>> schieffer: today on face the nation, are your taxes going up? will democrats sign off on the president's tax compromise with republicans? >> i don't believe there is a better deal out there. >> schieffer: yes, that was bill clinton who showed up at the white house, but liberal democrats want no part of the deal. >> this was a take it or leave it deal. we're saying "leave it." >> schieffer: what now? we'll ask david axelrod, the president's senior advisor. we'll get the liberal side of it from new york congressman jerrold nadler. and we'll bring in former presidential candidate howard dean to talk about the political fallout. then, i'll have a final word on washington's smoke signals. but first, david axelrod on "face the nation." captioning sponsored by cbs

"face the nation" with cbs news chief washington correspondent bob schieffer. and now from cbs news in washington, bob schieffer. >> schieffer: and good morning again. david axelrod is in the studio with us. good morning, mr. axelrod. >> good morning. >> schieffer: so the president says the only way to get republicans to go along with extending unemployment benefits and keeping the same tax rates for middle and lower income people is to also extend those rates-- what some people call tax cuts-- for the upper income groups as well. the republicans, most of them seem to love it. the liberal democrats are in a rage. what do you do now? >> first of all, let's be clear that what we agreed to is not just extending the tax cuts from the bush era, but also some tax cuts that we passed two years ago that go right to middle class families for college, for

a child tax credit. it also includes a payroll tax cut of 2%, so people will have more money to spend in the coming year. it includes business tax cuts. for example, if you own a business, you can buy equipment next year under this plan and defer your taxes on that purchase. this is going to help our economy move. that's why, bob, all economists who have looked at this have said this will put a real charge into the economy. it will add a point or a point-and-a-half to our growth next year. that means more jobs. that means better news for the american people. >> schieffer: so why is the left side of your party, why are the liberal democrats so against this? i mean, they're not just against it, they're mad about it. they're in a rage. i mean, somebody in the house using the f-word to describe the president. >> there are people on both sides of the aisle, bob, who have been unhappy because the nature of compromise is that you have to accept some things that you don't like in order to get the things that you do. there are things that the republicans did not want. they did not want the child

care... the child tax credit. they did not want the college tax credit. they didn't want to extend the full earned income tax credit. that helped people down the income scale. they wanted high-income tax cuts, and they wanted to expand the estate tax exemptions. and so we had to make a... a compromise to get to where we are. understand that if we don't, taxes are going to go up. the average person is going to see a $3,000 tax increase on january 1, two million people will lose their unemployment insurance. that safeguard will go away. and our economy will take a tremendous hit. so faced with that deadline, we made the... a good deal for the american people. >> schieffer: do you think the liberals and a lot of these democrats are just being unrealistic about this? >> look, i'm not going to denigrate them, because they

have strong feelings, as we do, about whether these high-income tax cuts are the right thing to do at this time with the deficits. that's why we limited it to a temporary tax cut. the same is true with the estate tax. they have valid concerns. the question is when you weigh all of it, is it a net winner for the american people? is it important for our economy? i think the answer to that is yes. i think many will come to that conclusion over the coming days. >> schieffer: you're not going to denigrate them, but they don't seem to worry about denigrating the president. some of this language they're using to describe the president, telling him basically shove it. >> you know what? the president of the united states has a bigger concern. those concerns are people who are sitting at home wondering whether they're going to be paying higher taxes on january 1. the people who are sitting home who are between jobs because of this economic downturn. and are relying on unemployment insurance to get them through this holiday season. those are his concerns. i think he's properly focused.

>> schieffer: let me ask you. you said in an interview on n.p.r., you call this deal a framework. does that me there may be some give in here? the president said that. >> i think what was agreed to is substantially what people will vote on, bob. there have been the house... some in the house raised concerns about the absence of an extension of a energy... renewable energy tax credit. that has now been added back in. in the main, i think that the vote that's going to be taken is on this framework. i don't see huge changes here. >> schieffer: but you would be open maybe to some changes, but you're saying you don't see anything major. >> what we want to make sure is that we don't get into a kind of washington-style gridlock, where this flows over into the new year and we send our economy in the wrong direction. we see taxes go up on all americans.

