Fox News "Fox News Sunday with Chris Wallace" - Transcript
Interview
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WALLACE: With the super committee failing to make a deal to reduce the country's debt, a number of spending cuts and tax increases are set to take affect unless Congress acts. Joining us now are both parties' second ranking leaders in the Senate: Illinois Democrat Dick Durbin is in Chicago, and Arizona Republican Jon Kyl who's in Phoenix.
Gentlemen, before we discuss Congress and the debt, I want to ask you both about the foreign policy issue I was just discussing with Governor Huntsman. And that is the latest breach in relations with Pakistan. As you both know in response to the killing of two dozen Pakistani soldiers, Pakistanis say U.S. and NATO have to stop drone operations from one air base in their country and they're also cutting off the two major supply routes for NATO into Afghanistan.
Let me start with you, Senator Kyl -- what would you do about it?
SEN. JON KYL, R-ARIZ.: Well, there's a lot of diplomacy that has to occur and it has to be tough diplomacy in the sense that they need to understand that our support for them financially is dependent on their cooperation with us. But it's not the kind of situation where you just cut off all assistance because we do need their in the region.
If I can just tell you one quick story. About two weeks before 9-11-2001, I was part of an intelligence trip to Pakistan. And I'm visiting with President Musharraf.
We made the point that because we cut off relations before, military support and other economic support before, that the officer corps that was coming up behind him have not been educated in Great Britain or the United States as he had and his fellow senior officers. And he was very concerned about the Muslim influence, the radical influence of those young officers as they were coming up the ranks.
He said that was a mistake. A couple of weeks after, we got back. We helped to restore those military to military contacts.
The point being that it's very important to maintain a relationship for the long haul.
WALLACE: Senator Durbin, what should we do?
SEN. DICK DURBIN, D-ILL.: First, I'm deeply saddened 24 or 25 Pakistan soldiers were killed by NATO drones and I think we've expressed those condolences. Imagine how we would feel if it had been 24 American soldiers killed by Pakistani forces at this moment. Secondly, keep in mind that as difficult as it is to find our way through this diplomatic morass between the incompetence and maybe corruption in Afghanistan and the complicity in parts of Pakistan, our soldiers are caught right in the middle of this.
At a time when they're trying to bring peace to this region, I think it's an argument, from my point of view, of moving us toward the day when our American soldiers come home.
This is a terrible theater that we have been unable to find a clear path toward reducing terrorism. We've got to leave it to the Afghan forces to meet the challenge and bring American forces home.
WALLACE: All right. Gentlemen, let's go back to the debt. And let's start with the items that run out at the end of this year, not 2012. Let's take a look at them. This is unless they are extended.
First, the payroll tax cut costs $112 billion to extend. If it lapses, a family making $50,000 will pay 1,000 more in taxes.
Senator Durbin, Democrats plan to bring this measure, to extend the payroll tax cut up this week. But you're going to pay for it by -- with a surtax on millionaires. That maybe a smart political move, but there's no chance it's going to pass.
DURBIN: Well, it should pass. I mean, look at the bottom line here. You say $1,000. I think it's closer to $1,500 for the average family. If we don't provide the tax relief that President Obama has asked for, families are going to see an increase in taxes.
These are working families, lower and middle income families. And those at the very top who have enjoyed tax cuts that have been very, very generous for a long period of time can afford a slight increase in their tax burden so that we don't add to the deficit. Let's help the working families who are struggling paycheck to paycheck, and ask those who are the most well off in America to pay a very small percentage of increase taxes.
WALLACE: Senator Kyl, Republicans are demanding -- and that's the reason that the Democrats are putting this millionaire surtax are demanding that an extension of the payroll tax cuts, be paid for. But you haven't done that in the past for the Bush tax cut. And one, I would like to know why, the difference between paying for one and not paying for the other, and what do you think are the chances for a deal for the end of this year? Because it runs out this year to extend the payroll taxes.
