All-Star Panel: What are implications of 'fiscal cliff' deal?

This is a rush transcript from "Special Report," January 2, 2013. This copy may not be in its final form and may be updated.

(BEGIN VIDEO CLIP)

PRESIDENT BARACK OBAMA: The agreement we reached will reduce the deficit even more by asking the wealthiest two percent of Americans to pay higher taxes for the first time in two decades.

SEN. RICHARD SHELBY, R - AL: The failure to step up and do the big thing when he could. He could have brought leadership to the table.  He didn't. Now he's wanting to talk about cutting spending. It's kind of a joke.

REP. STENY HOYER, D - MD: The very definition of "compromise" contains elements that neither side likes. But it also contains pieces both sides can embrace.

REP. DAVE CAMP, R - MI: So by making Republican tax cuts permanent we are one step closer to comprehensive tax reform that will help strengthen our economy and create more and higher paycheck for American workers.

(END VIDEO CLIP)

BRET BAIER, ANCHOR: The fiscal cliff bill passed the House, passed the Senate overwhelmingly, and now it's headed to the president for a signature. It will be an autopen signature since the president is in Hawaii. Today, you saw at the beginning of that clip a campaign style video in which he said that the bill, soon to be law, reduces the deficit by asking the wealthiest households to pay more.

We're back with the panel. Charles, the nonpartisan CBO says it actually adds nearly $4 trillion to the national debt over 10 years. If you break it down on deficit year to year, it's about $300 billion per year. How is that possible?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: The president was only off by, as you say, $4 trillion. Well, what he is pretending is that this is sort of an isolated increase in taxes. Nothing else happened. If that were true, you could say he reduced the debt. Of course, it didn't because there is an avalanche of spending and what's called tax expenditures, like the money the government gives away that it would otherwise have had in taxes, which is up to $4 trillion. This is a huge increase in the debt and deficit. Everybody understands it.

BAIER: Understanding that a part of this is the tax cuts – keeping the taxes the same way that they were for the last decade costs this money. So there is a part of that that is about paying for that.

KRAUTHAMMER: But CBO says as of midnight of last night we would have had expiration by law of the Bush tax cuts that would have replenished the treasury by a huge amount of money. So a piece of it is reduced. But all of that that would have been increased in taxes is removed, because -- it's all so hard to explain, it's so convoluted -- but if you exempt 98 percent of the population from what would have been an increase of taxes, then you have vastly increase the debt because the treasury is now starved. So Obama wants to say it's a tax cut, he's got all kinds of new language, which explains everything. And in fact, last night he said in the victory lap he said oh, yes, we may have to cut spending, but we have to increase our investments -- and then he went on the usual litany -- education, R&D, roads and bridges. "Investment" is the liberal world for "spending." He has no interest in cutting spending. He basically announced last night that I am a pre-Clintonian tax and spend Democrat and I will increase taxes more and increase spending.

BAIER: Do you buy that?

KIRSTEN POWERS, COLUMNIST, NEW YORK POST: I don't know is really the truth. And I have talked to a lot of people about this, including some Democrats who are very disappointed who are more of the Clintonian stripe, who were hoping that there would be some sort deficit reduction. They feel the political people kind of won on this issue -- that the policy people in the White House really are serious about deficit reduction but that the political people saw a chance to sort of dance on Republicans' grave. They feel like they just had this big win.

So now, the question is, will they try to do something as we come up against our next deadline? The fact that I can't answer the question, the fact that I can't say that President Obama affirmatively wants to reduce the deficit suggests that he probably doesn't.

BAIER: Bill, I know you were a proponent of Republicans signing on to this current deal. I want to talk about the next fight. Take a listen to what the president said last night and reaction to it.

(BEGIN VIDEO CLIP)

OBAMA: While I will negotiate over many things, I will not have another debate with this Congress over whether or not they should pay the bills that they have already racked up through the laws that they passed.

REP. MARSHA BLACKBURN, R -  TN: I was very disappointed in his demeanor and the comments that he made last night, wanting no fight over the debt ceiling. Are you kidding me?

(END VIDEO CLIP)

BAIER: So Republicans seem ready for this fight, or at least some of them do. This is Moody's investor service, a top rating agency, saying they will keep the government on negative outlook because they actually don't see a forecast for deficit-debt reduction in the short-term.

BILL KRISTOL, EDITOR, THE WEEKLY STANDARD: Look, I think Republicans should be ready to fight on the debt ceiling. I don't think Republicans should kid themselves as long as President Obama is president, especially as well as while the Democrats control the Senate there is not going to be appreciable reduction in the deficit. The only way there would be is if there was some faster economic growth, which is devoutly to be wished. But at the end of the day President Obama has been perfectly happy running trillion dollars deficits for four years, he seems perfectly happy to run trillion dollar deficits this year and he's going to be happy to do it next year.

And Republicans might be able to make a difference on the margin, but they do need to think ahead of time. What are they going to ask for at the end of February when the debt ceiling and, in fact, the sequester run out and actually the continuing resolution runs out in March as well? And I think they can ask for spending cuts. They should really look at the regulatory situation. I think, we want an economic growth. At the end of the day, this president is not going to solve the debt and deficit problem. We can ameliorate the problem with economic growth and then the next Congress and the next president perhaps can really get serious about entitlements. Economic growth, I think regulatory relief, postponing ObamaCare for a year or two, I think there are proposals that the Republicans could suggest that would be a little hard for the president to say, well why isn't that a good idea in a slowing economy?

BAIER: You think the president is going to sign on to slowing ObamaCare?

KRISTOL: If he doesn't, fine, because they're not going to be able to implement it anyway at the end of this year. The Democratic governors say they are not ready to set up the exchanges. It would actually be doing a favor for him honestly to put it off a year or two, it would save a lot of money.

Let the president explain that it's so urgent that ObamaCare go into effect this November, even though it's going to be killed January 1st of next year, even though it's going to be chaotic, that we need to do that at all cost and that the regulatory burden on the economy that he doesn't care about. But honestly this president, I'm afraid, we have to hope that markets will tolerate this level of the debt and deficit for a couple more years because I don't think this president will allow serious efforts to reduce them.

BAIER: That is it for panel. But stay tuned to see and hear how you can have even more "Special Report" tonight. That's right.

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