from washington, "the mclaughlin group," the american original. for over two decades, the sharpest minds, best sources, hardest talk. issue one, headwinds ahead! >> if the united states government for the first time cannot pay its bills, if it defaults, then the consequences for the u.s. economy will be significant.

and unpredictable. so all the headwinds that we're already experience engine terms of recovery will get worse. >> this warning came from president barack obama on wednesday. congress has until august 2 to raise the u.s. debt ceiling. that's the maximum limit on the time that the white house and congress have to borrow money to keep the government going. if august 2 comes and goes without raising the $14.3 trillion debt ceiling, mr. obama says the nation will feel the hurt. >> if capital markets suddenly decide, you know what, the u.s. government doesn't pay its bills, so we're going to start pulling our money out, and the u.s. treasury has to start to raise interest rates in order to attract more money to pay off our bills, that means higher interest rates for

businesses, that means higher interest rates for consumers. >> the international monetary fund, the imf, with its new head, christine legarde, says that financial markets would face a "severe shock. "if the u.s. does not move to increase its more borrowing authority. house speaker john boehner says the focus should be more on cutting our massive $14 trillion debt, not making a new borrowing deadline. >> nobody believes the united states will walk away from its obligations. dealing with this debt problem and this deficit problem is far more important than meeting some artificial date created by the treasury secretary. >> question, why has the debt ceiling caused a political impasse? pat buchanan. >> the democrats don't want to give up on their entitlement program and takes cuts and

things like medicare. secondly and more important, republicans aren't going to give them a dime in tax hikes, john. but i'll tell how will win this. boehner has nor confidence, you see the president talk income panic. what the republicans will do is wait until about july 20th, and then take the biden cuts, all the biden cuts in social programs, tie them to the debt ceiling, and pass them in the house and send them to the senate, so you've got your debt ceiling raised for one year, with the biden cuts. i think the democrats, the president of the united states, will have to sign that. the republicans have an enormous weapon here and they've got the whip hand by just sending over these debt ceiling increases with cuts on them, again and again and again. that's how it will play out. >> are you saying the senate will be become part of the annual budget? >> i think the debt ceiling battle could -- that cook a six- month thing or one year thing every year. republicans have a whip here, john, to force cuts in social spending year after year after

year. if they play the game right. >> but across the senate, it's going to be in a legal instrument, congressional -- that's the budgets. >> sure -- no, the house will pass the debt ceiling. >> within the budget? >> no, with these cuts on it and just send it over to. >> separate piece of legislation? >> yes, sure! >> this is like the ryan plan on steroids. just do away with the social programs. >> not all of them, eleanor. >> take the republican party with it if they try that strategy. this is a typical washington dance, with stakes that are considerably higher this time. and if you look at how it's going to play out, i think the speaker, because he's got a majority that was elected on refusal to raise the debt ceiling, cutting the deficit, he wants to have a vote that fails in the house and then go back to the white house and have the president give him something so he can -- they can pass the debt ceiling. the president believes that the republicans are so mouse trapped politically that

they're going to center to make a deal, and this is the fostering that's going on on both sides, and it's go to last several more weeks. but boy not sell short the guy who has a bully pulpit, especially when he knows how to use it, which he did very well this week. corporate jets and all. >> you think they'll get in trouble with the japanese for characterizing the can bookie in terms of debt ceiling? >> it's an elegant dabs but not so elegant with the congress. >> that's what i mean. they could be besmirching the can bookie james. >> i'm not not ready for that question but i am ready for the tax questions, and there's no way the republicans are going to agree to a tax increase. any republican who votes to raise taxes by any amount is going to face a tea party primary challenge. this tax issue is an issue for the republicans. they will not cave on it. if the president caves on it and signs a bill without taxes, guess what, he's not going

