today on face the nation, the tea party's rand paul and democrat chuck schumer. is the partisan divide wider than ever? polls show americans want compromise, but can washington find a way? with a lame duck congress reconvening to deal with extending the bush tax cuts and other crucial budget issues, the outlook isn't promising from what the two sides are saying. but what do we know? so we'll try to get answers from the tea party's new hero kentucky senator-elect rand paul and democratic stalwart chuck schumer the new york senator. then i'll have some thoughts on even stormier political forecasts for next year.

but first the search for common ground on "face nation." ?gx 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 welcome to the face the nation studios for the first time the newly elected senator from kentucky rand paul. mr. paul, thank you very much for coming. congratulations. polls show overwhelmingly that voters want the two sides to find compromise. do you come to washington to compromise? >> i think there is room for compromise. i think that overwhelmingly the polls also show that people are concerned about the debt, and you have, you know, reasonable people saying that one of the biggest threats to our national security is the debt. i say the compromise is often you have republicans who say we'll cut domestic spending

but won't touch the military. then you have some good people on the left who say the debt is problem. steny hoyer has said the national debt is a threat to our security. so there are good people on the left who are saying this. but their compromise has to be they have to cut domestic spending. really if you're serious about the budget you have to look at the entire budget. military and domestic if you want to make a dent in the debt. >> schieffer: are you willing to cut both sides including the military? >> absolutely. you have to look at it. there's no way else, you know, it's just all consuming between entitlements and the domestic spending and then the national defense. if you don't look at all of it you don't get anywhere close. this is an exploding problem getting worse as we speak. >> schieffer: david axelrod, one of the president's senior advisors, says that the president has all nearly every newly elected republican in the congress and all of the newly elected senators. what did he say to you? >> he hasn't got through to me yet. i'd love to speak with the president. >> schieffer: he didn't call you? >> well, i haven't heard that

i've gotten a phone call. i think i would hear about that if the president called. i would love to speak to theate president and show him that people coming from the tea party can work with people from the other side of the aisle. but really we have to be serious about what we do about the debt. >> schieffer: what would you say to him? what would be the first thing you would say? >> laughingly i said the other day my kids would like to meet his kids. i think getting to know people personally is a good step forward and having dialogue up here. and then from that i would say that i do like the fact that they appointed the debt commission. i think we're showing people have serious ideas about trying to address the debt. i want to be one of those who is part of the debate about how do we fix our country? how do we get out of this mess. >> schieffer: let's just talk about that because the deficit commission issueded kind of a preliminary report. it's not even their final report. it seems to gore everyone's eyes. it calls for cuts in spending coupled with tax hikes including a 15 cent increase in the gasoline tax. let me just run through part of this and see how you feel

about i. would you support raising the gasoline tax? >> i don't think i want to raise taxes right now. i think government is too big. i think we need to cut spending. the way i see it is that you want the private sector to have more money. i want to expand the private sector because we have a serious recession so i want to leave more money in the private sector. i want to shrink the ineffective sector of the economy which is the government. >> schieffer: the commission doesn't seem to think you can do it with just cuts. let's run through a couple of other things here. eliminate mortgage interest deductions. would you favor that? >> no, i'm on the other side. i want to be on the side of reducing spending. really the compromise is where you find the reductions in spending. i don't think the compromise is in raising taxes. i mean, you have to put things in perspective. we now consume at the federal level 25% of the gross domestic product. historically we were at 20%. so we've taken 5% away from the private sector. and the private sector is the engine that creates all these jobs. i want to send that 5% back to the private sector. >> schieffer: the commission is talking about bringing it

back to 21%. let's go through a couple other specifics. increase the retirement age for social security. >> yeah, i think you have to probably do it quicker actually. i think you can't do it on people who have already made their decisions or on people who can't afford it. but i would say instead of waiting until 2050 you've got to move that up many decades to have a chance. the other thing is instead of taxing high wage earners more on the social security, give the maybe have means testing for those who are high wage earners for receiving social security or for receiving medicare instead of adding new taxes. the problem and the reason why that is better is instead of the government accepteding a check to somebody who makes $200,000 a year in retirement income let's not tax them. let's just not send the money to them. you don't want to tax them though because they are creating jobs. you don't want to take more money out of the private sector. >> schieffer: cut the federal work force by 10%? >> absolutely. >> schieffer: do you think that's do-able? >> well, the federal employees

