This is a rush transcript from "On the Record," July 25, 2011. This copy may not be in its final form and may be updated.
GRETA VAN SUSTEREN, FOX NEWS HOST: Now, there are three debt plans, in essence -- the "Gang of Six," Speaker Boehner and Senate Majority Leader Harry Reid. Each plan is different, and there is plenty to fight about. But one flashpoint is whether any deal is short-term or long-term. President Obama wants a long-term deal that covers us through 2013. His critics say that it is because he's worried about getting reelected and doesn't want the issue flapping all over him in 2012. He says it's because it's the right thing to do and we need to put the economic anxiety behind us.
Earlier, we spoke with Republican Arizona Senator Jon Kyl.
VAN SUSTEREN: Senator, nice to see you, sir.
SEN. JON KYL, R-ARIZ.: Thanks, Greta.
VAN SUSTEREN: All right, big crisis, obviously, this whole debt ceiling, trying to figure out, you know, whether to raise it, to what extent, and the (INAUDIBLE). But let me take you back to February of '09 and the stimulus bill. If the stimulus bill had been more effective in revving up the economy, I take it we'd have more revenue and that we would be not quite in this crisis, or it'd be a different crisis.
KYL: This is somewhat of a different kind of recession, and it's not one in which consumer demand is driving recovery. That's why the Bush stimulus didn't work, the Obama stimulus didn't work. I mean, when you take a trillion dollars and basically give it to people to spend and it doesn't move the numbers at all -- in fact, now we're at a 2 percent of growth -- under 2 percent of growth of GDP. In the last quarter of 2009, as you mentioned, we were at almost 6 percent growth in GDP. So we've actually gone downhill. We're now at 9.2 percent of unemployment. The stimulus did not help. All it did was add to our debt.
VAN SUSTEREN: Well, the reason I ask that is that while all the focus is on this particular problem, is that once we get through this crisis, we have to think down the road. And I think -- are we really on the right track in terms of revving up our economy so that the economy -- so we have more revenue in to the government because people are employed? And should we not also be, like, incredibly focused on that so we're watching down the road?
KYL: Yes. I mean, the point you just made is so important. Economic growth will go a long way toward getting us out of the problem that we're in. And I'm not just talking about families and businesses and jobs. I'm talking about the federal government needing to somehow get all this debt paid off.
You do that by growing the economy, so people do more what? They pay more federal income tax. When the president says we have a revenue problem, it's not because we -- our tax rates are too low. The tax rates have been the same here for a decade. The problem is, we're in an economic downturn, and so people are unemployed. They're not working as much. They're not making as much money. And that's why the federal government's tax take is not as big as it was at one point.
But with the same tax rates we have, we could get right back to the average 20 percent of GDP in tax collections if we had the kind of economic growth that you're talking about. And how do you get there?
VAN SUSTEREN: That's just what I was going to ask you, is how do you get there? Because that -- I mean, that's the big picture long-term problem.
VAN SUSTEREN: How do we get there so we don't have this discussion a year from now or even six months from now, as much?
KYL: First I can tell you how almost everybody recognizes you don't get there. You got a sick economy, the last thing you want to do is raise taxes. What did President Obama say in August of 2009? You don't raise taxes in the middle of a recession. And that, as I said, was back when we had 6 percent growth. We're under 2 percent growth right now. So what you don't do to this sick economy is pile more taxes on it.
What you do do is give businesses and families a longer-term prospect for growth -- in other words, not temporary fixes. We'll give you a tax holiday of a year this year, but next year, your taxes go right back up again. If you're an employer, you don't hire based on that. What you do is provide certainty in terms of tax policy and regulatory policy.
And by the way, pass these free trade agreements so we can sell more stuff to countries abroad. That takes time, but the economy will recover if we do those things.
VAN SUSTEREN: All right, so that's the big picture issue looking down the road. Now let me now talk about now Senator Harry Reid has now a proposal. Speaker Boehner has a proposal. And the president is down the street. Apparently, he likes Senator Harry Reid's proposal. Are we going to get either one?
