Charlie Rose Final Transcript. Session One. Charlie Rose: Tell me what you are saying in terms of what has been released.

Transcription

1 Charlie Rose /16/2010 Guests: Erskine Bowles Alan Simpson Charlie Rose Final Transcript Session One [begin interview with Erskine Bowles, Alan Simpson] I am pleased to have both of them with me here in Washington to talk about their proposals which they have released, representing their views and no one else. We have been hearing from Paul Ryan last night. And we will hear from others about what ought to be done, what might be done and what's feasible. So thank you for doing this in Washington. It's a great treat. Tell me what you are saying in terms of what has been released. Well, I always say that, first of all, Erskine and I have to stick to together. You almost have to have a six gun in each hand, back to back to ward off the distortion. I tell people to read it. I said it's a sick idea, I know. But just read it all. And we -- and in the politician extent that hasn't said during this campaign, cut spending, cut spending, cut spending. Well, we said, Okay, pal, there it is. How many chunks we got in there, 200 plus of savings, specific savings. Just on discretionary spending in the year And they just shrieked like a gut-shot panther. Well, I didn't know you were going to do that, you know. So it's good to be able to describe what -- So the point is here what? Just represent your views, the two of you, or you want to get something out there to start the dialogue?

2 Charlie Rose /16/2010 We have to start the dialogue. Charlie, I think this is the most -- I think the path we're on is unsustainable. I think every member of Congress knows that. And I think we had to lay a predicate out there that would force action of this Congress and future Congresses. I think the problem is that deep. Everybody believes that, don't they? I mean, the idea that the problem is deep, what we end up with is great differences from the left and from the right and from the center as to how to deal with the problem. And that's what Al and I have been trying to do is to find out where that common ground is. We spent literally months coming back and forth to Washington, from Cody and from Chapel Hill trying to find out where the common ground is, what we can get down. And we think this plan we put out there is a serious effort to bring people together to find that common ground. And I think there's probably more common ground than people expect now. And why do you say that? Because you have had the debates inside when you had the meetings with the commission? Yeah, we've had plenty of debates inside. We've had visits one on one. We've met with groups of people. I think there's more common ground than people realize. But it took us months since we started in January to establish trust. This town is devoid of trust. And it took us literally three, four months to trust each other. Nobody's left the room. We don't agree, seriously disagree. But nobody's left the room. But at least I think we established -- ruined the stereotypes that Andy Stern was this or Doc Coburn was this. All that's gone. But boy, it took a long time. It's very sad for me, to a person who loved this institution, loved this place, loved the Senate. And Erskine is the last guy to balance a budget around this joint. And to come back and see -- It was in the '90s, wasn t it? '96. To see the total lack of trust. Yeah. But did you establish trust within the confines of the commission?

3 Charlie Rose /16/2010 I do think because oddly enough, nothing ever leaked until the other day when we had our first meeting -- When you were ready to go. -- and then it looked like a sieve. And we decided we better get in and defend ourselves because it was coming out in a distorted way. Before I get into the details of what you have said, I mean, give me a sense, Erskine, of how it went, what happened inside. What would you do to sort of come out with a seriousness of purpose in trying to find 14 people who would vote for this to send it to the Congress. It's very similar to what we did in '97 when we had the last balanced budget agreement. You have to go into these meetings and first listen, just like you do on this show, listen to people, let them talk, let them tell you, and then find out what they're for and really what they're really against and what they might be able to support. And once -- it's like doing any other kind of deal that I've done my whole life and trying to find that common ground. And as Al says, build up some trust. Lots of that's one on one. Gosh, I can't count the hours we spent. But I think we've done that. I think they think Al and I are serious about this. They know that we're in it for the right reasons. We're not taking any jobs up here or coming back for elected office. Not making any money, either. So just for the record, I mean there's all this rumor that you might have seen the president about taking Larry Summers' job. You are not going to take Larry Summers' job. I'm not a candidate for any job. I'm going home to Charlotte. You can count on that. Okay. You are not a candidate, nor will you accept -- Yeah, I'm not any job from the Obama administration.

4 Charlie Rose /16/2010 Look, I'm a big fan of the president. I'm going home to Charlotte. That, you can count on. He's going to come to Wyoming first. Does that sound like a Sherman statement to you? It did indeed, yeah. It did indeed. And if nominated, I will not serve. Oh, I didn't hear him say that. Right. It looks like Roger [unintelligible] Alman might have -- I hope so. I would recommend Roger. I think Roger would do a terrific job. I do too, and I know him quite well. He lives in Jackson. You know, he stays in Jackson, Wyoming. He has a home there. So if you go to Wyoming, you can't be all bad, can you? Oh, it's the affluence [spelled phonetically] of the West. All right. Let's stay with this idea. So there is a certain common [spelled phonetically] inside. Where is the common ground other than we have to do something? Is it about the level of and the degree of cutting discretionary spend something is that where the common ground is? Is it an understanding what the ratio ought to be between cutting taxes and cutting spending? You know, I think the common ground is first, people have come to accept the era of deficit denial is over. I think that's been an enormous leap on the part of most people. Two, I think when we put out $4 trillion of real cuts in the deficit, that people saw there

