The United States finds itself on both sides of the Sunni-Shiite conflict in the Middle East. In Yemen, helping the Saudi-led effort against the Iranian-backed Houthi rebels. And in Iraq, fighting on the same side as Iran in the effort to take Tikrit from the terror group ISIS. The chaos threatens ongoing nuclear talks with Iran, as well as the White House’s terror strategy as a whole. We’ll discuss the possibility of regional war in the Middle East, and the Obama administration’s handling of it all, exclusively with retired U.S. Army Lt. Gen. Michael Flynn, former Director of the Defense Intelligence Agency.
Sen. McConnell on Prospects for Big Debt Deal, Rep. Becerra Gives Democratic Response; Sen. DeMint Talks Tea Party Politics
Written by Bret Baier / Published July 10, 2011 / Fox News Sunday
Special Guests: Sen. Mitch McConnell, Rep. Xavier Becerra, Sen. Jim DeMint
The following is a rush transcript of the July 10, 2011 edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.
BRET BAIER, GUEST HOST: I'm Bret Baier, in for Chris Wallace.
The debt ceiling negotiations hit a snag.
As President Obama and congressional leaders work overtime to forge a deal, we'll get a progress report from the Senate Republican Leader Mitch McConnell, and from top House Democrat, Congressman Xavier Becerra.
Then, after reshaping the political landscape, the Tea Party looks ahead to the 2012 presidential race. We'll talk about the campaign and size and scope of government with the man called Senator Tea Party, Jim DeMint.
Also, a stunning unemployment report send shockwaves down Main Street and Wall Street. We'll ask our Sunday panel how damaging the numbers are with the president.
All right now on "Fox News Sunday."
Hello again from Fox News in Washington.
Late Saturday, there was a major development in the debt ceiling negotiations. Speaker of House John Boehner issued this statement, asking for a smaller package instead of the bigger grand bargain. Quote, "Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes. I believe the best approach may be to focus on producing a smaller measure based on the cuts identified in the Biden-led negotiations."
White House communications director Dan Pfeiffer responded with this, quote, "The president believes that now is the moment to rise above that cynicism and show the American people that we can still do big things. And so, he will make the case to congressional leaders that we must reject politics of least resistance and take on this critical challenge."
Joining us now is the Senate's top Republican, who will be a key participant in today's talks. Senator Mitch McConnell.
Welcome back to "Fox News Sunday," Senator.
SENATE MINORITY LEADER MITCH MCCONNELL, R-KY.: Glad to be here.
BAIER: Let's start with what happened and from your perspective, where do things stand now ahead of this meeting tonight at the White House?
MCCONNELL: Well, unfortunately, as the speaker said, insisting on the White House and congressional and Democrats insisting on really big tax increases as a condition to do anything on the spending side, we believe the president was right back in December when he signed the two-year extension of the current tax rates that raising taxes in the middle of this economic situation we're in is a terrible idea. Let me just look at the unemployment figures last Friday. All the arguments the president used in December still today were today. There's an additional issue addition to unemployment at work here is what kind of government do you want to have?
And if you look back at the last two and a half years, you see the government running banks, insurance companies, car companies, national housing loan business, taken over healthcare, trying to take over the Internet, increasing spending, discretionary spending 24 percent, increasing debt 35 percent. What -- how big a government do we want? And we don't want to use this opportunity presented by the president's request of us to raise the debt ceiling to kind of freeze perpetuity this much government. I don't thin the American people want it. I don't think it's good for the economy.
BAIER: So, is the big deal, a $4 trillion deal now off the table?
MCCONNELL: Well, I think it is because everything they told me and the speaker is that to get a big package would require a big tax increases in the middle of economic situation that's extraordinarily difficult with 9.2 percent unemployment. We think it's a terrible idea. It's a job-killer.
BAIER: I mean, you mention the unemployment rate. It came out Friday, 9.2 percent. Uptick, 18,000 jobs only created in June.
Your opinion how much has the jobs report affected negotiations?
MCCONNELL: Well, it incentivizes us do a big package without raising taxes. But unfortunately, I think the president is not thinking the same thing he did six months ago when the economy didn't seem to me as bad as it is today and he was making arguments that raising taxes in the middle of this recession or slowdown, whatever you want to call it, was a bad idea.
BAIER: Before the development Saturday, Democrats were very upset that the White House was talking about Social Security and Medicare and Medicaid, the entitlements, putting on the table.
Here's House Minority Leader Nancy Pelosi.
(BEGIN VIDEO CLIP)
HOUSE MINORITY LEADER REP. NANCY PELOSI, D-CALIF.: We want to, of course, reduce the deficit as we grow the economy. We are not going to reduce the deficit or subsidize tax cuts for the rich on the backs of America's seniors and working families. No benefit cuts in Medicare and Social Security.
(END VIDEO CLIP)
BAIER: So, the question is: can you to get to even a smaller package, let's say $2.5 trillion without touching Medicare and Social Security? MCCONNELL: Well, look, over 60 percent our budget we don't even vote on. It's popular entitlement programs like Social Security, Medicare, Medicaid and interest payments. You can't do anything serious about our deficit without impacting the biggest percentage of the budget.
And so, I commend the president for putting Medicare and Social Security on the table. He is correct in doing that. You can't have serious deficit reduction program without dealing with those programs in the long term, in the out years.
BAIER: What do you say to the Democratic critics who say, you Republicans are not coming to the table with a lot of give?