forget a chance. he's fine. republicans cannot vote for tax increases and they won't. >> what will it be? >> we're going to win. >> i think it's going to be -- what pat just said. >> a tax increase is not always a tax increase. >> why -- paying more -- >> i was a democrat controlled senate go the pat route? >> they have to. the debt ceiling -- look what the president said, everything is -- [everyone talking at once] >> the president don't want to be responsible for -- >> biden is -- >> social security. >> biden has already agreed to the cuts so they put them on the debt ceiling and send them over? >> it's a bipartisan consequence. >> there is another factor here. the debt ceiling was put in place exactly to do what it's now doing, which is to constrain spending by the congress. the country understands it. the country understands that debt has consequences because tens of millions of people have mortgages that ex seed the value of the homes and credit card lines they can't pay back. so they're sick and tired of

running huge deficits which do not seem to have worked in the terms of reviving the economy. so the public support is just going to -- go to the republicans. and somehow the democrats know that. >> you heard the dire predictions made by president obama, if the ceiling is not raised. but if he let that go forward, and the public sees that, this is not going to kill his re- election? you follow me? if he were to let that go forward. >> you understand that that's the gamble that both sides are playing, because i guarantee you they're in the white house saying, if we stop payments on social security, the republicans will be defeated. >> he is doing everything he does right now because he is in political mode for next year, 17 months from now. he want to win that re- election. >> absolutely. >> if we were to let that collapse occur, the government shuts down, the public would never forgive him and get him out of office. >> and he knows that. >> it all depends who they blame everybody will be playing the blame game. [everyone talking at once] >> if were you calculating the odds of whether he'll -- you

would have to calculate that he is too smart a politician no know you can only persist -- >> and should yield in the interests -- >> john -- [everyone talking at once] >> if it collapsed publicly -- >> if you want to make a deal -- >> john -- [everyone talking at once] >> okay, hold on. something else's there's no point in procrastinating or putting it off. we've got to get this done. >> malia and sasha generally finish their homework a day ahead of time. malia 13, sasha 10. it is impressive. they don't wait until the night before. they're not pulling all- nighters. they're 13 and 10. you know, congress can do the same thing. >> congress should cancel its 4th of july vacation until a

debt ceiling agreement is reached says mr. obama. the president says he himself has been dutifully in washington, fulfilling his duty. >> i've been here. i've been doing afghanistan and bin laden and the greek crisis. you stay here! let's get it done. >> but, mr. obama himself has spent considerable time outside the nation's capital. obama was in brazil on march 19 when he announced his authorization of "limited military action" in libya. for that matter, he has been away from washington for a large part of the this 2 1/2 years as president. according to figures compiled at the end of 2010 by cbs reporter mark knoller, obama's first 23 months in office saw 70 days on foreign trips and 58 days on vacation trips.

he's gambled at a pace to present himself as a statesman. above the scramble of something disagreeable called washington. question, with regard to obama's leadership on domestic issues, what hasn't emerges from his issue, what pattern e pledges his first -- >> first of all, i don't think anyone thinks this president is not a hard worker. and he went after the congress to what a ridiculous work schedules where the house and the senate take different breaks, so you can't deal with the congress as a whole for half the time. and they work tuesday to thursday. so -- and i think most americans have had it with the congress, they're not blaming the president in this one. in president's pattern is basically to come in at the last minute, when his supporters are thinking all is lost, and then he rises to the occasion. and he's done this now on this budget thing. they've been trying to get him into the ax for months. >> hold on, pat.

president obama speaks touches a nerve and caused soft-spoken like kansas republican senator pat roberts to say this -- >> maybe if he just 76 a valium and come down and talk to us, why, it might be helpful. >> question, is senator roberts right? >> yes, the president engaged in a lot of partisan -- some very funny, sasha and malia pulling an all-nighter -- but it was he slams the congress. it accomplishes nothing. this is mickey mouse, john. you ask who will be blamed. look at who said look, the whole thing will be -- if somebody is herbert lover mere and it goes down, do you think it's going to be john boehner that will be blamed by history or will it be barack obama who is in charge of the country and the economy? >> james, you realize we got the whole month of july to get through before we get to the august 2 dead like. what will we do with this matter? will we continue to debate this every week? that type of vitality in it?

