>> schieffer: today on face the nation," can the gridlock be broken before washington stumbles for the first time into financial default? >> if the white house won't get serious, we will. >> we have now run out of time. >> schieffer: we'll bring in the key players to try to answer those questions. white house chief of staff bill daley; senate negotiators democrat dick durbin and republican jon kyl; and two members of the so-called gang of six who forged one of the first plans-- senator mark warner and saxby chambliss. 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: good morning again. we start with white house chief of staff bill daley. mr. daley, the republican speaker john boehner now seems to be thinking of a two-part plan here. first, congress would agree to cut spending over the next ten years by a trillion dollars and raise the debt limit enough to meet the country's financial obligations through the end of the year. then, a 12-person bipartisan committee would be formed to find $3 trillion more in savings and making significant cuts in medicare and social security and overhauling the tax code. congress would then take another vote to raise the debt limit before the 2012 elections. democrats and the white house have already said there will be no short-term increase. you said that yourself. but speaker boehner just now appeared on fox news sunday and said it had to be two stages. here's what he said. >> there is going to be a two- stage process. it's not physically possible to do all of this in one step.

having said that... chris, i know the president's worried about his next election. my god, shouldn't we be worried about the country? >> schieffer: there you are, mr. daily. your turn. >> i think the two-step process, because the congress could not deal with serious budget deficit action, speaker boehner had walked away twice from a deal with the president which would have finally begun a serious attempt to cut spending and address the deficit. the president's position is, yes, let's move forward. if there's two steps, fine. but do not have a step in the second part that lets the political system once again show its dysfunction. get this deficit ceiling put off until after the election. but more importantly than putting that off and giving certainty and lifting the cloud of default is begin a serious discussion and action on the deficit.

that's what the american people want to see. >> schieffer: so, no short-term vote on this. that part is out. let me just... let me just ask you this. >> let me just say, bob. senator reid has said that's not the way to move forward. the senate does not want that system, that proposal. what they want is, yes, they want deficit reduction, yes, they want to get to the end of the year. but then they want a system that gets this into serious.... >> schieffer: let me ask you this. would you really allow the nation to slide into default and potentially really hurt the nation in the world's economy if you can't come to some agreement? aren't you going to have to find some... >> the leaders have all said they do not want default. there is a way that they can we can avoid default and give certainty to this economy for a longer period than five months. the american people do not... the markets of the world do not want to watch this show again in six months. if this commission that's being

recommended or committee does not act in a mere six months. we've been at this for a lot longer than six months. and the congress cannot seem to get its act together in order to do serious budget reform. >> schieffer: do you think, mr. daly, that while the leaders might be able to come together, the president on your side and the republicans on their side might... i sense they are all ready to make a deal, but it's the followers that are the problem. are we in a situation here where the leaders on both sides can't deliver the votes to get an agreement? >> in my opinion, the democratic leaders have made a serious commitment to deliver the votes for real serious budget deficit reduction. what you're seeing in the house, in my opinion, is a caucus that wants it their way or the highway. the american people elected a divided government, not dysfunctional government. >> reporter: the president says he has agreed to spending cuts and all of that. he says he's been left at the altar twice by the speaker. the speaker says the president

keeps moving the goal posts. i mean, it doesn't look like they're any closer to anything to me. >> the truth is we were probably 85% there. and the issues that were being discussed were just that. negotiations are not over until they're actually over and people sign a piece of document, a piece of paper. the president and the speaker were extremely close. there were different options on different items. much of it related to what would be the best strategy to get the needed votes to pass this, because it would be very hard for democrats with the amount of entitlement cuts and the amount of reform that was being done by the president to strengthen medicare and strengthen the system to help the least able to defend themselves. at the same time, the speaker was going to have to go to his caucus and say there is a need for revenue to solve our problems. that's where the breakdown came. >> schieffer: both sides have been saying that something needs to be done this afternoon before the asian markets open on the