MCCONNELL: We have 9.2 percent unemployment. Their prescription is to raise taxes? I mean, my goodness. Who thinks that -- the president didn't think that was a good idea in December. Why do they think it's a good idea now?
BAIER: Well, Senator, the words they are using "shared sacrifice," "balanced approach."
MCCONNELL: Those are nice words. But how do you get the economy growing, which is the biggest way to increase government revenue? You do get the economy growing by having a big tax increase. You get the economy growing by incentivizing the private sector.
Look, if you are in the private sector right now and you're trying to decide whether to expand, what do you see the government doing? Proposing to raise taxes, borrowing, spending, over- regulating. It's not a very reassuring message if you're running a business, if you look at the federal government.
BAIER: Treasury Secretary Tim Geithner is saying this morning that the White House is still going to try to get the biggest deal possible. What is the biggest deal possible?
MCCONNELL: Well, I don't know, but I'm for the biggest deal possible, too, it's just that we're not going to raise taxes in the middle of this horrible economic situation.
BAIER: Would you agree to raise the debt ceiling with promises for big structural changes to the tax code down the road? In other words, is there a mechanism that could tie a current deal to some future promise of a deal?
MCCONNELL: Well, we can't negotiate it here. But let me just say this -- we believe that tax reform is long overdue. And the president believes that as well -- try to get the rates down, take a lot of the preferences out. It's very, very difficult to do that a week. It's an extremely complicated process.
But we are in favor of that, and we think we ought to get about it, but I don't see how you can do in the context of our immediate challenge here, which is to figure what to do in response to the president's request of us to raise the debt ceiling. BAIER: Well, the House Republicans put forward their own debt limit proposal, do you believe?
MCCONNELL: Well, I think we're going to continue to hope here that we can work out something with the administration. Obviously, the other side, the other political side controls most of the government. They have the Senate. They have the presidency. You can't get an accomplishment without some bipartisan agreement. And that's part of what the meeting tonight is about and we hope it will be successful.
BAIER: So, what if there isn't a deal?
MCCONNELL: Well, we're going to go forward and I'll have more to say about that later in the week.
BAIER: Is there a contingency plan?
MCCONNELL: There's always a contingency plan.
BAIER: What does it look like?
MCCONNELL: I'll let you know.
BAIER: I mean, for people out there -- I mean, do you believe it's in serious jeopardy if the debt ceiling is not raise August 2nd.
MCCONNELL: Nobody is talk about not raising the debt ceiling. I haven't heard that discuss by anybody.
BAIER: Some are.
MCCONNELL: Not in the Congress. Yes, nobody is talking about doing that. We're talking about trying --
BAIER: Congresswoman Michele Bachmann has said don't them fool you that the economy is going to collapse.
MCCONNELL: We're talking about using this request that the president made of us to raise the debt ceiling as an opportunity to do something really significant for the country about spending and about debt. And that, of course, would also be good for the economy.
BAIER: So, you believe the August 2nd deadline if the debt ceiling is not raised by then, there would be serious economic repercussions?
MCCONNELL: Well, the secretary of treasury stated we need to do this and we're using this as an opportunity to have a discussion about doing something about spending and debt.
BAIER: There are now even proposals up on Capitol Hill for, again, a clean debt limit crease. Is that a possibility?
MCCONNELL: Look, we're going to try to use this opportunity to do something significant about deficit and debt, to get our spending down, get us headed in the right direction. And I don't think we would have been able to focus on this, but for the president's request of us to raise the debt ceiling.
BAIER: As far as revenue creases, not tax rate increases, revenue increases, closing tax loopholes -- Senator Kyl and House Minority Leader Eric Cantor came to some conclusions in the Vice President Biden meeting, the meetings led by the vice president. They said $150 billion to $200 billion in tax revenue increases. Would you be in favor of that if, let's say, a payroll tax cut is included in there?
MCCONNELL: Well, you are asking me a lot of things that are the subject of negotiations. What we're in favor of is growing the economy. And if you can get the private sector moving, Bret, you can get the private sector, the government will benefit by that by greater revenue.
MCCONNELL: I mean, the principal revenue is down now is not because we have rates that are too low, it's because we're in a very sour economy. When the economy goes south, government goes south as well.We don't want to do anything that keeps us from getting out of this economic trough, and that will, of course, produce more revenue for the government.
BAIER: There are a number of Republicans who are worried that you're going to, quote, "cave" too early. Presidential candidate, Texas Congressman Ron Paul is worried about a deal that promises things down the road.
He said this, "The Democrats pulled a similar maneuver during Ronald Reagan's presidency. A deal that promised 2-to-1 spending cuts in exchange for tax increases. Taxes went up, but the cuts never came. In Washington, if you hear about a so-called deal, you can be sure the taxes will come, but the cuts never will. Agreeing to this scheme by the White House would be a betrayal of the voters who put Republicans back in charge of the House in 2010."
So, would it be a betrayal?
MCCONNELL: I agree with that, by the way. I think he is absolutely right. The one long term spending reduction you can count on is when you make entitlement changes, Bret, that we don't vote on every year. They hold up. When Reagan and Tip O'Neill fixed Social Security which lasted for a generation back in 1983, it lasted for a generation. We didn't go back and revisit it every year because we don't vote on entitlements every year. They're on automatic pilot.
So, I agree with Congressman Paul. I think he's right about that. But I do think long-term entitlement changes do hold up and ought to be a part of any deal that we make.
