qvc. congratulations on your book and thanks for the owe yos and the rest of the food. >> thanks to juliet for being here and watch fox news all day for the debate on the debt ceiling. . >> dave: neil cavuto is next from capitol hill. >> a fox news channel special presentation. budget fraud. taking it to the limit. now, live from our nation's capitol, neil cavuto. >> here we go again, does this sound like deja vu all over? we're in lockdown with a measure in the the house that was onerously and barry sande sandersly passed and slapped down in the senate and a back and forth with the details, suffice it to say with little more than what, 72 hours to go, we still do not have an agreement and there in lies

the rub. for the next two hours, there in lies our continuing special coverage from the nation's capitol and we've got the best and brightest, to sort of articulate where things stand and where we could go in the hours ahead. of course, you know that fellow on the left there, he's been fighting heavy pressure from both sides and ended up being his own man in this debate and cost him probably a little sleep. we've got governor scott walker, we've got barney frank, antsy about what the moody's folks are doing and how he wants to channel what mooddy's says we have to be done. he thinks they are a jumping the gun and scaring us. we're not done there, we've got senator lee joining us, carly fiorina and don imus and the list goes on and on and straegize where these guys go. the house of representatives revealing the top headlines of the moment looking at the reid plan for a variation of it and

target that to essentially slap that down as the senate slapped only a couple of hours after the house voted the boehner plan down. a little bit of legislative tot for tat. and when it goes through the gobbledygook of getting legislation of its on through. and the reid plan, not only would be dead on arrival in the house as it presently stands, it might not even pass within the senate, something that happened close to midnight or thereafter. so that debate continues. we are he getting a sense whether there's an emergency plan on the part of the treasury in case it blows up in its face because even though the government might be shutting down on tuesday or a good chunk of it. do not think that taxes are going to out of the blue miraculously, be not taken out of your paycheck. they still will be. so, revenue will still be coming in to uncle sam. the question is how much

revenue. that's something they have to debate because if you put bondholders at the top of that. social security recipients at the top of that. medicare recipients at the top of that. you don't have to risk it per se. the only market open is the saudi arabiaen market falling close to 1 1/2%, but that really has to do with the global slowdown you've been hearing so much about the latest evidence in the united states. we could be going into a double dip. much more on that a little later. suffice to say a very, very busy show in the time being here. a guy with the point for us, on that you will. south carolina republican tim scott. congressman you were feeling the pressure and you were on stand by for speaker boehner in case he needed you, and he had his votes, but you would have been ready to vote for this. >> at the end of the day, why i voted no, south carolina

voted no, it doesn't go far enough to address the financial crisis that looms in america. there's only 7 billion dollars of actual cuts the first year out of a trillion dollars. simply put that that was simply not enough and having the balanced budget amendment attached to the second tranche as relates to the debt ceiling increase was insufficient as well the we'd loved to have seen it on the front end. >> neil: you're telling me that it was real close and that 14-15 or there, and you would not have helped the spooker out? >> all decisions get more difficult as we get closer to the end. if i had decided to vote no and colleagues talking about it come to a process and come to our conclusion, so, this vote would not have averted a crisis that we're having and it would have been doa in the senate as it has been already. >> neil: and so now, that was one thing the senate didn't waste a nano second. >> not at all. >> neil: as you said, it was shut down. what is the house going to do now, going to essentially come

up with something with the senate or what the remay is and-- >> well, the reed plan is an at the end of the day, 1.7 or 3 trillion out of the country coming out of the cut down from afghanistan and iraq. >> and that's the-- >> actually the first half of the boehner plan 940 billion dollars was actual cuts. this plan has 1 trillion dollars of a ponzi scheme on the american people that we will not support in the house. >> neil: but, the congressman, at least from the ratings, and talked about this process, they're kind of faulting all of you guys for ponzi schemes and saying that the numbers don't add up. whatever you agree to longer term does not seem to happen on paper or certainly in the first year or two, with the cuts are fairly paltry. >> neil, it sounds like you would have voted no, too, good sign coming from the great

neil cavuto. i will say this we need to get serious about a changing the trajectory of our spending in this country, and we're not talking about that yet. until we actually get on the page that talks about long-term systemic change and the way we spend money or the way we can spend money, i think you'll find that conservatives are looking for a way to support something that originally-- >> but you're not. i understand. >> at the end of the day. >> and why are the concerns getting more conservative. i see the liberals getting more liberal and i see the impasse on the deadline getting more close. >> there's no question, neil, you can't expand time and tuesday, no matter what happens, and we're still at the table, trying to find a way to make sure that this country starts changing the trajectory of our spending and at the same time, be reasonable with those on the left. we've said simply, give the states an opportunity to decide on a balanced budget amendment. that doesn't sound draconian. it doesn't sound difficult. >> and it doesn't seem to

promote the-- >> and where we stand. >> all right, senate doesn't want to do that, where do we stand? >> the question is it you've got a burglar breaking into your house, do you open the door or not? i say we polster a response to the other folks, we say drop a plan that works for the american people and the democratic philosophy and the republican philosophy on the sidelines and think about folks working 12 to 14 hours a day to pass on the american dream to the the next generation, we focus on that person and get rid of the bipartisan and nonpartisan debate and think about the average person who depends on strong leadership to make good decisions and we'll be in far better condition. we haven't gotten there yet. we have too much bickering and not solutions because we're not focused on the measured american people.