5 Charlie Rose /16/2010 was substance behind what we were saying. We've seen so many people, Alan and I have, come on shows like this, and people say, Well, that's all great and good. But you know, what are you really going to do? Right. But we have more substance backing up each and every -- we have specifics everywhere -- each and every recommendation we make. And I think people have come to realize that this is the problem facing our generation today. I was interested to hear the other day that Admiral Mullin said that this debt is the biggest national security problem we have. You and I know, Charlie, as business guys, that if we don't get this debt under control, it's going to crowd the private sector out of the market, and small businesses can't grow and create jobs without money. You have to think, well all those people who want to make sure that we invest in education and infrastructure and high value added research and development, all of those people have to know that we can't do that if we continue to have this amount of debt build up in the country and just will eat the budget alive. So I think there's a lot of common ground now. And then the troublesome is if you get into percentage of GDP and growth and so on -- But you have that in there, don't you? Yeah, but you lose the American people when you begin to say, did they go further with GDP or deficit? Did this group or did the Dinenishi [spelled phonetically] Group, or Ridland Group [spelled phonetically], it Pete Peterson's group, did the Concorde? As you get into -- it's my experience to get into percentage and so on, we're just telling them, look, it's unsustainable, and you getter get in, get wet all over. We have to touch every single segment of American society. And so far, the public is hearing it. But when you have 12 of those 18 of us who are members of Congress, it is so tough for them and it's -- So tell me how you two made your decisions about tax cuts versus spending cuts. We listened. We think we have the problems bigger on the spending side than it is on the revenue side. We then tried to look not at just hard numbers, but tried to figure out what we could really cut. And as an example, as Al was mentioning earlier, you know, we've made $163 billion of cuts in discretionary budget in the year The president gave us a goal to get to 3 percent of GDP. We actually got to 2.2 percent of GDP. But in that $163 billion worth of cuts we've recommended, we have $200 billion of specifics, of things we would actually cut out of a budget. And we wanted to make sure we had

6 Charlie Rose /16/2010 credibility. We wanted to make sure we could put substance on the table, that we could be specific. And we wanted to recommend -- have more payfors than we had things we recommended. So when Gates, Bob Gates, Secretary of Defense, says, well this is cutting too much defense, we -- it's threatening the national security. There isn't anything that any group or agency in America won't say that it's so critical they can't do it. We have visited with Bob Gates. Bob Gates is a very special friend. We were on the Iraq study group together. Before then he was -- In private sectored [spelled phonetically] over to this. Right. So when we visited with him, we said, you know, if we can't -- if Kent Conrad of the budget committee chairman couldn't get figures out of the Pentagon as to what they're doing with contractors who don't do their job, and then two years later they hire them again, and how many contractors are there? And there's no record of it. If I remember, they said it was between 250,000 and a million. We said, well, we'll just cut 250,000 contractors. I'm sure that [unintelligible] will get a keening wail out of segments of society but Bob Gates very beautifully was taking the saving and restructuring -- putting it back in [unintelligible] -- [talking simultaneously] Exactly, and that's what you're saying, the savings that you're already trying to engender and putting back into the military we want to take out and -- That's right. -- and eliminate the deficit. That's right.

7 Charlie Rose /16/2010 Yeah, [unintelligible], but don't forget what I said about what you know Admiral Mullen [spelled phonetically] said who's head of the Joint Chief of Staff, he said this debt is the biggest national security problem this country faces. Right, that's the thing that has happened and it is that -- even the president in his speech at West Point said no nation which loses its economic vitality can remain and maintain its power as a global [unintelligible]. Can't be the strongest economic power, the strongest military power, if you're also the greatest debtor nation [unintelligible]. And then you see what happened in the latest G20 when he went over there, they're not listening to presidents like these, listen to presidents, because they say, Look, don't come and give us too much over here, we know what's going on over there, and when the Chinese reduced their ratings from double A to A plus, and you know it -- we don't have -- it's not Obama's fault, that's not the point, it's America's fault. We are slipping into what other people perceive as a totally chaotic fiscal situation. Let me take some other people who have said things about this in this -- maybe put all of these in the same category. Nancy Pelosi said simply unacceptable. Broke my heart. [laughter] I just couldn't get over Nancy, I said, Nancy, you -- she hasn't been onboard with us at all in that sense. And so what do you do? She feels strongly but she's lost a lot of zeal since the election. But isn't that going to be the issue and how do you get past it? She put stuff on the table to get the conversation started, but you've got the left saying certain things, you have people on the right -- I'm going to run -- last night on this program Paul Ryan who was a member of your Commission -- Who we have great respect for.

