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'The Last Word with Lawrence O'Donnell' for Friday, July 22, 2011

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Guests: Kristen Welker, Andrea Mitchell, Kelly O‘Donnell, Kristen Welker, Eugene Robinson, Richard Wolffe, David Corn, Rep. Chris Van Hollen, Nicholas Kristof, Kent Conrad, David Corn, Richard Wolffe, David Frum

LAWRENCE O‘DONNELL, HOST: Good evening from New York on this night of breaking news from the White House of yet another and perhaps the final collapse in the debt ceiling, deficit reduction negotiations.
After yet another week of the president outmaneuvering the Republicans, he forced the up to now most patient of Republican negotiators, House Speaker John Boehner, to walk away from any more negotiating sessions with the White House on a deficit reduction package.
You will recall that weeks ago, the president maneuvered Eric Cantor into walking out of the deficit reduction talks to great advantage of the White House in its perception of being willing to compromise, willing to extend itself, willing to—as the president would say frequently—bend over backwards with the negotiations with the intransigent Republicans.
Now, the Republicans are walking away yet again. After receiving a phone call from House Speaker John Boehner, where the president learned that the speaker and the Republicans would no longer negotiate with him over a deficit reduction deal, the president went to the press briefing room to give his reaction to the American people.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I just got a call about a half hour ago from Speaker Boehner, who indicated that he was going to be walking away from the negotiations that we‘ve been engaged in here at the White House for a big deficit reduction and debt reduction package. We were offering a deal that called for as much discretionary savings as the “gang of six.” We were calling for taxes that were less than what the “gang of six” had proposed. And we had—we were calling for modifications to entitlement programs.
This was an extraordinarily fair deal. If it was unbalanced, it was unbalanced in the direction of not enough revenue.
Nancy Pelosi, Harry Reid, the Democratic leadership, they sure did not like the plan that we were proposing to Boehner, but they were at least willing to engage in a conversation because they understood how important it is for us to actually solve this problem. And so far, I have not seen the capacity of the House Republicans in particular to make those tough decisions.
What a lot of the American people are so disappointed by is this sense that all the talk about responsibility, all the talk about the next generation, all the talk about making sacrifices, that when it comes to actually doing something difficult, folks walk away.
Here‘s what we‘re going to do. We have now run out of time. I told Speaker Boehner, I‘ve told Democratic leader, Nancy Pelosi, I‘ve told Harry Reid, and I‘ve told Mitch McConnell, I want them here at 11:00 tomorrow.
We have run out of time, and they are going to have to explain to me how it is that we are going to avoid default. And they can come up with any plans that they want and bring them up here, and we will work on them.
The only bottom line that I have is that we have to extend this debt ceiling through the next election, into 2013.
(END VIDEO CLIP)
O‘DONNELL: Now, the only bottom line is extending the debt ceiling, and President Obama said he would reluctantly be willing to accept what he had asked for from the start: a clean debt ceiling increase through 2013.
This is the president now saying he is very, very reluctantly accepting what he set out to get in the first place.
Joining me now from the White House, Kristen Welker. Do we have Kristen Welker from the White House?
KRISTEN WELKER, NBC NEWS CORRESPONDENT: Hi, there, Lawrence.
O‘DONNELL: Hi, Kristen.
Kristen, I thought one of the interesting things the president offered without anyone pushing him to do it was to say I will give you the tick-tock. I‘m going to give you all the paperwork that shows exactly how this deal is negotiated. We now have a disagreement between the president and Speaker Boehner. Mr. Boehner saying that they had a deal for $800 billion in revenue increases, and the last minute the president tried to change that, add 50 percent to it, take it to $1.2 trillion.
The tick-tock, the paperwork will tell us exactly who‘s telling the truth about that.
WELKER: That‘s right, Lawrence, a lot of people are anxiously awaiting the paperwork. Senior White House officials just briefed us on more reasons why these talks may have broken down.
To your point, both sides agreed to about $800 billion in new tax revenue. They had agreed they would let the Bush tax g cuts expire for the wealthiest Americans.
And then there was this issue of extra $400 billion. Speaker Boehner said that was a new figure.
Senior White House officials saying look, this was always in discussion from the first time the president and Speaker Boehner were talking about doing something big.
One of the other point of contention here, Lawrence, were triggers, to make sure that those tax cuts actually did take effect, because remember, they weren‘t going to take effect until 2013, which would have likely required Congress to come back to the table.
So, they wanted triggers to make sure they both came back to the table. One of the triggers that Republicans wanted, according to senior White House officials, was to get rid of that individual mandate that is of course part of the health care law. And Democrats, President Obama said that they just couldn‘t come to the table over that. They just didn‘t think it should be part of the negotiations.
And, then, finally, these talks broke down over how deep the cuts would be in terms of entitlements. This is again according to senior White House officials. They say one of the biggest points of contention was over Medicaid.
So, those were really the three big sticking points, according to White House officials here. One more interesting note, though, Lawrence—according to President Obama, he called Speaker Boehner last night, didn‘t get a response. Got an e-mail today saying he‘ll hear from the speaker at 5:30. The White House apparently just called Speaker Boehner and said, hey, can we talk now, the reaction was no, you‘ll hear back at 5:30.
And it was at 5:30 that Speaker Boehner called to let the president know that he was pulling out of negotiations. And as you heard him there in the comments this evening, the president seemed quite upset. We‘ve heard him speak a lot throughout the entire process.
And it‘s safe to say tonight was arguably some of his most heated rhetoric—Lawrence.
O‘DONNELL: Well, it‘s heated if you believe it. It‘s heated if you believe that it is it‘s somehow politically unprofitable for him to be coming up with absolutely nothing right now. In other words, he‘s getting to the point now where he‘s asking for exactly what he asked for at the beginning of the process, which is a clean debt ceiling increase, and he‘s not suggesting himself politically to embracing a legislative package, that as he put it earlier in the day, in his public appearance in Maryland, would have pain for everyone.
This is not something that presidents want to do in reelection years. His performance skills at upset with the Republicans are, obviously, very refined. He‘s been able to rehearse these with the Eric Cantor walkout. He did twice refer to John Boehner in his statement today, in his press conference this evening, as walking out.
His mission tonight clearly in that room was to put the pressure on the Republicans for having walked out. He‘s trying to make them appear to be the irresponsible party here.
WELKER: That‘s right. He‘s putting the pressure squarely on their shoulders as we have been reporting. He has called congressional leaders of both parties back to the White House tomorrow at 11:00.
And to continue to put that pressure on, Lawrence, and as part of that pressure, he discussed the fact that, look, the markets are watching this. Earlier this week, we saw the markets respond favorably when there was news of a possible deal. So, there‘s concern of what‘s going to happen on Monday.
President Obama addressed that issue. He said he‘s going to send a very loud message tomorrow. That they need to get something done. They need to get something done soon.
Again, you heard the president talk about this grand bargain all along. Tonight, it seems there‘s little hope for a grand bargain. The president, himself, saying he would accept just increasing the debt limit through 2013.
O‘DONNELL: Well, Kristen, I‘ve been saying for a couple of weeks, there was no hope for a grand bargain. That all of this was a mirage, given that each side had a specific thing that they absolutely would not do, the other side wouldn‘t do it. So, they were going to be stuck on taxes from the start.
So, to my eye, it was very easy for President Obama to appear—pretend even, if you will—that he was willing to negotiate all of these things that would be difficult for Democrats as long as he was demanding this one thing that he absolutely knew from the start was impossible for Republicans. And in the negotiation where nothing‘s agreed to until everything‘s agreed to, the president wasn‘t agreeing to anything.
WELKER: That‘s right. Nothing had been agreed to. You‘re absolutely right. There was never really a deal here on the table, something that was signed, sealed, and delivered. And to your point about how much friction there was in both parties earlier today, Democrats were really in an uproar over this idea that the president might give in on entitlements without a very hard guarantee about when those tax reforms were going to go into effect.
And then, on the Republican side, you have a lot of pressure, especially amongst Tea Party freshmen, who by the way a few days ago gathered outside of the White House, staged an impromptu news conference and said they didn‘t even believe the August 2nd deadline is a real deadline. They don‘t think that Treasury Secretary Timothy Geithner is altogether honest when he says that we‘ll default on our loans on August.
So, those are some of the sort of worrying parties, the differing
fractions that we‘re dealing with here. But again, just a huge back and
forth, and we are again at a stalemate, which is where we‘ve been every day
Lawrence.

O‘DONNELL: Kristen Welker at the White House—Kristen, go back in and get that tick-tock from them. We need it as soon as possible.
WELKER: I will.
O‘DONNELL: Thank you very much for joining me tonight.
WELKER: Thanks. Thank you.
O‘DONNELL: Joining me now, the host of “ANDREA MITCHELL REPORTS,” Andrea Mitchell.