KYL: We'll know by, I would say, next Saturday. But I hope that the two sides don't dig themselves in so solidly that you continue to have this Republican-Democrat confrontation. Sometime within the next eight days or so, we'll have to have Republicans and Democrats actually get together on something.
VAN SUSTEREN: But it seems a lot of this is ideology. And so the Democrats think if they give up on raising taxes that they are unprincipled or they're backing off. And the Republicans think if taxes go up, that they in some ways unprincipled. I mean, that's the problem. It's -- it's -- when it is ideology that divides them, how do you get them to, quote, "compromise" or come together?
KYL: I've been in a lot of negotiations. And frequently, the way to a result is to say , All right, we can't do quite as much as everybody would like to do here. Let's see if we can do this one bite at a time. Surely, we can agree on A. Yes, we all agree on A. OK, let's take that bite now, chew it and swallow it, digest it, and then do the next bite and the next bite. Pretty soon, you're bought into reaching a total result. And so you make the compromises at the end that are the most difficult. What we need to do is do this in two stages. I know the president doesn't want to do that --
VAN SUSTEREN: He hates that. He hates it.
KYL: I know.
VAN SUSTEREN: He says no to that.
KYL: He says no, but why? Because if he allows that to happen, this will come up again in the middle of his election campaign.
VAN SUSTEREN: But it will come up --
KYL: That's what he doesn't --
VAN SUSTEREN: -- in the Republican campaign, too.
KYL: And we're fine with that. When the American people are focused on saving money, frankly, those of us who want to save money are benefited. That's why the president doesn't want that. That's why the most important thing to President Obama is get this beyond the next election. As you know, there's no --
VAN SUSTEREN: That's a harsh criticism. I mean, that's saying that he's more interested in his own job than he is the American people. Is that what you think?
KYL: I'm saying that the most important thing to President Obama is getting this debt ceiling discussion moved beyond his campaign for reelection.
VAN SUSTEREN: That's selfish and personal.
KYL: Well, it's political in -- on his part. And what I'm saying is that if you want a bipartisan agreement, let's start with the things we can agree on. They don't take us all the way through the end of 2012, but they can take us partway there. And then if we have a process whereby we're committed to have a result that we have to vote on so that we can then deal with the second half of the problem, I think we can accomplish a result.
We clearly can't agree on the first -- on the big picture. That we know for sure. So let's do it one bite at a time. That means in this case, a short-term extension, which, by the way, we've done 38 short-term extensions --
VAN SUSTEREN: I wouldn't be bragging about that! That's because we don't -- we can't do our finances!
KYL: I'm saying since 1972.
VAN SUSTEREN: Well, still I wouldn't brag. I mean, we haven't done our finances very well as a nation.
KYL: What we've decided is that rather than face default, while we're not quite in an agreement yet, let's extend the debt ceiling so that we're not in default. That's what Republicans are saying. We are not going to default. And if it takes a shorter-term extension to avoid that catastrophic result, then let's do it.
And I'm asking the president, Why would you risk that catastrophic result that you've been lecturing us about all this time just because your magic date is after the next election? There is no magic. We can do this for six months, for six years, for two years. What's magic about 16 months? Well, that gets it beyond the election.
VAN SUSTEREN: We have much more with Senator Jon Kyl in our next hour, so make sure you stick around to hear the rest of that interview.
HOUR 2 OF "ON THE RECORD"
VAN SUSTEREN: Earlier, we spoke with Senator Jon Kyl of Arizona.
VAN SUSTEREN: Let me ask you something, if something were agreed upon today, and both Republicans and Democrats, and everyone signed off on the President, two years from now, after the election could those terms be changed?
KYL: Sure and that's one of the things that we've been a little concerned about. When we talk about a $1 trillion in saving and discretionary spending that is 10 years worth of one year of savings, in other words we would agree next year that the budget would be let's say, $3 trillion or $4 trillion excuse me, $3 billion or $4 billion less than it is today.