unions are pretty strong but you have to do it. at the very least freeze the hiring and then through attrition shrink it. i think you should shrink the federal work force and make their pay more comparable. right now the total compensation for government workers versus private workers is almost 2 to 1. >> schieffer: would you include the military in that? >> maybe there are parts in the military that could. but i think the soldiers should not have reduced pay. you look at what the average soldier makes it's not a lot of money. they're putting their lives on the line. i don't see reducing the pay of soldiers but there is within the military structure maybe contractors and different people at different levels. >> schieffer: with a about the military health care? it's totally out of control the spending on that right now. do you think they ought to think about reducing benefits at military retirees? >> i think we have to look at how it is all distributed but the bottom line is there are a couple things i think the federal government should do. i'm always for reining in and getting rid of spending but we should take care of our national defense.

we should take care of our veterans. those two priorities. i'm not for reducing pay or reducing veterans benefits but does everything has to be done within a reasonable structure we do have to look at the process of all of it. >> schieffer: you won't be voting in this special session when they take up extending the bush tax cuts but i would just like to... unless they are unable to do anything and it carries over to next year in the new congress. but i'd like to get your thinking on that. various kind of little signals coming out of the white house that the president might be willing to compromise on what everybody seems to be talking about temporarily extending the cuts for the upper income people and in return for that he would go along with it and he wants to extend the tax cuts to the middle and lower income people. would you entertain something like that? do you think that's a good idea? >> i think the best thing is to make the tax cuts permanent. and the reason is people are talking as if this is something new. businesses have predicated and

made their business plans based on these tax cuts now for five, six, seven, eight years. and so if you abruptly change that, you're changing the business model of someone who has made.... >> schieffer: could you see a temporary extension? >> if that's all we can get that's better than nothing. >> schieffer: you would do that. >> the more permanent the better. what we need to do as republicans if we're serious about the debt is keep the tax cuts permanent but then come in and say here's several hundred billions we'll save by having spending reduction bills immediately introduce in congress. you'll find some of us that will be doing that from the get-go. >> schieffer: i just want to ask you this question. what do you envision the federal government is? and what do you expect it to do because, for example, after the b.p. spill, i remember reading that you gave... came down pretty hard on the administration for being too tough and putting too much pressure on b.p. at one point you said it was just downright unamerican. on reflection are you glad you

said that? >> the interesting thing is i think it got sort of distorted because it wasn't that they were being harsh that i disagreeing with. i didn't like the language. i didn't think the president or his people should say something like putting the boot heel on the throat of a business. i didn't like that. it wasn't that i thought that we shouldn't be tough. i do think we should be tough. if they broke the law they should be punished, et cetera, et cetera. they should be responsible. they should pay for the clean- you. but i don't think an american president should be talking about putting the boot heel on the throat of a corporation because it sends the wrong signal that the government is the enemy somehow of business. we need to always recognize that one in ten businesses succeed. we need to do everything we can to encourage business because that's where the jobs are created. >> schieffer: another statement that you made that kind of caught my eye was after one of the mine accidents down in kentucky. i think a couple of people were killed. you said we're back into this idea-- and i'm paraphrasing here-- of trying to find somebody to put the blame on and not recognizing that sometimes accidents just

happen. >> that was a poor choice of words. i think my wife even told me that was a poor choice of words. you need to think about what you're saying. what i was trying to point out is as a physician, you know, if you come to me and i do your eye surgery i'll tell you there's one in a thousand chances that you can get an infection in your eye and you could lose the vision. when that happens i might have done everything perfectly but it's one of these risks. to say accidents happen won't comfort you because that's just a bad wording so i used the wrong words but i do honestly want to tell you if you're my patient that there are risks. i think we realize that of all the things that happen that there are risks of oil spills, there are risks of mine collapses. it isn't always that someone intentionally did it or even if that someone broke a regulation. sometimes there are natural acts of tragedy that happen. that's what i was trying to pint out and i guess i'll learn to choose better words. >> schieffer: rand paul, thank you. welcome to washington. we hope you'll come back to see us. we'll be back with another side of this story with chuck schumer from new york in just a moment. i do a lot of different kinds of exercise,