an unemployment insurance collapse. that would be a bad result. >> schieffer: one of the things that is being talked about, you're talking about on inheritance taxes. liberals want an exemption of $3.5 million on estates for individuals, and then want to tax the rest at a 45% rate. the deal that the president has apparently worked out with the republicans, as i understand, exempt $5 million and then tax the rest of it at 35%. do you see any give in that? >> again, i think the framework in place is probably the one we're going to vote on. we agree with the members who want the lower number-- that's our position. but temporarily for the next two years, we're willing to accept the higher number. but in exchange for that, we demanded that we extend the child tax credit, the college tax credit, the earned income tax credit, and we got these additional tax cuts that are going to be very helpful to

people across this country. >> schieffer: just on the counting of votes this morning, this sunday morning, do you think that you have the votes to pass this in both the house and the senate? >> i believe that this will pass. the president has been talking to members. we're all talking to members. and members are talking to each other. i think we will get there. i don't think anybody wants to be responsible for taxes going up on january 1 because we couldn't come to a resolution. but there will be serious discussions between now and... the senate votes tomorrow. i think the house will get to it later in the week, i hope. but at the end of the day, i believe it will come together. >> schieffer: but is what you're saying to me is you don't have the votes yet, but you think about by the time it comes to a vote... >> i'm saying to you that i'm confident we will move forward and take this step to avoid a tax increase and to move the economy forward. >> schieffer: you know, i remember one of the things the president said back during the campaign was, "this is not about

me." you know, as we look at this, it seems to be all about him. i mean, you know, you got the liberals saying he's being... he's caved. he's not fighting hard enough. you've got some of the republicans saying he's trying to lead us down a "socialist road." has it become all about this president? >> no. i think it's all about the american people, bob. that's where our focus has to be. it's easy in this town to get distracted by the noise coming from all directions. you can get so absorbed by that that you don't move forward and do the things that are necessary for the american people. in this case, it's absolutely necessary that we get this done. the president has done the right thing by focusing on what's important. you know, the rest of the politics will take care of itself down the line. we can deal with those issues later. but right now, we're facing a deadline; we ought to get this done. >> schieffer: is this about politics or is this about tax policy?

>> well, it should be about our economy. it should be about the well being of american... of working americans. i think for most of the people who are voting, it will be. i understand, again, the objections that people have in our party to some elements of this compromise. but i say again that compromise necessitates accepting some things that you don't like. that's the nature of compromise. if we don't do that, then we get back into the kind of gridlock that enrages the american people and retards our ability to deal with our problems. >> schieffer: i say, is it about politics or policy, because already last week we heard people begin to say, you know, democrats are so mad that the president may wind up with an opponent in some of the early primaries in 2012. do you worry that president obama might wind up being a one- term president? >> no, i don't worry about that at all, bob, because i think he's done good things for the country. he's fighting for the american people and for progress.

and that progress is going to show. the thing that would be worrisome to me if we made a bunch of decisions based on short-term political calculations, and forgot about why people sent us here, which is to get this economy moving, to cut through the clutter here and do the things that are necessary to secure the future for this great country. we're going to get that done. i am very, very confident about the politics. but right now, if we don't take care of business, then the politics become more complicated later. >> schieffer: what about the start treaty? >> one thing i should say. there's no good politics in letting taxes rise on january 1. let me say no party is going to benefit from that. >> schieffer: the start treaty. do you think there's any chance now that you'll get a vote on that in this lame duck session? >> oh, i think there will. that's a critical piece for our national security. we need to verify what's going on on the ground in russia. it will help us enormously in

terms of our cooperation on issues like iran and north korea. we have to get it done. we can't delay that. so i'm hopeful that we're going to get vote on that. i think the support is there for it. >> schieffer: we saw these riots in london last week when people found out that the government was going to raise the price of going to college. we saw riots in greece when the government services had to be cut. we're seeing problems in ireland with their budget. are we at a point in this world where democracies have just gone in debt too heavily, where people want and have come to expect these services, but they don't really want to pay for them? is that part of what we're seeing here. >> we're going to have to have a serious discussion in the coming years about how we get budget deficits under control. the first element of that, the president believes, is to get the economy growing at a robust rate. we've seen growth. as a result of some of the things we've done and the

strength of the in... the inherent strength of the american economy. we have to do better. we're going to have a serious adult discussion about what we... what we can afford and what we can't and what our true priorities have to be to make ourselves strong now and in the future. and we're going to have that discussion. >> schieffer: david axelrod. always a pleasure to have you. >> thanks, bob. >> schieffer: we'll be back with some other sides of this story in one minute. ♪ [ man ] i thought our family business would always be boots. until one day, my daughter showed me a designer handbag. and like that, we had a new side to our business. [ male announcer ] when businesses see an opportunity, the hartford is there. protecting their employees and property and helping them prepare for the future. nice boots. nice bag. [ male announcer ] see how the hartford helps businesses at achievewhatsahead.com. [ male announcer ] see how the hartford helps businesses