financial pages. new york times puts it with the shipping news. it's an extremely important issue. the financial markets won't let you forget about. it let's not forget that every month the u.s. government has about 200 billion dollars coming in. there's plenty of money to cover the -- debt payment, social security, medicaid, and -- >> do you think he can squeeze the sponge in july to make all of that water distinguish into his bucket for the re-election? you think he can do that? we've got the whole month of july. >> if this goes on the page with the shipping news it, will be the page that deals with the shipping of the titanic. this is a disaster for the united states. and to play the kind of political game he just played on it, pat would say it's counter-productive. you can't attack that -- the people on the other side of the table. >> do you think he thinks he can win the -- re-election on this issue and if he does cave

he'll save -- he'll say he's caving in the public interests and get more mileage outs of it? >> look, the country does not want one side to win or lose. both parties have got to get together. the country wants bipartisanship on this. this is not bipartisanship. >> does he fundamentally want to deal? >> no, he does not! [everyone talking at once] >> if i can finish -- >> i'm going to let you in next. >> the white house thinks they have a winning hand on this. that because of the tabs issue they can a say you're not agreeing for minor tax and they're going to push it to the limit, whether that's july 22nd, 2 or whatever. >> free for all every day on capitol hill the selling of the president. he fights back and suddenly he's ruining bipartisanship? >> all right. >> what the stated alan greenspan said, that is incentives and tax breaks in the tax code are spending, and

they have to realize. >> exit question, exit question -- the president is also keeping something else off page one by this debated. what is he keeping off page one? what is it. >> poor economy. >> afghanistan, iraq. >> afghanistan off page one. iraq is on page one? >> in the ends of july, this is going to be up this big on page one finish they're in the deal. he's got to -- [everyone talking at once] >> unemployment rate on page one! >> if the unemployment rate comes out high, it will be the lead story in the newspaper, john. >> it will dominate the story that we just had? >> it will dominate if for a couple days. >> there will be a deal. >> there will be a deal? >> and there will be a deal and neither side will be happy. each side will give the other side something. they're -- >> not the taxes. that won't be part of the deal. taxes will not be part of the

deal. >> what do you 90. >> tax revenues -- [everyone talking at once] >> they'll find something, i think, to agree on finally. i don't know whether it will be on august 2 or august 5th. but unemployment rate is not off the front pages. unemployment is -- on the number-one issue in 20% of american names. you have the biggest unemployment we've had since the great despres in real terms that. is what will kill obama's prospects if he doesn't do something about. it. >> i think the public mood will go dark and they'll say yield and get -- compromise! that's what politics is built on, compromise. settle it now or it's self- defeating for both parties! obama gets smeared more. remains to be seen which it will be. when we come back, obama and the jet.

i think it would be hard for the republicans to stand there and say that the tax break for corporate jets is sufficiently important. you'll still be able to ride on your corporate jet. you just center to pay a little more. are they willing to compromise their kids' safety so that some corporate jet owner continues to get a tax break? if we choose to keep a tax break for corporate jet owners, that means we've got to stop funding certain grant for medical research. the tax cuts i'm proposing we

get rid of are tax breaks for millionaires and billionaires, tax breaks for oil companies and hedge fund managers, and corporate jet owners. i think it's only fair to ask an oil company or corporate jet owner that's done so well tax b other business enjoys. >> question, is this the rhetoric of a president trying to achieve a political consensus or is it the rhetoric of a politician trying to score political points? i ask you, james. >> let's be clear that the president's last budget called for 10 trillion in dollars in deficits. the jets would equal .03% if they got that revenue. this is the beginning of a next 17 months, a class warfare campaign to run against the republicans, same old same old partied of the rich, party -- and there we go.