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unitedhealthcare. >> schieffer: we're back now with senator chuck schumer of new york who joins us from new york. well, senator, i want to get... i want to ask you about your reaction to some of the things that rand paul said. the first thing i want to ask you about because this is what you're going to be dealing with and that is extending these bush tax cuts. we keep hearing that the president might be willaling, he says there will be no permanent extension of the tax cuts for the upper-income people but of course that makes you think, well, what about temporary? and a lot of people are saying that's where the compromise is going to be. would you be willing to go along with temporarily extending the upper-income tax cuts if the republicans would then go along with extending the tax cuts for the people in the lower brackets? >> well i think there is a compromise in the making. democrats had originally called for tax cuts for people below $250,000.

republicans for everybody. what if we moved it up to a million dollars. everyone below a million dollars will get a tax cut but the millions airs and billionaires won't. i think they shouldn't get it for three reasons. they're the only group whose income has substantially gone up in the last decade. middle class incomes have declined. second they're not likely to spend it. they have plenty of money anyway. it won't boost the economy. and third, we have a big deficit problem. we have a great jobs problem. better to put the money into deficit reduction creating jobs than give it to the millionaires and billionaires. i think that's a good compromise. i heard senator mcconnell talking about small business. under his plan, people like warren buffet, bill gates, rex tillerson, the head of exxon mobile would get the tax break. they are not small businesses. and the plan i've proposed would encompass virtually all small businesses. >> schieffer: you would not be in favor of a temporary extension of the upper income

tax cuts as some democrats are talking about that they might entertain that? would you.... >> i think it would be much much better to raise the limit to a million dollars rather than give it to people who are multibillionaires whose income has gone up dramatically over the last ten years. it's about the only group in america, the high very income who has had a gain in income. >> schieffer: what do you think the chances are of actually getting this done in this special session? >> well i think there's a good chance, bob. the american people want us to do a tax cut. i really believe that the republican party will not hold hostage middle class tax cuts for tax cuts for millionaires and billionaires. when they talk about small business they have something that i think is reasonable. so let's move it up to a million and include virtually all small businesses. but i think once we do that, the public will be on our side. republicans will come round.

they don't want to go away saying they held up middle class tax cuts to help the warren buffets, the bill gates, the rex tillersons. >> schieffer: the president's deficit commission was out. we just talked to rand paul about it. what's your general impression of the recommendations? and mind you, we should underline these are very preliminary recommendations that have come out from the co-chairman. >> well, i'd say three things about it. first, i do salute the two chairmen for coming out with sort of a opening foray here. there are things there that i would agree with. there are things there that i disagree with. the second point i'd make is this. i have learned through the years that when these commissions come out that are carefully balanced and they try to compromise, if individual senators and congressmen say, well, i'm for that but i'm never for that, the whole thing falls apart. i think it's not wise to comment on any specific provisions. rand paul just took about half

their recommendations off the table. third, and just a general guideline, nothing specific, the burdens of deficit reduction-- and we do have to reduce the deficit-- should not fall disproportionately on the shoulders of the middle class. i think that should be a watch word for both parties. >> schieffer: i mean, without commenting specifically on various parts of it, but do you think that that what's this recommendation does, does it put too much on the middle class? >> well, we don't know enough of the details. that's why it's did you have cult to comment. i haven't seen tables that break out where the burdens fall. and so i think again the wise thing to do here, if you want the commission to have a chan of accomplishing something is not say i'm for this, i'm not for that but let's see what they finally come up with as a specific proposal and let's take it from there and see if there can be an agreement so that we can reduce the deficit which is very important. >> schieffer: well, long before this commission decided

to look at if people were talking about social security and what we can do, what can we do about it, everyone seems to think you're going to have to do something here down the line. if it's going to remain viable. could you ever entertain raising the retirement age, means testing, all of the things that most people say the hard choices you're going to have to make in order to keep social security going? >> well again, bob, i just go back to what i said before. to talk about any one specific without looking at the whole package is not going to help us get anywhere. i'm not going to make any forays. i've been a strong defender of social security my whole career. i believe in it. i'm certainly against privatizing it or reducing its scope dramatically so that only a small number of people get it. but i'm not going to get into any specifics. >> schieffer: as you look at especially the new congress that's coming in, there's no question that the democrats, it's a more liberal group.