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>> well, we passed the resolution in our caucus the other day saying we would not permit this deal to come to the floor without some changes. many of those changes would have to be to... for members of our caucus to let it come to the floor, i don't know. i certainly hope that there are very major changes in this. >> schieffer: what's wrong with this? >> i'm looking at it in the long term. three major problems that i see with this. firstly, the republican blackmail is saying like a bunch of gangster, "it's a nice middle class tax cut. a pity something would happen to it." unless you give the millionaires and billionaires a long term tax cut, we're not going to permit the middle class to continue its tax cut. but that millionaires and billionaires tax cut will cost $700 billion added to the deficit over the next ten years, which we can't afford. i know that this is a two-year extension. but if we succumb to that blackmail now, when both the middle class and the upper end

tax cuts expire in two years in the middle of a presidential election, why would i expect that the president and the congress would then have the political gumption not to submit again to the republican blackmail and in effect make it permanent? i believe voting for this now may be to make permanent the upper end tax cuts at $700 billion a decade, which would be the cull culmination of a 30- year republican plan to starve the beast, to create deliberately such massive tax cuts that we'll have to cut social security, medicare, aids education, housing and everything else. >> schieffer: that will be a very long answer. we'll get back to the rest of it. what i'm asking you is, would you be willing to let everyone's taxes go up in order to stop that... extending those tax rates for the upper income people? >> i don't think that's the alternative. i think the alternative is to say we're not going to submit to that blackmail and let the president and the democrats go to the people, who the polls

show they want the upper-end tax cuts not to continue, but want the middle class tax cuts and say "don't submit to the blackmail." i believe if we conducted a campaign like that for some time period we'd win that. that's got to be done. >> schieffer: let me go to howard dean. governor dean, you said earlier this week that the president has got to start paying some attention to the people who got him where he is. you said he's got to find some way to heal this rift with the left side of his party. how serious is that, from his standpoint? i mean, could he be facing an opponent in the 2012 primaries here? >> i don't think he's going to face an opponent in the democratic primary. i think that would be a bad thing for the country. i think it would be a bad thing for the democratic party. the history of people running against presidents in their own party is the challenger loses, and then the president is weakened and loses. the president has done some things that i think are terrific. this is not one of them. but i think he will not get an opponent. >> schieffer: what do you think is going to happen here, governor?

do you think, in the end, the house democrats like congressman nadler will come around? >> here's the big problem with this, bob. this is terrible for the country, long term. it's not just the things that jerry was talking about. first of all, we're going to find out if the republicans are serious about the deficits. this tax cut is not paid for. the biggest part of the deficit, if you project out until 2018, is the bush tax cuts. that is what causes 50% of the deficit. second of all, the 2% payroll tax sounds great but in fact they take it out of the social security trust fund. here we are complaining about the social security trust fund going broke and we take $120 million, a billion dollars of revenue out and use it for a payroll tax mitigation. this is a short-term washington fix. it does nothing about the biggest long term threat to america, which is the deficit. i don't hear republicans or democrats talking about the deficit. there is no pain in this agreement. this is the easy way out for everybody. much as everybody is complaining and hooting and hollering, this is an inside the belt way fuss

and somebody needs to do something about the long term problems in this country. it's not in this bill. >> schieffer: congressman nadler, let me go back to your objections. it seems to me like it's going to be a difficult thing for the president to bring some of your colleagues around, because in that democratic caucus, i mean people heard through the doors some of the shouts. i asked mr. axelrod how did the president feel about some democrats actually using the f-word to describe him. it seems like this is a really wide divide we've got here between the democratic president and his democratic house members. >> well, it is a really wide divide for several reasons. people do not want to see those tax cults for the upper income people permanentized, which we feel this may do. second of all, governor dean is entirely right about the long term risk for social security here. now, this one-time one-year $120 billion tax cut in social security taxes will be paid for out of the general fund. that, for the first time, starts getting the general fund to

