate about entitlements going on. they talked about cutting medicare. people reacted to that. democrats see it as a winning issue. host: how significant is entitlement reform? guest: it will now be on the table as the committee meets. turenne number of entitlement put on the floor. raising the age you can receive

medicare benefits. a number of other proposals, which freaked out a lot of people on the left. and beyond that. it will be a tough issue. democrats will be comforted this morning. it felt like they had a good issue with the ryan budget. they still have a little bit of room to look against republicans. the committee will come out with a cole's laid of reforms in six months. they may take the issue off the table. guest: it is an issue the democrats see is very politically powerful for them. republicans want to cut entitlements.

putting it on the table was hard for them. host: one element that we have heard is part of this deal. take a look at the details on our screen. entitlement reform, tax reform. it could occur by the thanksgiving recess. one person on winter writes this. not pleased by this idea. what is the expectation on behalf of the white house about what the committee can do? guest: it is a committee of lawmakers. they do not want outsiders telling them what to do. either have one member

disappointed by the leadership. the white house has expectations. leadership people are serious about this issue. they are putting a lot of faith into a group of 12 lawmakers that at a very significant teeth in this. if they do not reach an agreement, there will be triggers. host: we will be watching over the next few days is a who is on this committee. will congressional leaders follow what they said they were going to do? guest: i think the penalties are

pretty severe. guest: it is hard to see the contours' of this debate change drastically. lawmakers are hardening their views. some are skeptic in terms of the ability of both parties to get away from preconceived notions of what this should look like. host: what about the options of having moderates in this program? they do exist in both branches. [unintelligible] guest: it is an option. we have seen a number of these groups. host: thank you both for being

here. we really appreciate it. coming up later in the program, we will hear from thing policy center. the next up,larry kudlow, cnbc's "the kudlow report." we will be right back. ♪ ♪ >> with titles like slender, the obelisk, guilty, and the demonic, and kolter has something to say. sunday, your chance to talk to her in depth at noon eastern live on book tv on c-span2. the supreme court is now available as a standard and

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our programs at any time at c- span.org. c-span, washington your way. "washington journal" continues. larry kudlow, cnbc's "the kudlow report." he joins us from new york this morning. what is your big take away from this whole debate and everything that has been going on the last few weeks? guest: you are witnessing a real change in the policies regarding spending and borrowing. we are moving into the era of smaller government. the magnitude of this bill is not as great as some would have preferred. we need lower spending. the direction is unmistakable. i think the debates of for

continuing resolutions. the debt ceiling debate is unmistakable. washington will spend less and borrow less. can we grow the economy and create jobs? that will be absolutely essential. host: u.s. stock futures are jumping after a deal has been signalled to reach the limit after tomorrow's deadline. what do you make of that and what the expect the market to do today? guest: our market opens at 9:30, and it would not surprise me if the dow were up 150 points. the big relief is no debt default, which would have been catastrophic in some sense. it would not have been a good thing.

it begs the question, moody's and s&p rating agencies will still look at this deal. will there be a downgrade of u.s. treasury debt from aaa to aa? we do not know that yet. my suspicion is that it will not be. the markets will react to this with bleach into relief. the u.s. economy will be part of the story. host: does the market shift now, looking at other factors in the economy? guest: the jobs numbers come out friday. that is going to be a big number.

it virtually has been a jobless recovery. it is going to be a big issue. we have the gdp report friday. the first quarter was revised down to 0.4%. we were in a growth recession the first half. that is a poor performance. i like to be as optimistic as i can. i do not think we are going into another recession. the second piece of good news is companies have recovered from the meltdown of 2008. they have a lot of cash and cushion. there is no real risk taking going on. the expansion going on. we have to grapple with those

issues. host: what about the deal between the president and congressional leaders to raise the debt ceiling? and cut any debt? guest: they will slow down the rate of increase of debt not cut it. the most important years are 2012-2013. i do not know the details of what the appropriations committees will do. judging from the congressional budget office, it looks like $25 billion and lowered the spending otherwise than what would have been the case in 2012. maybe 45 billion in 2013. they will be capped in the discretionary account. i would have preferred it doubling. it is a downward direction. that is better than nothing.

i felt the paul ryan budget about 6 trillion over 10 years. i thought it was some shock therapy that our budget process needed to get it on a smaller growth path and give some relief to taxpayers. get rid of the deductions, flatten the great. we need a regulatory moratorium. i think we need a strong dollar. one of the biggest disappointments in this story and the oil shock, food price shock. much of that comes from the dollar that has dropped 10 or 12% and shows no sign of recovering right now.