other side of the world, the beginning of monday morning over there. what happens if you don't get something done that looks significant before dark today? >> well, i think it remains an uncertain situation, to be frank, with you to try to guess what the markets are going to do. this is the responsibility of congress. in the end, the congress must pass this. it is their responsibility to extend the debt ceiling. so my sense is that, in the end, they will act. we may have a few stressful days coming up, and stressful for the markets of the world and the american people. but in the end, there's no question in my mind the government of america will not default. >> schieffer: if nothing else works and the republicans send a last-ditch emergency raising of the debt ceiling and nothing else, would the president sign that? >> see, bob, there should be a bipartisan agreement. the democrats, harry reid, has said that what the speaker has spoken about so far will not

pass the senate. so they must sit down and work out a compromise. it is not "my way or the highway;" this is not the way we run a government that divided. we should prove to the american people it's not dysfunctional. >> schieffer: mr. daly, thank you so much. >> thank you, bob. >> schieffer: we taped that about a half hour ago. now, we'll get the republican take on this stand-off with the number two republican in the senate, one of the negotiators, jon kyl. well, senator, what do you make about what mr. daly just said? he said, you know, no way in two steps. >> now who's saying my way or the highway? the house of representatives has twice now passed budgets. the second time this "cut, cap and balance" would have extended the debt ceiling. twice the senate democrats voted no. so the question is what can we do now? i think given the fact that the president did move the goal posts, they've acknowledged that they demanded another $400

billion in taxes-- and that's when speaker boehner said it's like negotiating with jell-o down there. we're not going to do that. so this weekend, he and the other congressional leaders are working on a plan which would provide for a temporary extension of the debt ceiling. daly is right that nobody wants the credit of the united states to be called into question. i'm confident that that will not occur, that we will pass an extension of the debt ceiling. the only question is for how long. it's interesting that, since 1972, congress has raised the debt ceiling for six months or less 38 times. so we can surely extend it for five or six months. have this committee of congress come back and report on the way to continue to reduce our deficit, and in that way avert the disaster and make forward progress. the problem i think is that the single most important thing to president obama is extending this beyond his re-election campaign. he just doesn't want to have to deal with it again. >> schieffer: in other words,

what you're saying and it looks to me like what speaker boehner is about to do here is to call the president's bluff. it sounds like he's going to come out with something this afternoon, whether democrats in the senate or in the house agree with it or not, he is going to lay out a plan to raise the debt ceiling at least until the end of the year. is that what is about to happen here? >> maybe. i think he wants to make it clear to the markets that we're going to extend the debt ceiling, so we don't have to worry about default. but i also know that the democratic leader in the senate harry reid has been talking a lot with speaker boehner. both of them want to find a by bipartisan way to move this thing forward. >> schieffer: do you think they'll go back to the so-called mcconnell-reid option, which would call for the president to lift the debt ceiling, give them the sole responsibility of lifting the debt ceiling, and the congress would vote to disapprove it if they so chose, which basically is just kind of a cover story for people who don't want to vote for raising the debt ceiling.

is that what is going to happen here? >> it remains to be seen. i think that's primarily between speaker boehner, majority leader reid, and the other two leaders in the congress. the key here is boehner's formulation, which i think is quite good, that we should extend the debt ceiling for as long as we reduce spending-- a dollar per dollar. if we can reduce spending by a trillion dollars, then we extend the debt ceiling a trillion dollars worth. that would take it at least through the end of this year. >> schieffer: what if that won't pass the senate? mr. reid says they won't pass the senate. what do you do then some. >> the president would have to answer a tough question. "is my re-election more important to me than the potential for default for the united states?" as leader of the united states he has to be first and foremost concerned with our credit worthiness. i can't imagine that he would sacrifice the credit worthiness of the united states just because he doesn't want to deal with this during his election campaign. >> schieffer: let me ask you this, senator. do you think that republicans, particularly those in the

freshman class over in the house, understand just how serious this debt limit crisis is? because so many of them ran for and were elected on a platform of "i promise no way no how will i ever raise taxes." that puts them in a really tough spot. do you think they understand what might happen if you can't raise this debt limit here? >> part of the problem, as you point out, is if you look at the public opinion surveys, the majority of americans don't want us to raise the debt ceiling. what the republican leadership has said is, look, it's got ton raised but perhaps we can satisfy the large majority of american public by accompanying that with large reductions in spending. spending is our problem here. if we can show them that we can substantially reduce spending, then maybe we can go ahead and make this debt ceiling extension without too much political repercussion. >> schieffer: is there a problem for republicans that might emerge as just "the party of no"? the party that can't say yes to anything? do you see that as a political problem?