>> neil: a bunch of of people there last night, she was saying i'm reporting each and every one of their votes, freshmen republican and people who got in. does that make you nervous? >> not at all. i call my folks back at home. one thing that makes me nervous, i come here and guide to vote like a washington republican and congress member and not the common sense caucus of the american people, that makes me nervous. >> neil: you look good for a guy who has had no sleep. >> thank you, sir. thank you very, very much. in the middle of the debate as said waiting to hear from the ratings agencies and in the end they're the guys that will decide whether this is fiscal progress or folly. keep in mind the big ones' going to hear about s & p, and fitch investments and moody's, the troika of terror increasingly at the markets because at the push of one of their financial buttons they could decide to downgrade u.s. debt.

that's worried barney frank because he thinks that moody's, for example, jumped the gun hinting it would put debt on review for possible downgrade and others views that these guys have gotten to the deadlines and the ratings agencies are getting antsy and a lot of folks on capitol hill are saying that isn't fair or write. and we've got the democrat from arkansas, senator, what do you think of what barney frank is saying, look, if moody's or s & p want to move that's one thing, but to threaten a potential downgrade n now, just bad timing. >> well, there's no doubt. all of this is bad timing we are in the middle of the session, that's terrible. the bottom line the rating agencies have been around a long time and always treated the u.s. government debt as triple-a. and really the best in the world. >> neil: even though their own track record isn't great. >> not always great, but it is what it is and so, a downgrade

is a real serious problem and-- >> do you think they're putting undue pressure then by they think that? and everyone knows it's fairly obvious, are they forcing you in a corner where you guys come up with a quick deal, but it might be a bad deal and in the end they'll downgrade you regardless. >> i don't think they'll downgrade us recordless, i don't think they're trying to do that. >> neil: they're saying, senator, unless the figures we're talking about are in the 4 trillion dollar range, right. >> neil: spending cuts of that magnitude over ten years, it could happen. >> i think that's based on the simpson bowles numbers and i think you're having alan simpson on your show later. i very much support what they did, i support what the gang of six tried to do in the senate and i think that's the solution and hopefully what they'll get to and maybe we'll get a vote on-- >> i notice there's been a tit for tat between the two bodies between the house and senate.

the house says something and two hours later senate picks up the boehner measurely and the guys in the house, oh, no you didn't. we'll pick up a facsimile of what the senate is looking at, plan, and on and on. >> it's not helpful and folks around the nation are sick and tired of this politics, and that's politics, that's not leadership. and we have a lot of people in washington, who are very, very good at campaigning, unfortunately, don't have as many as good as governing. >> what's your gut say? >> that we will get something worked out. it may look like frankenstein in the end and i think they will keep something together. >> not to compare the two, but the frankenstein in this case, we're told, could be mitch mcconnell that's behind the scenes, the republican leader has a plan that you could all hold your nose on vote on and that would allow the president po raise the debt ceiling on his own and congress would have the power to override it

if he does so, but the votes wouldn't be there, and if you do so. so tell still have the president's fingerprints on it. >> if that's what we have to do, that's what we have to do. >> would you be open to it? >> i'm open to it, i don't think it's the best course. i think we in congress should take responsible for the the debt. i mean, we love to talk about how congress has the purse strings which we do. >> right. >> that means we have the responsibility to manage money and we've not done a good job of that in a long time. now the numbers, as well as anybody in your audience does, too, so, if that's what it takes, that's what it takes, but it really is similar to advocating some of our responsibility to the president and i don't want to do that. >> the last question, do you have any power over the air conditioning in this building? >> i was here yesterday. >> we can't afford-- >> how about control over tan. >> we'll work on that. and very good having you. and a lot of people want to make deals and they want to entertain any middle ground to

get us beyond this crisis and you think this is a big crisis in washington. imagine being a governor of a state already under enormous cost pressures and now the money from washington could start bleeding out. emergency being governor scott walker. he's next and also, barney frank, on that generation agency already threatening a move and you haven't had a chance to even act on the deadline. barney frank is angry and barney frank is here. you're watching special coverage of washington on the brink. we're there, following your money. turn left. you have arrived. sweet belt. e-reader for textbooks. gps. hd video cam for lectures. game pad. have you considered this by motorola ? it's got all that and more than 200,000 apps. technology to learn and play on-the-go. only at verizon. get the latest smartphones like the more powerful than ever droid x2 by motorola.

buy one for $199.99, get another one free. the two trains and a bus rider. the "i'll sleep when it's done" academic. for 80 years, we've been inspired by you. and we've been honored to walk with you to help you get where you want to be ♪ because your moment is now. let nothing stand in your way.

learn more at keller.edu.