BAIER: S, without this wall of the debt ceiling, does the prospect of that start to diminish? If you don't have this back stop that pushing up against.
MCCONNELL: Well, it's helpful. I mean, the president's request of us to raise the debt ceiling is the reason we are having these discussions. So, it's been helpful in that sense and I hope it ends up being productive in the end.
BAIER: Senator, I'm sure you're aware of the politics of all of this. Democratic operatives are trying to sell a couple of storylines. One, that if it does not get raised and the economy falters, it's your fault, Republicans walking away from the table. And, two, that Republicans want a sour economy, bad economic numbers.
I received an e-mail with a list of quotes on it -- Republican candidates and leaders saying that bad economic numbers help Republicans' chances in 2012. And on that e-mail is one of your quotes from last year where you said, quote, "The single most important thing we want achieve is for President Obama to be one-term president."
So, how you respond to those Democratic lines of attack?
MCCONNELL: Well, that is true. That's my single most important political goal, along with every act of Republican in the country. But that's in 2012.
Our biggest goal for this year is to get this country straightened out and you can't get this country straightened out if we don't something about spending, about deficit, about the debt, and get this economy moving again. So, our goal is to have a robust, vibrant economy that will benefit all Americans. And that's why I think this debate that we're having right now is so important to our country's future.
BAIER: The treasury secretary also saying there is credible way to get the Congress more time. They have to act, you to act by August 2nd. Is it possible that you will push forward -- and I know we're getting into negotiations here -- a shorter deal that doesn't even take you past 2012? That perhaps is dollar for dollar and only gets you part of the way, but is dollar spending cuts and -- you know, maybe get you $1 trillion.
MCCONNELL: Good try, but those are all the things that we're talking about. And you and I can't resolve it here this morning. I wish we could.
BAIER: Last question -- and it's another topic. The Obama administration transferred this terror suspect, Somali suspect Ahmed Warsame, to the U.S. to try in a federal court, after interrogating him on a U.S. naval ship. You have spoken out against this. The administration continues to argue that there are solid charges that can be brought in federal civil court and the attorney general appears convinced this is still the way forward.
What's the next move in this standoff?
MCCONNELL: I agree with Chuck Schumer. Schumer agreed -- opposed trying KSM in New York, in a regular civilian court. I'm sure he must surely oppose bringing this terrorist to New York. By the way, they are going the try a couple foreign terrorists in Kentucky, in my state, whose fingerprints were found on IEDs in Iraq. These foreign terrorists or enemy combatants, they should be taken to Guantanamo. They should be tried in military commissions, new legislation that we passed just three years go precisely with the purpose of dealing with foreign terrorists. These are not American citizens.
We just found with the Caylee Anthony case, how difficult is to get a conviction in a U.S. court.
I don't think a foreigner is entitled to all the protections of the Bill of Rights. They should not be in U.S. courts. They should be at Guantanamo and before military commissions.
BAIER: Senator McConnell, thank you very much for your time. We'll be interested to hear what happens tonight.
MCCONNELL: I will, too.
BAIER: Coming up next, we'll talk to a key House Democrat about the line in the sand some in his party are drawing over potential changes to entitlements.
BAIER: Now for the Democrats' view on where the debt negotiations stand. We're joined by California congressman and vice chair of the House Democratic Caucus, Xavier Becerra.
Congressman, welcome to "Fox News Sunday."
REP. XAVIER BECERRA, D-CALIF.: Thanks you for having me, Bret.
BAIER: I'll start with the same question I started with Senator McConnell. Where do you think things stand before this evening's meeting at the White House?
BECERRA: I think they are where they have always been; and that is, that the leaders have to come together and get this done because once again, the American people probably get it better than the politicians. This will affect them more than the politicians -- their mortgage, their opportunities to pay for a student loan for their kids to go to college, the opportunity to see new jobs if small businesses can go ahead and get the line of credit they need to expand -- all of this impacts their ability to do well.
And so, I think we are where we were before. Get it done.
BAIER: So, you're pleased with the news that perhaps it's going to be a smaller package that originally proposed?
BECERRA: Well, I was never pleased that we link in such a way that you threatened the full faith and credit of the U.S. government this issue of a debt ceiling increase with the need to come to grips with our budgets. We need to do both. But to say you can't do one without the other is to take to us the brink.
And we see this now occurring where, apparently, Speaker Boehner could not get the votes in his Republican conference and we're now at the stage where the markets tomorrow will tell us what they think about this. And the American people have been telling us for quite some time.
BAIER: Congressman, there was a pretty big push-back by your Democratic Caucus to the White House when word came out that Social Security, Medicare and Medicaid were on the table.
BECERRA: Well, think of it this the way. The negotiations began with the president saying let's all come together, the leaders, and discuss a negotiated settlement here. Everything has to be on the table.
But pretty quickly, my Republican colleagues said, everything should be on the table except taxes. That doesn't seem fair.
The American public gets it that there has to be shared sacrifice. The American public gets that there are some folks, millionaires, who haven't been paying their fair share. And so, the American public poll after poll show that said let's let everyone pay a price so we can have some gain in the future. No pain, no gain.
BAIER: Congressman, you were on the president's debt and deficit commission, the Bowles-Simpson commission, and you voted against the recommendations at the end. But during the meeting, one of the meetings, you said this, quote, "As you just said here, I don't want to leave the table because I started off the first day saying everything must be on the table" -- what you just said.
