>> smith: today on a special edition of "face the nation," house speaker john boehner and president barack obama headed for a showdown over the debt crisis. as the nation reaches the limit on its debt, both sides say it should be increased, but republicans want strings attached. >> without significant spending cuts and changes in the way we spend the american people's money, there will be no increase in the debt limit. >> smith: the president says no way. >> let's not have a kind of linkage about where we're not talking about raising the debt ceiling. that will get done. but let's get serious about deficit reduction. >> smith: hearing what the president had to say, what does it mean to you? >> it makes me think he's not serious about tackling the big problems.

>> smith: you don't think he's serious about the deficit? >> he's talking about it, but i'm not seeing real action. >> smith: we'll also get the speaker's thoughts on the republican plans for reforming medicare, the mortgage crisis, and what's next after bin laden. 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, substituting for bob schieffer, harry smith. >> smith: good morning and welcome to a special edition of "face the nation." we're at the capitol this morning. we are speaking to the speaker of the house. good morning. >> good morning. >> smith: i'm going to get back to monday when you were in new york speaking to the economic club. you made a lot of news because you said, "you know what? we can have a conversation about raising the debt ceiling, but

it's got to go hand in hand with reducing the deficit." have you given serious thought about what parts of the deficit... what would be traded here? >> i think it's time to deal with the big problems that face our country. we've got spending that's out of control. we've got an economy that's not producing jobs. a lot of economists believe that all of the debt and all of the spending is causing uncertainty and causing job creators to sit on their hands. i used to be a small businessman. i understand what uncertainty does. i think it's time to deal with the pressing fiscal problems that we have here in washington. i've been here for 20 years. i've watched leaders look at this problem. it's like looking up at a mountain and seeing how tall it was and how steep it was, and deciding we'll kick the can down the road. guess what? we're running out of road to kick the can down. i want us to deal with the big

problems that are facing us here in washington. >> smith: we had a town meeting earlier this week with the president talking about economic issues. we talked about that very subject. i'd like you to take a look at what he had to say. we came precipitously close to a government shutdown within recent memory. now, the next potential real falling out is with the debt ceiling. speaker john boehner said this week, "you know what? we'll be happy to help you raise the debt ceiling. we want equivalent deficit reduction for every dollar we raise the debt ceiling." can you even start a conversation on that? >> first of all, we both agree... john boehner and i agree that we have to reduce our deficit. second of all, we both agree that we have to raise the debt ceiling. now, a lot of americans, by the way, when you ask them, should we increase the debt ceiling, they say "no, we've got enough debt. why would we increase our limit on our credit card when we can't

pay what we've already got on there?" the problem is that the way the federal government finances itself is we sell debt to investors, other countries, et cetera, through treasury bills. and if, at any point, somebody thought... if investors around the world thought that the full faith and credit of the united states was not being backed up, if they thought that we might renege on our i.o.u.s, it could unravel the entire financial system. we could have a worse recession than we already had, a worse financial crisis than we had already. so we can't even get close to not raising the debt ceiling. but we also have to reduce the deficit. what i've said is let's not have a... the kind of linkage where we're even talking about not raising the debt ceiling. that's going to get done. but let's get serious about deficit reduction.

i've put a plan on the table that takes $4 trillion out of our deficit and debt. the question is, are we going to have some compromise? is it going to be balanced? are we going to make sure that no single group-- not seniors, not poor folks, not any single group-- is carrying the entire burden. let's make sure that the burden is shared for making some tough choices. >> smith: hearing what the president has to say, what does it make you think? >> well, it makes me think he's not really serious about tackling the big problems that face our country. >> smith: you don't think he's serious about deficit reduction? >> he's talking about it, but i'm not seeing real action yet. i just think this is the moment. we all know what the problems are. why don't we just deal with them? no more kicking the can down the road. no more whistling past the graveyard. now is the time to deal with the

fiscal problems we have in an adult-like manner. >> smith: including medicare. >> medicare, medicaid. everything should be on the table, except raising taxes because raising taxes will hurt our economy and hurt our ability to create jobs in our country. >> smith: one of the things that the president also said during this town meeting was, "well, let's have this conversation, but the rich have got to start paying more of a fair share. >> the top 1% of wage earners in the united states pay 40% of the income taxes. the top 10% of wage earners pay 90% of the income taxes. the people he's talking about taxing are the very people that we expect to reinvest in our economy and to create jobs in our country. >> smith: he's talking about going to the clinton-era tax levels, at which point you had a 4% annual growth in g.d.p.? i mean, just a... just to kick the can back a little bit. >> we don't have an economy as good as we had during the