Andrea, this is one of those news nights where it feels like the news is breaking on all sides at once, the president comes out with his news conference. John Boehner comes out and answers it less than an hour later. The Boehner news conference was fascinating. He didn‘t want—it seemed at the beginning, he didn‘t want to specify a number. He said we agreed to a number on revenues.
Then later he said it was $800 billion in revenue increases that he and Eric Cantor agreed to, they then claim the president, having reached that agreement with them, then asked for a bigger revenue increase, which they absolutely couldn‘t do. That would look like, if that‘s the way it played out, that would look like in the end, the president making sure they wouldn‘t get a deal.
ANDREA MITCHELL, “ANDREA MITCHELL REPORTS”: We‘re going to have to see exactly what Kristen is briefed on and what we get out of the White House.
But seems to me both sides, as you‘re pointing out, all sides positioning themselves here. The president saying it was taxes, no-tax pledge, and more on that that in a moment, because I spent sometime, quality time today with Grover Norquist on that subject. And also, of course, Boehner saying that the White House was moving the goalpost. So, you got both sides.
I think what has been lost clearly is a lot of trust. We‘ve had a lot of sort of fantasy in this town for the last couple of days about the emerging relationship between the president and John Boehner and was it forged from the golf course or over cigarettes, secret cigarettes. One of them claims not to be smoking any longer.
But I think the bottom line is that they are, as the speaker said, from two different worlds, two parties. The speaker said, when I go home to my district, people talk to me about spending cuts and he clearly is suggesting that the president is in the tax increase mode.
And I think the bottom line is that also we‘ve had this whole fandango where the Bush tax cuts could be repealed without violating the no-tax pledge. That‘s a big part of it. And these both sides would end having to agree what we‘ve seen from Grover Norquist and that wing of the party, and you got 236 House members who have signed the no-tax pledge, 41 senators, all but a handful of Republicans, that the speaker could not deliver his caucus.
And I‘m not sure—in fact, I‘m not at all sure that the president could have delivered not only the entitlement cuts, but the triggers.
It was all about the triggers, and the triggers in one side was if these tax increases or tax reform and spending cuts didn‘t materialize by 2013, then the Bush tax cuts would have to be extended and on the president‘s side, they‘d have to give up the individual mandate on health care.
When you think about the political price this president paid for that individual mandate, to give that up at that stage, that was something they were not going to be able to sell.
I spoke to Barney Frank, he was on the show earlier today, and he was livid about. So, I don‘t think either side was able to deliver their caucuses.
O‘DONNELL: Yes, I think you‘re right, Andrea. And one of the indicators of that on the Democratic side is they never had caucus meetings. They never brought anything to caucus meetings either in the Senate or in the House to say, look, this is the general shape of what you might be asked to vote on in a couple of days. And that means there isn‘t anything serious being discussed.
But what the president has won successfully all the way through here is the perception, especially as the polls indicate, the perception among independent voters and swing voters that he is the one who‘s trying to cooperate. He‘s the one that‘s trying to find a bipartisan partnership and he has very successfully—at the same time, he‘s won the perception of being the reasonable man, he has very successfully portrayed the Republicans at the same time as being unreasonable, and they always do him the favor of literally walking out as now John Boehner has done.
MITCHELL: And the timing is not an accident either. The fact there were four telephone calls from the White House, the president trying to reach John Boehner and being told, we‘ll get back to you 5:30. That‘s Friday night.
A great man, great writer and producer referred to Friday night at the White House “take out the trash night” on a well-known series, that‘s exactly what‘s going on here. Each side trying to make this as late as possible, jam the president so he‘d come out right before the networks newscast and not be able to spin it his way. And, of course, he also managed to win that round, because he got out first and Boehner was the follow-up.
The president is saying that there had been attempts to reach John Boehner and clearly indicating there had been some rupture in this personal relationship. And Boehner, the speaker used the term the trust had not been irreparably damaged. That‘s pretty interesting.
O‘DONNELL: And it‘s impossible to compete with a president who‘s good at communicates at the microphone. It‘s just—you‘re never going to get the same kind of treatment, Boehner can‘t expect it, and the perception of who‘s reasonable and who wins this round is determined tonight and even though the tick-tock is going to tell us a lot about the what the real truth is about this, that‘s going to come too late- - the perception is won tonight.
Andrea Mitchell, thank you very much for joining me tonight.
MITCHELL: You bet.
O‘DONNELL: Up next, Democratic Congressman Chris Van Hollen worried on MSNBC today that the president would compromise too much. Where does he see this going from here? He joins me.
And how far are Republicans willing to go to protect the top income earners? Nick Kristof from “The New York Times” is here.
(COMMERCIAL BREAK)
O‘DONNELL: House Speaker John Boehner has just said he walked away because the president walked away, but the president is still standing there taunting the Republicans for their refusal to cooperate, their refusal compromise in any way and their need to protect the top income tax bracket. Chris Van Hollen joins me next.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: There was an agreement on some additional revenues until yesterday when the president demanded some $400 billion more, which was going to be nothing more than a tax increase on the American people. And I can tell you that Leader Cantor and I were very disappointed in this call for higher revenue.
(END VIDEO CLIP)
L. O‘DONNELL: NBC‘s Kelly O‘Donnell was with the speaker as he told the press he was walking away before he called the president. Kelly joins us from the Capitol.
Kelly, there‘s a big discrepancy here now between the White House and the speaker on exactly how this week unfolded. Walk us through that.
The speaker came out and said they had an agreement at $800 billion in revenue increases, which is shocking. I think it‘s the shocking news of the night that he got himself and Eric Cantor into an agreement to raise tax revenue by $800 billion, and then the president wanted to raise it even more.
KELLY O‘DONNELL, NBC NEWS CORRESPONDENT: Well, I can give you a sense of how this unfolded here today.
I was over in the speaker‘s office. He has a group of offices. He walked into a room, there were reporters there to be briefed by senior aides, and we asked the speaker what was up, and he said, you‘re a bit early—kind of quiet reference of the fact he was about to call the president.
He left the room. We had asked him, is this vote the ultimate conclusion of whatever happens here going to be tougher than the TARP vote, that was so politically damaging? And he said, “Not yet.”
So, the speaker went off to call the president, we were given insight from the Republican point of view about how this went down. They said a week ago, there was discussion with the White House with some broad outlines of what they‘d do—a two-step process, they said. On Sunday, there were more discussions where the White House asked for some changes.
Now, Republicans said they had had an agreement to change the tax code where you‘d had a shrinking of the number of rates so that it would be fewer rates at a lower rate, but expanding how many kinds of income could be taxed. So, you would have an increase in taxes, but it would change the formula.
Now, Republicans say the White House agreed to their numbers, agreed to the principles on Sunday, and then they were supposed to come back with specifics on paper Monday. Republicans say they waited Monday and got nothing. They called again, still nothing.
On Tuesday, Republicans say they believe the intervening event—that‘s the word they used—was the kind of surfacing of the “gang of six” again, which had a different formulation, which was working on its own track. Republicans say after that went public and the president sort of embraced it, that the White House then changed what it wanted and wanted to change the formula.
When you and Andrea were talking about the individual mandate, the Republican leadership says that they wanted that on the table, knowing it was politically important for the president, in order to keep Democrats to stick to the bargain if Republicans were going to have to raise tax rates on the highest earners. So, they were trying to even out those two things, the individual mandate, raising taxes on the highest earners, so that if either side tripped, you‘d be paying a dear political price.
They were trying to get as much as that parody, if you will, as they could. That‘s according to Republicans.
So, this started to fall apart. You mention the speaker had not returned the president‘s call—there was a lot of kind of jockeying here to try to figure out is there a way to do it. And Republicans tell me they were prepared to go for those higher taxes by changing the formula, but couldn‘t get through—they did not believe they could sell keeping the Bush tax rates for the highest earners, having those expire so you‘d have them job creators paying a bigger amount down the line.
So, that‘s where it broke down, on taxes and to some degree on spending.
What the Republican leadership will say is that they believe that the president was willing to pay a tough political price with cuts to things like Medicare, Medicaid. They said they were talking about changes to the eligibility age and a lot of the formulations that you know so well, Lawrence.
So, this was a heated thing. The tone of the speaker today was certainly respectful of the president. He walked away from the talks but says he‘d be at the White House tomorrow.
L. O‘DONNELL: Kelly O‘Donnell, thank you very much for joining us tonight.
Joining me now is Congressman Chris Van Hollen of Maryland, the ranking member of the House Budget Committee.
Congressman, you were worried earlier today.
REP. CHRIS VAN HOLLEN (D), MARYLAND: Well, I was worried about, Lawrence, was the reports yesterday that came out that the White House was not prepared to do a balanced approach in the sense they were going to do $3 trillion in cuts and no revenue. But the White House was quick to put to rest those reports, and, in fact, despite the fact a lot of our Democratic colleagues in the Senate got understandably worried, those assurances from the White House were clear and were consistent entirely with what the president says the deal was—which he has said, you need balance, he‘s prepared to do at least $3 in cuts for every $1 in revenue, but you need to have a revenue piece that‘s locked in and it‘s real.