But as the negotiations in the debt ceiling increase have continued, you said this week, quote, "I don't see why I would support any plan that would cut benefits to seniors to pay for the reckless fiscal policies that led to us these massive deficits." That seems like a big change.
So, now, there are some things that are off the table for you.
BECERRA: As when I was on the fiscal commission and when any proposal comes before me for a vote, I would take a look. As much as I believe that Social Security should not be on the table because Social Security hasn't contributed 1 cent to the deficit that we face today, nor 1 cent to any of the national debt, the $14.3 trillion.
So, why should Social Security, why should seniors have to pay to balance the budget through Social Security cuts? But it should be on the table. I would fight to take it off the table, but it should start off on the table and then what should remain on the table are the things that really drove us into this deficit. And most folks know what drove us into these deficits. When you don't pay for two wars in Iraq and Afghanistan and you borrow all the money from China, you're going to have to pay for it at some point.
BAIER: OK. You mention Social Security. In the president's deficit commission report, they say, among other things, "Without action the benefits currently pledged under Social Security are promise we cannot keep."
Do you think changes need to be made to Social Security for future generations or not?
BECERRA: Absolutely. That you just said the operative words, "future generations." We're not talking about balancing these budgets today for future generations. We're doing it because if we don't do it today, the person who got to pay that mortgage tomorrow will find interest rates will have shot up.
And so, we're trying to take care of past debts. Remember, the debt ceiling vote is about past debts. So, it's not about future obligations.
Social Security will be good for the next quarter century. But we should still do something to make sure that after that quarter century, we're not paying 78 cents on the dollar in benefits, we're paying 100 percent on the dollar.
BAIER: Right. But last year, for the first time since the '80s -- excuse me -- Social Security paid out more benefits than it took in payroll.
BAIER: And, essentially, and correct me if I'm wrong, the Social Security Trust Fund is a pile of IOUs from the government, that was taken from Congress' past that have already borrowed that money and spent on other programs. So, eventually, you have to pay that back. Is that not accurate?
BECERRA: Well, OK, this is -- this is the best way for me to display this for you. Do you have a wallet?
BAIER: Not on me.
BECERRA: Well, let me pull this out. Five-dollar bill, right? OK. It's just a piece of paper but it says $5 on it.
OK. Let me show you something else. This is a $50 savings bond. My daughter got it when she was born 16 years ago.
Both of these are pieces of paper. This is a Treasury certificate, this is a dollar. Both of them rely on the full faith and credit of the United States to be covered. If I try to cash either one of these in, it's only because the federal government says you can count on getting paid.
That's what Social Security has to the tune of $2.5 trillion. So when people say that Social Security has no money, they're saying to you that for the last 30 some odd years politicians have been stealing the money out of Social Security. It's there. Ask China, because China has these as well and they expect to be paid. Social Security expects to be paid.
And, by the way, you and I expect to be paid.
BAIER: Sure. But with 10,000 baby-boomers retiring every day for the next 19 years and with people living longer, and Social Security trustees report says the program will not be able to pay fully beginning in 2036, eventually, you're going to have to deal with this program. And you have the White House saying, why not now?
BECERRA: And we could. But you have to do it in strengthening Social Security, not paying for deficit that the Social Security and Social Security beneficiaries had anything to do with. That's the difficulty that Democrats had with what Republicans are proposing. Republicans want to put Social Security and Medicare on the table.
You just heard Senator McConnell say we need to put the two programs on the table to deal with deficit and debt of today. And Democrats are saying wait a second. Whoa!
Every day an American works, when he or she pays a FICA tax out of the paycheck, it's going to Social Security and Medicare. Why when it's paid for system should it now have to pay for deficits that were caused by Bush tax cut to wealthy, unpaid for wars in Iraq and Afghanistan?
That's the big rub.
BAIER: You're against any changed consumer price index, changed CPI, consumer price index change, that would -- which is essentially adjusting benefits for what the Bureau of Labor Statistics says is overstated inflation? You're against that?
BECERRA: If you -- are you parents still alive? Grandparents still alive?
BECERRA: OK. Do they have the same healthcare cost that you do? They don't. Seniors have higher healthcare cost than someone your age or my age. What's going to happen if you change the CPI, the backdoor cut to Social Security? Why?
Because while you and I are nimble enough still to make a consumer choice to say not buy a Mercedes Benz and buy a Ford -- less expensive Ford vehicle, a senior can't decide, I need to find a substitute for health care. I need health care. And so, the changed CPI does exactly, it changed seniors to lower benefits, which is unfair to them because they worked for those Social Security benefits.
BAIER: Are Democrats' resistance to this in part because they've enjoyed the political success with the Medicare issue, for example, in New York 26, that it's powerful political issue heading into the election?
BECERRA: The public has made Social Security and Medicare a powerful issue, because the public so believes in Medicare and in Social Security and Medicaid, I should say, as well.
The public is the one that's telling all the politicians, keep your hands off of our Social Security and Medicare.
But at the same time, let's be prepared to strengthen the programs in the future because we do see that in the out years with the baby-boom generation, we want to deal with Social Security to make sure it's continuing as strong as it is today. And on Medicare, you want to make sure that you lower the health care cost so that Medicare could continue to provide benefits to seniors. BAIER: Last question, 30 seconds here -- do you think is going to push up against this debt ceiling limit? How do you think this comes to an end?
BECERRA: Bret, if we're smart, we'll agree that we will not jeopardize the full faith and credit of the United States. Never have -- during the Bush administration, seven votes to increase the debt limit. Republicans voted for it. They shouldn't play politics this time around.