>> welcome back everybody, neil cavuto reporting from washington where we're just watching with only days to go whether they come up with an agreement here. but as you probably heard some of the ratings agencies today, if it's investors, moody's have their ducks lined up get

kwauking with a potential downgrade, or even a future downgrade even ahead that have deadline and that poiriers congressman barney frank. congressman, thank you. can you explain your concern with moody's in particular. >> it's moody's and standard & poor's. moody's got issued a threat to downgrade triple rated and steven townsend, massachusetts, never defaulted, well funded, no chance of default. few entities in our economy were as culpable as moody's and standard & poor's for the down turn that we just went through. because they told people, it's triple. and no defense for them. they way overrated. >> neil: no doubt about it. the only rating game in town. >> well, what do we do? we don't pay as much attention to them. in a bipartisan way, the market is down. you asked me what to do.

and what the markets do, part of what you want to try to do is to change things, now, the government is in part responsible for the overrating of the rating agencies. because we had until last year, a requirement that people use the rating agencies. >> we required people to pay attention to entities that were totally misleading people. what we did in the bill last year, this part testify bipartisan and virtually, we told the federal government do not require anybody to use a rating agencies. those that want to do them, it's a free country. we will not be doing it and i think people need to do their on due diligence. if people paid less attention to the ratings agencies five years ago we would have been better off. >> neil: if we do in fact move the downgrade debt and change-- >> it is to some extent, although, we can, and now, we will not have people, i mope having to sell automatically. and part of the problem has been there were pension funds and others, have had automatic

with the rating agency downgraded. if you're a pension fund and you think the ratings agencies are no more accurate than they have been for the past years, don't sell. >> and what happened to the requirement. a move afoot, i understand, to allow them to hold nontriple-a rated debt in that event by simply saying triple-a and government security. >> it depends where the requirement is, as i just said, we have passed a law that says that will not be a government requirement. it used to be for some cases, in some cases they're self-imposed, i'm urging people do not self-impose this need to sell, the rating agencies drop you, and in my district that are very, very well-financed if they're hit with a reduction in the rating for no good reason, then i would advice them not to sell that, dent take a lost based on an inaccurate rating. >> they have certain rules to

stand by in the event after downgrading, they have to-- >> what would you do, what would-- >> when you ask me when you know what i say. we do two things, first of all, we've already moved from federal statute and we have instructed the regulators and sec complied with it, to remove any requirement that's imposed. so some of this that was imposed by either the sec or federal-- >> and is that in a-- >> the statute is in effect now just took effect. the rules we gave the regulators some time because they had to come up with alternative methods. the sec just promulgated that rule. >> neil: and you might think of-- no one, all they know is that they have it. >> get about two words out if you want to-- >> please go. >> please don't interrupt me when i'm talking. >> neil: what if they want to sell. could we get downgraded? >> i'm not playing games. you asked me a complex question and trying to explain

it to you. and i get a couple of words in and you have another question. this is an interplay of statute and regulation. we decided a while ago that this was a great mistake, precisely the problem you're talking about. the statute is in effect so there are no statutory requirements and some the regulations just now gone into effect. what i'm saying, two things -- well, three. first of all, if you have no requirement that you do this, if there's no statutory or regulatory requirement, don't be guided -- don't be ruled by the rating agencies. >> neil: and the requirement, that's news to me, congressman. >> i keep trying to explain it and you keep interjecting. i'm sorry, they're complex. there are three sources of required reliance on the rating agencies. one, the federal government. that in turn had two parts. i'm sorry it's complicated, i had to explain it and the regulations, and we've got part of the sec wasn't giving

up money to carry out the rules and we have revealed the statutory requirement, and the sec will now, have now made it clear they have not penalized anybody who has that requirement. >> neil: let's focus on this. a very important question and the world market. you're saying that the perceived requirement that a lot of big banks humthat are required to hold triple-a security. in the event that u.s. debt goes down, among the securities they hold, they do not have to sell them? >> not according to federal rules. now, some of them may be subject to, pension funds, for example, may have state rules. >> there are no federal-- i want to be clear, you're saying there are no federals to that effect? >> i tried to explain it and i can't get it out because you want to oversimplify it. the fact is-- >> because that's the gist of the issue. >> let me explain it.