O‘DONNELL: Well, Congressman, I never flinched. I never worried this White House was going to do so crazy as to enter a big deal that did not include revenue, and did not include revenue at least the ratio that the president was insisting on.
But the deal the president outlined tonight in his news conference, which he said was the deal they agreed to involved, he say, $1.2 trillion in revenue increases. That‘s 50 percent more than what Speaker Boehner says that they‘d agreed to, which was $800 billion. And it is not the one to three ratio. It‘s actually closer to one to one.
In the deal the president described, there was $1.6 trillion in spending cuts and $1.2 in tax revenue increases.
That was a deal that was impossible for the Republicans to accept. That would have violated what they said they were negotiating on in the first place.
VAN HOLLEN: Well, a couple things, Lawrence. I mean, they were adopting the counting rules that applied in Simpson-Bowles and the treatment of interest savings there, number one, and that‘s been consistent from the beginning.
Number two, everything I heard with respect to these revenue negotiations which was consistent with the president said. As you said, we‘ll see the tick-tock.
But in addition to the magnitude of the revenue, a very fundamental issue has been guaranteeing it would happen, the enforcement issue—the issue that got a lot of people nervous yesterday because of the reports that the revenue would only, you know, come on the basis of a handshake.
And I think as we piece all this together, we‘re going to find that it was—a big part of this was the Republicans, at the end of the day, not willing to provide any guarantees that if the revenue didn‘t come through the normal process, through a tax reform process, that they would still make good on that promise. And that had to be done through the legislative process, because, as you know, you want to lock all that in right from the beginning.
O‘DONNELL: Well, how much reality was there to the Democrats and the president‘s negotiating position if the president never sent any representative to a House Democratic caucus or a Senate Democratic caucus to say to you and your entire caucus, here‘s the general shape of what we might be asking you to vote on in a few days. It seems to me if that never happened, the White House was never really serious about closing a deal.
VAN HOLLEN: Well, Lawrence, in fact, there were representatives to the White House that came before our caucuses over a period of time. In addition to that fact, our members in caucus were made aware of the general outlines of the discussion that the White House was following.
And you saw what happened in the Senate just the other day when there was a lot of concern because of that information.
So I think people were very well aware. That doesn‘t mean that they were not nervous or worried, but they were prepared to give the president some running room—and what happened at the end of the day was, I think, Republicans in their caucus were ultimately not willing to guarantee this revenue piece.
It was interesting to hear Speaker Boehner say, you know, the $400 billion in revenue was somehow going to be this jobs killing revenue, but the $800 billion was not. I mean, I don‘t know how you square those two things.
At the end of the day, the reality was the president was prepared to do, I think, math will show, $3 in cuts for $1 in revenue.
And that the breaking point was that in the Republican caucus, they just couldn‘t ultimately provide that iron-clad guarantee on revenue.
But we will find out.
O‘DONNELL: I don‘t know, Congressman. When I see the president get a deal, an outcome, I should say, that is the best political outcome he could possibly get, which is the perception of him, as the only reasonable man, the one who is willing to compromise and go against his party if necessary on some very difficult things—and he fought and fought and fought and pushed and pushed and pushed, and wanted the big deal even after Eric Cantor want walked out he wanted a big deal, even after these break in negotiations, he wanted the big deal, only one that wanted the big deal, pushed it to the end, and he didn‘t get the big deal, but he got the perception he wanted.
And now, he doesn‘t have to deal with any of the politically consequences of the big deal. That looks like a big win for the president, and it looks like a perfectly manipulated process by the president from beginning to end.
VAN HOLLEN: Lawrence, I really don‘t think this was stage craft. I think in this case, the perception is the reality. In other words, that the president was willing to make the tough decisions.
I was part of the Biden negotiations, I remember when talk turned to trying to do something serious on the health care issue. We said you guys need to talk about these issues on the revenue side with the same degree of seriousness.
That‘s when they walked out of those discussions. The preliminary discussions between the president and the speaker of the House, same thing. When they got to talking about really making sure that the revenues were there at the end of the day, the Speaker‘s caucus left him.
Look, I think what we‘ll find out at the end of the day here is that there was no enforceability to the Republican‘s part of the bargain. But we will see. Because at the end of the day—and this is the whole Grover Norquist story and the fact that, when it comes down to it, our Republican colleagues are more worried about Grover Norquist than the deficit.
Because closing those tax loopholes for the purpose of deficit reduction, that violated the Norquist pledge. Now having the top rates go back to where they were in the Clinton administration, as you just discussed in the previous segment, has always been an anathema, I mean, something that the Republicans hated.
And so the question was how do you enforce this deal? And that is part of what it broke down on. You can understand that the president and the White House wanted to make sure that once they were willing to make these tough decisions on the cut side, that at the end of the day, the revenue would be there.
Otherwise they would be seen to be total chumps. And that was why you had that reaction just yesterday when those false reports were coming out that this was all cuts and no revenue.
O‘DONNELL: Well, that‘s what I think was so brilliant about the president‘s orchestration of this, is that he did successfully reveal that the Republicans are much more interested in protecting the top end of income taxpayers than they are interested in deficit reduction. And deficit reduction, obviously, is going to be a major campaign issue.
And I think this whole process has clearly revealed what the Republican priorities really are. Deficit reduction is a distant cousin to them to the most important mission of protecting the top taxpayers and keeping them their share of tax payments as low as they currently are.
VAN HOLLEN: There is no doubt about that. That has now been demonstrated on all three rounds, when the Republicans walked out. At each stage, that was the breaking point. That‘s why I don‘t think this is stage craft on behalf of the president.
If they were really willing to make that an enforceable deal, he was willing to make other tough decisions. But at the end of the day, they just couldn‘t do it because their priorities is protecting both special interest loopholes and the folks at the very top.
Let me just make this point, Lawrence, because they keep talking about this is going to hurt small businesses. The Joint Tax Committee, that you‘re well aware of, has said that only three percent of all businesses would be affected by the president‘s proposal, and that many of those are very big businesses, like KKR, Price Waterhouse, good businesses, but certainly not small.
O‘DONNELL: Congressman Chris Van Hollen, thanks very much for joining us tonight.
VAN HOLLEN: Thank you.
O‘DONNELL: Coming up, cuts to Medicare and aide to single mothers and protections for tax loopholes for depreciation of corporate jets. What should take priority in budget talks? Nick Kristof of the “New York Times” joins me.
And later the Tea Party caucus helped Republicans win control of the House, but who is controlling the Tea Party?
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
OBAMA: Working stiffs out there, ordinary folks who are struggling every day. And they know they are getting a raw deal. And they are mad at everybody about it.
They are mad at Democrats and they are mad at Republicans, because they know, somehow, no matter how hard they work, they don‘t seem to be able to keep up.
You know, for us not to be keeping those folks in mind every single day, when we‘re up here, for us to be more worried about what some funder says or some talk radio show host says, or what some columnist says, or what pledge we signed back when we were trying to run, or worrying about having a primary fight—for us to be thinking in those terms, instead of thinking about those folks is inexcusable.
(END VIDEO CLIP)
O‘DONNELL: Joining me now, two-time Pulitzer Prize winning “New York Times” columnist Nicholas Kristof. Thank you for joining me tonight, Nick.
NICHOLAS KRISTOF, “THE NEW YORK TIMES”: My pleasure.
O‘DONNELL: I think what we just saw this evening is a brilliantly effective appearance for the president in his reelection campaign, which is, people should remember, underway. Not that he was intending it to be that, but he has clearly isolated the Republican party now as the party that is more interested in protecting the tax code and reducing it, especially at the top end, than in deficit reduction, the issue they like to claim is their big concern.
We‘ve really seen it isn‘t. It‘s really protecting the tax code for the rich.
KRISTOF: I think that, indeed, you‘re right that an awful lot of what is motivating Republicans is the notion of starving the beast. This is the chance to just make sure that there‘s no more revenue coming into government.
But I also think that there are a certain number of Republicans who really are concerned about debt and that, as a result, they may be willing to drive the whole nation over the cliff in terms of preventing the debt ceiling from being raised, and that the great paradox of that is that if they do that, it will result only in higher interest costs and more debt.
So there‘s an element of calculation on their part, but I think there‘s also just a measure of complete misapprehension of how the economy works.
O‘DONNELL: Was it your sense that up to now, up to tonight, when actually the president went into that particular passage of his statement, that what he called the working stiffs out there, the ordinary folk, were ignored in this budget negotiation that had gone on all year.
There was plenty of concern in both directions about the top income tax bracket and other income tax brackets. There was plenty of interest in exactly how much medical inflation is building into Medicare and all sorts of other issues. But I didn‘t hear in those budget negotiations, until the president‘s statement tonight, a concern for the ordinary citizen out there and how this budget negotiation would affect them.