8 Charlie Rose /16/ and here is what he said. Roll tape. [clip playing] All right. So there you go, one issue, person respects -- he said he respects you, I know he respects you, why didn't you take on healthcare? We did. We did, I don t get it. Yeah, you know, I do have -- I not only respect Paul Ryan, I like him. I think he has a great future for this country and I wish we had more people like Paul who are thinkers and do their homework and always come to the table prepared. I think he's great. He speaks too quick for me, I can t keep up. I don't know how you did it last night. But what I can tell you is in our budget we don't do as much as Paul would like us to do but we have $700 billion worth of payfors [spelled phonetically] for $500 billion worth of cuts in the next 10 years. That's no small potatoes. And where does it come from? It comes from lots of different places. First of all, we do something called the doc [spelled phonetically] fix. That cat takes about $276 billion. We have $282 billion for payfors. Where do we get the money? We get the money from providers, from doctors themselves, from drug companies, from hospitals. We also get the money by charging people more for the services they are provided, and we get the money from lawyers. We have real tort reform in this package. So but why did he then say healthcare was off the table? Because what Paul would like us to do is -- and we have what he recommends as an option in the second 10 years -- is what we do is we cap the rate of growth of healthcare at GDP plus one, which is what the people in Congress say that these new demonstration projects and these pilot projects will hold the rate of growth of healthcare. And if that works it's great, but we say if it doesn't work then what you have to do is go to something like Paul is has recommended which is a premium support plan or a robust public option

9 Charlie Rose /16/2010 but some other plan that will force the cost of health care to come down. Paul would like to see us do that earlier. But there isn t any question we touched health care because Erskine and I got together months ago and said this is the worst thing we ve ever been in so if we re going to do it -- Leave nothing untouched. We took the pledge and we did address -- it is -- you can t even wrap your arms around health care. But if anybody believes that these little groups 10 years from now, a group of Congress persons, is going to get together and do some limitation, forget it. I ve never seen any of those work. So we did it. We dinged Medicare, Medicaid, Social Security, the whole works because, God bless them, if we get 14 of 18 it will be great but if they don t, we ve put something out there that s going to be helpful to the American people. $700 billion of specific payfors in black and white. All right. Social Security. What are you going to do about Social Security? I think we ve taken a very balanced approach. We take about 43 percent of the -- we close the gap to get to 75 year solvency. To us this is not about balancing the budget. It s all about [unintelligible] That s the key. We re not balancing a budget on the backs of Social Security. That s just garbage, the woo-woo [spelled phonetically] stuff. You know, and people talk about, you know, what kind of effect is this going to have on people? There s what you promise and what you actually can deliver and if we stay on automatic pilot, the Social Security trust fund including all of the interest earned on it runs out of funds in That is a fact, you know, and by law they can t pay out more than they take in there. So there s going to be a 22 percent cut in Social Security benefits beginning in 2037 under any circumstance. And what we do is try to address that now. We raise a little bit of revenue, we raise a little -- we have a few benefit cuts, principally on the upper-end people, so that we can preserve Social Security preserve its solvency for 75 years. Then we have 125 percent of poverty for those at the lowest level and a little boost for people over 80 and groups, big groups like the AARP, are saying to us, Look, oh this is horrible, but have, we know that all we need to do is modest changes, and we say, Will you please share with us what the modest changes are, and all you hear is violin music

10 Charlie Rose /16/2010 in the background. They never come forward with what the modest -- and they know what they are -- you do something with the retirement age. We would raise the retirement age to 68 in the year If you can t get that done when life expectancy is 76, take care of the steel worker who can t work past 62. We ve done that. We ve accommodated every single essence of the people who moaned and whined [unintelligible]. Here s exactly what we ve done so there s no question. We have made our job harder by giving a higher benefit to the truly disadvantaged. We take it up to 125 percent of poverty. People came in and told us that you ve got to take care of the older old so we have a bump up in benefits between 81 and 85. Both of those cost money. How do we pay for it? We have to pay for it in three basic benefit ways. We do go to longevity. We increase the normal retirement age which already goes to 67 in So that s the law today. We take it to years from now and to years from now. That s a -- I have nine grandchildren. None of them will even be eligible by this year. You only had eight last year. Yeah, we had another one. [talking simultaneously] The argument you made, you remember that? [laughter] Yeah, I do, I do. The argument made by Paul Krugman in The New York Times. Well now Paul is getting a little hysterical. I love the way he savages people, absolutely savages people, and then talks about poor [spelled phonetically] savaging people. That we re savaging -- I mean, Paul may have the Nobel Prize but he doesn t have the Nobel Prize in figuring out what we re doing. His argument was that when you raise the retirement age, the people, it benefits the wealthy rather than the poor who work with their hands or the middle class because they don t have the same life expectancy that the rich do.

