>> schieffer: today on "face the nation"-- at the 11th hour, congress and the white house were able to head off a shutdown of the government and the victory laps began. the president showed up at the lincoln memorial, to the surprise of weekend tourists. >> because congress was able to settle its differences, that's why this place is open today and everybody is able to enjoy their visit. >> reporter: at a fundraiser last night in connecticut, republican speaker john boehner regaled a partisan audience with insider details of the negotiations. >> all of a sudden the jovial, "never says a nasty word" joe biden jumps up and says, "well, i think we've had enough of this. i think we ought to shut it down and let the american people decide."

>> schieffer: so. what happens now with a bigger battle being raised to lower the debt ceiling. we'll bring in jeff sessions the ranking republican on the senate budget committee, and new york's chuck schumer, a member of the senate's democratic leadership. we'll round out the discussion with two reporters who covered this story-- cbs news congressional correspondent nancy cordes, and major garrett of the national journal. it's all ahead on "face the nation." captioning sponsored by cbs "face the nation" with cbs news chief washington correspondent bob schieffer. and now from washington, bob schieffer. >> schieffer: and good morning again. welcome to "face the nation." senator sessions is in the studio with us this morning. senator chuck schumer is back home in new york. senator schumer, i want to start

with you. because the president and the leadership in both houses has now agreed to a funding bill to keep the government running mstil october, but it includes $38 billion in cuts to federal programs. the problem is we really don't know where these cuts come. tell us what some of them are. >> well, let me say the compromise i think is a fair compromise. both sides gained. i think it will get broad bipartisan support. hie turning point in this was when the hard right, which wanted to focus the cuts... >> schieffer: senator schumer, before we get to that, tell me what some of the cuts are. >> well, the cuts are across the board. everybody gives some pain. we don't have the specific details yet. they're going to be published on monday. i'm not going to get into any of the specific details until then. but i can tell you this. about half of the new cuts will go not just from what's called the domestic discretionary, but

other areas-- defense, agriculture, and things like that. that's what allowed us to get up to that number. that was the turning point. the tea party folks wanted them all to come from the domestic discretionary. it's much broader than that. more than half of the new cuts are from the so-called "chimps," which don't cut the seed points, the things like teachers and head start and cancer research and helping kids go to college which we thought would have been a huge mistake because those would have hurt our economy and hurt the middle class. our goal-- cut the waste but don't cut the seed corn which keeps the economy growing, because the american people have said to us two things. they said, yes, cut but make sure you grow jobs and grow that economy. you had to do both. >> schieffer: i mean, do members of the senate and the house know what these cuts are, because you say you can't tell us what they are? >> well, no, there are broad outlines. this much is coming from defense. this much is coming from agriculture.

this much is coming from, let's say, h.h.s. but as for the specifics, those are going to be published on monday. we've agreed not to say anything before then. >> schieffer: all of this, of course, is just prelude to the big battle coming down the road here, because if congress does not agree to raise the debt ceiling-- and that's going to have to be done in the next month or so-- then the government will have to start defaulting on its debts. if anyone out there thinks that what has just happened here in washington didn't send shivers down the spines of economists and people who follow this sort of thing, just wait until you see the impact on the economy if the united states has to start defaulting on its treasury bills. but the president has said he wants a clean bill. he wants an up-or-down vote on this to raise the debt ceiling. last night, speaker boehner made it pretty plain that is not going to happen. let's listen to what he said. >> and the president says, "i

want you to send me a clean bill." guess what, mr. president. not a chance you're going to get a clean bill. i can just tell you this. there will not be an increase in the debt limit without something really, really big attached to it. >> schieffer: well, senator sessions, what does that mean "without something really, really big attached to it"? >> we've got to talk about the systemic problem that we have. we limited how much debt by congressional action that the country could assume. we reached that limit far sooner than we thought because the spending is surging out of control. so the question now is, should we raise it? and the american people are saying, "children, you've misbehaved. you've spent too much of our money." i think through their elected representatives, they will insist that we make some changes in how we operate the budget. you could have a two-year budget, for example, instead of one. i think that would help. we can put statutory caps on spending. we can have a balanced budget

constitutional amendment that failed by one vote about a decade ago. so i think a number of serious things of that nature that we must confront. and the president just can't waltz in and say we're going to have a debt crisis if you don't raise the debt limit, congress, and we're not going to have any changes and i'm not going to support any changes. he's going to have to meet congress halfway. really, the american people halfway. >> schieffer: senator schumer, one of the white house advisors, david plouff, said this morning that or suggested anyway that the white house may agree to some conditions before raising the debt ceiling. what would be the acceptable? >> well, i think david plouff said that the president would outline a proposal to get our long-term debt down this week. that's a good thing because, you know, speaker boehner had to keep these negotiations going to the last minute to show the tea party people he was doing everything he could. you cannot do that with the debt ceiling.