BAIER: You mentioned seven times in the Bush administration.
Then Senator Obama said this, "Increasing America's debt weakens us domestically and internationally. Leadership means the buck stops here. Instead, Washington is shifting the burden of bad choice today on the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."
He voted no against increasing that debt ceiling limit back then. Was he wrong?
BECERRA: What he is saying is what he is saying today and yesterday and that is -- let's resolve the big issues that we have before us because we can't just continue to raise the debt ceiling limit. What we have to do is get our house in order.
But let's do it in the ways that are balanced, and way American public would do it if they were sitting down at the kitchen table of Congress. They wouldn't walk away from the negotiation. They would sit there and get it done because they have no choice.
BAIER: Congressman, thanks very much for your time.
BECERRA: Thanks for having me.
BAIER: Up next, Senator Tea Party, Jim DeMint, and what he makes of the economy, the state of politics and who the GOP should nominate in 2012.
BAIER: Joining us now from his home state of South Carolina is the leading activist in the Senate for the Tea Party cause and the author of a new book, "The Great American Awakening," Senator Jim DeMint.
Senator, welcome back to "Fox News Sunday."
SEN. JIM DEMINT, R-S.C.: Bret, it's good to be with you. Thanks for having me.
BAIER: Senator, where do you think things stand ahead of tonight's meeting at the White House over the debt ceiling limit raise?
DEMINT: Well, Bret, I'm afraid I'm not optimistic. I think the president has been gaming Republicans. He has been talking about this for six months, and the only proposal he sent us is his budget to raise the debt $10 trillion. So it's hard to take him seriously here.
There is a lot of things we need to do, and we've talked about reforming Social Security, Medicare, the tax code. I, along with many other Republicans, have introduced legislation over the years to the just that.
But what we really need to do, Bret, is recognize that the main problem, the thing that's affecting our economy and jobs, is an overbearing government that's spending too much, it's borrowing too much, it's creating too much debt. So, thousands of Americans and many Republicans in Congress are uniting around the idea that we will give the president his increase in the debt limit in return for some reasonable cuts in spending this year, some caps on spending over the next 10 years, and his agreement to send a balanced budget amendment to the Constitution, to the states for them to ratify.
We can't solve the Social Security, Medicare, tax issue this week. But we can agree that it's time to stop spending more than we're bringing in.
BAIER: Do you believe, Senator, that the country risks default or major economic consequences if the debt ceiling is not raised on August 2nd -- by August 2nd?
DEMINT: No, I don't. I think Secretary Geithner has been irresponsible. He's playing Chicken Little here.
The fact is, we will pay our debts if it's the last dollar we have. There are enough assets in Social Security and Medicare to pay the benefits of those programs for several years. Other programs can be funded from tax revenue. There would certainly be disruption, Bret, but this is not a deadline that we should rush and make a bad deal, and do something that cuts benefits from seniors without giving them better choices.
But what we need to do, Bret -- we're not going to get these programs reformed and all of this done in two weeks -- is let's agree that the problem is spending and debt, and let's agree to stop spending more than we're bringing in. Not this year, not next year, but let the states decide if sometime over the next six to 10 years, is bring our budget in to balance.
Forty-nine states have to balance their budget, and they have to make the tough decisions every year. We never make the tough decisions because we don't have to balance our budget.
BAIER: Senator, I'll talk about that in a second, but on the August 2nd deadline, Speaker Boehner said this Friday -- "While some think we can go past August 2nd, I frankly think it puts us in an awful lot of jeopardy and puts our economy in jeopardy, risking even more jobs."
You disagree with the speaker?
DEMINT: Well, if the president and Secretary Geithner have not planned for contingencies -- and we have sent them letters to tell them they needed to -- there would certainly be disruption. But the president is required by law to pay our debts. He is required to pay Social Security and Medicare.
I know he's going to try to frighten seniors and frighten other Americans that something terrible is going to happen, but we're willing to give the president an increase in the debt limit. But Democrats in Congress are going to have to work with us on some reasonable cuts and give the states the opportunity to vote on a balanced budget amendment.
This is not asking too much right now. We're not asking them to make radical cuts anywhere, but to agree with us that the American people and the states should be able to finally decide if we're going to balance our budget.
BAIER: Senator, we have been talking about this financial cliff before, not just in the past few months. Here's another quote for you -- "The full consequences of a default -- or even the serious process of default -- by the United States are impossible to predict and awesome to contemplate. Denigration of the full faith and credit of the United States would have substantial effects on the domestic financial markets and the value of the dollar."
That is from President Ronald Reagan in November of 1983, issuing a warning and a letter to then-Senate Majority Leader Howard Baker.
Your thoughts on that?
DEMINT: Well, Bret, it would be catastrophic to default. And we shouldn't default. But we're not going to default.
And the president's obligation is to pay those bills. And if they have to have contingency plans to make sure other functions of government go on -- again, we want to give the president his increase in debt limit. We need to make it at least one of the last times, Bret.
This is the fourth time he's asked for it. Each time we get promises of change. We're not getting any change.
BAIER: You mentioned attaching the balanced budget amendment to whatever deal comes out here. Here is what your colleague Republican Senator John McCain said on the floor about that.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN, R-ARIZ.: In order to avoid what would be disastrous consequences for our markets, our economy as a whole, and our standing in the world, I encourage my colleagues to lay aside, at least temporarily, their insistence that amending the Constitution be a condition of their support for a solution to this terrible problem.