11 Charlie Rose /16/2010 Charlie, that s exactly why we put in the 20 percent hardship exception for the 20 percent of the people who really have back-bending jobs, that need to retire at 62. Right. Male speaker: We not only put in a provision for them but we fully funded it so that they can still retire at 62. We took care of that. If Paul had read it, he would see that. I tell you, he s a brilliant guy. Wish I could meet with him. Be nice if he d like to visit with us so we could shape him -- Did you invite him? We d love to visit with him but I ll tell you, when you see a guy who is really almost flunking the saliva test about what's wrong with America, you have to question his economic skills. I do. I question them seriously. Which part of them? That you have to spend more, you have to grab great dollops of money out of this economy and shovel it in, and you have to get the unemployment and just scoop it in by shovel fulls and just keep going and never look back. That's impossible. I mean, one of the arguments coming out of the G20, as both of you know, was that, on the part of [unintelligible] Merkel and David Cameron was that, yes, in fact, you can do spending cuts and grow the economy at the same time. You don't have to say, well, we're not going to -- we're going to have to grow the economy first, and then we'll get to austerity later. Their argument is you can do both. Yeah, but one of the things we tried to do was to protect what is a very fragile economic recovery. We don't put -- The president's concerned about too, the Federal Reserve as well.

12 Charlie Rose /16/2010 Everybody should be concerned about it. So we don't have any cuts in We have only $69 billion worth of cuts in In a $14 billion economy, that's not going to have a big effect. But what it will do is send a signal to the markets that we're serious about deficit reduction. What about private accounts and Social Security? What's your -- You know, George Bush went around the country on that and just -- it was like a hollow gong. And he tried so hard. And Bob Carrie and I, at one time, proposed a little of that in our -- Bob Carrie, we tried a lot of stuff. Okay, here's actually the question about this. When you set about thinking about the things that you two -- first question, was it how you viewed the consensus of the commission? Or was it just simply what you two thought? I would say some of both. You know, really, we spent a lot of time listening to people. So obviously, that had a big effect on what Alan and I [unintelligible]. And you two think the same thing. Absolutely. Totally. There's no -- There is no space between the two of you. None. Zero. Not one shred. Over the cliff, no parachute. Here we go. We're ready.

13 Charlie Rose /16/2010 It's great for a while, the wind in your hair -- You've been watching too many movies. Where were we now? Okay. Okay. The second question about this, because I'm going to talk about more of the tax cuts as well, corporate tax cuts. Sure. How much did you factor in, as you thought about this, what's politically feasible in today's political environment with a new Republican majority in the House of Representatives? Alan and I didn't come here to get these nice editorials that we've gotten about how serious this proposal is. We came here to do something. We've spent eight months, the two of us, flying back and forth working with people. You have to take the political reality into account if you really want to get something done. But we tried to do what we would be proud of, what we thought was right. And we'd rather have a real proposal out there. We got 10 votes and some kind of marginal just bunch of ideas out there. We really made that a pledged to each other so that at this stage of life, both of us, thinking we've had a fair reputation, I do get my foot in it more than Erskine ever did, but -- I don't know about that. -- that we would go out. I'll grant you that.

14 Charlie Rose /16/2010 That we would go out with pride that we did something that no one else has ever done. And they're picking that up. The editorial columns are picking that up. But I don't agree. They'll say I don't agree with this or that. But for heaven's sakes, finally somebody had the guts to throw something out on the table and just let the whining begin. And that's where it is. Talk about corporate income tax. Talk about tax cuts first of all. Do both of you -- what do both of you think the president ought to do about the Bush tax cuts? Boy, I tell you, that is, to me -- I hate to say this, but I never thought it was a good idea in the first place. I thought the tax cuts way back there, when they first did it, was a mistake in this economy. And what was then the economy. But it happened. And now I don't -- I'm not going to -- they're talking about instead of 250,000, they're talking about a million. I just stay out of that one. That's for Congress. We got enough problems. Okay. Should the president, as he has suggested, certainly continue the middle class tax cuts or not, when you need revenue? Well, if you -- if you give more tax cuts, you lose revenue. Right. And trillion, I have to assume, isn't it? Let me try to -- He's the numbers guy. Let me try to -- first of all, I don't think people like you and me need a tax cut, Charlie. No, that's true.

15 Charlie Rose /16/2010 So I mean, that's -- I'm clear on that. But we have proposed is something that's completely different. We said, look, let's broaden the base, simplify the code, bring down rates and cut the deficit. How do you do that magic? There are $1.1 trillion worth of tax expenditures, what I call spending into tax cutting. Right, right, right. That basically benefit people like us. The top one percent of America. We're talking about deductions that you can take advantage of. Right. Things that people love, charitable deductions, mortgage interest deduction, a deduction for state and local taxes. And those things you are prepared to say no more. What we're saying is let's eliminate them. And if we eliminate them, let me tell you what we can do on tax income rates. We can take the rates to eight percent, 14 percent and 23 percent, and we can take the corporate rate to 26 percent. From 30 down to 26. Yes, where we can be the best place in the world to start a business. We can go to a territorial tax system which makes a lot of sense. But most importantly, we can get those rates down. Now, if somebody comes back to us and says, Oh, Erskine, oh, Al, we've got to add back the earned income tax credit or we've got to add back the mortgage interest deduction. We say, Fine. How do you want to pay for it? Whose taxes do you want to raise in order to pay for those deductions? But that's what you have to do. We can get the rates down to eight percent up to $70,000, 14 percent up to $210,000 and 23 percent, the maximum rate above that. That's a good deal. And we can -- with that, we can take $100 billion a year and pay down the debt. Okay. But let me -- you believe -- you believe that the economic consequence beyond the deficit, lowering the income tax would be what, other corporate tax? It would be