KRISTOF: Oh, they‘ve absolutely been thrown overboard in the whole budget process. One of the things that just appalls me is that a few months ago, in the budget negotiations, with the concurrence of the White House, we managed to eliminate all the major illiteracy programs that the United States has. Those have been zeroed out.
More broadly, I guess, you look at the fact that right now we‘re in the worst down turn, economic down turn in 70 years. We have historically high unemployment rates.
Yet the narrative right now, the issue on the agenda isn‘t unemployment and how to address that. Rather, it‘s long-term debt and what to do about, say, the carried income tax loophole for billionaires.
I mean, Republicans, I think, have been very successful at driving that narrative. And I think that‘s a tribute to the wisdom with which they‘ve crafted it, but also I think that some fault lies there the White House and also, frankly, with those of us in the news media.
O‘DONNELL: Let‘s listen to what the president said tonight about millionaires and billionaires.
(BEGIN VIDEO CLIP)
OBAMA: We think it‘s important to make sure that whatever additional revenue is in there covers the amount of money that‘s being taken out of entitlement programs. That‘s only fair. If I‘m saying to future recipients of Social Security or Medicare that you‘re going to have to make some adjustments, it‘s important we‘re also willing to make some adjustments when it comes to corporate jet owners or oil and gas producers or people who are making millions or billions of dollars.
(END VIDEO CLIP)
O‘DONNELL: Nick, your column the other day was called “Bonuses for Billionaires.” If the president had succeeded and gotten his way, especially with the last tax pieces he was trying to get into this negotiations, this would have been the first negative outcome for millionaires and billionaires in any of our public discussions in quite awhile, wouldn‘t it?
KRISTOF: Yeah, it would have been. We have to remember the backdrop here. Right now, we‘re in a situation that is exemplified by just two data points that drive me wild. One is that the 400 wealthiest Americans own more in terms of assets than the bottom 60 percent of Americans. And the other is that the top one percent of Americans own more than the bottom 90 percent.
This is a period of historic inequality, the greatest inequality since the 1920s, at a time when, if you look at Genie (ph) coefficients, measures of inequality, we are now more unequal in the U.S. than a lot of the traditional banana republics in Latin America.
So at a time like this, it seems particularly incumbent upon us to be worried a little bit more about how to extend unemployment benefits and a little less concerned about, say, write offs for private jets.
O‘DONNELL: Nicholas Kristof of the “New York Times,”, thank you very much for joining us tonight.
KRISTOF: My pleasure.
O‘DONNELL: Coming up, our panel weighs in on tonight‘s breaking news.
We‘ll be joined by David Corn, Richard Wolffe, and David Frum.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
OBAMA: What had become apparent was that Speaker Boehner had some difficulty in his caucus. There are a group of his caucus that actually think default would be OK, and have said that they would not vote for increasing the debt ceiling under any circumstances.
(END VIDEO CLIP)
O‘DONNELL: Joining me now, MSNBC political analyst Richard Wolffe, also David Corn, MSNBC political analyst, and Washington bureau chief for “Mother Jones,” and former speech writer for President George W. Bush and founder of FrumForum.com, David Frum.
Richard Wolffe, I‘ve been suggesting for the last couple of weeks that there were just too many incentives to get nothing here, and that nothing was a very likely outcome under the circumstance. The president has successfully portrayed himself as the reasonable man, willing to make compromises that were very painful for him.
And in the end, he doesn‘t have to make any painful compromises at all because John Boehner walks out, the deal‘s blown up. There‘s the president, the last man standing, asking to be perceived as the most reasonable man. I think he‘s won that perception. How does it look to you?
RICHARD WOLFFE, MSNBC POLITICAL ANALYST: Yes, the White House—by the way, it‘s very cynical and it also turns out quite realistic of you to think about it that way. The White House has planned this out for many months, not just weeks here.
First off, they wanted to do the deal. They wanted to be reasonable, not just look reasonable. They wanted to reach out and find the common ground and deal with deficits, because it‘s the right thing to do.
But in the event of failure, which they kind of suspected would happen, this was the most favorable outcome for them, which is to test the proposition that Republicans have laid out that they were the serious party about deficits, to see whether they could actually have any kind of leadership, be reasonable.
There‘s one more hoop for them to jump through in terms of responsibility, of course, because we do still have this whole debt ceiling crisis to get through. But yes, in terms of being the grown-up in the room, he‘s there.
If the deal had gone through, I would argue that actually being a grown-up in the room doesn‘t help you, because irresponsible children know that there‘s always someone to bail them out.
In this case, the collapse of the bigger deal actually, in some short-term—and it is just a short-term aspect—helps the president. Long-term, of course, it hurts all of us.
O‘DONNELL: David Corn, was getting a deal the right thing to do for the country? Call me old fashioned, but I‘ve been having trouble finding the economics text books that say, yes, cutting spending during a very weak recovery is a good idea for the government to do.
DAVID CORN, “MOTHER JONES”: Well, I think the Obama—I was going to say campaign—the Obama White House found itself cornered by deficit fever. It‘s quite clear that, at this point in time—Larry Summers was blogging about this or talking about this the other day.
This is not the time to contract government spending when the recovery is fragile and anemic. But the White House has sort of lost the public debate about this, and hasn‘t found a way to punch back.
So it was their strategy to sort of try to accept some of those premises, that we have to deal with deficits and debt immediately, rather than down the road, in order to get some street cred—some credibility, so they could continue to have some sort of public investments, and maybe extend the payroll tax and do other stimulative measures in the next six months to year and a half.
I do think though—I agree with Richard that if there was a deal to be had, I think the president was very eager and was very drawn to the idea of making a difficult compromise. I mean, right now, he gets the added benefit of saying well, I wanted to do that. I was sincere.
And, you know, it‘s what they used to say about Bill Clinton sometimes. If you can fake sincerity and do it well, you really have a leg up. I think he was sincere. It‘s coming across. There will be political benefits for that. And they are still going to figure out what to do regarding deficits and debt once they get past the debt ceiling issue.
O‘DONNELL: My experience forbids me from believing that a politician is willing to make the difficult deal until the politician makes the difficult deal. Call me old fashioned on that one too.
David Frum, are you shocked by what I consider the giant news of the evening, the real news here. I am not shocked or surprised by the collapse of the talks. But John Boehner came out and said in public that he and Eric Cantor agreed to 800 billion in tax revenue increases.
I am stunned that Eric Cantor went along with that.
DAVID FRUM, FRUMFORUM.COM: Well, we don‘t know what they were. We
have some hints that they are not the kind of tax increases that headline -
that go by the name in the headlines. They look like stronger enforcement activity, perhaps efforts to bring cash deposits that are held overseas back into the United States, where they would be subject to tax.

He used the word revenue over and over again, not tax, certainly not tax rates. And I think that the president, if the what speaker said was right—then what the president did was change the discussion at the last possible moment. And that maybe lent some credence to your theory that the president was bluffing all along, that having got 800 billion dollars in these revenue enhancements, to then say, now I‘m going to up the ante and ask for more because I want to drive you to no.
O‘DONNELL: Richard Wolffe, I‘ve been doing the back of the envelope calculations as the president spoke tonight. He said—to go to what David just said, he said that they reached an agreement on a trillion in discretionary spending cuts, and an extra 650 billion in cuts to Medicare, Medicaid, and Social Security, he said.
He then—but did not, by the way—did not hit current beneficiaries of those programs. So there you have 1.6 trillion in spending cuts, matched by, in the president‘s description, 1.2 trillion in tax revenue increases. Now, that is not the ratio that they had been talking about trying to get with the Republicans.
That‘s a much better ratio than what they‘d been trying to get with the Republicans on taxes.
WOLFFE: Right, although we pointed out that it was less than the gang of six was recommending tax revenues.
O‘DONNELL: Richard, what did the gang of six have to do with anything? I found that fascinating too. Why was he inserting the gang of six in his announcement tonight, as if the gang of six was in any way part of his discussions and baseline discussions with John Boehner?
WOLFFE: Because it was a pre-buttal to what the Speaker was talking about, which was that somehow when the gang of six came back on the scene, the president moved the goal post. That‘s the Republican explanation here.
So the president was saying actually, yeah, I moved. I moved away from their position. I moved towards the Republican position.
Now these are funny numbers. Let‘s face it, it‘s not a trillion this year. It‘s spread out over time. What‘s the baseline here. What—as David Frum points out, what are we really talking about?
In the end, if they really wanted to do this deal, they could have done it. That is why it does comes down to both the question of leadership that the president and the Speaker were both indicating, but also the politics of how this gets played out from here.
These talks are gone. You have the speaker talking about process, talking about who left the table first and where the next steps are. You have the president talking about the working folks in America who are struggling to make things meet.