that is playing with fire, because if the markets believe we are not going to pay our debts, it could be a formula for recession or worse. so this is playing with fire. i would urge both sides to take the threat of not renewing the debt ceiling off the table. having said that, the president is going to come forward early and outline a plan, as david plouff said. it will be... that's a good idea because it doesn't bring things down to the wire on the debt ceiling, but it also will show the great contrast with paul ryan's plan. while i don't know the details, there are, knowing what the president thinks on specifics that are likely to be there, or some generals, rather, that are likely to be there. oc will be broader. the ryan budget focuses on the middle class. you need to share sacrifice. and we believe that, for instance, defense cuts should be greater than ryan proposed. there's waste there, like everywhere else. even more importantly, there has to be revenues.

if you're going to reduce the deficit, how do you allow the oil companies to get huge subsidies based on a time when oil was $17 a barrel, not $100. how do you give tax breaks for multimillionaires and companies that send jobs overseas, and yet decimate middle class programs? it's got to be fair and across the board. >> schieffer: but you say has got to include revenues, so you're talking about raising taxes? >> well, there are revenues in terms of oil company liabilities. there are revenues in terms of tax breaks to corporations that go overseas. but i think many of us feel that tax breaks for millionaires is part of that shared sacrifice, absolutely. >> schieffer: i want to get a response... >> we do share a lot, chuck. but this budget that the president has already submitted a few weeks ago is the most irresponsible budget ever submitted to the american people. we're in a financial crisis.

it did nothing to change the trajectory we are on, but actually increased it. he has education spending increased 10%. energy 9.5%. state department 10.5%. his rail deal-- 62% increase in transportation's funding. we don't have the money. we're spending money we do not have. we have got to change. what this plouff announcement today is... we've got to examine it very carefully. the reason we've changed, the reason this dynamic has changed, the reason the president has dramatically suggesting he's altering the budget that he sent a few weeks ago is because of the tea party. the people out there who are unhappy with the way this congress has spent our country into virtual deficit oblivion, and put us in a recession and they're demanding a change and i

understand the big spenders don't like those people. but i like them. i think they are saving the country. >> schieffer: let me just ask you this. if we don't have the money, you're talking about we don't have the money this plan that david plouff that senator schumer just referred to talks about lowering the tax rates for upper income americans down to 25% and also lowering if corporate tax rates. senator schumer says we may have to raise taxes. republicans seem to be talking about let's cut taxes some more. >> the ryan plan is a really comprehensive, historic plan that erskine bowles and alan simpson and the debt commission people praised as straightforward and honest. any other plan they submitted needs to deal in the same way that ryan did. if they don't cut this spending, say where you're going to get the money, is what they basically said. we're now waiting to see, with baited breath, whether the senate democrats will propose anything. the house republicans have stepped up. will the senate do the same? >> let me say this.

first, the only taxes we're saying is don't give the bush tax breaks to the multimillionaires. no one else's taxes will go up. the pledge that the president made stays. but why shouldn't there be shared sacrifice? you're telling... the other side wants to tell middle class kids it's harder to go to college, wants to lay off teachers, lay off or stop research which creates new jobs. we're saying there should be shared sacrifice. i'll tell you one other place there will be a difference, which is in medicare. we both agree. i think there's agreement from both parties that we have to look at medicare and medicaid, these health entitlements. but instead of privatizing it, which is what paul ryan has proposed-- when you privatize, you're saying basically... you give the insurance companies a lump sum of money and they go do what they want. what history has shown that rates continues to go up and costs go up, but benefits go down. we're looking at keeping the benefits but making the delivery systems more efficient.