KYL: Well, we have to deal with the unemployment insurance, with payroll taxes and a lot of other items before the end of the year. The problem here is that the payroll tax doesn't go into general revenue, it supports Social Security. And you can't keep extending the payroll tax holiday and have a secure Social Security. That's the first problem.
The second problem is that by taxing the people who provide the jobs, you put off the day we have economic recovery and job creation in this country. And that's precisely what the Democratic plan would do. It would hit those people, the small businesses who we all acknowledge are the ones who create the jobs coming out of economic difficulty.
And that we think would be a big mistake in --
(CROSSTALK)
WALLACE: If I may, Senator Kyl, just to cut this short, are you saying no deal on extending payroll tax cuts?
KYL: The payroll tax holiday has not stimulated job creation. We don't think that is a good way to do it. Before the end of the year, we will have discussions about what we're going to do on all these different programs.
WALLACE: Go ahead, briefly, Senator Durbin.
DURBIN: I can't believe that at a time when working families in this country are struggling paycheck to paycheck, when we need them to have the resources to buy thing in our economy, to create wealth and profitability and more jobs, that the Republican position is, they'll raise the payroll tax on working families? I think that just defies logic.
What we should do is to help these working families struggle through. President Obama has showed leadership on this. And now, the Republicans are walking away from lower and middle income families because they don't want to impose a small, small tax on the wealthiest people in America.
Listen, we can save Social Security. I agree with Jon Kyl. Let's be serious about it. Let's pay for this payroll tax cut by imposing the slight increase in taxes on the wealthiest people and replenish the Social Security trust?
WALLACE: Let me if I can Senator Kyl. I want to give you a chance to respond to that. I also want to ask you, if you will, briefly, the response to this, because economists say there's a real impact if you don't extend payroll tax cuts and employment insurance. And let's put it up on the screen.
They estimate and again both of these run out January 1st, that failure to extend the payroll tax cuts and unemployment benefits will cut GDP growth 1 percent to 2 percent next year, and cost more than half million jobs.
You say you question the stimulative affect. But according to these economists, there's a real danger if Congress doesn't extend both of those, put the country back into a recession?
KYL: Chris, I don't know who those economists are. I just read a piece by Art Laffer, who is a respected economist, who say that isn't true.
Here's the problem, when you are in a recession and you're in difficult economic time, as we are, and you need to put people back to work, as well as dealing with our deficit, how do you do that? You do it by enabling the economy to grow.
The best way to hurt economic growth is to impose more taxes on the people who do the hiring. And as a result, the Republicans have said, don't raise the existing tax rates on those who do the hiring. Instead, I hope we can get into this, explore the kinds of things that we did during the deficit reduction committee work to reform the tax code, eliminate preferences, credits and deductions, or reduce their value significantly on the upper income taxpayers, so that they end up paying more, but not through a tax increase on the rates either on capital gains, dividends or upper marginal rates.
(CROSSTALK)
WALLACE: Let me ask you -- let's pick up on that. You have a short-term problem, which is you've got to deal with these -- the payroll tax cut on employment insurance, the AMT or alternative minimum tax, the doc fix, all of which run out at the end of this year. You've also got the long-term debt issue. And I would like to briefly address that.
Bowles-Simpson and a lot of people say that the presidential commission which the president basically walked away from had the basic idea, the right idea. And, of course, Senator Durbin, you are a member for that. You voted for it.
Two aspects to it: one, they said, let's lower the rates dramatically, as low as 28 percent of the top tax rate, but let's eliminate the deductions, the loophole. We'll take $1 trillion in tax expenditures and we will contribute that to the $4 trillion fix of the debt reduction.
And the flip side of that is they said, we want to see half trillion, $500 billion in entitlement reform, cutting some benefits, raising eligibility ages.
Let me start with you, Senator Durbin -- would you go for all of that again?
DURBIN: I can tell you that that is the basic guidelines as I see it to reaching the kind of stable growth situation, creating jobs now, and reducing our long-term deficit.
To paraphrase one of our former colleagues, I know Erskine Bowles and Alan Simpson, I've worked with them on the committee. And what was proposed by the super committee by the Republicans on the super committee was not even close to the Bowles-Simpson proposal.