That‘s election rhetoric around a very complex subject. We‘re away from the details of the actual negotiations now.
O‘DONNELL: David Corn, the president sounded very convincing to me in his press conference that he volunteered that they would release what they call the tick tock, all the paperwork of exactly how this unfolded. Now, in those negotiations, the Treasury staff issues every day, at the end of negotiations, a spreadsheet summery of exactly what this would all look like, in real dollar terms.
That‘s what the Republicans say they were waiting for after their last meeting. And they waited for a couple of days and it never came. If that‘s true, there isn‘t a real excuse for that, because those are generatable fairly quickly. But do you think we‘re going to get to the point where the tick tock, the paperwork from the White House, going back and checking our notes with exactly what John Boehner says, will give us some sense of who‘s telling the truth about how this tax piece of it all broke down?
CORN: Well, I‘m not sure. Tick tocks come in all different forms. I get them every day. Sometimes they are more general and not detailed, and they usually support the premises of the side generating the tick tock. Boehner gave us—we heard Kelly O‘Donnell earlier giving the GOP tick tocks. So there will be lots of tick tocks coming out.
I think you have to step back a little bit here, Lawrence, and not get caught up in the tick tock. Journalistically, we‘ll be interested in it. And look, it‘s still the big picture. The big picture here is the president had decided to play on the Republican field of deficits, spending cuts, and only, you know, somehow squeezing revenues in at the end and intermittently.
The Republicans—I just got a Tweet from Speaker Boehner, as did everyone else, saying our position is no tax hikes. We won‘t lift the debt ceiling with tax hikes. Then he walks away.
So listen, you can keep talking. If there‘s a 1.2 trillion versus 800 billion difference, it seems to me that‘s still negotiatable. Now there are other things that came up, the triggers and so on. But we have how many days left before the August 2nd deadline?
I don‘t understand why Boehner finds it politically to his advantage to leave the table rather than complain publicly, but stay in there.
O‘DONNELL: Richard Wolffe, David Corn, David Frum, thank you all for joining us tonight.
CORN: Thanks.
O‘DONNELL: We will continue to learn more details about how and when this deal broke down, and reactions from all sides are still coming. Stay with us. Our breaking news coverage will continue right after this.
(COMMERCIAL BREAK)
O‘DONNELL: There is breaking political news from Washington tonight. House Speaker John Boehner has walked away from the negotiations on a major deficit reduction agreement, the so-called big deal with President Obama. Speaker of the House John Boehner told reporters he would be calling the president and then at 5:30 tonight, he told the president he would no longer be working with the president on a deal on the debt.
The speaker says he will now be working on a way forward with Republican and Democratic leaders in the House and Senate on raising the debt ceiling.
In a few minutes, I‘ll be joined by Eugene Robinson, Richard Wolffe, and Senator Kent Conrad. Plus, the latest from the White House.
But, first, here‘s the president in the White House after speaking with Speaker Boehner.
(BEGIN VIDEOTAPE)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This was an extraordinarily fair deal. If it was unbalanced, it was unbalanced in the direction of not enough revenue.
But in the interest of being serious about deficit reduction, I was willing to take a lot of heat from my party, and I spoke to Democratic leaders yesterday, and although they didn‘t sign off on a plan, they were willing to engage in serious negotiations, despite a lot of heat from a lot of interest groups around the country in order to make sure that we actually dealt with this problem.
It is hard to understand why Speaker Boehner would walk away from this kind of deal, and frankly, if you look at the commentary out there, there are a lot of Republicans that are puzzled as to why it couldn‘t get done.
We have now run out of time. I‘ve told Speaker Boehner, I‘ve told Democratic leader, Nancy Pelosi, I‘ve told Harry Reid and I‘ve told Mitch McConnell, I want them here at 11:00 tomorrow.
We have run out of time, and they are going to have to explain to me how it is that we are going to avoid default. And they can come up with any plans that they want and bring them up here and we will work on them.
The only bottom line that I have is we have to extend this debt ceiling through the next election, into 2013.
And the reason for it is we now see how difficult it is to get any kind of deal done. The economy is already weakened. And the notion that five or six or eight months from now we‘ll be in a better position to try and solve this problem makes no sense.
Up until sometime early today when I couldn‘t get a phone call returned, my expectation was that Speaker Boehner was going to be willing to go to his caucus and ask them to do the tough thing, but the right thing. I think it has proven difficult for Speaker Boehner to do that. I‘ve been left at the alter now a couple of times..
And I think that one of the questions that the Republican Party‘s going to have to ask itself is can they say yes to anything. I‘ve gone out of my way to say that both parties have to make compromises. I think this whole episode has indicated the degree to which, at least a Democratic president, has willing to make some tough compromises.
So when you guys go out and write your stories, this is not a situation of somehow this was the usual food fight between Democrats and Republicans. A lot of Democrats stepped up in ways that were not advantageous politically. So we‘ve shown ourselves willing to do the tough stuff—on an issue that Republicans ran on.
Working stiffs out there, ordinary folks who are struggling every day, and they know they are getting a raw deal, and they are mad at everybody about it. They are mad at Democrats and they are mad at Republicans because they know somehow, no matter how hard they work, they don‘t seem to be able to keep up. And what they are looking for is somebody who‘s willing to look out for them. That‘s all they are looking for.
And, you know, for us not to be keeping those folks in mind every single day when we‘re up here, for us to be more worried about what some funder says or some talk radio show host says or what some columnist says or what pledge we signed back when we were trying it run or worrying about having a primary fight—for us to be thinking in those terms instead of thinking of those folks is inexcusable.
Why was I willing to go along with a deal that wasn‘t optimal from my perspective is because even if I didn‘t think the deal was perfect, at least it would show that this place is serious. That we‘re willing to take on our responsibilities even if it was tough, that we‘re willing to step up even if the folks who helped get us elected may disagree. And, you know, at some point I think if you want to be a leader, then you got to lead.
(END VIDEOTAPE)
O‘DONNELL: House Speaker John Boehner then held a press conference at the capitol shortly after the president spoke tonight where Boehner, big surprise, blamed the breakdown in negotiations on the president.
(BEGIN VIDEOTAPE)
REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: I want to be entirely clear. No one wants to default on the full faith and credit of the United States government. And I‘m convinced that we will not. Starting tonight, I‘ll be working with the colleagues here in the Capitol, both the House and the Senate, to find a responsible path forward.
And I have confidence in the bipartisan leaders of the Congress that can come together and to ensure that we have an agreement that will allow the country to avoid default and meets the principles that we‘ve outlined. Spending cuts that must be greater than the increase in the debt limit and no tax increases.
Discussions we have had with the White House have broken down for two reasons. First, they insisted on raising taxes. We had an agreement on a revenue number. A revenue number that we thought we could reach based on a flatter tax code with lower rates and a broader base that would produce more economic growth, more employees, and more taxpayers, and a tax system that was more efficient in collecting the taxes that were due the federal government.
And let me just say, the White House moved the goalpost. There was an agreement, some additional revenues, until yesterday when the president demanded $400 billion more, which was going to be nothing more than a tax increase on the American people. And I can tell you that Leader Cantor and I were very disappointed in this call for higher revenue.
But secondly, they refused to get serious about cutting spending and making the tough choices that are facing our country on entitlement reform. That‘s the bottom line.
I take the same oath of office as the president of the United States. I‘ve got the same responsibilities as the president of the United States, and I think that‘s for both of us to do what‘s in the best interest of our country.
And I can tell you that it‘s not in the best interest of our country to raise taxes during this difficult economy and not in the best interest of our country to ignore the serious spending challenges that we face.
I want to say, this is a serious debate. And it‘s a debate about jobs and it‘s a debate about our economy, and frankly, it‘s also a big debate about the future of our country.
You know, until recently, the president was demanded Congress increase the debt limit with no strings attached. As a matter of fact, treasury secretary sent me a letter two days after we were sworn in on January, demanding that we give him a clean increase on the debt limit.
I immediately responded and told the secretary treasury that the American people would not tolerate a clean increase on the debt ceiling unless there were serious spending cuts attached and real reforms to the way we spend the American people‘s money.
I went to New York City in May to give a speech to the New York Economic Club where I outlined the challenges we were facing, and I made it clear that we would not increase the debt limit without cuts that exceeded that increase in the debt limit, that there would be no new taxes, and that there would be serious spending reforms put into place.
Listen, it‘s time to get serious, and I‘m confident the bipartisan leaders here in the Congress can act, the White House won‘t get serious, we will. Dealing with the White House is dealing with a bowl of Jell-o.
(END VIDEOTAPE)
O‘DONNELL: NBC‘s Kristen Welker is at the White House with details on the communications between the speaker and the president.
Kristen, thanks for joining us again.
What more have you learned about what went between the speaker and the president. There‘s talk of missed phone calls and refusals to return phone calls. What do we know?