(END VIDEO CLIP)
BAIER: So that's a nonstarter for you, pushing that aside?
DEMINT: Well, Senator McCain is a co-sponsor of this balanced budget amendment. And we're not holding this debt ceilings hostage to actually implement a constitutional amendment. That would take years.
It would take states two or three years to ratify. After that, it would be five years before this was implemented. So there would be plenty of time to do the things we need to do to save Social Security and Medicare, to fix our tax code.
Those are the things we can't do in a couple of weeks. But what we are asking is to give the American people and the states a chance to decide if the federal government should, over the next few years, bring our budget into balance. And Bret, a fifth grader can tell us if the problem is debt, then we have to stop spending more than we are bringing in. That means we have to balance our budget.
BAIER: Senator, sorry to interrupt. I apologize.
If you look at recent polls, the latest Fox News poll, for example, about a balanced budget amendment, 72 percent to 20 percent. Most voters favor overwhelmingly this amendment to the U.S. Constitution. But the sentiment is reversed.
If having a balanced budget amendment means major spending cuts to entitlement, that's 63-31, again. Major tax increases, 62 percent oppose.
So critics say this could backfire and really limit option on any government in a crisis.
DEMINT: Well, Bret, I don't think that we ultimately are going to need to take anything away from existing seniors. In fact, I don't think we should. But there are a lot of less expensive choices for Social Security and Medicare that I think younger workers would take in a hurry.
Younger workers would much prefer a 401(k) style plan for Social Security. They would -- a lot of them would like to keep their own health insurance when they retire. This would save the federal government money and give people better choices. But these things we're going to have to work out over several years.
And we need to have good, open hearings in Congress. We're not going to do it in the next couple of weeks. But we're also not going to do it, Bret, if we don't agree that at some point in the future, we need to balance our budget.
That's what we need to do first. I have to do it in my home. I had to do it in my business.
You have to decide what your budget is. Then you decide what you can do, what you can spend money on. Right now, this is irrational, just to decide everything we want to do, and then how much we're going tomorrow to make that happen.
BAIER: Senator, only 12 senators have signed on to your cut, cap and balance plan. Eight presidential candidates have, including Mitt Romney, former Massachusetts governor. You supported him in the 2008 South Carolina primary. But Tea Party favorite Congresswoman Michele Bachmann has not signed on to this.
What about that? And will you endorse a candidate this time around?
DEMINT: I will probably endorse, but it won't be until the end of this year, first part of next year. I want to see what these candidates are doing.
Well over half of the Republican conference in the Senate is cosponsoring the cut/cap/balance bill. The pledge is one thing, the bill is actually the real thing here as far as what we need to do. And I'm still encouraging people to sign a pledge, because that's a commitment to oppose the debt limit, and unless we get real spending cuts and a balanced budget amendment.
But you're going to see over the next week, Bret, the large majority of Republicans in the Senate, and hopefully in the House, sponsor a bill that gives the president his debt limit increase, contingent on real cuts, and sending a balanced budget amendment to the states. If any presidential candidate doesn't take the balanced budget seriously, I don't see how they could add anything to Washington right now except more debt.
BAIER: And have you take an presidential run off your table?
DEMINT: Yes, I have.
BAIER: Well, that's simple.
Senator DeMint, thank you very much for talking to us today.
DEMINT: Thanks, Bret.
BAIER: Coming up, I'll ask our Sunday panel what the new unemployment numbers mean for the economic recovery and the president's political future.
(BEGIN VIDEO CLIPS)
PRESIDENT BARACK OBAMA: The sooner that the markets know that the debt limit ceiling will have been raised, and that we have a serious plan to deal with our debt and deficit, the sooner that we give our businesses the certainty that they will need in order to make additional investments to grow and hire.
SPEAKER OF THE HOUSE JOHN BOEHNER, R-OHIO: I think the situation that we face is pretty urgent. As a matter of fact, I think I would describe it as dire. And we have three really big problems. We have a spending problem, we have a debt problem, and we have a jobs problem.
(END VIDEO CLIPS)
BAIER: President Obama and Speaker Boehner draw battle lines ahead of debt negotiations scheduled at the White House today.
Now it's time for our Sunday group: Brit Hume, Fox News senior political analyst; Mara Liasson of National Public Radio; Steve Hayes of The Weekly Standard; and Fox News political analyst Juan Williams.
Brit, let's start with the unemployment number out Friday and what it means for the president and what means for this situation.
BRIT HUME, FOX NEWS SR. POLITICAL ANALYST: Well, I think it was a real game-changer in terms of the debt negotiations. It hardened positions I think on both sides: Republicans are against any kind of tax increases, and Democrats against any sort of major entitlement reform that you heard echoed in the interview with Congressman Becerra today, which meant that the possible big deal that the Speaker and the president had been talking about kind of evaporated, although word of that came apparently in a phone call from the Speaker to the president. But I think that's where we are.
And I also think, Bret, that as we look to today's talks, I'm not sure what will be resolved. But I think Republicans do not think that time is on their side. They're terribly afraid that as we get closer to the announced deadline, that letters will go out to frighten the dickens out of Social Security recipients, perhaps, or others, and that they're going to need to do something.
What it will be remains be seen, but I know for a fact that the two leaders, House and Senate Republicans, do have a plan in mind. They're not going to tell you what it is, but we'll find out soon enough.