whinnied pro-growth economic reforms. -- we need progress and economic reforms. host: take a look at some of the plans. let's go to the phones. pam, minneapolis, in the pan and line. -- independent line.

caller: i live in independent living for seniors. a lot of us are frightened about what is going on. we are wondering what is going to happen from here. host: what concerns you? are you worried about social security check's not going out? growing debt? caller: [unintelligible] not having enough money to live on. what bothers me is the stubbornness of both sides. i think obama was backed into a corner, because republicans said we will not budge or increase taxes.

i do not think obama failed for this. i think he was back into a corner -- backed into a corner. guest: the process worked itself out and always is a difficult process. the tea party back born -- backbone is a very important movement and is not going to go away. they are representative of the new movement in american politics. they want smaller government, lower spending, lower taxes. this may be the best deal that could have been worked out at

this point in time. we are at a great national debate. it is a very important debate. what is the role of government. what do we want the united states to look like in the next 10 or 20 years? do we want to risk the type of ramifications seen in greece, or do we want more free enterprise economy? 31 greater rewards for small business? the tea party want smaller government and the private sector not the government to be in the driver's seat. here is a comment from twitter. guest: windows bush tax cuts

expire, we will have at least $3 trillion drain from the private sector going back into the government and marginal tax rates across the board for all income categories. they will go up. i think it will have an extremely negative impact on the economy. incentives will be greatly weakened. on the other hand, in this super committee embodied in the deal agreed to on the debt, it could have tax reform. i am a strong advocate of tax reform. if the bush tax rates expire but you have tax reform and you bring the rates down air and you have only two brackets for the

middle income that would be terrific tax relief and would be very pro-growth and create a new incentive. at the same time, a lot of the across the board deductions would be eliminated and would help finance lower marginal tax rates. overall, pro-growth tax reform would balance the budget or reduce the deficit. i do not want punitive taxation. i want a fair system that is simple and has plenty of incentive. we will see if the super committee will go to tax reform. host: tampa, fla., welcome. caller: it seems to me that the politicians are way too worried about their next reelection, rather than actually doing the job they are there to do.

it seems to me that all this bill does is take as down the same road again. we will still being $18 trillion in debt. can this be beneficial if we have not slowed down spending all that much? guest: i think i agree with where you are coming from. this is a small step. but i think small steps are important. there is a shift in the direction going on right now as a result of the new congress into a new house. i think it is a good thing. in terms of kicking the can down

the road, the reality is we are not taxing the entitlement reforms. i do not know the debt ceiling bill would have been the appropriate spot for that, but we will have to figure out the social security plan we have, the medicare plan. put more market choice and competition. whatever the details are, i think ryan is right. do we want people to have investment options in social security? what is the right level of taxation for the programs? what are we going to do about medicaid and put pressure on states for financing? we need that conversation. i thought a commission was

really splendid. it did not have every answer but put a lot of important options on the table. we will have to go through this exercise again. the house and senate will pass it. we still have the 2012 budget. we still need a continuing resolution down the road. these factors will come back into place very soon. host: this deal would create a commission made up of members of house and senate republicans and democrats to come up with some ways to find another $1.20 trillion in savings or cuts or revenue increases. this has been done by committees already. do you expect this group to work on the foundation that has already been laid?

or are they starting from scratch? guest: i do not know the answer, because i do not know the group. they need to lower spending over the next 10 years. i do not know how they are going to do that. my suspicion is they are not going after entitlement reform. there is a stipulation in this committee that if they do not get their work done on the target, there is a trigger mechanism. it will force across-the-board spending cuts for defense and non-defense. it will include medicare, but not the beneficiaries. medicare providers like hospitals and doctors, where we have had a major controversy about taking their levels of spending down by $500 billion.

