CNN "State of the Union with Candy Crowley" Transcript: Fiscal Cliff and Taxes

Interview

CROWLEY: Joining me now to tell us where this is all headed, the Senate's number two Democrat Dick Durbin of Illinois. Good morning, and happy new year, senator. Thanks for joining us.

Can you get a deal on the debt ceiling? Can you raise that debt ceiling without agreeing to some spending cuts?

DURBIN: Well, I think we're going to need both. What the president has said is we need some balance here from this point forward...

CROWLEY: Excuse me what, the president said he's not going to deal. He's not going to negotiate. He just wants you to raise it. Is that going to happen?

DURBIN: Let me add one thing. I think in the course of his State of the Union Address, and the president has already said it, we're going to be talking about further deficit reduction, but it has to be done in a balanced way. At the heart of this debt ceiling debate is whether or not we're going to continue to reduce the deficit. I think we need to do it in a thoughtful way. And the president said as long as it's balanced he's open to the conversation.

CROWLEY: OK. So I'm confused because I've heard him say multiple times I am not going to negotiate over raising this debt ceiling. So are you going to negotiate?

DURBIN: I can just tell you this, the debt ceiling is something that we should put behind us in a hurry. You know, it was John Engler, Republican governor, former Republican governor of Michigan now head of the business roundtable who said we ought to project debt ceilings for the next four or five years and not fight over them every time they come up. It was Newt Gingrich of all people who said it was a dead loser for the Republicans to choose this as an issue.

What I'm saying is the president should not have one of these last-minute showdowns over the debt ceiling, but we should speak in honest and I think complete terms about dealing with this deficit. It truly is a challenge we haven't faced as much as we should.

CROWLEY: So taking the president out of it, do you think that you could agree to spending cuts, provided you were amenable to whatever the cuts were, in order to get the debt ceiling raised?

DURBIN: I can tell you that sounds like a bargain, and it sounds like a deadline that I don't want to see. What I'd rather see is a bipartisan approach starting soon, as soon as we return, between Democrats, Republicans in the House and the Senate, talking about where we go, for example in, tax reform. There's money to be saved in tax reform. There's money to be saved in other areas.

Debbie Stabenow is head of the Senate ag committee, found a way to save $23 billion in spending we don't need in the farm program and reduce the deficit. Why doesn't the House take that up and pass it? That's a good move towards deficit reduction.

CROWLEY: Let me ask you about money to be saved in tax reform, because if the government saves money in tax reform, that means somebody's taxes go up. Do you think that taxes have been raised enough on the wealthy?

DURBIN: I can tell you that there are still deductions, credits, special treatments under the tax code which ought to be looked at very carefully. We forgo about $1.2 trillion a year in the tax code, money that otherwise would go to the government, and when you look closely, some of those things are near and dear to us individually and to the economy -- the mortgage interest deduction, charitable deductions, deductions for state and local taxes, but beyond that, trust me, there are plenty of things within that tax code, these loopholes where people can park their money in some island offshore and not pay taxes, these are things that need to be closed. We can do that and use the money to reduce the deficit.

CROWLEY: So there are other taxes that you believe that you can, however you want to put them, raise, retrieve, whatever, from the wealthy?

DURBIN: Absolutely.

And I'll also tell you that I think we need to open our minds to our tax revenue. You know, we've had conversations about an infrastructure fund that will really start America building again, for the highways and airports and locks and dams and things like that.

CROWLEY: How do you fund that? I mean, it's already funded by gas taxes, right. You want to raise the federal gas tax?

DURBIN: I believe we should have energy taxes that really fund infrastructure investment.

CROWLEY: On who?

DURBIN: It's going to create jobs in America.

Pardon me?

CROWLEY: On who. I'm sorry, who would -- whose taxes would be raised?

DURBIN: Well, there's a variety of ways to approach this, Candy. I mean, we've talked about the gas tax. Now is not the moment to raise it, but it really is something we should consider in the future. But there are other sources of energy taxes we ought to consider. I'll give you an example, the electric grid, power grid in America is ancient. And if we are going to expand it so that it can meet the needs of the 21st Century, we need an investment. That means revenue coming in from that sector. I think they would be open to it if the investment went back into the infrastructure. CROWLEY: Let me ask you, when you're talking about these special loopholes and -- et cetera, that you want to close in tax reform, there were some things in this fiscal cliff, last-minute deal, didn't even make the deadline, and it was all to save the middle class from not getting a tax hike, and yet included, and this is just a partial list, included in this bill were tax breaks for Puerto Rican rum producers, tax breaks for Hollywood film-makers, tax deductions for NASCAR and tax credits for algae growers. So this is money coming out of the Treasury, so why is all of that in this bill? Isn't that's exactly the kind of thing you're going to run into in tax reform because something is sacred to algae growers, and somewhere somebody is making sure that they can -- it may be very important. I have no idea what the tax break is for algae growers, but nonetheless they were included in this bill. Why?

DURBIN: Well, I haven't heard from the algae lobby, so I don't know what their position was on this bill, but I think you're describing that category of tax extenders. These were temporary tax breaks given long ago that have been renewed year after year.

Max Baucus has been the first to say we need to sit down and look at these. Am I for the wind energy tax credit? Yes. I want to see us move toward a greener, cleaner form of energy in our future, but when you start ticking off the others, as small as they may be, these things have really outlived their usefulness, and that can be part of tax reform as well.

CROWLEY: I suspect, senator, that it's possible you might not have had enough votes for this bill if some of these tax breaks weren't in there, that these were sort of payoffs.

DURBIN: Well, you're certainly not new to Washington because you know how it works. You bring together a majority by putting something in the bill that is appealing to a member of congress.

CROWLEY: Right.

DURBIN: And who knows who represents the algae lobby on Capitol Hill, but they must have been very happy with the outcome.

CROWLEY: We'll try to find out.

A final question for you, senator. President Obama has said, look, I'm not going to do any kind of negotiating over this debt ceiling. You all have spent this money, and he points to congress, so you have to raise this debt ceiling. He is, and we expect him to appoint Senator Chuck Hagel whom you know, a Republican senator, to be defense secretary. He's quite controversial amongst some of your Democratic colleagues, but especially among Republicans.

What do these two stances by the president, his decision to go forward on a nomination that he knows will be controversial, and his decision not to deal with the all on the debt ceiling with the Republicans. What does it tell you about President Obama's tone in this second term? DURBIN: It tells me that he not only won the election but he wants to lead this country. You know, sitting back here and avoiding any confrontation and any controversy is going to make a weakened presidency. He needs to lead for the good of this nation, and we need to work together and find compromise and consensus in both political parties.

Chuck Hagel was a Republican Senator from Nebraska, a decorated veteran of the Vietnam war, a person who has a resume that includes service on the foreign relations committee as well as the intelligence committee. Yes, he is a serious candidate if the president chooses to name him.

And when it comes to the debt ceiling, the more often we have confrontation, the more uncertainty there is in this economy. We need the certainty to move forward so that businesses will invest and jobs can be created.

CROWLEY: Senator Dick Durbin, it's always a pleasure to have you on. Thanks for joining us.

DURBIN: Thanks, Candy.

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