>> bob, i would just put it the other way. the first thing i pointed out was that twice congress has passed something. they've said yes to something and gotten strongly criticized. when the ryan budget was passed, the president, a lot of his folks savaged it. they've never put on a budget on the table. twice republicans have said yes. the only thing we haven't said yes to is "job-killing" tax increases. >> schieffer: the democrats are having a hard time, a lot of them, with talking about reforming social security and medicare. republicans, as you point out, are having a hard time with anything that looks like a tax increase. could you tell me something that republicans would be willing to compromise on in the way of revenues? i know you want to bring the tax rates down by eliminating some of the deductions. what would be some of the deductions that you might get republicans to go along with? >> let me just back up one stage. i was part of the so-called "biden talks." we agreed to at least $150 billion in increased revenues.

they weren't tax increases, but they were user fees, user fee increases, sale of assets and so on. it's not as if we're against revenues. it's just we don't like to see the tax increases. but on the tax side, we have uniformly said we need tax reform. and the president, we believe, is correct when he said, on the corporate tax rate, for example, in order to be more competitive around the world, we need to bring our corporate rate down. we're by far and away the highest in the world. we could do that by eliminating some of the deductions and credits, and then with that savings, reducing the rate. so that's the way we would prefer to deal with that. >> schieffer: say, for example, would you be willing to eliminate the deduction on mortgage interest rates? >> well, i'll listen to my constituents on that. they'll have a lot to say about it. i think it can be reduced somewhat, but that's something that is very important to a lot of americans. so i think the president should be careful about proposing to eliminate... and charitable contributions-- i don't want to

provide a disincentive for people to contribute to charity. these are the kinds of things you've got to be very, very careful about. saying it's easy to reduce when in fact the american people will have something to say about it. >> schieffer: senator kyl, thank you very much for giving your side of the story. >> thank you, bob. >> schieffer: i'm going to go to his sort of counterpart in these negotiations, number two democrat in the senate dick durbin, who joins us from chicago. senator durbin, speaker boehner is working on a plan that he hopes can be supported in the house. but democrats have already said no way. that is this short-term extension of the debt limit. could something like that possibly pass the senate? >> bob, let me tell you what the problem is. those who give us a rating, a credit rating for the united states of america-- moody's, fitch, standard and poors have told us "don't do that." a short-term extension of the debt ceiling is going to jeopardize our economy. at a time when the global economy is so weak, when we are facing a downgrade of america's

credit rating, they have warned us not to do it. and speaker boehner is ignoring that warning. we can't do that. i'll tell you what will happen. we know that majority leader kantor walked out of the negotiations with vice president biden. we know that speaker boehner walked out of negotiations with the president, not once, but twice. and now, the reality is if we fail to extend the debt ceiling of the united states, we will be imposing a new tax on working families and businesses across america. they'll see it in their credit cards. they'll see it in their home loans and their automobile loans. this is a tax which will be imposed because speaker boehner refuses to consider a tax on the wealthiest people in america. >> schieffer: all right. but... i take your point on all of that. but wouldn't it be better to pass a short-term extension to raise the debt limit than just letting this thing go? >> well, we absolutely do not want to default. but this notion that we're going to replay this movie in four or five months, that we're going to

face this whole thing all over again-- the american economy is too fragile at this point in recovery for us to allow that to happen. we've been warned not by political advisers. i hear the republicans-- they want to make this a campaign issue. ignore the political advisors for a moment. listen to the economists who are telling us-- all of them together-- do not lurch from one five-month period to another when it comes to the credit rating of the united states of america. not at this moment in history. it's going to hurt us. it's going to stall our recovery. i might say to speaker boehner, he should remember six words: if you break it, you own it. in this situation he has the responsibility to lead his republican caucus and to help this nation move forward in a stronger economy. >> schieffer: have you talked to senator reid? what's his thinking here at this hour? >> i called harry reid this morning in washington. he's been working non-stop, as everyone has. they've all put a lot of time into it. but an agreement has not been reached yet.