If you run that $3 billion or $4 billion savings out for 10 years and we stick by it, we can actually save $1 trillion over what we otherwise would have spent but you've got to stick by it.
VAN SUSTEREN: Is it ever -- does anyone ever -- did any Congress ever stick by it?
KYL: We haven't. We also have a --
VAN SUSTEREN: So why do the American people feel secure with any of that? Because of -- you know as we sort of watched this debate and we hear these numbers and we hear these agreements. The fact is, is that whatever is agreed upon in next Congress could get changed and historically it has been changed.
KYL: It could. And that's why Republicans, do you remember the phrase, "cut, cap, and balance". Well, the cut is reduction in their -- in their term, the capping is to cap it so that it sticks for 10 years so that Congress can't then get out of that straight jacket and be spending more than we promised.
And then, balance of course is over the long term if you can balance the budget, then, you never have to get back to this constant upping the debt ceiling. That's why the House of Representatives has said let's cut, cut, let's cap it and then let's balance the budget.
VAN SUSTEREN: Why -- why doesn't the Senate want that?
KYL: Well, every Republican in the Senate all 47 of us voted for it.
VAN SUSTEREN: Why doesn't a Democrat want -- what are the Democrats saying is wrong with it?
KYL: It constrains spending, it constrains spending. And frankly, they don't want to have too much of a straight jacket on them in spending because they favor things that cost money and so ideologically they don't want to have too many constraints on their spending habits.
VAN SUSTEREN: I'm curious. President Obama versus let's say another Democratic president, President Bill Clinton. Would he be handling it any differently do you think?
KYL: Bill Clinton would have handled -- Bill Clinton did handle this a lot differently.
VAN SUSTEREN: How? I mean compare him to --
KYL: Well, if -- if you go back in time, what Bill Clinton was willing to do is to agree with a House -- with a Republican House of Representatives led by Newt Gingrich, for example on welfare reform, on the budget where they had the government shut down. In each of those situations in effect he met them halfway. Now, you can argue about what was exactly half but he agreed to meet half way. And what happened?
During his presidency, when Republicans head the Congress we actually had three years on '02 and I think three years of budget surplus. Because we cooperated together we met each other halfway.
VAN SUSTEREN: He also did that housing market though, we I mean, there's a lot of other economic pressures, two wars. I mean so there are - - there were other economic pressures on our country.
KYL: No, that's -- I -- I grant you that. The question is would he have handled it differently. And I think the answer is yes. Remember Bill Clinton liked to triangulate and so it wasn't just one side versus another. He was trying to find a middle ground and he frequently did.
VAN SUSTEREN: Is the -- are Republicans better off negotiating with Senator Harry Reid or with President Obama and why?
KYL: I think it's important for us to try to solve this Congressionally now. Because the President I mean, he -- he gave it a shot. But I would argue that he actually made it worse. He made it worse in his demands and his lecturing in saying that he absolutely under no circumstances would agree to anything but a long-term deal after he had first said he absolutely had to have a clean debt ceiling extension. In other words no big deal.
He's made a lot of demands here. And I think the people in Congress are willing to say look, we've worked together on a lot of things. Let's work this out. Even maybe, if it ends up being a two-step process rather than doing it all at once as the President wants.
VAN SUSTEREN: And so how does he save face if indeed that happens? I mean because he know this is a political environment and he doesn't want to say well, I lost to all Republicans, they got everything they wanted?
KYL: Well, we'll try to help him find a way to get off of the limb that he's out on if that is what it takes. But we've got to do what's right for the country and that means saving some money, not spending so much. Extending the debt ceiling so our credit worthiness is not called into question and if you can't do it at once, then let's take it in bite- size pieces where we can get the job done even though it might take a little longer.
VAN SUSTEREN: Senator, thank you. Nice to see you sir.
KYL: Thank you.