subsidize social security for $120 billion a year and bring social security into the deficit debate, which greatly undercuts the political support to avoid eviscerating social security a few years down the road. that's the second major problem, which we don't want to see. the third is the give away on the estate tax which, over ten years, is $115 billion more than we should be doing. >> schieffer: do you think if this does not get done somehow in this lame duck session, it's going to be easier next year, when you have a more liberal democratic caucus and a more conservative republican caucus? because it's definitely going to be that, because that was the impact of these elections. >> i don't think it's going to be more easy. i think it will be probably somewhat more difficult. but the fight hasn't been made. we haven't gone to the country and said, "do you want to submit to the republican blackmail in order to keep the middle class tax cuts by increasing the deficit by $700 billion to give the millionaires and the billionaires their... let them keep their tax cuts?" and that issue has to be made and go to the country. i think we win on that.

i think republicans have to back down. >> schieffer: governor dean, what is the congressman talking about here? isn't that going to be hard to go to the country now? we've already had an election here. what do you do when you go to the country? >> look, this is already on down the track. i mean, you know, once you make the offer and you come to the deal, it's going to be pretty hard for the president to pull back and then change his mind in midstream. the truth is i don't think this is all that bad for the president politically, because he is going to be seen as acting presidential and bringing both sides together and all that stuff. the thing that bothers me about it is we have yet to deal with the biggest problem that is facing this country, which is size of the deficit. and nobody is doing anything about it. if you keep doing what people like, which is cutting their taxes, you're going to have a bigger deficit. we're going to be weaker in the long term. i just don't see how that contributes to the long-term future of the country. sure, it's easy to promise everybody tax cuts all the time. you have to make some cuts if you're going to do that. >> schieffer: do you advocate letting all these tax cuts run

out, as it were? and having everyone's taxes go up in january? >> no, i don't advocate the middle class tax cuts expiring, because it is really clear that the middle class is under a lot of stress. every dime you take out of their pockets is a dime that won't go back into the economy. but ultimately, these tax cuts all of them are going to have to expire at some time. if you don't do that, you're facing numbers that are unfathomable eight years from now. >> schieffer: clearly, congressman nadler, we're in the land of poor options here. there's no question about that. but how can you prevent people's taxes from going up next year if you don't come to some compromise with republicans on this? >> well, i think you're going to have to come to a compromise, but this is a bad compromise. because as governor dean said, it really sacrifices the welfare of the country long-term. i would say that the second largest problem we face long term is the long-term deficit. the more immediate problem we face is to create more jobs right now. we have to do that. but you can't do it at the

expense of permanentizing these upper end tax cuts and the estate tax cut and jeopardizing social security down the road. >> schieffer: do you feel that the president has betrayed his party, congressman? >> no, i'm not going to say the president betrayed his party. i think that he probably should have stood a little stronger and not gone along with the... with what is the republican blackmail attempt. he thinks that we can fix this in two years. i'm more skeptical of that. >> schieffer: all right. i want to thank both of you for giving that side of the story. we'll be back in a moment. i'll have some final thoughts. this was me, best ribs in nelson county,

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unexpected-- yes, that was former president clinton holding forth at the white house podium friday and loving it. yes, he still is a good briefer. and yes, those were republicans lining up to support the president's tax proposals. and yes, those were democrats telling him to shove it. talk about role reversal. it was as if actors in a play all decided to exchange costumes and roles onstage. "you wear my suit, i'll wear yours. i'll say your lines, you say mine." amidst all that a nice surprise. we learned that the president hasn't been seen with a cigarette in nine months. good on it. i hope he's beaten it once and for all. as a once heavy smoker who got cancer and several other diseases from my addiction, i know how hard it was to quit. but over the past few months, i have publicly challenged the president and incoming house speaker and heavy smoker john boehner to set an example and

pledge jointly to quit. my buddy tom brokaw joined the cause today and said the two should make that pledge on the steps of the national institutes of health. he noted cancer kills 443,000 people a year, ten times more than car wrecks. so what do you say, mr. boehner? are you going to let the president one-up you on this? if barack obama can do it, can't you? back in a minute. ♪

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>> schieffer: that's it for today. thank you for watching face the nation. we'll see you next week. captioning sponsored by cbs captioned by media access group at wgbh access.wgbh.org ,,,,,,,,