This is a rush transcript from "Your World," November 8, 2012. This copy may not be in its final form and may be updated.
NEIL CAVUTO, HOST OF "YOUR WORLD": I want to bring Austan Goolsbee into this, because Austan Goolsbee, as a former top economic adviser to the president, one thing I have always commended this gentleman for is, he is a straight shooter, he's very fair, he's pragmatic. He's not one of these dogmatic -- on either side. He's one for moving the ball forward.
So, that is the angels that I want to address right here, Austan, because I think both parties have to adhere to their better angels and try to move this ball forward. How do we do that right now?
AUSTAN GOOLSBEE, FORMER CHAIRMAN, COUNCIL OF ECONOMIC ADVISERS: You know, I agree with that.
I thought, actually, the statement that Speaker Boehner made was a pretty mature, if I parsed it right, that he was basically saying, all right, let's address the fiscal cliff and let's address -- you know, let's call it the grand bargain of long-run fiscal consolidation.
And I think it might be bumpy for several months, partly because you still have got the mentality of the celebrity death match still kind of lingering in there from last summer. But if we can just get past that, I think there is a decent chance that in 2030, we can do tax reform or we could do a grand bargain. And both sides, I think, would view that as a pretty big accomplishment.
CAVUTO: Yes. No, I agree with that, Austan.
Here is what worries me, what we do in the interim, because it is not as if we can just patch together something now. There isn't enough time to do all of this stuff, as you have pointed out just now and in prior interviews, with a grand sort of a tax reform package and maybe a simple, streamlined budget process that avoids this constant chicanery.
CAVUTO: But how do they get to there?
CAVUTO: If John Boehner is saying, as he did yesterday, right, I am open to revenues -- and I am just paraphrasing here -- I do not hear -- and again this is not taking sides -- the same willingness or the same leap on the part of Democratic leaders to say, all right, and we are open to reining in let's say entitlements, for want of a better word.
GOOLSBEE: Well, no, I don't know if that is true.
CAVUTO: How can they -- is that what they need to do to then say, all right, we got the entitlement thing going, you have got, Boehner, the tax thing going, we agree on that, let's get a six-month extension?
GOOLSBEE: I do think that would be part of it.
CAVUTO: What do you see happening?
GOOLSBEE: Well, I do think that that would be part of it. Certainly, if you are doing the grand bargain, you would have to have the entitlement reforms, the tax revenue.
CAVUTO: Right. Right.
GOOLSBEE: You would have spending cuts, et cetera.
Now, here is the thing that they will, I am almost certain, choose to avoid. And that is if you remember back in 2010, the two sides made a deal to extend the tax cuts for two years, just like this. And the feeling when we did that was, hey, look, we have shown the world that the two parties can get along and they can do something.
And they even made another deal to avoid a shutdown of the government. But then what that did is put the whole thing naked on to the debt ceiling increase and that allowed what I call the hostage-taking to begin.
CAVUTO: That's very true.
GOOLSBEE: But there was nothing else, the president had nothing to say to the Tea Party folks that they wanted. So he had no bargaining positions.
CAVUTO: What it also did, Austan...
GOOLSBEE: Almost certainly, the Democrats are not just...
CAVUTO: Very good point.
GOOLSBEE: They're not just going to extend the tax cuts and then...
CAVUTO: And also this time, if they were to try to do that, I think the markets would sell off and they would see through that, that silliness.
CAVUTO: Real quickly, I do want your reaction to the CBO estimate that just eliminating the automatic spending cuts, keeping Medicare payments unchanged, would boost the U.S. GDP by about three-quarters-of-a- point, factoring in the fact that all the tax rates are extended, minus those for the rich.
Now, that is an ideal math scenario for the CBO, but do you agree with that?
GOOLSBEE: OK, so, wait. So, theirs is, you extend all the tax cuts except the high end and you don't do the sequester cuts?
CAVUTO: Right. Eliminate automatic spending cuts, keeping Medicare unchanged, would boost United States GDP by three-quarters-of-a-percent. Well, of course it would, right? Of course it would.
GOOLSBEE: I think if you just add up the mechanics of the math that sounds right.
I think the CBO -- everyone ought to sober themselves up, the election is over, go look at the CBO report. It shows if you go off the fiscal cliff, the economy goes into recession in the beginning of 2013. This is not a small matter. I do think we have got to address this.
CAVUTO: Very good point.
Austan Goolsbee, thank you very much.