that would be done in the health care bill and will continue. it's a much different proposal. it's not leaving it up to the insurance companies. what i'm saying, jeff, is this, we will both agree that we have a deficit problem and have to bring it down. our belief is... >> that's what a change. >> shared sacrifice across the board. yours is just saying that middle class people. >> i deny that, that it's aimed only at middle class people. but what is changing here is the president's budget did none of that. the president's 2,000 pages he sent to us just a few weeks ago proposed no changes in medicare, no changes in social security or medicaid. and actual increases in discretionary spending, increases in taxes, and still increasing the debt even more than we were already on. so we're going to look at this, and we'll discuss it, chuck. and i will. and the members of congress and we'll wrestle with these difficult numbers.

but i'm glad to see some sort of retreat and acknowledgment that the original proposal to do nothing is no longer on the table. >> schieffer: let me just say this. just a very short answer here, because we're close to out of time. do either of you seriously believe that they would not raise the debt limit when push finally comes to shove? >> the president is going to have to meet with the speaker in the house and make some concessions. i think eventually we'll raise that debt limit. but if he thinks he can just do it without making any changes in the spending patterns we're on, it won't happen. >> schieffer: senator schumer. >> let me say this. playing the same game they played on shutting the government down up to the last minute, and using that as sort of leverage to get things they wanted, and fortunately we didn't go along with a lot of them-- but doing that on the debt ceiling, a disaster. a formula of playing with fire that could actually have the

credit markets stop taking u.s. debt and create a recession. this should be taken off the table now. it is highly irresponsible. it is... it shows a lack of knowledge as to how our government works. and major business leaders, jamie diamond says he can't imagine either party would even think of doing that. >> the president is going to have to reach out early if he wants to get an early solution. he cannot just do nothing. >> schieffer: all right. gentlemen, i think we're going to be talking about this a lot more. thank you. >> he's just not doing what jeff wants. >> schieffer: we'll be back. growing up, tom watson couldn't hit a curveball. nick faldo rarely found the back of the net. and arnold palmer just wasn't fast enough for track. isn't it funny how sometimes success begins

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cordes, who both of them covered capitol hill. major, what do you make of this? and what does this pretend for what's about to happen here, this situation with raising the debt ceiling. >> a couple things-- that the system can work, and that senator reid and speaker boehner have a better relationship than they had before, as does the speaker and the president of the united states. that all counts because before they really were testing each other to find out who could prevail. and both sides to a certain degree prevailed but it's quite clear, bob, that from where this debate started to where it ended up speaker boehner drove this farther than the president or harry reid did. remember, at the beginning senate democrats in the white house wanted no cuts from the 2010 budget. they've now agreed to almost $39 billion. senator schumer was just talking about taxing oil and gas companies. that was also part of the initial senate democratic bid. that issue was completely pushed aside. he's resurrecting it, but republicans know if that argument didn't work the first time, it's unlikely to work the second time. internally, house republicans feel though they didn't get all

that they wanted they got more than they expected. >> schieffer: i'm not into this who won and who lost business. i don't think anybody won, quite frankly. i'll have more to say about that later. but i would have to say this. i think probably speaker boehner had the hardest job here, because it wasn't just the republicans against the democrats. it was boehner kind of in between, because all these tea party people on his right. >> he did, but it gave him great leverage because he was able to go to the white house, and say you're going to need to give because i have these tea party folks. they won't be happy unless you meet me halfway. i think he said at one point. "thank you, tea party members, for putting me in this box." he ended up going in there asking for a lot, and got more than halfway to where he wanted to go. >> i wrote on friday afternoon, bob, after the first republican conference meeting about 4:00 in the afternoon, many of the freshmen said "mr. speaker go cut us a deal. you have our... we have your back. whatever you come back and tell

us is the deal we will accept." sight unseen, whatever you bring back, i trust. i personally will support." it was a key moment for speaker boehner because he was then able to say, all right, i have a deal and it can hold. >> schieffer: do you think, nancy, there is some talk that they will take this ryan plan, the paul ryan plan, which calls for cutting $6 trillion out of the budget over the next ten years, and really does overhaul medicare and medicaid. there are some very serious changes in there. some on the republican side are talking about just attaching that to the debt limit bill and having a vote on that. do you think that's what's going to happen? >> well, i think you can see that the white house is worried about that, because they were hoping to put off this fight caer medicare and medicaid and social security until after the presidential election. now, you hear david plouff saying the president is going to come out and talk about it this week. they know republicans are going to engage on this issue, no matter what. they've got to be prepared to fight against it.