and the republicans are a more conservative group. do you see any chance that there can be some coming together? >> i do. >> schieffer: that people can actually get together and get something done. and if so, where? >> okay. first, let me give you a general analysis. >> schieffer: okay. >> i think there's the same reason that allowed democrats to get such sweeping majorities in 2008 and republicans to take so many of those seats back in 2010 is the same. that is the very important fact that middle class incomes this decade are shrinking. for the first time since world war ii and they were even shrinking before the recession. they're getting worse now. but from 2001 to 2007 median income went down. so the middle class is not content. they are up for grabs. the party, the people, the leaders that are able to focus like a laser on middle class anxieties both creating good jobs and for those who have jobs stretching that paycheck will be the majority party.

so this talk that some democrats on the far left will huddle and say we won't do anything and do no compromises and some republicans on the far right will huddle and say we won't make any compromises they'll lose if they do that. i think there are a number of areas where we can come together and benefit average families. i think we can on education. i think we can on immigration. i think we can on energy policy. major policies that affect this country where there are grounds for compromise. any leader, any party that just says we're going to block everything as middle class incomes are declining is going to lose in 2012. >> schieffer: if you were going to give the president some advice-- and i know senators don't like to say it in public what they tell the presidents in private-- but what would you say to the president about why democrats did so poorly in this election and how do you dig yourself out of this hole? >> here's what i'd say. i'd say, look, the congress

the last two years have been historic. we've pass major pieces of legislation. four pieces that will go down in history as one of the most significant congresses we've had. but two of them, the tarp which was passed the previous congress but it gets attributed to us and the stimulus, prevented bad things from happening. there were about 10 million people probably who are working now who would not have been had we not passed those laws but they don't know who they are. and then, two, health care and financial reform will benefit the middle class but in the future. so the average middle class citizen with incomes declining, with unemployment high said nothing is benefiting me now. my advice is very simple. it would be the same to the president, to my colleagues in the senate and house, to people of the other party, focus on the middle class like a laser. no one in the middle class expects us to snap our fingers and everything will get better in two months but if they feel we're focusing on them and they feel that the american dream is alive, the american dream being the concept that

you're likely to do better ten years from now than you're doing today and your kids will certainly do ber than you do, if they once again, they're having doubts about that. if they feel that's alive and well, our president will do very well. i think that's what he's goinged to do. he's going to surprise a lot of people with how strong he will be down the road because i believe he will focus on the middle class like a laser. >> schieffer: all right. senator chuck schumer of new york. i'll be back in a moment with some final analysis. logistics makes the world work better. ♪ when it's planes in the sky ♪ ♪ for a chain of supply, that's logistics ♪ ♪ when the parts for the line ♪ ♪ come precisely on time ♪ that's logistics ♪ ♪ a continuous link, that is always in sync ♪

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finally today the people on the side lines including me use weather metaphors so often before the election they became a collective cliche. the winds were blowing the republican way. we kept saying. the only question would it be a tropical storm or a hurricane? well, for sure it was a big blow. and for the republican... for the president, i should say, the ill wind just kept on blowing. his trip to asia turned out as badly as the election. how long has it been that a president went to a foreign capital to put the finishing touches on a trade agreement only to come away with nothing? did no one in the white house staff see that coming? how can that be? and when the president tried to lecture china on their monetary policy he was politely told to mind his own business. that's not a great signal to send to the rest of the world. if that were not bad enough, look at another storm coming when congress reconvenes this week. democratic speaker nancy pelosi is already balking at

any kind of compromise to extend the bush tax cuts for the wealthy. republicans say without that, all deals are off. so the tax cuts for everyone may expire at year's end. that's just the half of it. the middle has fallen out of our politics. democrats elected to next year's new congress are more liberal than those in the current congress. and the republicans more conservative. so the partisan divide is bound to grow wider. i hate to keep using these weather metaphors but for this president when it rains it just seems to pour. and keep on pouring. back in a minute. [ male announcer ] how can rice production in india affect wheat output in the u.s., the shipping industry in norway, and the rubber industry in south america? at t. rowe price, we understand the connections of a complex global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average.

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t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment objectives, risks, fees, expenses, and other information to read and consider carefully before investing. that's it for today. thanks for watching face the nation. we'll be right here again next week. captioning sponsored by cbs captioned by media access group at wgbh access.wgbh.org ,,,,,,,,