16 Charlie Rose /16/2010 mean that corporations would therefore have predictability, therefore they would take -- they would allocate capital, and therefore they would create jobs? Sure. I'm a business guy. I think if we get the tax rate down for corporations, America will be competitive. When our tax rate was put in, we didn't have a global economy. We didn't have competitors. My competitors in North Carolina were in South Carolina and Virginia. Now they're in China. They're in Singapore, they're in Brazil. We compete in a global economy. We have to have a tax code that is sensitive to what goes on in the real world. And if we have that, we'll create more jobs. We'll create more money flowing into the economy, and it will be a better place to start and own a business. And we'd unleash a pile of scratch that those corporations are holding back. Right now. They're just looking around wondering what's going to happen in this country. You unleash -- what is it they have in there, 2 trillion or something that they're holding back? It's in the trillions. And then the argument is that they are waiting to see what the regulatory landscapes look like with the tax -- landscape will look like before they invest that. And there are trillions of dollars overseas that they haven't brought back to the country, which they would bring back if we had a territorial system instead of the system we have today. Okay. Tell me more about how the tax recommendations would work, because taxes will be at the center of this next Congress. We probably have had more agreement on broadening the base and simplifying the code and bringing rates down and using some of the funding from getting rid of these tax expenditures to reduce the deficit than anything else we've done, you know, on both sides of the aisle. What people disagree about is what do you add back? Should you add back the earned income tax credit or some of a child tax credit? Should you add back the mortgage interest deduction to preserve the housing industry? There are arguments on both sides of that.

17 Charlie Rose /16/2010 We'll just take that one thing, because I know that argument. Do you believe that if you eliminate the mortgage deduction, it will have an impact on the housing -- We won't eliminate it. It's interesting. They don't have a mortgage interest deduction in Canada or in Europe. And they have fine housing industries. I think it would have an effect, but I think if you phased it in over time, it would probably be okay. So there was a kind of a consensus about taxation. Where did the rubber meet the ground? I would say on the discretionary cuts that we put forward, we have $1.4 trillion worth of discretionary cuts. There is significant difference on Social Security and on whether it should be mainly out of revenue or out of benefits. We have it at revenues about 43 percent and benefits are 57 percent. And health is the other big area. That's a big enchilada. That's -- But most of that has to do with Medicare? Actually, a great amount of it has to do with Medicaid. Because -- and how does that work? Because so much was done to take to cut Medicare in this bill that just went through the Congress. Right, right, right, right. And so many more people have been added -- In order to add access. [unintelligible]

18 Charlie Rose /16/2010 Right. And they've done a great job. I think the bill did a great job on improving access. I think where it does need improvement is while the Democrats have lots of support that it does bring down calls to about 130 billion in the first 10 years and 1.3 trillion in the next 10 years. We still got a $10 trillion problem. The thing about taxes is you have groups like Grover Nordquist [spelled phonetically]. He and I don't agree on much and we've been at each other. And I enjoy the spirited combat but he just lays in the weeds, to go to people and make them sign a pledge, no taxes. And he goes to people like Orrin Hatch [spelled phonetically] and says, If you don't sign this pledge, we'll do to you what we did to Bob Bennett, which is beautiful. Bennett was a liberal, I mean, where are we? But this -- when you can say to them, You are really deceiving the American people but we can show you tax rates that have been reduced to eight and 14 and 23, I'm not listening to your babble on the other side. It's time to just cut them off. They're become irrelevant. Peter Orszak [spelled phonetically], talking about the Social Security benefits cuts, said the main flaw in the proposed Social Security plan is that it relies too little on revenue increases and too much on future benefit reductions. Yeah, I think Peter'd rather see the ratios at He has said some good things about the progressivity in our plan. But I think he'd rather see it more on the revenue side than on [unintelligible]. He's also a man who's on record as saying two years from now he thinks that the middle class income cut -- Bush tax cuts for middle class should also be eliminated two years from now because he thinks they need that trillion dollar revenue. Peter's comments were totally appropriate. He was right on track. That last comment was in the last part of his statement but the rest of it was very positive toward what we're doing, [unintelligible] -- Look, it's no surprise where we are. You can't cut taxes, increase spending, and think you're going to create anything but a pretty big deficit out here. You know, we've fought two wars, we've put a new prescription drug benefit in, so we've got a lot of things that have created this, plus we had this horrendous economic you know recession, and we've