i do not think this super committee will do the entitlement work that you just referred to. host: north carolina, rob, the democratic caller. caller: they said they made an agreement to raise the debt ceiling. they have to do it by august 2. how is it going to go through the house and the senate and be signed by the president by tomorrow? guest: i think you will get a vote in the house and senate. if they both past, the president will sign it tomorrow. the debt ceiling actually expires midnight tomorrow night. we know there is some wiggle

room based on the cash machine -- cash management but the treasury. do i predict the outcome? i think it will go through. what do i know? stranger things have happened. they may be up all night tonight. host: baltimore, independent scholar. ller.c -- caller: i am wondering why -- there is such status concern in this debate? how will the wealthy respond to a tax increase that is only

marginal and historically low. they are like a silent participants. i want to know their reasoning. guest: that point of view has been strongly reflected. i am a reagan supply-side died. i look at it as a question of incentives. they work, invest, and the incentive reward model is absolutely essential to all economic growth. i am a tax reformer. i would want to get rid of the

deduction and loopholes. i want incentives to grow. i am fearful. one reason for our poor economic performance, new business creation has been absent. the absence of job creation. people do not want to take risks. there is a series of tax hikes down the road and a series of regulatory costs treat health care obama care costs, their relations waging war on boeing and businesses in general. i am not saying we should have no regulations at all, but we should minimize them. we should be very careful when we talk about tax policies. it is not about rich people.

people that make businesses jets do not cause a bad economy. all of these factors contribute to economic recovery. it is a question of incentives. the heart of our capitalist model. that is what i want to preserve. it is what has made the country so great in the past. larry kudlow, cnbc's "the kudlow report." he is our guest. he served under president reagan. he has been a chief economist and managing director of bear stearns and company. he worked in the open market operations in new york in bank supervision. you are a reagan guy. i want to ask if you perceive a shift going on and what it means

politically. there is a story today called america's right turn. it talks about senator orrin hatch and what makes him a bonus by conservative. he may face a republican challenger next year. does it say something about the way the political will has been moving. the geopolitical center of america has shifted rightward. what do you think about that and where does it leave you? guest: it is accurate. what we were talking about at the beginning is iconic change. the role of government is at the

center of political change and a policy change. you saw that with great clarity last november. i regard it as a bipartisan revolt. many of the peoples and the tea party and independent in general were annoyed at president bush, who they felt spent too much in a variety of areas. they were very much against the bank bailout, the auto company bailout, against the large-scale stimulus package that we had a few years ago. loan modifications. it all seemed like government was running the economy. i know these are exaggerations, i think there is a revolt against it. it is a little different. when reagan was elected, there

was a direct tax revolt going on. the property-tax revolt in california. rates were much higher. inflation putting people into higher tax rate brackets. people felt that spending is the problem today, not taxes. they want to put the clamps on the growth of government and federal spending. that is the heart of it. the political side will be around for quite some time. host: frederick, maryland, republican line. caller: i have a friend of mine with a doctorate in finance and he spoke about you glowingly. it is good to have you on.

i want to get your take on a few things. i hear a lot of things said about the bush administration. republicans overspent. the democrats actually wanted have a figure. -- wanted it bigger. if they had their way, it would have been larger. guest: that is a fair criticism. george bush, medicare drug

entitlements did not cause this entire problem. it has been growing for many decades. the root cause is the generic entitlements. the drug expansion has probably come in slightly under budget. we did not pay for it. people want to see when the federal government undertakes mission programs -- let's have a debate about the program and an equal debate about the financing of the program. there are no free lunches. when you look at our federal debt to gdp, debt as a share of the economy, it is about 70% according to the forecast from the professional -- over a period of time, it saps the strength of the economy and drains the private sector in

order to pay for these transfer programs. you might say that some of these are very good and they help to keep people alive. i do not want to abolish the entitlements. but i want to put as much market competition in for cost control. we need a tough discussion in this country about financing federal spending commitments, including taxation that goes along with that. we need that conversation. we have not had that conversation. i mentioned this earlier. we do not have enough discussion about monetary policy and of the dollar. i want to add this in. is a bit of an out wire. the dollar is very important. not only from the standpoint of inflation, but from the

standpoint of food, oil, gasoline prices, things that people buy, from the standpoint of financing our budget deficits. we need a real debate in this country about why the dollar has no anchor. it has been onward since the early 1970's. the falling dollar is one of the key problems with our whole story today. it may be contributing to the weaker economy. host: a top adviser to the president today said that this new deal puts a big cloud over the economy, even if the country has to endure a three ring circus. let's take a listen to the president commenting on the effect this has had on the economy. >> this process has been messy and taken far too long. i have been concerned over the