KRISTEN WELKER, NBC NEWS CORRESPONDENT: Well, we‘re getting a better sense of the timeline this week, Lawrence.
I just want to go back to Wednesday, that‘s when senior White House officials say the deal to get $3 trillion in deficit reductions over the next decade really started to pick up steam between Speaker and President Obama. As you remember, that‘s when Speaker Boehner, Eric Cantor, came to the White House, talked to the president. The president also talked to the Democratic leadership.
As you know, on Thursday, the Democrats really expressed some concern this $3 trillion deal would be too heavy in terms of entitlement reforms and not heavy enough in terms of tax reforms.
So, you hear that $800 billion that the speaker was talking about. White House officials agree that $800 billion had been agreed to. Now, there‘s a lot of question over this $400 billion. Senior White House officials say look, that had always been a possibility, had always been bandied about.
However, they do say it was on Thursday that the president let the speaker know that he wanted to revisit this idea of $400 billion being added to changes in the tax code. So, according to the White House officials, President Obama called Speaker Boehner on Thursday night and he said during this phone conversation or the message that he left, if you can‘t do $400 billion, let‘s talk.
I just want to repeat that. If you can‘t do $400 billion, let‘s talk.
A very interesting statement we‘re getting out of the White House tonight. You heard Speaker Boehner say the president demanded that there be $400 billion. So, certainly agreement on that front.
But after the phone call last night, President Obama didn‘t hear back from Boehner. The White House got an e-mail today saying Speaker Boehner will contact the president at 5:30 this evening. That was 3:30 this afternoon.
At that point in time, the White House picked up the phone, called Speaker Boehner‘s office and said, can they talk right now? And they were told, no, they can‘t.
It was at 5:30 Speaker Boehner called the president and said they were pulling out of this deal. Speaker Boehner‘s office has been saying that these reports out of the White House, this $400 billion was always a possibility, is simply misleading. They say the goalposts were changed at the very last minute. But again, this final message that was left by President Obama certainly interesting and shedding new light on how these talks may have broken down—Lawrence.
O‘DONNELL: Well, Kristen, that‘s very helpful. It seems to indicate the president did reopen the tax number, which they seemed to have agreed on the $800 billion, he was not just reopening it. He was suggesting can we raise it by 50 percent? Can we add another $400 to it?
But that‘s the semantics they are giving you, the presidential language of if you can‘t do this, let me know.
WELKER: Right.
O‘DONNELL: It seems to be that‘s where the White House is trying to say to us, look, we didn‘t make a new demand, we made a new suggestion and wanted feedback on it.
And, Kristen, take us through it one more time. The feedback they got on that, if this is a problem for you, let us know.
What was the next thing they heard?
WELKER: They heard basically radio silence Thursday night, and then, just again, you know, Friday afternoon, 3:30 this afternoon, the White House reached out to Speaker Boehner‘s office again through an e-mail and said, can we—rather Speaker Boehner‘s office e-mailed the White House saying, you will hear from Speaker Boehner at 5:30 this evening.
It was that point that the White House picked up the phone and said, look, can we talk on the telephone about this. Speaker Boehner‘s office said, no, you‘ll hear from us at 5:30. And it was at that point that Speaker Boehner picked up the phone, 5:30 p.m. this evening, called President Obama and said he was pulling out of this deal—Lawrence.
O‘DONNELL: Kristen, we‘ll find out if anyone has voice mail messages they want to play for us.
NBC‘s Kristen Welker, on the White House lawn—thank you very much nor joining us again tonight.
Ahead, House Speaker John Boehner caught in the middle of a battle with his own party. North Dakota Senator Kent Conrad joins me next.
(COMMERCIAL BREAK)
O‘DONNELL: As I said on election night, when it was clear John Boehner was going to become speaker, this would be the biggest challenge of his speakership, how would he be able to negotiate an increase in the debt ceiling and negotiate that with President Obama?
President Obama presented that biggest challenge to the Boehner speakership, and tonight, John Boehner walked away from those negotiations.
Senate Budget Committee Chairman Kent Conrad will join me next.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
BOEHNER: I‘ll be working with the bipartisan congressional leaders on the path forward. I‘m confident. I‘m confident the Congress can act next week and not jeopardize the full faith and credit of the United States government.
(END VIDEO CLIP)
O‘DONNELL: Joining me now by phone, Senator Kent Conrad of North Dakota, the Democratic chairman of the Senate Budget Committee.
Well, Mr. Chairman, what happens now?
(LAUGHTER)
SEN. KENT CONRAD (D), NORTH DAKOTA (via telephone): Sixty-four thousand dollar question. You know, obviously, we‘re going to have to extend the debt limit before August 2nd. In addition to that, the overarching challenge here is to deal with the debt threat itself.
You know, just extending the debt limit without dealing with the debt doesn‘t solve the problem. So, both have to be achieved. That‘s why the speaker and the president were talking about a grand bargain, and that‘s ultimately required, and to get one, we‘re going to have to have revenue, entitlement reform, and, yes, we‘re going to have spending cuts.
Senator Conrad, you‘ve come after this a couple of different ways, assembling the “gang of six,” the famous “gang of six” in the Senate, including three Republicans who were willing to raise tax revenue order to make some kind of compromise deal. The president kept stressing the “gang of six” tonight in his statement, describing how all of this broke down, and he was comparing his proposal to the Republicans with the “gang of six” proposal and saying that it was more—it was more compromising in certain ways than the “gang of six” proposal.
At the same time, Senator, you may have heard some Republican back talk about the “gang of six” proposal coming out this week somehow doomed these negotiations.
What do you know about that?
CONRAD: Well, I don‘t know. And it‘s perplexing how anyone could claim that, because the “gang of six” came out in a bipartisan way—the only bipartisan plan that‘s emerged from anywhere, three Democrats, three Republicans.
And, you know, it‘s very interesting how one talks about revenue—and you understand this—it‘s all about what you compare it to. What‘s kind of bizarre is if you compare all these proposals to current law, law Republicans overwhelmingly supported, all these proposals constitute a tax cut, and apparently, the president‘s proposal, which he described is $800 billion more in revenue, if you compare the current law, is $2.3 trillion less in revenue.
Somehow the use of language here, I think, is confusing the American people and maybe confusing the negotiators themselves.
O‘DONNELL: At 11:00 tomorrow in the White House, do you expect them at this point, to be discussing some variation on what was the McConnell plan and then became the Reid-McConnell plan, which basically a way to get to a debt ceiling increase in a way that the Congress can claim to not have its fingerprints on it?
CONRAD: Yes, I suspect Reid-McConnell, McConnell-Reid, however one terms it, will be the basis of the discussion. And, you know, we had met with the two leaders this morning, the “group of six,” we met with both Leader Reid and Senator McConnell and talked about how the “group of six” formulation might fit into a new offering.
And so, I anticipate on Monday, there will have been formed a new plan for going forward. And something that will involve an extension of the debt limit, but also a plan to deal with the debt, because I don‘t think anything passes either body unless it fundamentally and credibly deals with debt.
O‘DONNELL: But as we get closer to the clock ticking to midnight on August 1st, doesn‘t that actually increase the possibility—given the resolve expressed by Speaker Boehner, Senator McConnell, Senator Reid, the president, all of you, to raise the debt ceiling—doesn‘t that increase the possibility, slim at the moment, that this might end up being like most other debt increases, a one sentence increase that does nothing but raise the debt ceiling?
CONRAD: I don‘t think so in this case. The reason for that, you know, I spent hundreds of hours in negotiations with Republican senators and House members, representatives of the administration, and it‘s very clear to me that people understand when you‘re borrowing 40 cents of every dollar and when the gross debt of the United States has reached 100 percent that we‘re at a new—a new position, and it requires a new response, and just extending the debt limit itself is not going to cut it.
Clearly, we have to do that, we must do that. It would be a catastrophe not to. But at the same time, we have to do something credible that‘s serious about dealing with our debt burden as well—and I think any successful formula for navigating through here is going to have to deal with both.
Senator, back when the White House was still at the position—this was months ago—to give us a clean debt ceiling increase. The White House began this whole story, not interested in not doing any big deficit reduction deal in association with a debt ceiling increase. Way back at that point, you told this audience that you didn‘t see any way for a debt ceiling to occur without a large and significant deficit reduction package being attached to it.
What happened that changed the shape of things that the White House started moving toward what you described as the legislative reality?
CONRAD: Well, I remember very well a meeting we had in Leader Reid‘s office, Leader Reid, myself, and Jack Lew, the head of the Office Management and Budget for the administration, they were saying, you know, they were going for a clean debt limit, and I told them with some intensity that it‘s not going to happen. Just, you know, you got to come up here and talk to the members and find out what they are thinking and feeling, and what their constituents are thinking and feeling—and just extending the debt limit without dealing something about the debt, it‘s just not going to happen.