clinton era when republicans were in charge of the congress. we're trying to get our economy moving again. you can't do that by taxing the very small business people that we expect to invest and create jobs. >> smith: we need to talk about medicare because the trustees report came out this week. it said that medicare will be insolvent five years earlier than they had anticipated in the past, because of the failed economy and because of increased costs of the medical services. how is this going to get done? either your way or the democrats' way or... people in this country feel so strongly about medicare-- you don't touch that. that's our right. we're entitled to this. >> no, they are entitled to it. we should keep our commitments. but we have to find a way to make this affordable, not only for seniors but for our kids and grand kids who are going to have to pay the bill.

harry, we've waited too long to deal with this problem. today, there are 10,000 new people signing up for social security and medicare every single day. 10,000 more every single day. and as a result, the money in the so-called trust fund doesn't exist. and it has to come out of current revenues. that's why everything needs to be on the table. we've put forward our plan. our plan said that no one 55 or older would have any changes to their current plan. but for those 54 and younger, i think it's time to make changes to those plans or they won't exist. remember, the greatest threat to our country and to our economy is doing nothing. >> smith: isn't that a way to say we're not really serious about it, because the fact is the biggest part of the population, the baby boomers are just coming into the plan now.

you're saying, "don't worry 55 and over, you're fine." well, guess what? a lot of... even more revenue than we can possibly comprehend is going to get chewed up in this thing just in the text ten years. >> that was our proposal. it was our budget that we moved through the house. but we haven't seen the plan from the president. we haven't seen a plan from the senate democrats. it's time for them to put a plan on the table. >> reporter: paul ryan talked about addressing medicare in a significant way. he talked about budget deficit reduction. and once that happened, it really turned into a political football... actually more of a hot potato, excuse the metaphor. some of the republicans started running away from it because their constituency said "don't touch this. this is..." >> harry, that's just not a fact. you know, i've talked to all of our members who did town hall meetings during the two-week easter recess all over the country. moveon.org and some of the unions sent people in there to make noise.

but you can ask any one of our members, and they'll tell you that, on average 80%, of the people at these town hall meetings were supportive of taking big steps to put our fiscal house in order. >> smith: the next time you go home to ohio and you're standing around in a tavern some place, all the retirees are going to put their arms around you and say, "please, please, change medicare"? >> no, no. listen. the retirees are going to be taken care of. there's no ifs, ands or buts about that. but we all know that if nothing is changed, seniors' benefits are going to get cut. why? because they're unaffordable. that's why we have to deal with this. and we need to deal with it now. >> smith: can republicans and democrats have a serious conversation? is there a middle ground? is there a place they can meet? >> i would hope so. i think we will. listen, i understand what the president was saying about jeopardizing the full faith and

credit of the united states. that's why i've said in every public and private utterance that our obligation is to raise the debt ceiling. but to raise the debt ceiling without dealing with the underlying problems is totally irresponsible. >> smith: you believe it's true because there are some doubt now, even people in this building, who have said geithner is overstating it. maybe we don't... there's places where you could do some better bookkeeping and raising the debt ceiling is not that necessary? >> i think it is necessary, but i understand the doubts. remember, two days after i was sworn in as speaker, i got a letter from mr. geithner telling me that we had to raise the debt limit in the next 60 days. they've pushed the date and they've pushed the date back and pushed the date back. so i understand the doubts and the questions. but at some point, it's clear to me that we have to increase the debt ceiling. as we do, we're going to do it in a way that addresses america's long-term fiscal challenges.