Mara, the treasury secretary saying he won't have any time past August 2nd, saying they are still going to try for the biggest deal possible.
MARA LIASSON, NATIONAL PUBLIC RADIO: Well, I think the biggest deal possible now is the $2 trillion get you through the next election deal, which was the deal that they were talking about in the Biden negotiations. Then I think the president and the Speaker tried something bold and creative and ambitious, which is to not kick the can down the road and try to make a big deal that would really solve the deficit problem by doing the three things that everybody has always felt was needed: tax reform, where you get more revenue while lowering tax rates; entitlement reform; and real spending cuts. And it didn't work. Boehner couldn't bring the votes along for that. Eric Cantor --
HUME: But you were never going to get tax reform in a debt limit package.
LIASSON: No, no, no. But that was always -- that was the sticking point. You couldn't figure out how to guarantee tax reform, which takes many years, in something that has to be done in two weeks. That was the big problem.
But now we're back to the medium-term deal. And I think the question there is, the president's bottom line is it has to be big enough to get you through the next election. He doesn't want to do it again, before then. And can you make it revenue-neutral?
And I think if you are going to close loopholes, which the Democrats want, you could have an extension of the employee Social Security tax cut that the president wants, and that would balance it out. You would --
BAIER: Steve, this is not an easy jump either to get the smaller version.
STEPHEN HAYES, THE WEEKLY STANDARD: It's certainly not. And if you look at the -- just look at the numbers in the House in particular, but also in the Senate.
You have to get the votes to pass this thing, whatever this looks like, whether it's $2 trillion or $2.5 trillion. But John Boehner said in his statement that the president is operating on good faith, that these are good faith negotiations. And I just don't see a lot of evidence to support that claim.
If you look at what the president did, if you look at what the White House did, he insisted on tax hikes that Republican leaders had already ruled out and that could not pass the House of Representatives no matter what. My view is that the White House actually wants to push this to the brink, maybe even beyond August 2nd.
I think they believe that they have more flexibility than Tim Geithner is saying publicly, because Democrats want an issue. They want to be able to talk about the disruption that the Republicans are causing by pushing this, the economic disruptions that they're causing by pushing this.
They want to be able to send those letters that Brit mentioned because the White House has no argument on the economy. It's been two-and-a-half years. The stimulus didn't work. They need an argument. And I think right now this is an exercise in attempting to get some blame-sharing.
BAIER: So, Juan, do you agree with Brit that it was a game- changer Friday?
JUAN WILLIAMS, FOX NEWS POLITICAL ANALYST: No, I don't think that -- I mean, I think a lot of these things were in place before Friday. I think that everybody saw that it was terrible economic news. But what I think is going on here is, to my mind, intransigence on the part Republicans on taxes.
And it's taxes not for not only the rich, but for the very rich. They're saying we refuse to raise taxes, to make taxes a part of a deal and violate what Congressman Becerra called, this notion of shared sacrifice.
So, to me, I'm just puzzled by it. I mean, I think the job numbers indicate we have to do something. It's made the Democrats now more persistent in the idea that whatever deal comes along, it has to include some kind of new stimulus spending. Imagine the Republican reaction to that given that they've condemned passing stimulus spending.
HUME: Well, wait a minute.
LIASSON: Well, you're not going to get stimulus spending. You might get an employee payroll tax cut. That's what the president wants.
BAIER: No, but they're saying it's stimulative.
WILLIAMS: Yes, stimulative.
HUME: And what could be less stimulative than raising taxes on anybody?
WILLIAMS: How is it that now the very rich is everybody? The very rich is small business? It's just not true.
HAYES: The president himself, back two years ago next month, in August of 2009, made the argument that raising taxes in a recession, even on the rich, was the "last thing" he wanted to do. These are President Obama's words.
How does it make sense to raise taxes on anybody right now?
WILLIAMS: Because, Steve, we are trying to cut entitlements because we have a huge debt problem. We need, in fact, to raise the debt ceiling to a point that nobody thinks is rational. Everybody thinks we have to cut spending.
The Democrats are proposing I think $2 to $3 in terms of cuts, even taking on something so risky for Democrats as Social Security and Medicare. In exchange, simply asking that there be some responsibly on the part of Republicans to say yes, people who have made -- have become prosperous in this land of opportunity are also going to share the pain involved.
BAIER: Although, Juan, the pushback from Democrats on Friday after the leak about the entitlements being on the table was pretty strong.
WILLIAMS: Correct. And, well, you know what? Democrats are in the minority in the House. They feel like no one is paying attention to them. Everybody is playing ball right now along the Tea Party line.
And the Tea Party, I don't think they're interested in governing. They're interested in campaigning. They keep talking about what people were elected to do.
HUME: Let's get back to the major players here.
I don't quite agree with Steve about what the White House strategy is, because I think that the person who would benefit most from the kind of big deal where you solve the entitlement program -- problem going down years into the future would redound to the president's benefit enormously. It would take the debt and spending issue basically off the table because it would be a bipartisan deal. It would give the president a talking point he does not now have about how he's done everything he can to solidify the nation's fiscal situation and give confidence to the markets and all the things that might begin to get the economy moving.
WILLIAMS: But who allowed the Bush tax cuts to be extended? Wasn't that President Obama in service to the economy, which the Republicans said is necessary for this economy --
HUME: That was his position six months ago.
WILLIAMS: He did.
HUME: What's changed?