O‘DONNELL: Well, Senator, if this administration, as expressed to you one-on-one in that kind of meeting, was interested in a clean debt ceiling increase with nothing else attached to it, how disappointed can the president really be tonight if that‘s where this process ended up?
You know, I think he is very disappointed. Having met with him two weeks ago, met with him and the vice president, and the president is absolutely genuine about wanting to do the grand compromise in the range of $4 trillion to not only stabilize the debt but to begin to bring it down, because he recognizes that would provide certainty to the markets, certainty to the business community in terms of what the rules of the road are going forward, and also get us going in a much more positive direction, take away the threat of a spike in interest rates because of failure to deal with the debt.
Remember, rating agencies have told us you got 90 days here. And, yes, you can raise the debt ceiling, you simply must do that, but if you don‘t deal with the debt in a credible way, in a serious way, if you‘re not making progress, we‘re going to downgrade you. That means, as you well know, higher interest rates.
And, you know, Lloyd Benson, you know well. When he was secretary of the treasury invited me down one day for lunch. I thought I was going to be there with many others, I got there, I was the only person there. I just got on his chair in the finance committee, and he showed me a calculation that added up all the debt of the country—the corporate debt, the government debt, not only federal, but state and local, individual debt, and then he showed me what percent of that number is bigger than any tax cut being discussed in Washington.
And he said, Senator, I want you to always remember that 1 percent of the outstanding debt of this country is bigger than any of the tax provisions being discussed. And a 1 percent interest rate hike in this country is a hidden tax on everybody.
You know, I think our colleagues need to remember that today.
O‘DONNEL: Senator Kent Conrad of North Dakota, thank you very much for joining us to cover this breaking news tonight.
CONRAD: You bet.
O‘DONNELL: Coming up, what happens in tomorrow‘s meeting at the White House. MSNBC political analyst Eugene Robinson joins me.
(COMMERCIAL BREAK)
O‘DONNELL: The president has summoned House and Senate leaders to the White House tomorrow for the next step in the talks to raise the debt ceiling. MSNBC‘s Eugene Robinson, Richard Wolffe, David Corn, and David Frum will join me on the way forward.
Breaking news continues, ahead.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
OBAMA: They will come down here at 11:00 tomorrow. I expect them to have an answer in terms of how they intend to get this thing done over the course of the next week. The American people expect action and the American people, I think, are fed up with political posturing and an inability for politicians to take responsible action as opposed to dodge their responsibilities.
(END VIDEO CLIP)
O‘DONNELL: We‘re back with THE LAST WORD‘s special coverage of the breaking news, collapse of the debt ceiling talks in Washington tonight.
Tomorrow morning, House and Senate leaders will convene at the White House including Speaker John Boehner, who started the breakdown by refusing to return to the president‘s calls and walking away from the talks.
The big question still hanging over the heads of Republicans: is there any deal that they will accept?
(BEGIN VIDEO CLIP)
OBAMA: One of the questions that the Republican Party‘s going to have to ask itself is can they say yes to anything? Can they say yes to anything?
I mean, keep in mind: it‘s the Republican Party that has said that the single most important thing facing our country is deficits and debts. We‘d now put forward a package that would significantly cut deficits and debt. It would be the biggest debt reduction package that we‘ve seen in a very long time.
And it‘s accomplished without raising individual tax rates. It‘s accomplished in a way that‘s compatible with the no tax pledge that a whole bunch of these folks signed on to, because we were mindful they had boxed themselves in, and we‘re trying to find a way to generate revenue ins a way that did not put them in a bad spot.
And so, the question s: what can you say yes to?
(END VIDEO CLIP)
O‘DONNELL: Joining me now, MSNBC analyst and Pulitzer Prize-winning columnist for “The Washington Post,” Eugene Robinson.
Eugene, we‘re going to find out what you can say yes to now.
The—whenever the talks of this kind break down, whenever you hit the complete collapse point, there‘s a rush to the microphones because the political tax at hand immediately becomes winning the blame game for how these things broke down. It seemed to me the president turned in a masterful performance, about 45 minutes at the microphone at the White House, making a statement, answering some questions, in which as far as I can see, there‘s no way the Republicans can counter that effectively. He seems to have won the perception of who was the reasonable man here.
EUGENE ROBINSON, MSNBC POLITICAL ANALYST: Oh, I think he absolutely did, Lawrence. He was first out of the box, number one. Number two, he‘s laid the groundwork for this, the last weeks he‘s been ensuring that he‘s seen as the reasonable man—the guy who‘s willing to make a compromise, who‘s willing to anger his own base as opposed to the Republicans who have this adamant position, no new revenue no matter what you call it, no matter how you phrase it, no matter how you structure it, not a cent more to the treasury than is coming in now.
And so, I think the president has won that—that sort of political perception battle, but, you know, I think that ends up being the president‘s plan B to win the politics of it. I think he genuinely did want to do some sort of big deal, and because I think he saw this as genuinely the best time to try to do some kind of big deal, and I think that frustration that you saw while expertly presented by the president, I think it was genuine.
O‘DONNELL: And he also kept saying tonight as much as he regrets it, we must absolutely raise the debt ceiling, and if that‘s the least they can do, he kept saying that thing in an insulting sort of way, like if they are so bad that all they can do is raise the debt ceiling—well, then, I‘ll just have to live with that and sign a clean increase in the debt ceiling that does nothing else and doesn‘t inflict any painful cuts that he‘d have to explain to the Democratic Party.
ROBINSON: He could settle for that, Lawrence. You know, he would be able to live with that. And, frankly, as you well know, as time grows shorter, the odds on a relatively short piece of legislation, of limited scope that doesn‘t try to do all this stuff becomes more likely because again, there‘s just not the time to, perhaps, do the big deal anymore. And so, if he has to sign some limited little thing that‘s basically a clean debt ceiling increase, I think he could stand that.
O‘DONNELL: He will dry his tears at having been, as he put it, left at the altar twice by the Republicans—especially when the opening position of the White House, the administration, was: we want a clean debt ceiling bill with none of this big legislation attached to it, which is the most common kind of debt ceiling increase. They are just one page bills normally and they‘re frequently done at the last minute.
So, Congress knows how to do this. The question, I guess, becomes, Gene, will the Republicans be able to do that?
Boehner seems to me tonight truly frustrated to the point where he doesn‘t want to deal with the debt ceiling anymore—please, get this thing off my doorstep—he seems to be saying.
ROBINSON: Yes. Boehner doesn‘t want to deal with it anymore. Nobody wants to deal with this anymore, and frankly, if you look at the big picture, the politics of this might be somewhat better for the president than for the Republicans, but they‘re not really good for anybody because, in the end, all this attention has been focused on debt and deficit and expectations of a big deal have been raised.
And if, in the end, it‘s sort of a damp squib and gets increased and we go on about our business—I think it reinforces this idea they can‘t get anything done in Washington. That‘s, obviously, bad for Republicans who took an absolutist position, but it‘s not great for a president who came into office with great promise of changing the culture of Washington and with this sort of “we can work together to tackle the big problems” sort of—sort of ethos.
And, you know, if it doesn‘t bare fruit, I think that‘s not great for him.
O‘DONNELL: But there was no great choice for the president in this, Gene, going to his reelection campaign, having cut Medicare, Medicaid, and Social Security—as he says he agreed to in these discussions, I think that particular part of his Democratic convention speech would be a difficult paragraph to write.
ROBINSON: That would be a difficult paragraph to write. I was speaking to a friend of mine this morning who‘s a labor organizer here in Washington who—you know, I don‘t know, livid incensed, you know, apoplectic about what he was hearing about the big deal that the president and Boehner were working out and the cuts that were in there.
So, not having to explain that to the base is something that the president will indeed relish.
O‘DONNELL: MSNBC political analyst Eugene Robinson—thank you very much for joining us.
ROBINSON: Great to be here, Lawrence.
O‘DONNELL: Will the debt ceiling be with us in 2012? Or can the president get it wrapped this weekend? That‘s next.
(COMMERCIAL BREAK)
O‘DONNELL: Most members of Congress left town for the weekend before the talks broke down, but the leadership will meet with the president and the speaker of the House tomorrow to find a way forward on raising the debt ceiling. Richard Wolffe, David Corn, and David Frum join me next.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
REPORTER: You‘ve said that your bottom line has been the big deal. That‘s not going to happen. Are you going to be willing to go back to just a raising the debt ceiling bill?
O‘DONNELL: Well, I think I‘ve been consistently saying here in this press room and everywhere that it is very important for us to raise the debt ceiling. We don‘t have an option on that. So, if that‘s the best that Congress can do, then I will sign an extension of the debt ceiling that takes us through 2013.
(END VIDEO CLIP)
O‘DONNELL: Joining me now, MSNBC political analyst Richard Wolffe, also David Corn, MSNBC political analyst and Washington bureau chief for “Mother Jones” magazine, and former speech writer for President George W. Bush and founder of FrumForum.com, David Frum.