impact it has had on business confidence, consumer confidence, in the economy as a whole. >> president obama, speaking yesterday. this story from "usa today," "prolong the debate hurts the economy." what do you think, larry kudlow? guest: i would agree, but i think it is a small factor. this coincided with of the jump in oil prices and gasoline prices. if the dollar had not fallen so much, if the federal reserve had not allowed the dollar to fall, i think that the economy would have been stronger. gasoline prices really hurt the economy. there is a second point. there are a lot of barriers to

economic growth and risk-taking. including a large budget deficits that suggest higher tax penalties down the road. regulatory barriers. here is one. this business about the national relation -- national labor relations board preventing boeing from adding to their jobs capacity in south carolina is crazy. is part of a washington assault on business, throwing a wet blanket around risk-taking. boeing is just one company. businesses take a look at that and do not want to expand. these kinds of regulatory interventions are too great. we have a lousy dollar, too much spending, taxing, and the borrowing. we need to change the direction. looking at the polls, people are

still going in the wrong direction. we need a more free-market direction. this deficit is going to go away temporarily. but the economy will not come back as a result of today's deal. host: this is what it says in "usa today." host: if you have painted a much broader picture over the debt ceiling over concerns involving the national debt. what will it take to boost consumer confidence, at this point? is there a sign that he will be looking for down the road? guest: a very good question. job creation is very important. it is kind of the chicken and

the egg. but it is so closely related. consumer sentiment has plunged at lot in recent months. it affects people. some white house advisers say that people do not look at the unemployment rate. but of course they do. you have close to 20 million people unemployed or under- employed. we need better growth. people want to see economic growth science. people would also like to see some stability and a reduction in gasoline prices at the pump. they want to see easier credit from the banks. may be trying to refinance their mortgage or a young couple going out to buy a new home sold in foreclosure. they want to see a loosening up of the economic system. there is no sense of the animal

spirits in the economy. today's solution to the immediate issue of the debt ceiling and borrowing more, it is a good thing. i have not seen the details, but it is a small piece of the puzzle. we have got to get a spirit, an attitude, a zeitgeist back into this country. that is what is lacking right now. host: trenton, new jersey. caller: i agree with you. we need a national conversation and around what it is that we think is important. unique this morning was your comments about the fact that the bush tax cuts, if they had gone into effect, would be a $3 trillion drain away from the public and into the government. the question is, how did that $3

trillion wind up on that side of the equation? it seems to me that the investment that needs to occur, which can lead to job generation, can get made. we are talking about investments in education and infrastructure. right now the entire infrastructure in this, but -- in this country is an embarrassment. not to mention our education system. if we stop and fix both of those critical investments, we can go ahead and create the jobs. i have worked with small business owners for my entire career and i have never met one that started a job because of incentive. they spread or expanded because they had a product or a

service, an item to sell in the marketplace. host: let's get a response. guest: people do work for reward. it has got to be profitable. raising investment money, small businesses, it has got to be profitable. look, everyone wants education to be better. does that mean that we need to spend more? where do we need more quality education in the classrooms? i am completely unconvinced that our education system, particularly the public schools and cities, is a function of spending too little. second, yes, a lot of infrastructure needs to be done. we are always building

infrastructure in this country. we are spending $1 trillion per year and it seems to be financed by gasoline taxes. it is an ongoing process. you want to spend more? fine. it will not drive the businesses and jobs in this economy. my view is that it is private investment that creates jobs. the overall number might be closer to $3.70 trillion. you are draining investment. you would be affecting small business in a negative way. i know that taxes are not the only consideration, i get that. but it is important. it is very important. i am saying -- burdened

businesses less. take it out of the public sector, which has become too fat, in my view. host: this comment from twitter. host: what do you think? guest: raising the debt ceiling was never a big issue with reagan. he wanted smaller government. he never got hung up on this. his big deals were lower marginal tax rates and slowing down the growth of spending. he used to argue, correctly, i think, if congress argues for spending, they should argue to allow the government to work. reagan tried to slow down that spending. he did a good job in the

domestic side. but he never got hung up on the debt ceiling. he was better at negotiating deals that would get those outcomes. reagan wanted lower tax rates, fewer regulations. he made good on those policies. he wanted to get the inflation rate down, working with paul volcker. not everything was perfect. i have never made that case. but to have a stable currency, i thought he did a pretty good job. our economic growth was one of the main reasons that communism literally disintegrated. host: greenville, north carolina. james? caller: how you doing?