>> just let me say the program thursday night of this week had alice on and he said what do you think of this corporate jet issue? she said it's too trivial to talk become trivial! [everyone talking at once] >> you arrived one here today. >> no, i arrived in a jet but it's not a corporate jet. that makes -- not tax deducteddible. >> personal jet? >> it's a personal jet, not a corporate jet. care to define the jet? >> it's enough or two to people, maybe enough for four people. when when you're on it, john, we had caviar, just to maintain your lifestyle. having said that, okay, i agree, you do not go public in this way if you want to make a deal with the other side. it's exactly the wrong way do it. it's bad politics, okay? these are trivial items, they do not address the major problems facing this country in terms of fiscal policy. >> why is he doing it? >> because he -- because it's an easy way -- populous

politics. thinks hylleraas the company. he raises taxes on everybody earning $250,000, but setting aside -- cause millionaires and billionaires. it's easy for him to say that. it's ridiculous -- the president of the united states to run politics that way. >> is it long tactics, soak the rich? >> yes. >> does this breed class warfare? >> classic antagonism and it's politics. >> failing to recognize that the wealthy and the ones who travel in jets, they have meetings aboard the jets, before they go -- >> john, john -- >> is he also describing what it's like to wait around in airports today? >> john -- john -- you mention the people -- >> wait a minute! eleanor! >> we could get another view here, when the corporate jet caucus is done convening. >> oh, that's nonsense! >> do you remember the $400 toilet sets the pentagon had to defend? >> i do. >> this is the kind of thing that people understand, and when you look at the tax code,

it's riddled with tax breaks for special -- >> remember the yacht tax in the yacht industry? put them out of work. it's the exact same thing. >> this is demagoguery. hold t eleanor! this is complete demagoguery! and and i'll tell you why. there are workers out there that build these planes, pilots that fly them. there are guys that service them. may fly around one. i was down there at that boat factory when they had the luxury tax, they used to build eight a month and now they're building one. they gave them to mexico! >> the big yachts? >> the big yachts! [everyone talking at once] >> don't you think this is more joe the plumber stuff he he says he wants to spread -- >> it's small -- small -- [everyone talking at once] >> small board demagoguery. >> i favor higher taxes on the rich, on the wealthy without question as part of this package. but if you can't get it for the reasons patted described, it's

ridiculous to -- it's not going to go anywhere. >> for people like you and we want you to invest, we want you to invest in new properties. we want to you take risks. and -- maybe you can support t maybe you can't. some of you can't. but the 1 who take the risks are the one who have the money. and they do take the risk because of all kinds of projects -- fortunately -- [everyone talking at once] we'll be right back. >> [ kate ] if this icelandic mud could work wonders on my skin,

imagine what it could do for my business. now, i just had to figure out a way to get it back to the states. so i called john, my citibank small business expert.

[ john ] kate, how are you? [ kate ] he got me a line of credit and together we made it happen. now, my spa has more business than ever. ...and so does our cleaning crew. [ male announcer ] at citibank, we believe small business is a big deal. what's your story? citibank can help you write it.

prediction, we'll have a new secretary of the treasury by november wanted. >> yes, we will. >> more interesting is who comes next 90 hope he's more popular than the current one. >> a new one? >> we will. but he won't be a banker. >> will he own a private jet? >> yes but earlier than that. >> you know who it will be? >> no, but -- >> the head of j.p. morgan chase? >> no, it will not. >> absolutely not. >> we will have a new secretary of the treasury by

these sweet honey clustery things have fiber? fiber one. almost tastes like one of jack's cereals. uh, forgot jack's cereal. [ jack ] what's for breakfast? uh, try the number one! i've never heard of that. [ wife ] it's great. it's a sweet honey cereal, you'll love it. yeah, this is pretty good. are you guys alright? yeah. [ male announcer ] half a days worth of fiber. not that anyone has to know. fiber beyond recognition. fiber one.