Richard Wolffe, the president said he‘d sign—the only debt ceiling increase he would sign is one that goes to 2013. And he actually used the phrase on the other point in the press conference, “one that gets us past the election.” And he was able to say that without sounding political to most ears, because he has won so masterfully this perception of being the reasonable man.
It clearly is a political issue that he does not want to be dealing with at any point during the next year, 2012, the campaign year, isn‘t?
RICHARD WOLFFE, MSNBC POLITICAL ANALYST: Oh, yes, and that‘s plainly reasonable because if Washington is this dysfunctional now, then how much more dysfunctional is it going to be next year? And when you look at the reasonable fight, the fight to look reasonable, you have to remember that it‘s Republicans who have repeatedly walked away from these talks. That never looks good.
So, no matter what the numbers debate is, and who said what and when, and who didn‘t return who‘s phone calls or emails, if you walk out of talks, that means you‘re taking a hard-lined approach and looking unreasonable by the very nature.
So, yes, you want to get this done. Unfortunately, the president said the American people are tired of posturing what we‘re going to end with this debt ceiling, denial, disapproval vote is a monumental exercise in posturing. People are going to be pretending like they‘re disapproving of the debt ceiling while voting for raising the debt ceiling.
O‘DONNELL: David Frum, did the Republicans make a mistake with these walkouts?
DAVID FRUM, FORMER BUSH SPEECHWRITER: Sure, they made a mistake, but there‘s a danger of overdoing the criticism because it‘s important—because everything you say about the president‘s performance I think is right. But it‘s also true he‘s lost the plot of the substance. I mean, the president has moved off the concerns that are most urgent, which are economic recovery into a debate about debt.
He hasn‘t negotiated very successfully. He wanted something, I think he sincerely wanted it, he didn‘t get it. And maybe he was dealing with difficult people, presidents often have to do that.
And he‘s walked into a framework that I think that doesn‘t make a lot of sense anyway.
Why do this now? And it‘s not just—it‘s not just because of the political cycle. A recession, a deep recession, is a bad time to do your path to future budget balance. First, because your revenues look worse and your expenses look worse than they may in a year or two.
But second, everyone is so afraid. There‘s no generosity to make the concessions. People who have lost so much in savings don‘t want to risk taking cuts in Medicare. And people who feel hard-pressed don‘t think they can afford a few dollars more in taxes.
When Americans feel good, they feel generous and agreements come.
That‘s the time to do it.
O‘DONNELL: David Corn, we have just heard from our Republican voice on the panel. I think are the most important dynamic about this whole thing is that at a moment in the fragile and very delayed recovery of this economy, how did we shift over to this massive deficit reduction conversation without thinking through the full economic implications of it?
DAVID CORN, MSNBC POLITICAL ANALYST: Well, what happened was, go back to the beginning. The president came in, wanted a bigger stimulus than he could get through the Senate. He had to he had to cut it down. According to the CBO, the Congressional Budget Office, it saved or created 3 million jobs, but still unemployment went up.
What did Republicans like Eric Cantor do? They proved the idea of stimulus. In fact, at one point, Eric Cantor said it had not created a single new job, not a single on.
So, they keep demagoguing the issue, and the president, to his discredit—and he will admit this—they lost the messaging war, the communications war, the salesmanship war on whether we should have stimulus. And people started saying, hey, if I have to cut back, the government has to cut back, too.
That fuelled the Tea Party. They took that ball. They ran with it. They won seats back in November and it spooked the Democrats. It spooked the White House and put them back to the Republican field which doesn‘t make sense economically. We need to create demand and keep the recovery going.
And I think the president, you know, felt boxed in and that he had to do this to maintain credibility politically. And he put himself in this corner, and in some ways, he‘s been helped by the Republican whose decided to hold the debt ceiling hostage.
They could have had this fight another year and a half, about tax cuts, spending, stimulus, revenues, but they tied it—they tied it to the debt ceiling and it‘s not working out well for them now.
O‘DONNELL: All right. Everyone stand by. We‘re going to have a few finality thoughts on tonight‘s breaking news after a quick break.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
OBAMA: I am confident simply because I cannot believe that Congress would end up being that irresponsible that they would not send a package that avoids a self self-inflicted wound to the economy at the time when things are so difficult.
(END VIDEO CLIP)
O‘DONNELL: We are back with our panel, Richard Wolffe, David Corn and David Frum.
Guys, I have to tell you, I share the president‘s confidence because it is very easy to raise the debt ceiling technically. It is just one piece of paper. Here‘s one that raised the debt ceiling and it‘s just one sentence. It‘s, you know, section 3101 of title 31, you just change it to $16.7 trillion and you‘re done.
(LAUGHTER)
O‘DONNELL: So, that‘s all you need to do. They can do it by a voice vote, one minute to midnight.
But take us through what you think you‘ll see as this unfolds next week.
Let‘s go first—Richard Wolffe, what do you see happening?
WOLFFE: Well, you‘ll get this kabuki dance and papering over the clacks with this implausible deniability I think McConnell wants. I think this is a fundamental debate being played out in the pettiest possible manner.
What‘s really going on here is the central field for 2012, about the right size and scope of government. Is the government crowding out the private sector? Or is that same government the last best hope when everything else fails? When Wall Street goes under and the car makers are bankrupt, is that all there is?
And, you know, that‘s not a small thing being played out in a ridiculous way right now.
O‘DONNELL: David Frum, the McConnell plan is to put a resolution forward that is a resolution of disapproval of raising the debt ceiling. And then Republicans can all vote their disapproval of raising the debt ceiling and then the president can simply veto that resolution and he gets to raise the debt ceiling.
Will Tea Parties be fooled by that maneuver that, in fact, McConnell didn‘t somehow facilitate raising the celebrity ceiling?
FRUM: McConnell‘s proposal will fool only those who want to be fooled. But since that will be just everybody, it will do.
But I don‘t think you should—Lawrence, I don‘t think you should let the president off the hook here because he‘s also said some irresponsible things, including that he would veto a stop-gap measure. And the stop-gap measure may well be the thing we end up with. He shouldn‘t be making threats like that.
O‘DONNELL: Well, yes, he said two weeks ago and I went on the air immediately saying I don‘t believe that. That‘s not true. If at the last minute that‘s the only thing I well get to sign, he will not put the country into default.
But, Richard Wolffe, the Republicans—luckily, for the president and perception have continued to play unreasonable so that those little moments that David just isolated, they disappear in the general flow of this story and what you have are walkouts and Republicans leaving the table. And the president left alone as the only reasonable man.
WOLFFE: For now. I think they‘ll forget it pretty quickly. What people want to know is about jobs. They‘re all off-topic. They all look like squabbling school children—even the responsible adults in the room.
So, I‘m not sure the way this plays out in the short term really even takes us through the next year.
O‘DONNELL: David Corn, how does it play out this week and next week?
CORN: I think it comes down the wire. I think there‘s a lot of back and forth. I think at the end of the day, whether they have one to 2013 or one for six months, something will be signed. The Tea Party will scream bloody murder. The unreasonableness of the Republicans will give the president a temporary escape route.
But, you know, he still has to find this debate as a deficits and he‘s going to have to find a way to pivot back to jobs and the economy. The interesting thing is tonight, Grover Norquist, who has tied Republicans‘ hands on tax cuts is saying that, hey, we should just vote, just vote, lifting this to the debt ceiling and have this fight, the fight that Richard just described, all the way into the 2012 elections. I think that‘s probably the best thing for the country, both sides think they can wit it and it should be a clean lift of the debt ceiling and then a clean political fight about some of the very basic premises of our government and our nation.
O‘DONNELL: David Corn, what discussions is the president going to have to have with his base above this revelation tonight he brought himself to the point of an agreement with what he calls adjustments to Medicare, Social Security and Medicaid?
CORN: Well, I think he gets points for triangulating without doing the triangulation.
O‘DONNELL: Right.
CORN: And so, you know, it‘s all theoretical. He can say that his cuts were cost savings, that they were not necessarily going to be strong in benefits, but they‘re going to find other ways to do this. And it won‘t have the same bite.
Right now, as it stands, when it comes to votes and what‘s on the table, the Republicans have put down that they are for ending Medicare as a guaranteed benefit. The president discussed possible savings. Right there, the Democrats are ahead in that political fight, though may not stay in that position, you know, between now and November 2012.
O‘DONNELL: He did stress that nothing he agreed to would affect current beneficiaries of those programs.
MSNBC political analyst Richard Wolffe, David Corn of “Mother Jones” magazine and David Frum, founder of Frum Forum—thank you all very much for your time tonight on this breaking news story.
FRUM: Thanks, Lawrence.
CORN: Good night.
O‘DONNELL: Stay with MSNBC tomorrow for any headlines from tomorrow‘s meeting at the White House. That‘s it. Goodnight.
END
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