host: good. thank you very much. caller: what happened between 2000 and 2007? why did we have to raise the debt limit for bush? the bush tax cuts. of what that did for the united states was put virtual legislation in where we had it today. if we were to get rid of the bush tax cuts and tell businesses that if they do not come back to the usa, you are supposed to start taxing businesses and they will start to create jobs. guest: you cannot run an economy by threatening businesses and taxing them.

ordinary, freed people in a free economy, they know what is best. they go where the opportunities are. the idea that government is going to start -- that is what we have too much of right now. going back to my point about the national labor relations board singling out boeing, who are they to tell bolling where to make investments? just on the basis of a union or non-union work? that is not america. we have assigned blame. there is too much cost warfare. sometimes the president drives me crazy. blasting millionaires, billionaires', hedge funds, people that make business. they did not cause this crisis. they are not the ones to blame for the bad economy.

why pick on free enterprise? it is why it -- it has such a durable track record over the years. asia, china, even russia, they do not imitate dictatorships, they imitate more free-market systems. we do not want to lose our principles just because a few people are grouchy. i want government allowing business to teach more of what it earns. and then business will do what it does best. if hiring new people because it is paid to do so. host: let's get one more call in on the republican line. [laughter] guest: i am sorry. host: not at all. go ahead, robert. caller: thank you for making sense.

did is scary to hire people. as a one-man show, hiring people for security systems, i do not want to get out there and work that hard for no reason. i am also an inventor. what i to do with that would be magnificent. i forget the name of the ceo of ge. obama placed him as the head of jobs. i heard that he was going to close down his manufacturing plant and shipped it off to china.

immelt, ceo of ge, i will not pared down his inventory. but i think that corporate tax reform, business tax reform, is very important. we talked about that with the of the super committee. we need a flatter and simpler tax system. as everyone knows, we have just about the highest business tax rates in the world. so, we should make it easier for businesses to do business here. very simple. host: larry kudlow, host of the kudlow report, on cnbc.

thank you for joining us this morning. guest: thank you for having me. i enjoyed it. host: next, we will hear from jay powell, talking with us about the treasury's backup plan. if the deal today does not work out, what does the treasury have in store for tomorrow? first, this break. ♪ host: you are watching c-span -- >> " -- >> you are watching c- span. every morning is a live call in program about the news of the day. weekdays, live coverage of the u.s. house. policy forums in supreme court

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potential default on the debt? guest: the sentiment over there has got to be relief, although conditional. again, i have no direct knowledge about what is going on over there, but i am sure that there has been a great deal of contingency planning going on. and that they are ready for whatever may come. particularly ready to deal with whatever events in the bond market, and i hope that people understand that. host: what does the treasury have to do? given your past experience, what does the preparation look like. i would imagine it is not white sun, lights off. what has to be done to increase

the potential for hitting the debt limit? guest: this is unprecedented we have never cost of this -- crossed as august 2 date with the government has no cash to pay its bills. so, that would have been examining basic things, like legal questions and the authority to choose to pay bills in any other way that they do. there is no statute in which they can order you to pay this money. do it in the following order or make up your own mind. treasury may have concluded that they did not have the authority. pork or, they may have decided that they did have that ability and they would pay -- take

social security and payment for the troops. i hope that we never find out the answer. host: president obama warned that this could include military pay and social security payments. since this is unprecedented, there is no model, but why is there no framework in place on how it would all unfold? who would make that decision and how would it play out? guest: the job in congress is due principally decide what to spend an order the executive branch to spend that money. with the executive branch, they have followed the orders of congress to a t.

that is what they are supposed to do. that is why there is no rule book here. there might be one going forward, but no one contemplated that we would cross what amounts to a very bright line. other debt ceiling impasses were all well before the government were well short of -- was well short on cash. in future episodes congress may want to pass something about the order of payment. host: jay powell served as the under-secretary of finance for george w. bush. working with treasury, that, and market related areas, he was also a banker in new york city and a partner with the carlyle group. john, democratic line,

massachusetts. go ahead. turn down your television. co-head. caller: now that the american people -- what happens if the resources in this country argonne and everyone in wall street leaves the poor people behind. resources have been depleted and we have been poisoned by all of these companies. now they want tort reform so that we cannot sue these people. what happens when we run out of resources and these fat cats decide to go to china? guest: i guess i am watching a different narrative from you.