it needs to be reached today. i know that tim geithner, secretary of the treasury, has warned us that, at that some moment, there's a tipping point here. these political negotiations will go on too long and people will start paying the price. it won't be just the politicians; it's going to be the average working family in america, the average business, that will face this new burden from this failure to reach an agreement that they are going to sense and feel. they're going to see it in their savings, a reduction in value i'm afraid if we don't extend the debt ceiling. that's why it's critical for us to reach an agreement today. >> schieffer: so, exactly... so what happens if you don't reach the agreement today? >> well, it becomes problematic, bob, as you know in the senate. it takes a long time to move legislation through the senate under the best of circumstances, a controversial bill will take you a week to go through the senate. so we need to have an understanding today and move forward. i would just say to speaker boehner, the president

negotiated directly with you in good faith twice. and you walked away from it. at some point, the speaker has to accept the responsibility beyond his caucus to this nation. i met with a business leader here in chicago yesterday, who was in a meeting with speaker boehner where the speaker was saying, "well, not extending the debt ceiling is not that serious a thing." yes, it is. it means that people will not be receiving their social security checks at least on time. that we'll have to make a decision about whether we're going to pay those who work in the military. these are critical decisions that will have to be made if we fail to extend the debt ceiling. >> schieffer: all right. we've got a critical decision here. i have to break it off there. time is running out. thank you so much, senator. we'll be back in one minute with more. >> thanks, bob. >> schieffer: thank you. ffer: thank you. 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. energy is being produced to power our lives. while energy developement comes with some risk, north america's natural gas producers are committed to safely and responsibly providing decades of cleaner burning energy for our country, drilling thousands of feet below fresh water sources within self contained well systems and using state of the art monitoring technologies, rigorous practices help ensure our operations are safe and clean for our communities and the environment we are america's natural gas. >> schieffer: joining us now, two leaders of the so-called gang of six-- senators mark warner and saxby chambliss. they started in early on trying to resolve this problem.

senator chambliss, it looks to me like that the speaker has decided to call the president's bluff. it looks to me like he's going out today with some sort of a plan, whether he gets any kind of an agreement with the democrats or not. where do you see this going? >> well, i think that's probably a good move on speaker boehner's part because here's where we are, bob, in my opinion. the president came in late in the game. even though this scenario has been very predictable for months and months now. it's time for the real leadership, in a bipartisan way in the house and senate to get together and come up with some proposal can pass the house and the senate. and they go to the president and say, "mr. president, this is it" and put the ball in his court. >> schieffer: do you think what speaker boehner is talking about here, is there a way this could pass the senate. >> my feeling has been we're still the only bipartisan effort in this town. over a third of the senate has agreed to try to move forward with our $3.7 trillion deficit reduction plan.

one way out might be, if this so-called new commission doesn't come up with a solution, let's have a vote on our plan. we built upon the simpson/bowles approach. we have over a third of the senate saying this is a way forward. why should we turn away from again the only effort that says let's have a comprehensive bipartisan approach, which is what the gang of six... >> schieffer: would you all agree with the statements today that you need to get basically get something done before dark around here or the asian markets are going to be... >> you've got to get something done, or what we will is indirectly a tax increase on every american family with increased interest rates. >> frankly, we don't know what is going to happen for sure. but one thing will be guaranteed. that's exactly what mark just said. we know that every household in america will be affected in negative way, just by virtue of the fact that credit card interest, interest on commercial loans is going to increase. this is not the time to see an increase like that, whether you consider the interest increase or a tax increase, which is

right, indirectly it is. >> schieffer: why is the president so against a two-step plan, senator warner? >> i think we all don't want to see a repeat of this kind of political posturing and back- and-forth with this kind of deadline. i agree with the president-- we ought to move this out as far as we possibly can. it looks like the leaders have come together on some process. what we're saying is, if this new commission-- lord knows we've had plenty of commissions- - they all end up basically within the same 20% of each other. if this commission can't come up with a solution, why not turn back to something that has bipartisan support? we've taken arrows from the left and the right now. my fear is any new commission will try to wall off the kind of choices we've already made. our plan at $3.7 trillion is relatively meager. the this will come under assault, how are we going to get the $14.5 trillion that our nation faces in debt. >> schieffer: let me ask you this, senator chambliss. this is a question that i think a child might ask. why has it come to this?