19 Charlie Rose /16/2010 had to spend some money to get out of there. So it's easy to see how we got here. What we got to talk about is how can we end it? How can we get out of it? And if you tell people, ever dollar that's spent by this country, we're borrowing plus 41 cents, I think it's 39 now, but whatever, I mean, that's something any American can understand, they understand that at the barstool in Buffalo, Wyoming. You cannot -- every buck we spend, we're borrowing 40 cents. This is madness. And they know this. So -- Because they can't do it in their own budget, so they know that the country can't survive by doing it. Sure, you bet, you got it. That's what they feel in their gut. And when those guys get here, they say, We're going to go in, cut 40 percent, why you know, merry Christmas, the drinks are on me. You're going to have -- and if you can't compromise an issue without compromising yourself, you're not a legislator; you're just an ineffective totem. If you can't learn how to compromise an issue without compromising yourself, go home. Okay, so tell me this, out in the west, where cars and trucks are very important, how's a 15 percent gasoline tax increase -- Oh, I'm glad -- I knew you were going to ask that because let me tell you, what we're just saying is under the transportation trust fund, if you go over that, don't come to the feds and inject more money. And Erskine said [unintelligible] -- Yeah, basically, what we [unintelligible] either/or, we are day to day spending more than we take in. So what we said, look, if you're going to spend that amount, let s pay for it. If you re not going to pay for it, let s cut the spending. That s pretty simple and you need 15 cents gasoline tax in order to pay for what we re currently spending today. That seems to be what you re saying about all my -- I mean --

20 Charlie Rose /16/2010 Yeah. -- it seems to me you were laying this out and saying, Look, okay, I m going to help you. We ve brought how many people together, all right, and you re the two co-chairs of this thing and we have nine Democrats and seven Republicans. And you basically seemed to say these are the kind of choices you have to make, where you can agree and you can understand if you don t do anything there is disaster. You re going off the cliff. But these are the choices and so if you say to me you want this, you ve got to give up this. And if you say I don t want to give up this then you got to find something else to give up. That s what you re trying to make the country understand. We live in a world of choices and what we ve tried to make clear is that the problem is real, the solutions are painful, and everything has to be on the table. And this wonderful Congressman who I knew when I was here, Javier [unintelligible], he put one out the other day, Erskine and I just kind of little cheerlead on the side. He said Wait a minute, I don t like a lot of this stuff, but if you re going to reject something put something up there as to what you would do to replace your rejection. And boy that s called the rubber and the road. All right, but at the same time there are people who look at this and say, okay, that's what we have to do. But they say, how did you come to three dollars in spending cuts for every one dollar in higher revenues? Why shouldn't it be three dollars and -- why shouldn't it be the reverse? Well, that's because the numbers guy -- Oh, okay, numbers guy, tell me. Because I think we're probably -- [unintelligible] -- you know, we also put a cap on revenue coming into the country at 21 percent GDP. Right, that s right.

21 Charlie Rose /16/2010 And we think that s enough. You know, that s enough to take out of the economy. We want an economy that will grow and prosper and we think the problem is basically on the spending side and while we do want to increase revenues by lowering rates and by cutting out these tax expenditures, we really want to focus on going to the main problem and the main problem is on the spending side and that s why we proposed cuts and we told people exactly how we d pay for it. Do you believe that in the next Congress coming to town in January, they can find $100 billion in discretionary spending to cut? Well they ll start that way and they ll say We re not going to stop there, we re going to go to double that [spelled phonetically] and then the gears will begin to close around their ears and the grinding and the sound of rust. You mean, you ve been there? Yeah, but let me tell you, three of these fine young men on this Commission are going to be in positions of rare power. Paul Ryan -- Paul Ryan, the chair of the Budget Committee. And David Camp [unintelligible] [talking simultaneously] [unintelligible] Henserley [spelled phonetically] will be in the leadership. He s going to be third in the leadership. He says, I ll be the moderate in the leadership now. And you think because they participate in this Commission they will be what? They will be able to tell people to cut through the fog. And Ryan, I heard Ryan speaking to Durbin the other day.

22 Charlie Rose /16/2010 Durbin is one of the people who s been complaining about this three to one ratio. I know. But they re talking and I heard Ryan say to him, without naming names, he said that Somebody of the new group came to me and said here s what I m going to come on. I m going to get on the Budget Committee and do this, and Paul said, You can t possibly get that done. So the sobering has started. They re up off the street now, they re standing by the lamp post and we ve got them standing and we re going to sober them up. One thing s for sure. If they don t do it next year, they can put it off for another year but I m telling you, the markets will force us to act. There s no way we re going to have these deficits going out to the future. There s no way we re going to end up paying $1 trillion in interest costs. The markets are going to force us to be fiscally responsible. Okay. What happens between the release this -- what you two would recommend as you flesh that out and December 1? What s going to happen? We met for several hours today. We re meeting -- All 18 members. All 18 members. We re meeting for several hours in small, individual groups and individually tomorrow. And then tomorrow we have another all 18 of us come together - - What s happening in these meetings? Today we spent the whole time talking about exactly what you re talking about today. Discretionary cuts, should there be more, should there be less. You know, some people who wanted more, I said Fine, bring me the specifics. We had $200 billion worth of specifics. You want to cut more than that? You re going to have to show us more specific cuts.