>> schieffer: do you think, in fact, major, that some democrats may be praying they attach that to the vote, because then they can say look what these mean old republicans are doing? >> certainly. i think house republicans know that's probably a bridge too far this soon on the debt ceiling vote. but they want things that change the way washington builds its budget. maybe going to a two-year budget cycle, doing other things that put a higher premium on balancing the budget or reducing spending, as opposed to increasing budget baselines. i think that's where republicans are heading. the other thing is, last week, charles schumer said john boehner was the reasonable republican to deal with. john boehner has one of the most conservative voting records in the history of congress. for democrats to say and now portray speaker boehner as the voice of reasonableness against the tea party, when the divisions with john boehner and the tea party were miniscule in the end, anyway, i think puts republicans at least for now in a stronger position than they were. and the assumption that they

would be divided and unable to govern are less true than they were two months ago. >> they've come up with a couple of negotiating tactics that really work for them when they only control one third of the government. first, they ask for the whole enchilada. the 40 or 50 riders on all these sensitive social issues they were able to hand those in one by one on planned parenthood and the epa, and get another billion in cuts each time. so that really worked for them. they showed they were willing to go right up to the brink on a government shutdown to get their way, and that's something they may repeat when it comes to funding the government with the debt ceiling. >> one other quick point going forward, bob. the president's announcement that he will put together a speech on entitlement reform and other budgetary issues begs a very important question. with that speech, will the president essentially be discounting the budget he submitted to congress? because in this fight, the president has already given ground. he originally said freeze 2011 spending, but cut nothing from the 2010 enacted budget. he's cutting that.

he talks about significant title reform-- not in his budget. does that budget he submitted to congress become by his own word and action essentially a dead letter. >> schieffer: one of the things in the paul ryan plan is this plan to basically overhaul medicare, and go back to make it in the private insurance that seniors would have options to buy, and then there would be federal subsidies. >> "premium support," yes. >> schieffer: it also calls on medicaid, which is the aid for poor people-- it just simply does away with it, sends that money in block grants to the states, and lets the states administer it as they choose. do either of you think that either of those proposals can fly in the united states senate? >> i think medicaid has a chance, although there are some conservatives who don't believe block granting is a good idea. many governors, republican and democrats, don't want the responsibility of handling that block granted money for medicaid. they would like the money but they know it will become a great responsibility to deliver those

services and all the political risks would come with their administering of medicaid. that's something that is an idea that works great theoretically, but as far as practical politics, i'm not sure it works out. moving medicare from where it is to premium support is an enormous title shift in the way that the government deals with elderly health care. that's an awfully ambitious thing. paul ryan is trying to move it in that direction. if he gets halfway that far, he'll probably accept that. >> it's dead on arrival in the senate. what democrats say is that the greatest leverage that medicare has to bring down prices overall is that it's so big and covers so many people. you take that money and send it all to the private sector, you basically give up any leverage the government has to bring. >> schieffer: thanks to both of you. one thing for sure, you'll both have plenty to do. >> no doubt. >> schieffer: i'll be back in a moment with some final thoughts.

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>> schieffer: finally today, i am glad that washington found a way to avoid shutting down the government, but excuse me for not applauding. when we are involved in three wars, the country was in a recession and people are out of work, you don't have to be too smart to know this is not a good time to shut down the government. and figuring that out is no reason to offer congratulations. i hate to paint all of them with the same brush. there are some fine and serious people in congress, and in the white house, too, for that matter, but washington has become more than dysfunctional. its inability to act has become disgraceful. if washington had been willing to meet its responsibilities, the two sides would have resolved this last year. last week's argument was last year's argument, or should have been. but there was an election last year. and all sides were happy to put off the hard choices, which brought us to this remarkable

year in which congress has been in session since january and managed to do absolutely nothing. i don't know about you, but where i work, every once in a while, they expect us to do something. it doesn't seem to be a requirement in official washington, and now they are talking about who won and who lost this epic battle. don't they understand there were no winners and losers. they just wasted a lot of time with partisan posturing until they were forced to do what they should have done last year. that is nothing to brag about, and certainly nothing to applaud. back in a minute. somewhere in america, a city comes to life. it moves effortlessly, breathes easily. it flows with clean water. it makes its skyline greener and its population healthier. all to become the kind of city people want to live and work in. somewhere in america, we've already answered some

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>> schieffer: that's it for today. we'll see you right here next week on "face the nation." thanks for being with us. captioning sponsored by cbs captioned by media access group at wgbh access.wgbh.org ,,,,,,,,