>> neil: five different ways. you're saying there are no requirements, period, so you don't have to sell? >> here is the situation. i'm sorry it's more complicated than maybe you can-- >> i'm sorry i'm stupid. >> you're not being stupid, this is the mode of journalist, i'm trying to explain it to you. one the statutory requirements are gone in some cases requirements imposed by regulation and we've mandated the regulators take those out. bank regulators and sec, they are in the process of doing that, what i've said is doing this, in the one case where the regulation hadn't yet been removed and offering was given, without a rating and this sec data include the rating. the sec, issued what is called a no action letter and said we will not penalize you for this. and under the statute, yes, if people now disregard any federally imposed requirement they be removed by the rating agencies, that's no longer in effect. they know longer have to worry about that.

some of them have their self-imposed rules, i would advise them, take ratings-- don't make it automatic. and communities in the district i represent that are being threatened with a downgrade, this is zero chance of them not making a payment and if i were in charge of their investment i would disregard the rating agencies. >> neil: but there would be more chances of not making a payment if the government goes up against the deadline tuesday. >> no, not in these committees. depends, if you notice what the market has been doing, short-term, long-term thing. short-term paper could be a problem, but most of the municipalities i'm talking about, i'm trying to protect them from paying more, fire buildings, firehouses, these are 20, 30 years bonds, i don't think there's any dang wer a 20 or 30 year bond with 7 day commercial paper, yeah, could miss payment, but the bonds given the longer term, zero-- people ought to disregard the

latest threat by moody's. >> neil: interesting. congressman, thank you very, very much, we appreciate it. that could be an interesting development, i think the congressman who knows the the issues certainly more than i. the worry that a potential downgrade to have, might not materialize if they don't have to do it. governor scott walker of wisconsin on that, what do you think of that, governor? >> well, i think the reason the national bond rating agencies are clamping down is because too many governments, whether it's greece, whether it's the federal government here in the united states or in some cases some state and local governments, the last few years have really been playing fast and loose with their finances. so they're clamping down precisely, not because of some of the issues the congressman just talked about, but also because governments aren't doing enough to control their finances. you've talked about them earlier. >> neil: you know what's interesting. governor, i know what municipalities are doing and that sort of thing. maybe i'm slow and stupid, congressman was inferring, i

think one of the things i took away from that was the fear you lower the top rating of the united states, the banks and institutions, a lot of them, pension funds as well, retirees who hold only triple-a securities and if things get downgraded, they have to dump those securities that were once triple-a, government notes and bonds, they don't have to. >> well, i think there is a real concern, at least, not just from pension funds, but from employers you've talked to about the impact on interest rates, what it's going to have on the economy and not just reaching the deadline this coming week and what happens if they don't make a real move toward tackling the debt. whether they hit the deadline or not. whether or not the debt ceiling goes up, we're still a long way off on any of the plans fully addressing the debt of the united states and that's an ongoing problem. probably why in contrast in wisconsin a 3.6 billion dollar deficit and turned it into a 300 billion dollar surplus and

the bond ratings agencies affirmed our bond rating and moody's called positive, what they're looking for structural changes. i don't hear that talk much m washington, that's what we need more than a debt ceiling lift. >> neil: the irony could be, whatever they deal they make even if it's by the deadline, the same rating agencies say, they're missing a variety of problems, including the entire financial meltdown and the housing crisis, that little "but" aside. they are the only game in town. they might go ahead and downgrade u.s. securities regardless, even if there is a last minute deal, especially if that deal looks shallow, right? >> well, the interesting thing in the krit-- you heard in the last second. criticizing missing or partially missing the ball before. what are they doing now, they're compensating and people are criticizing that as well. i think a lot of people have overlooked the financial missteps of some businesses in

the private private sector and the federal government is at the top of that list and what's missing in the debate not just whether or not we hit the debt ceiling, it's whether or not they're going to be honest and truthful about getting the debt under control because the number one issue is not the budget. the number one issue, at least in wisconsin, is the economy and this is providing more uncertainly for employers. we've more than doubled the rate of growth in jobs in the last six months. that's going to slow down if they don't hit this. >> neil: governor, thank you. governor walk are of wisconsin. and peer you faulk passed away, of columbo fame, and sometimes i scratch my head and say, repeat what you said, what did you say. it's my columbo moment. if i heard barney frank

correctly. >> it's the fear of the downgrade that everyone has to sell the securities. he's saying that's not necessarily the case, no rules on the book that would force that issue unless they're individually mandated by a given party. now, that could be a big turning point in taking either the pressure off these guys to rush a deal or if you want to slip it around, the pressure off the guys to even care about rushing a deal. depends on your point of view. i'm going to get reaction from senator mike lee of utah, who's also dealing with, indeed the entire capitol hill phone lines, well, a lot of people calling. a lot of people. . [busy signal]