23 Charlie Rose /16/2010 Okay so you ve said, Look, we ve done the best we can and this is what we recommend, you know. But we want 14 votes here so therefore show me a better way and I m prepared to walk down that road. And we re not going to wimp out on this deal. You know, we re not going to end up -- Wimp out would be saying, Well we can t come to some agreement. Yeah. Well look. We may not be able to come to an agreement. But if you think you ve got 14 votes -- No, we re not saying -- What I m saying is we re not going to wimp out and put together some whitewash that s just a bunch of principles. Right. You know, we re going to make sure that whatever we support, you know, we can stand behind and we can be proud of and to do that, we ve got to really address this deficit. We d like to be able to use legislative language but we don t have the time to get that created. At some point that would be an ideal. Okay but tell me one more time, what s coming out now? You have these meetings and you talk about discretionary spending and you talk about, you know, the kind of feedback that you ve gotten since this is out there. We have the chairman s mark up [spelled phonetically] there. We ll try to improve it. It will go through some changes. But I guarantee you, it s not going to be less than what we already proposed.

24 Charlie Rose /16/2010 And we re not bullying them. We re just saying we re not going to sign our names at this stage of life to a bunch of pap. Just nothing that doesn t get it done and is pushed to the side by the power of groups in this town. This, as Andy Stern, a good egg on the Commission, he said, This city is not built for success. So you guys really believe that in this case, 18 people have come together members of Congress 12 members of Congress. Six from each side. Yeah. And people who have real influence in the Congress. Yeah, oh yeah. [unintelligible] Coburn [spelled phonetically]. Durbin. Durbin. Yeah, Whit [spelled phonetically]. They ve all come together and there s a seriousness sense that this could be, you re looking at this as what s happened in this Commission, as a possibility for the first time you ve turned the road here, turned the corner. When I said the era of deficit denial is over, I meant it. They all realize now that they can't deny this any longer, that they've got to face up to it. They may do more revenue or less, or more spending cuts or less. But they're going to face up to it because they realize the problem is real. And I think we can --

25 Charlie Rose /16/2010 We call it the cruelty of making promises you can't keep. And that's a cruelty. And that's what's happening. It's like the Social Security promises. We can't keep them. We can't make them. It does run out of money in All right. So what's been the response from the president so far other than to say I'm willing to work with the Congress to get some of these things done? I think the president deserves a lot of credit for, A -- Appointing the commission, right. B, I think he knew that Alan and I were deficit hawks when he appointed us to head this thing up. So he knew what he was getting in bed with. And thirdly, I think his attitude to date has been great. He said, Look, don't shoot down any of these proposals that Erskine and Alan have made. Let's make sure that they get serious discussion. And once you come up with a recommendation, bring them to me. I'm going to get a hold of Biden who called me in January and said, Alan, I've got a real deal four. You're going to love this. I said Let me get Ann [spelled phonetically] on the phone, Joe, you have spoiled me before. But Joe -- I need a backup here. And then you got Denny Hoyer [spelled phonetically] over there. These are -- you have to have solid people on the other side. Joe Bidens, Denny Hoyer. Right. These -- we have -- it's not networking. It's just, will you listen to us? There's been almost no politics in these meetings. People have checked their politics aside.

26 Charlie Rose /16/2010 Politics and ego? Yeah. Yeah, they -- And ego too? Yes, I mean that. Yeah, yeah. Okay. So you said to the White House, I have spent -- you said I have spent more time listening to people in the opposition party than they had done, the White House had done as a whole group. What did you mean by that? I think somebody said that was tweeting. I don't know what it was. What I meant was the truth. The only way that you get to common ground is to listen to people, to meet with people, to really try to understand where they're coming from. And we had spent an enormous amount of time with Republicans and Democrats listening to them, trying to come up with what we felt was a reasonable recommendation. That's all I meant. I think Jan Schakowsky and I -- Jan Schakowsky. I've seen what she said. We bristled up. But let me tell you, she is who she is. And she was appointed by the speaker. And she has some strongly held views. Give her credit today. She came out with her own proposal, and it's real. I have right here in my hand.

27 Charlie Rose /16/2010 But it's real. You know, it's heavy on the taxing side and light on the spending side. This is from The Washington Post, "One of the most liberal members of President Obama's bipartisan deficit commission unveiled her own plan Tuesday to balance the budget, keep Social Security benefits intact, make deep reductions in the Pentagon budget and raise corporate taxes -- raise corporate taxes to target profits and excessive pay for chief executives. So you were saying -- I'll talk with her. I don't know what will happen. But you do have to give her credit. You didn't know she said that? No, I did. I did. Yeah, you have to give her credit. She's done something real. It's not what Alan and I would do. Oh, so this is what you want. You want them to get out front and say This is what I believe and this is what I do. She's recognized that we have to do something. Her solution is not my solution. People see this, and they'll say How do you raise corporate taxes or how do you do this at this point in time? That's tough to do. Okay. So Paul Ryan said to me last night, Alice Rubin [spelled phonetically] and I plan on putting out our own plan on healthcare hopefully this week. She and I are still talking about it so I don't want to get ahead of things. They don't really address this in the plan. So you welcome that too. Put it on the table.