WILLIAMS: He did it. I'm just saying -- you said --
HUME: So now he wants to go back on that?
LIASSON: Well, wait a minute.
WILLIAMS: He's saying right now, if you want the big picture, if you want to take on entitlements, Social Security, Medicare, let's talk about it. Let's have an honest discussion.
HUME: Didn't you hear what I just said? I say he is for that. I think he wanted to do it. I think it would be a tremendous benefit to him if he did.
That's my point, Juan. Didn't you hear me?
(CROSSTALK)BAIER: But how he gets there from here is the question. And we are going to answer that question with more fireworks after the break and the panel.
Back in a moment.
BAIER: And now we're back with our panel, talking about the debt ceiling negotiations that will be ongoing at the White House.
Mara, the question is how you get to the cuts of $2.5 trillion. The vice president's meetings, it didn't seem like they had specifics to get them to those cuts.
LIASSON: Well, what we've heard is they identified about $1.5 trillion. I don't think you can get to $2.5 trillion. Maybe you can get to $2 trillion.
But the idea was that at one point, the Democrats were talking about make up the last $400 billion with revenue increases like closing loopholes on corporate jet owners, which is pennies, on oil and gas companies. But then Republicans said we're willing to close loopholes, but they have to be revenue- neutral, we have to cut taxes somewhere else, which made you think, OK, well, the president wants an extension of the employee tax cut and you could put that in. But then that reduces your whole number.
They were having getting to the $2 trillion deal. That's why they made the problem bigger and went for the bigger deal. I think they're back to square one. It's going to be very, very hard to get that deal.
BAIER: Steve, what if House Republicans came forward and said, dollar for dollar, we'll match you, say, $1 trillion in cuts, we'll raise it $1 trillion? So you get to that number and it doesn't take you past the election in 2012, but it gets you past this moment.
The president has said that he would veto that. But in a bind, up against a wall, what about that?
HAYES: Well, there is some question as to how much you need to raise the debt ceiling to get past the election. I think that's a little bit fuzzy.
But I think you're going to see, possibly even this week from House Republicans, they're going to take this, if the negotiations don't go well tonight, and say we're going to own this, we're going drive this process. And I expect House Republicans to put up some kind of a plan that would attach raising the debt limit with some kind of their own spending and deficit reduction plan, something that would be maybe a light version Paul Ryan's path to prosperity, something along the lines of cut, cap and balance.
I think this is all being discussed, hashed out right now. But I expect House Republicans, if the negotiations don't go well tonight, to take this and say we're going to do this, which would make Harry Reid in the Senate say we're turning this down and make the president veto it, if he's going to do that.
BAIER: Because let's be clear. Mostly, House Republicans don't want to vote on raising the debt ceiling, period, and they definitely don't want to vote it on it twice.
So if they have to bounce back band forth with pieces of legislation, that's not attractive for a lot of these lawmakers, Brit.
HUME: Well, look, if this -- if any kind of a debt ceiling increase passes with attached spending cuts and no tax increases, it's a big win for the Republicans in the long-term scheme of things. Look at where we started.
We started with the president, who didn't want the Bush tax cuts to stay in effect. And after the election he gave on that.
He also wanted the continuing resolution for the rest of this year. That's the spending bill for the balance of this year to pass without any spending cuts. He didn't get that. He had to swallow nearly $40 billion in spending cuts, some now, some in the future.
He also wanted a clean debt ceiling, a debt ceiling increase passed, no spending cuts or anything else attached to it. One way or another, he's not going to get that, and he's going to have to swallow some more spending cuts.
So, what the Republicans, holding one House have been able to do is to leverage what they could find with these must-pass bills in to getting some spending restraint done. That's a win for them. It would be a real win, as I said before, for the president, who it was a great big deal that accomplished entitlement reform, but that seems out of reach.
BAIER: Juan, Congressman Becerra didn't really answer this, but Democrats do like having this political issue on entitlements.
WILLIAMS: Well, I think if you look at the results of the Paul Ryan effort to make some cuts in Medicare, it has redounded to the benefit of Democrats. And you look at the special election that took place, I think going forward, it has given Democrats some hope that they can even recapture the House, because seniors, who have been a reliable voting bloc for Republicans, now see Republicans, now see that in fact Republicans are willing to take on something like Medicare, and take it away from them in a serious way.
Now, let me just say --
HUME: They're all exempt. All the current seniors are exempt.
WILLIAMS: Look, let me just quickly add, Republicans wanted something done about entitlements, they wanted spending under control. In this deal, they had the opportunity to make history, and Republicans have been the ones who have turned away from it. I think it is regrettable and I think it's really an abdication of adult responsibility.
BAIER: Down the road, quickly, does it get done?
WILLIAMS: I hope it gets done, but I don't know.
BAIER: What about tonight?
WILLIAMS: I think they make some progress, but I'm with Mara. I just don't see how exactly they get to the $2.5 trillion.
HAYES: I think the White House pushes this to August 2nd or beyond.
LIASSON: I think the United States will not default.
HUME: No default.
BAIER: Thanks, panel.
And don't forget to check out our "Panel Plus," where our group picks right up with the discussion, fiery discussion at that on our Web site, FoxNewsSunday.com. We will post the video before noon Eastern Time.
That's it for today. I'll see you Monday at 6: 0 p.m. Eastern for "Special Report" on the Fox News Channel.
And Chris Wallace returns right here to the anchor chair on the next "Fox News Sunday."
Have a great weekend.
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