>> smith: the other concern that is out there is this is going to turn into another soap opera. high drama. you know, countdown clocks down to the last minute, as we just went through last month with extending the government's ability to pay for itself. can this get done in a way, to take the drama out of it, because the higher the drama, the less the credit markets are going to like it probably. >> i'm ready to cut the deal today. >> smith: (laughing) >> we don't have to wait until the 11th hour. but i am not going to walk away from this moment. we have a moment, a window of opportunity, to act. because if we don't act, the market is going to act for us. our creditors are going to act for us. we could see exorbitant interest rates. we could see the end of our economy. if we don't act. so i am committed to making sure

that we have real deductions in spending and real changes to the budget process so this problem will never occur again. >> smith: the president has met with republicans and democrats this week. there's been a little bit of talk about maybe this is one of those reagan/tip o'neill moments, clinton/gingrich moments, where two sides theoretically at absolute odds could come together. is it ripe for that possibility? >> i think, at the end of this process, it's going to have to come to that. i've talked to the president all year privately. about the fact that we were not going to increase the debt limit without serious changes. i mean, this conversation has been going on for quite a while. i've offered the president, i said, "mr. president, come on, you and i. let's lock arms and we'll jump out of the boat together." i'm serious about dealing with this. i hope he's just as serious. no gimmicks, no automatic

clawbacks. i've had it with all of that. we know what needs to be done. let's just do it. >> smith: mr. speaker, we're going to take a break and we'll continue with speaker john boehner from the capital on "face the nation" right after this. we're america's natural gas. and here's what we did today in homes all across america: we created the electricity that powered the alarm clocks and brewed the coffee. we heated the bathwater and gave kelly a cleaner ride to school. cooked the cube steaks and steamed the veggies. entertained dad, and mom, and a neighbor or two. kept watch on the house when they slept. and tomorrow we could do even more. we're cleaner, domestic, abundant and ready now. we're america's natural gas. the smarter power today. learn more at anga.us.

>> smith: welcome back to the special edition of "face the nation." i'm harry smith sitting in for bob schieffer. mr. speaker, one of the things that seems to be dragging down the economy-- you've got one in four mortgages in the united states that are underwater. some estimates say there may be another five million foreclosures in the pipeline still to come. people are scared to death about what's happening with their biggest single investment. has washington done enough to

alleviate some of that pain, to help folks out who, many, through no fault of their own, ended up in a cataclysm that was really created by the banks? >> over the last couple of years, congress has really set up four programs to help those with mortgage problems. unfortunately, none of those have worked. all they really have done dragged out the length of time for the market to clear, for the problem to resolve itself, which is unfortunate. until we get our economy moving again and until we get more people employed, taking care of themselves, taking care their families, and able to purchase a home-- we need more buyers. that's what it all boils down to. you won't have more buyers until the economy improves. >> smith: so the government is off the hook on this? >> i don't know that... i was

approved. skeptical before it was approved. i'm even more skeptical today that there's anything the government can do to resolve these problems. >> smith: if i'm siting in that situation, i'm gainfully employed, maybe working two jobs or whatever it is, i've done what i'm supposed to do and i look at-- you know, the banks got bailed out. they've actually paid the money back. they're making money. the ceos are fat and happy. i'm sitting here with an anvil over my head. >> there's no easy answers to this. if there were, then they'd have been passed and congress would have acted and the president would have signed it. but when you look at how big the problem is, it's pretty clear to me that the sooner the market works through this process, the sooner we deal with the problem mortgages, we get those homes back on the market and sold, the sooner we get through this, the better off the country will be. >> smith: i'm going to go back to something you said in the first segment.

you really feel that the deficit reduction is the key to getting the job market... to lighting a fire under it? >> i think that the debt that we have-- $14.3 trillion, a budget deficit this year of $1.5 trillion, the fact that we're borrowing 42 cents for every dollar that the federal government spends this year-- that's hanging like a cloud over employers. they see all this deficit spending. they see this debt. it scares them to no end. that's why economists have written to me on several occasions over the last six months suggesting that if we were to cut spending and begin to address our long-term debt problem, that it would lead to a better environment for job creation in america. >> smith: a couple of other subjects very quickly. osama bin laden killed in pakistan. that was one of the main reasons we went into afghanistan in the first place was to find this guy

and either bring him back or make sure that his life was over. is it time for a serious reevaluation of the united states' role in afghanistan moving forward now? >> it wasn't just bin laden. i'm glad that we got him. i congratulated the president and president bush, along with our military men and women and our intelligence officials who did a great job in tracking him down. but it was bin laden and al qaeda. as we've seen over the years, al qaeda moves people up through the ranks as they need to. they've needed to a lot here over the last several years. but our goal in afghanistan is to make sure that we're not ceding ground to the taliban, al qaeda and others, ground where they can plan, train and execute attacks on americans here and abroad. that effort has to continue, because there are others out there, the attacks are continuing. but we've got to work with the