28 Charlie Rose /16/2010 Yeah. Paul and Alice are going to come forward tomorrow with a premium support plan that we look forward to seeing. We haven't seen it yet, but we're looking forward to seeing it, and it'll get due consideration. So the American people, if these recommendations, you get 14 members to vote for this, and the Congress does something, American people are looking at what in their future? Don't sugar coat this. They're looking at people who have decided to be patriots instead of getting reelected. I'm asking what are they -- okay, that's -- does your political experience suggest to you that people are going to go that direction at this time? I think with what's happening in the world and at home and around the earth with France and Britain and everybody reads. They know about Greece. They know these things, that at some point they'll say we can go no further. I don't know if this will work, but these guys put something up. If we don't get anybody to go along, we won't say so and so does a minority report or a dissent. We're not into that. We're not blaming anybody. But for heaven sakes, if you just want to sit and go through this ritualistic business and the man behind the curtain saying things to the American public, notice what's happening. Appropriators are getting beat. Guys who have the purse strings are getting beat in Congress. They used to be the guys that would come home and just grace you with money. I just see people saying, We're sending you there, and if you don't do it, we'll throw you out. In two years, if these Republicans are just obstructionists [spelled phonetically] or whoever, Democrat or -- and they're going to play the ancient game, the people in America are just going to pitch them right out again. And then I don't know where it goes. It gets into -- We are at a moment. I think there were a lot of people in Washington before this last month who really thought they'd be penalized if they made some of these tough choices and they were specific. A lot of people got penalized in this previous election. They did. And so I think people now realize they're going to be punished if they walk away from these tough choices and if they don't make these really tough decisions.

29 Charlie Rose /16/2010 Yeah, I think just two months, three months ago, that if a person did this, that they might be denied a leadership post in the new Congress if the Republicans took over. And they found that they had done and sullied themselves by doing something with the tax code or whatever, that they would not get their leadership post. This is a real opportunity also for Washington to prove that the political system can work. I think so. It can deal with problems. How did we get here? Erskine, you have said that we made promises we couldn't keep. We all know that we have been living off of borrowed money, and that's what as issue and that China, which has been loaning us the money -- Charlie, it's frightening. We will be paying a trillion dollars in interest costs in I heard on the radio this morning just as a perfect example, China s economy is one-third the size of ours, yet they are investing in high-speed rail this year $100 billion. We're investing $9 billion. What makes me mad is that's our money they're investing. It's our interest on our debt. And where did it get that money? They loaned us the money to consume their goods that they were making over there. Right. You know, that just won't wash in the long term. We have got to get the economy of this country going. We've got to -- you know, we can't grow ourselves out of this problem. We can't tax our way out of it. People who want to do just taxes, you'd have to raise the maximum marginal rates to 80 percent. You'd have to raise the corporate rate to 70 percent. You'd have to raise the capital gains rate to 50 percent if you're just going to do taxes. We can't cut our way out of it. People say, Oh, well, let's just cut the budget. If you just rely on deficit reduction through cutting, and you want to exclude Social Security, Medicare and defense and of course interest, then you'd have to cut everything else by about 60 to 65 percent. You can't do that either. What we've got to do is some combination. Alan and I have come out with a plan that's balanced that takes $4 trillion out of the deficit over the next 10 years. I think that's the kind of thing we have to do. And if we don't, the markets are going to force us to. You wanted to ask me that same question.

30 Charlie Rose /16/2010 I do. And I can tell you exactly how we got here. For the last 75 years, you were sent to Washington to bring home the bacon. And I remember in my second term in the Senate, I went back, and somebody said, You haven't helped us out here get a new dam or a new visitor center whatever. I said, No -- or new VA Hospital. I said, No. I'm not going to sign on for that. We already have one. We have this. Oh, well, what kind of a congressman are you? What kind of a senator? Let me tell you, when you went home to your district, you had staff around you. And in your town meetings would say, Now, do you have any questions? Yes. We need this, and I hope you will get it. And the person turns to the loyal staff person and says, Right that down. We'll get that. We'll inject it as an earmark, or we'll have it. I mean, the fun and games is over. You can't do that anymore. Now ear marks, that's [unintelligible] belch. I mean -- It's over. Yeah, well, but it's -- But it's only $16 billion. You know, it's important we get rid of them too -- But the point is that they were sent to Congress to get money. And if they got it, they were reelected. And as they got reelected time after time, they said there's a great way to keep this going. Just bring more bucks home to the district. And that's where we got here, and that's how we -- that's where it happened. And that's how the system became dysfunctional. You bet, boy. Yeah. But here is a piece in The Washington Post today, Ezra Klein. He says, "Here is the dirty little secret that Washington politicians know but its elites want to deny. Voters don't really care about the deficit. And don't take it from me. Take it from them. A CBS news poll found that only four percent want the new Congress to put deficit reduction first, and it was far behind economics and jobs, 56 percent, and healthcare, 14 percent. That's why the Simpson-Bowles proposal is getting a lot of attention from budget [unintelligible] and policy writers but few endorsement from active politicians, even the ones who serve on the Commission.