• With: Sen. Tom Coburn, R-Okla.

    STUART VARNEY, GUEST HOST: Stocks up 200 points on word a new debt plan is in the mix.

    Hey. Welcome, everyone. I’m Stuart Varney, in for Neil Cavuto. And this is "Your World." And not one, not two, but three plans to raise the debt ceiling are making their way through Congress, but only one’s getting the president’s praise. And it’s not the one that balances the budget. A House vote on that is just hours away. And it’s not that backup plan, either. Yet work on that is still under way. Ah, it is yet another plan just released by the so-called ‘Gang of Six’. It would slash the deficit by $3.7 trillion, in part by adding new taxes while reducing others.

    To the guy who just breathed new life into the plan, Oklahoma Republican Senator Tom Coburn.

    Senator, let me ask you first of all about the tax element in this plan. I am told that you are reducing income tax rates. Is that accurate, sir?

    SEN. TOM COBURN, R-OKLA.: That’s accurate.

    VARNEY: Reducing them to three brackets and also reducing corporate tax rates. Correct again?

    COBURN: That is correct.

    VARNEY: That should make it very attractive to conservatives. But what other tax angles are involved?

    COBURN: Well, as you – there’s no question that the Alternative Minimum Tax will be permanently eliminated. That’s another tax angle.

    As the rates come down and the tax expenditures and tax credits come out, they’ll be generated through economic gains, at least $859 billion to $1 trillion worth of dynamic gains and about $1 trillion worth of those benefits will go to deficit -- reduce the deficit. After that, the moneys will go to lower tax rates additionally.

    VARNEY: There is some plugging of tax loopholes, I believe. Is that correct?

    COBURN: Yes, yes, that’s the elimination of tax credits and tax expenditures, that we have $1.1 trillion of those a year, Stuart. And what this will do is take about $100 billion of those away net-net per year.

    VARNEY: Now, the president was fairly optimistic about this plan. He was broadly -- he said it is broadly consistent. I must say I’m surprised at that, bearing in mind the reduction in income tax rates. Does the president go along with that as part of the plan?

    COBURN: Well, but it’s paid for by taking away deductions.

    So in essence, for certain high tax income people, they’ll pay more. Certain high tax income people will pay less. But it will depend on what the committees do and how the mix of that is depending on whether or not you pay more or you pay less.

    But on net, what I would say if I were talking to conservative Oklahomans, I would say it’s probably a wash overall on tax deductions right now. But the future would be that after you do this first set of reductions of rates, the dynamic effect with that and the income that comes off of that will actually lower rates further. So ultimately you’ll see tax cuts, net -- net tax cuts to individuals in this country.

    VARNEY: So, can we now turn to the other side of ledger, which is the spending cuts? Do you have any specifics on that at all, sir?

    COBURN: Well, there’s $500 billion that are locked in initially. And then there’s another $2.2 trillion that will come through a process of forcing the committees to come to a certain fixed result, $500 billion of that through health care reductions and mandatory programs.

    And I can’t give you all the details right now, but significant spending reduction that starts us on the way of getting ahead the curve. It’s not all -- it’s not going to solve all our problems, but it starts us down that, so a total package of $3.7 trillion over 10.

    VARNEY: Anything to do with Social Security, any changes there at all?

    COBURN: Well, it does. And the changes are -- is, we may force the committees to come to a result to make Social Security viable for the next 75 years, and then also require that the Congress every 10 years after that continue to keep it at 75 years.

    And it may be that they don’t have to do anything more than to do this. And that comes in at the last part of this bill. And the reason that’s important -- any money that is saved in Social Security goes right back to Social Security. It’s totally separate from any savings. So there’s no savings in that $3.7 trillion that have anything to do with Social Security.

    Any savings that might come from reforming Social Security go back into Social Security.

    VARNEY: I have to tell you, Senator, there was a burst of what I’m going to call optimism when news of this reached us middle afternoon today. Do you share that optimism? Do you think this is a breakthrough?

    COBURN: I think it is a way that will allow everybody to come together. Everybody can say, I got something, and everybody can say, I gave something.

    VARNEY: Can this be legislated and voted on before the August 2 deadline?

    COBURN: I think that’s the difficult question. This is some resistance to that right now. My pleasure would be that we work like heck and so that we get something like this done before the August 2 deadline.

    VARNEY: Is it the ‘Gang of Six’ or do you now make it the 'Gang of Seven,' sir?

    COBURN: No, I make it the ‘Gang of Six’. It was -- the ‘Gang of Six’, without me, it was the 'Gang of Five.'

    VARNEY: OK.

    (LAUGHTER)

    VARNEY: We appreciate you being with us, sir.

    COBURN: You’re welcome.

    VARNEY: Thank you very much, indeed, Senator Tom Coburn.

    COBURN: All right, Stuart. See you.

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