What we've got to do is establish the basics: $2 in cuts for every $1 in revenue. Now, let's do this in thoughtful way that creates jobs now, does not handicap or damage Medicare or Social Security or Medicaid in the long run, and creates a kind of approach that is balanced. We didn't get that out of the super committee --
(CROSSTALK)
WALLACE: Let me just ask you directly. One of the hang ups is the Bush tax cuts. Would be willing -- Simpson-Bowles basically forgot about the Bush tax cuts. They said, you know what? We're going to lower all the rates and the top rate maybe down to 28 percent, but we're going to get $1 trillion in tax expenditures.
Are you willing to say, "Forget about ending the Bush tax cuts, we'll lower our rates if we get these tax expenditures"?
DURBIN: Chris, you have to look at it in the total context. And I'm not dodging the question. The Bush tax cuts are overly generous to highest income Americans. Going back to our early point, we don't want to disadvantage those who are working families, the middle class families across America. Let us put tax reform together to give them a fighting chance.
There was a commitment in the gang of six, there was a commitment in Bowles-Simpson to at least maintain if not improving the progressivity of the tax code. That means giving working families a fighting chance. I hope we can establish that as one of the principles in future deficit reduction.
WALLACE: Senator Kyl, I want to go at this with you a slightly different way, because there is a narrative out there that you and other members and Republicans on the super committee were scared of an outside player and that's Grover Norquist, and his anti-tax pledge. And that basically, you just wouldn't give on the Bush tax cuts.
Norquist, a couple of weeks ago, said that he had to yank you into line. I want to put up what he said. And I repeat -- it's what he said.
"So, I call Kyl. 'What did you say? What do you mean? How can we work together on this?' Norquist said, adopting the tone of a teacher scolding a second grader as he recalled the conversation."
Two questions, one, is that story true? And, two, are you and other Republicans somehow cowed by Grover Norquist and his anti-tax pledge?
KYL: The answer to both questions is: absolutely not. And the proof in the pudding is the fact that the so-called Toomey Plan, which Republicans, all six of us, offered to the Democrats, would specifically have raised tax revenues. It would have raised $250 billion more than the tax reform that would be necessary to reduce the rates and would have applied that to debt reduction. Grover was not happy with that, we did it anyway.
And this is the point. The Bowles-Simpson Commission said: raise whatever revenue you can and apply it to reducing rates. We did that in the Toomey plan by reducing the value of all this tax credits and deductions, the kind of thing you spoke of. And Toomey Plan scored by the Congressional Budget Office, would have reduced the top rate to 28 percent and every other rates by 15 percentage points. As a result of which, we could accomplish both goals.
What you can't do is raise more than $250 billion. And that's why that was the amount that we raised above that necessary to reduce the tax rate.
WALLACE: And, finally, Senator Durbin --
KYL: We accomplished that in the Toomey Plan.
WALLACE: And we've got only have 30 seconds left. To answer this -- an awful lot of people say, you know, we talk about Grover Norquist. A lot of people say that President Obama was missing in action during the key negotiations here. Wasn't that a failure in leadership on his part?
DURBIN: Not at all. Those of us who know the facts realize that Vice President Biden, the president made an overture, which Congressman Eric Cantor walked out on to a deficit reduction, and twice, the president negotiated directly with Speaker Boehner to a deficit reduction. Speaker Boehner walked away.
WALLACE: I'm talking about the super committee, sir. You're talking about last summer.
DURBIN: The point I'm making is this was a congressional undertaking and the Republicans made it clear that if President Obama weighed in, it would become another presidential issue. They don't want to give the president any credit for achieving things. We knew that if he came into the super committee negotiations, it would not be constructive on the Republican side, but we know where the president stands. He wants substantial deficit reduction, but first get America back to work.
WALLACE: Gentlemen, we're going to have to leave it there. Thank you both so much for coming in. We'll stay on top of the story. Obviously it isn't going away.
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