i see a country on an unsustainable fiscal path that needs to do something to address those issues. no one is satisfied, no one should use as far, with what was proposed -- no one should be satisfied with what was proposed over this past weekend, but it is a star. postal walk us through the t- build process. -- t-bill process. guest: building up short-term debt and longer securities through 30 years, it is an ongoing machine with much of the cash used to roll over or pay off other debts. we borrow about as much as the deficit is on a net basis every year. much of the money being borrowed today will be used on

august 4 to pay off maturing bills. in ordinary times, these are not particularly newsworthy operations. one hopes that if this bill passes, we will return to normal times. host: in the treasury department's it says that they go -- from the treasury department's web site -- host: who works in this world? why are these significant? guest: domestic finance is the job that i had from 1990 to 1993. there is a substantial and highly qualified, dedicated group of career professionals that work closely with the fed.

they make recommendations to political appointees about what to do. this is a lot of expertise and mechanics built up over many decades. we are the biggest bar were in the world. we are the most creditworthy bar were in the world. the quality of the operations reflects all of that. host: who purchases t-bills? guest: mostly foreign governments and the like. the rest are purchased by individuals, abroad and at home. all sorts of different lenders and securities have reasons to own them. they are a risk free asset. if you want to buy something with a relatively low return and

no down side, getting your interest payment back, everyone purchases united states bills of note. every other security of real- world is valued on the treasury's offer. host: from friday, this story from "the wall street journal," "bailed out." can you understand -- what will the impact of that be? guest: owners of short-term securities that were due to mature this weekend and next, they sold a significant number of those. they traded off in the interest rate went up. however, the implied interest rate is still incredibly low. saying that they would own treasuries that matured in

october or september, rather than in the middle of this process, it is a natural reaction. these will all be money-driven. interest will be paid. long-term effect is going to be nothing. host: let's here from missouri on the independent line. from missouri, on the independent line. caller: what is going to happen to our senior citizens if they cut disability? or if they take it out? what will happen to the seniors in the home? turned loose, there is nowhere for them to go. guest: no one is proposing to cut payments from people in nursing homes.

these kinds of cuts are for the longer-term and for people who are a long way from a nursing home. id is important to remember that that is the case. cuts are for people my age, people with time to plan ahead. the problem is, if we allowed the current system of medicaid and social security to run on without adjusting them in any way, they will go bankrupt at some point. we must make very small adjustments now that will amount to significant improvements in sustainability. host: this is from the bipartisan policy center. a collision course the projects revenues of $172 billion in august, not enough to pay the bills if the debt ceiling is not raise.

you can see the costs there. medicare, medicaid, totaling $307 billion. guest: yes, we looked at august and said -- what happens if we do not raise the debt ceiling? based on independent data, i am told that people are trent -- that people at the treasury often look at our study, which is nice validation. but the reality is that we would have to default on approximately half of our other bills. if you know how the federal government is structured, you cannot do that without cutting into treasury payments. something like 85% of what the government does is either military spending, interest on the debt, or entitlement. if you try to cut down to 50, by

definition you would be cutting deeply into all of those things. i think that this presentation has opened people's eyes to the fact that there is no alternative other than opening the debt ceiling by august 2. host: you can make comments on facebook and twitter. c-span is the handle on facebook. this comment on the debt ceiling debate -- host: let's go to arlington, texas. michael, good morning. caller: i had a very important question for you. [unintelligible] host: eloquent. let's go to dalton, texas.

caller: what will happen to america if they do not raise the debt ceiling? how will america pay down its debt? guest: if the debt ceiling is not raised, we will immediately find ourselves unable to pay about half of our non-debt related bills. an enormous political shock in the country. it will be very bad for the economy. we know that people will love to benefit checks, that kind of thing. keeping the debt ceiling where it is or not raising it has nothing to do with future deficits or paying down the debt. the only way to control spending, what differentiates the levels, is for congress to

do its job in raising the debt ceiling, allowing the executive branch to pay for and carry out the orders they have already made. they should not put the country in the situation where the orders were made. host: this comment from twitter -- host: do you expect to see this groundwork use as congress debates taking the conversation

down the road? guest: this plan is a small and does not get to the heart of the problem. it does avoid default on -- not that payments, but benefit payments and the like. in that sense, it is very disappointing. one can hope that in the second phase it is an additional deficit reduction. one hopes that they will find widely agreed upon ways to control spending. by eliminating loopholes in taking spending out of the tax code. we hope to that would happen in the second phase of this plan.