afghans and the pakistanis where a lot of the taliban and al qaeda continue to exist in the tribal areas, and they've got to be eliminated. >> smith: you're with staying the course then? i'm basically hearing you i'm basically hearing you say... >> we have.... >> smith: even though al qaeda to a large degree has been eliminated in afghanistan. >> we have hundreds of billions of dollars that we've spent in afghanistan and in pakistan. we've lost thousands of lives. this is not the time to just walk away from the fight. we've got an awful lot invested here in lives and in treasury. and i think that we need to make sure that we put afghanistan on a solid foundation before we walk away from there. >> smith: you said pakistan, and we have spent... that's another place where we have spent billions, going back a long, long time.

do you feel like we've gotten our money's worth? >> they are an important ally of the united states, and i think that, at this moment in time, we should reengage and strengthen our relationship with pakistan, not walk away from it. this is a country with over 100 nuclear weapons. the terrorist threat to them is just as great as it is to us. i believe that it is... it's time that we strengthen our relationship. let's not forget that the pakistanis have lost more people in the fight against these terrorists than we have. but having said that, there are some real questions that remain about their relationship with us. and i think it's time to look to the pakistanis in the eye and to make sure that they have both feet in our camp-- not one foot in this camp and another foot in another camp. >> smith: mr. speaker, we sure appreciate your time. thank you very much. >> thank you.

>> smith: "face the nation" will continue right after this. you could get arrested for that you know. it's not what you think. look. there was a time when a company like that would envy us. little outfit. it's almost quaint. all these years we had something they could never have. something only the biggest operations could ever afford. it was our strategic advantage. now they have it. what exactly is "it" that they have? logistics. a level playing field. it's not fair. and go everywhere. to help revitalize a neighborhood in massachusetts. restore a historic landmark in harlem. fund a local business in chicago.

expand green energy initiatives in seattle. because when you're giving, lending, and investing in more communities across the country, more opportunities happen. sadly, no. oh. but i did pick up your dry cleaning and had your shoes shined. well, i made you a reservation at the sushi place around the corner. well, in that case, i better get back to these invoices... which i'll do right after making your favorite pancakes. you know what? i'm going to tidy up your side of the office. i can't hear you because i'm also making you a smoothie. [ male announcer ] marriott hotels & resorts knows it's better for xerox to automate their global invoice process so they can focus on serving their customers. with xerox, you're ready for real business. and all we need to do is change the way we're thinking about them. a couple decades ago, we didn't even realize just how much natural gas was trapped in rocks thousands of feet below us. technology has made it possible to safely unlock

this cleanly burning natural gas. this deposits can provide us with fuel for a hundred years, providing energy security and economic growth all across this country. it just takes somebody having the idea, and that's where the discovery comes from. >> smith: for you at home and for bob, a glimpse at what you missed behind the scenes when we spent time this week with the president and the speaker of the house. so... bob schieffer isn't here because he has pneumonia. >> i was disappointed. ( laughter ) >> smith: they called me and

i said "you want me to do what? i've got to go to see who? >> no rabbit ears behind me or anything? for at least another ten minutes. have you ever noticed how cold it is on these things? freezing. yeah, i mean, they don't want, you know, the sweat. the rest of us all have to suffer. good tip for next time. wear long johns. >> smith: fire away. >> wait, wait, wait. what i've got to do is i've got to stand up... first, i'll go to this group. i'll do like this. all right. everybody say cheese. everybody say cheese. cheese. >> smith: not bad. first time you came out here on this balcony and stood here. >> that was a long time ago.

>> smith: as speaker. >> oh. >> smith: this being your balcony? >> i don't get too excited about things. just a regular guy with a big job. that's all. >> smith: all right. thank you. i wasn't trying to make you cry. >> (laughing) >> smith: bob schieffer is on the mend and will be back next week. i'm harry smith. thanks for watching "face the nation."

somewhere in america, there's a doctor who can peer into the future. there's a nurse who can access in an instant every patient's past. and because the whole hospital's working together, there's a family who can breathe easy, right now. somewhere in america, we've already answered some of the nation's toughest healthcare questions. and the over 60,000 people of siemens are ready to do it again. siemens. answers.

captioning sponsored by cbs captioned by media access group at wgbh access.wgbh.org ,,,,,,,,