what has happened to our congress here? i mean, it appears to be totally dysfunctional. it can't seem to address any serious issue head on anymore. what happened? >> the atmosphere has gotten worse and worse, it seems like, bob, every year that i've been here. today, it is just very, very difficult to get republicans and democrats to sit down together and have serious conversations these complex problems, but it's absolutely necessary, now particularly. we have divided government and previous administrations, like the reagan administration where reagan and o'neill got together and reformed social security, cut taxes-- incidentally, like we're proposing. in the clinton administration, we reformed welfare and balanced the budget. in a bipartisan way with a divided government. we do have an opportunity right now, but there's simply in my opinion a lack of leadership at the top. a president can't come out and show anger towards the people

he's negotiating with and hopes to get something accomplished. >> bob, i would agree there's a lot of dysfunction. something remarkable happened this week-- tuesday morning we had half the senate in. we laid out our plan. as opposed to people saying no we want to punt some more, they said sign me up. >> schieffer: we'll see what happens today. i'll be back in a moment with some final thoughts. al thoughts. this...is the network. a living, breathing intelligence that's helping drive the future of business. in here, inventory can be taught to learn. ♪ machines have a voice. ♪ medical history follows you. it's the at&t network -- a network of possibilities... committed to delivering the most advanced mobile broadband experience to help move business... forward. ♪ to help move business... forward. finally, there's a choice for my patients with an irregular heartbeat called atrial fibrillation, or afib, that's not caused

by a heart valve problem. today we have pradaxa to reduce the risk of a stroke caused by a clot. in a clinical trial, pradaxa 150 mg reduced stroke risk 35% more than warfarin. and with pradaxa, there's no need for those regular blood tests. pradaxa is progress. pradaxa can cause serious, sometimes fatal, bleeding. don't take pradaxa if you have abnormal bleeding, and seek immediate medical care for unexpected signs of bleeding, like unusual bruising. pradaxa may increase your bleeding risk if you're 75 or older, have kidney problems or a bleeding condition, like stomach ulcers. or if you take aspirin products, nsaids, or blood thinners. tell your doctor about all medicines you take, any planned medical or dental procedures, and don't stop taking pradaxa without your doctor's approval, as stopping may increase your stroke risk. other side effects include indigestion, stomach pain, upset, or burning. if you have afib not caused by a heart valve problem,

ask your doctor if pradaxa can reduce your risk of a stroke. >> schieffer: finally today, in the furor over this latest washington stand-off, let us not overlook this outrage. the federal aviation administration, which keeps our planes flying safely, was forced to begin a partial shutdown this weekend because congress can't agree on legislation to fund it. so the agency is furloughing more than 4,000 workers, including those who collect the $200 million a week in taxes that help to pay for it. air traffic controllers will remain on the job for now, so the planes will keep flying. but airport construction and faa funds for state and local airports will stop. if it were not so inconvenient to the rest of us, i sort of wish they had shut down the whole thing and grounded the planes. that way, members of congress could ride the bus to their home

districts. a nice long bus ride would give them time to reflect on why they were elected in the first place. "their way or the highway," then would take on a whole new meaning. it was a challenge that nobody had undertaken before. and we didn't know whether we could do it. when kennedy announced we're going to go to the moon, that was a thrilling proposition. they said, if you could start a computer over from scratch, what would you do? i thought, wow, this could really change things. if you have time for a story, i'll tell you why. but when she got asthma, all i could do was worry ! specialists, lots of doctors, lots of advice... and my hands were full. i couldn't sort through it all. with unitedhealthcare, it's different. we have access to great specialists, and our pediatrician gets all the information. everyone works as a team. and i only need to talk to one person about her care.

we're more than 78,000 people looking out for 70 million americans. that's health in numbers. unitedhealthcare. >> schieffer: we'll see you next week right here on "face the nation." captioning sponsored by cbs captioned by media access group at wgbh access.wgbh.org ,,,,,,,,,,