after the presidential election, it will be time to return. close to 100% of the increase of spending in this country, by the government, is because of health care over the last 30 to 40 years. we have to fix our health care delivery system. that plays itself through medicare and medicaid costs. no one really knows how to do it. quite difficult. that is the job that must be attacked. there are good ideas in the other plants as well. -- plans as well. host: this comment --

host: here you can see the outline from 1971 through current times and the projection through 2010. these are in billions of dollars. michael, in the end of line. good morning. caller: is all this worry overblown based on the collateral assets? of five will listen on the air. -- i will listen on the gear. guest: when you look at the debt, but you are looking at is the borrowing debts. what you are not seeing are the other liabilities. if you include these off-balance sheet liabilities, like the ability to pay social security medicare and benefit payments,

the number is much worse. the assets that we have in no way compared to the amount of debt that we have. host: this message from twitter -- host: explain it to us. guest: treasury auction, that is an auction of securities. we have had them since world war two. there are only a handful of years where we did not run deficits. bidders from all over the world submit their bids and the most attractive bids will be allowed to purchase securities. i do not know of any planned to auction off national parks. host: how significant is it when foreign investors buy them?

people are concerned about china's holding too many cards, so to speak. what are your thoughts? guest: it behooves them to keep their currency lower and not push the dollar down. that is why china holds us there. china will continue to hold lots and lots of dollars. from our standpoint, it is not great to have one, large global economy. increasingly having to say in our decisions that if these straight lines continue in this way, they will get bigger and bigger. our ability to make independent decisions from our creditors will diminish over time. we need to get our deficits

under control in shrink them. host: banker, maine, ernie, republican line. caller: my question, is there any one that you might work with? someone that works downhaul from your office? someone with a track of historical war debts that different countries have bowed us? since world war ii? guest: not that i am aware of. caller: why not? guest: i do not believe that that amount is that all material, if it even exists. host: why do you think that that is significant? guest: -- caller: we build your up and everything else since world war ii.

i would like to know if we get paid for that. the same thing with more recent wars, like in iraq. have we gone repaid in oil? guest: that is not the deal. caller: why not start collecting? host: we will leave it there. guest: there is no legal entitlement to repay these wars. we choose to enter them for our own reasons and they are not obligated. host: ky, larry, democratic line, welcome. go ahead. caller: social security, if this passes, those that include disability? -- does that include disability? guest: not directly. nothing will happen to social

security beneficiaries who are in their later years. these kinds of changes will be things that protect it for long term and will not affect benefits for current beneficiaries. nothing will come out of this current bill. host: in fact, entitlement changes are not on the table. part of the deal being discussed between the president and leaders in congress will be taken to the rank and file members today. numbers are coming in high gear with nearly $1 trillion in cuts. let's take a look at that.

host: peoria, illinois. independent line. good morning. caller: i wish that the old man sitting there, mr. powell, when you ask him about funding for wars -- i am an army veteran. i work with state seniors in california. i saw what happened in the 1980's under ronald reagan. they have less regulation with bush. unfortunately, there is no perspective for working people to giving out and bolts of what happened to our economy. people that belong to groups, no disrespect, but i would like to know the players of the carlyle group. so that people can know. i know who they are. the people making decisions that have never worked for a living. all that they know about is dollars and cents.

this thing about medicare and medicaid, as long as we continue to allow people, if you want to call them that, eating this lousy food, young people with health problems, obesity rates skyrocketing, i ask anyone how it will look when we have people walking around in 20 years. host: who did you wish was sitting here? caller: the old man from two calls before. people in $2,000 suits have a $2,000 suit approach. america needs to hear what is happening at a working level. debt, credit cards, none of that stuff. i can see what has happened to the people. personally, i do not think that this will happen for years to

come. guest: i have got to give the administration some credit on focusing on childhood eating and that kind of thing. getting a young child to eat healthy is a continuing battle for all of us. it is really important for the health of the country, going forward. host: bob, republican, arkansas. caller: i do not know why we do not have a bigger handle on domestic spending. pakistan, we have given them over $1 trillion. we do not have to do that. how many more countries are we

giving away trillions and trillions of dollars to? most of this touches on the point that another caller made, that we spend money overseas, whether or not it is considered to be nation-building or not, do you have a comment? guest: it does get a lot of attention and is being cut six ways to sunday. it is not growing, domestic discretionary spending, after this it will be at the same level as the eisenhower era. as far as military spending, it is much lower than it was during the cold war. the issue is health care costs. it is a hard truth to except. the issue is that we are

providing much more in health care, directly through veterans benefits and that kind of thing. everything else is flat as a percentage of the economy. you have to deal with health care costs in the health-care system. it will not be easy. it is the fastest growing thing. that is where many of the problems lie. host: kerry, ore., democratic line. caller: i have two things. maybe we need to moquette the health-care and insurance companies, given what they charge us, the second thing that i want to say is how can you think that social security,

medicare, and medicaid are entitlements when workers pay for it out of their check any way is it? -- anyways? guest: on the second point, it is substantially greater than the average. that is why they are, in fact, the do burden of deficit as well. no one is talking about taking away social security or medicare benefits. we are talking about taking away changes at the margin. younger people will hopefully be able to get them. host: grace says -- host: concern there are about wall street fitting a free pass.

guest: there was a bailout of the big banks. it is not something that anyone wanted to do, but it is the kind of thing where if the financial system collapses, it will affect the entire world. so, it was done. it will wind up being a substantial profit to the government. it does not detract from the fact that the financial system essentially failed. that is what bob frank was about, preventing it from happening again. host: independent line, they love. welcome. you are on with jay bell. caller: good morning. why can we not install a dead on sale, like we did with more bonds? of than the american people can

reap the interest rates to pay for them. i think it would be good for the entire country if we took control of our debt as individuals. thank you. guest: individuals to purchase a lot of these. they are, in fact, very popular investments, but they are available to others. those are risk free assets. they are popular abroad, here as well. you can buy them yourself. host: let's take a look at this story, "blomberg treasury losses."

host: there is a lot of talk about how everything comes down to the vote and seeing how it turns out before speculating on what happens next. guest: bad economic news drives people out of stocks and into bonds. bidding down the interest rate that the government is required to pay. bad economic news last week. another thing is the turmoil in europe becoming more and more clear. the europeans have not figured out what to do with the potential the fault of their major nations. global money has come into treasury securities.

the market is clear in pricing in successful votes. stock markets were up, when i got on the air, all over the world, as soon as the president made his announcement last met -- last night. if the bill passes it will be short-term good for the stock market as well. host: jennings, louisiana, welcome. caller: good morning. i wanted to ask you about what the other lady asked about. how can you call social security and medicare entitlement when we pay into this? i realize that social security right now, the money that we paid into, has already been used. benefits are coming from the younger people working today.

sometimes, did the government not take money out of the social security box? also, another caller commented on the money being sent to other countries. i cannot see, if we go to war with afghanistan right now, when we get out of there, we go back and rebuild that country. if you are going to do that, stay out of it from the beginning. host: david has a follow up on twitter. host: first come away in on this phrase, entitlement. -- first, weigh in on this phrase, entitlement. guest: this is stuff that just

happens, year after year. meaning that you are entitled to the money as opposed to something that someone gave you. it is not meant to be judgmental. i will try to use the word mandatory spending, but if i slipped understand that it means you are entitled to the money. there is no law that says they have to pay us back if we choose to engage in a war there. i think that there is a bit, just speaking for myself, a bit of skepticism going forward. the country will be reluctant to get engaged in the military age going forward. after all of these years in iraq and afghanistan, it seems to me that people will be reluctant to make those kinds of commitments. host: democratic line, good

morning. caller: i have a question that i do not think i have heard, but maybe i missed it. i am pushing over 70, i draw social security. both of my parents and died before they were the age that they would have collected social security. i know that they paid into it. what happens to the funds of people that pay into social security, but become deceased and do not have any one who paid in coverage, like for a minor child? guest: what really happens is it is financed out of payroll taxes. when they come in, the federal

government says -- thank you for your money -- and they give the social security trust fund the confirmation based on risk free assets. it pays to whomever is untitled and liquidates those securities, turning them into cash. there is no account for your parents, who passed away before. it really is a plan that is for everyone. the amount of money in the social security trust fund is only a few years worth of benefits. it is really a pay-as-you-go program. really, this generation of workers are paying for the retirement of the retirees now. this will continue, but the ratio of retirement to workers

is going to go up. it has done up. which is why we need to do some things. we know what they are. making sure that they are available in 25 to 30 years. host: what is the physical reality of an auction? can we watch it? can we see how it turns out? what is the process that americans can learn about? guest: all you need to be able to do is navigate the treasury department web site. you can go to the department of public debt, it is very transparent. they tell you a long time in advance how much they will be saying -- selling. including how many bids they got. they will disclose the