Inside the Democrats' budget strategy

Maryland Congressman Chris Van Hollen weighs in


This is a rush transcript from "Your World," November 16, 2012. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST OF "YOUR WORLD": Now to Democratic Congressman and ranking Budget Committee member, very powerful, Democrat Chris Van Hollen.

Congressman, good to have you.

REP. CHRIS VAN HOLLEN, D-MD.: Neil, great to be with you.

CAVUTO: Optimistic a deal can be reached. What do you think?

VAN HOLLEN: Well, I think a deal can be reached. The sentiment was good. They did have constructive talks at the White House today, but as you indicated...


CAVUTO: What made them constructive? Do you know?

VAN HOLLEN: Well, I was just getting to the fact that it was constructive in the sense that all parties understood the importance of trying to prevent us from going over the 'fiscal cliff.'

But I was going to quickly add, as you indicated in the lead-in, the devil is in the details. In other words, we have had those sentiments before and they have not produced a result. So this is going to be some are very tough negotiating. It is obviously better that the mood is constructive than otherwise. But at the end of the day, very tough compromises will have to be hammered out.

CAVUTO: Nancy Pelosi had said that -- not to touch entitlements, I think she was talking generally about Medicare and Medicaid, and Social Security. There's a letter circulating in the Senate, sir, I'm sure you're aware, Senators Harkin and Rockefeller, of the same sentiment. Do you agree with that?

VAN HOLLEN: Well, we have very different approaches, Neil, on how we save money in Medicare.

For example, if you save money the way we did in Affordable Care Act by focusing on ways to reduce costs, but not simply transfer rising health care costs onto the backs of seniors, that is the approach that we have put forward, that is the approach that we support. There's lots of things you can do --


CAVUTO: But you are not in the camp, sir, that says don't even look at these? This letter that is circulating in the Senate goes even further, don't even look at them.

VAN HOLLEN: I have not seen the letter, Neil, but those same senators voted for the Affordable Care Act, where they agreed that we needed to change some of the incentives in the health care system.

CAVUTO: So you think that might just be a negotiating tactic?

VAN HOLLEN: Well, no, no, that's not what I'm saying either.

I think what we have said is that we will look at ways to bring down health care costs overall moving away from the strict fee-for-service system in Medicare, and we already have begun to do that. We can build on that. But we will not take a system like the voucher systems that have been proposed and simply transfer the risks and costs of health care on to the backs of seniors on Medicare, which is what a lot of these Republican proposals would do.

We will not do that. So, no, I am not saying it is a negotiating point of view. I think those senators have also supported the idea of trying to change some of the incentives in Medicare to focus more on the quality of care and quantity of care. What they are saying is, we shouldn't simply off-load the costs of rising health care onto the backs of seniors.


CAVUTO: I think, yes, they were talking about that and also load it on the states. But we can argue about that for a while.

But, Congressman, I do want to get your take on what changed among the Democrats after the election to double the revenue ante? By that, I mean, we were looking last time at $800 billion in tax increases as part of the deal and now the president and the others want $1.6 billion and talk you will not accept anything less than a rate hike for wealthier taxpayers.

Do you concur with the rate hike idea, that anything short of that just doesn't cut it, whether you're talking closing deductions, loopholes, that sort of thing?

VAN HOLLEN: Well, you raise two issues. They are related.

One is the amount of revenue you raise. The second is how you raise it. With respect to the amount of revenue, what the president proposed more than a year ago now was a $4 trillion plan that included $1.6 trillion in revenue.

A lot of that revenue, about $1 trillion, would come from having the top rate on high-income earners go back to where it was in Clinton era levels. The other was a proposal the president had to reduce the value of the deductions for high-income earners, one of these tax reform proposals. That achieved about $1.6 trillion in revenue, which I should say is less than the total amount of revenue that Simpson-Bowles have in their deficit reduction numbers.

CAVUTO: But you want to do both. If you had your druthers, you would do both, not only a rate hike, but also limit deductions to the wealthy?

VAN HOLLEN: Well, I think the important thing is to get a balanced deficit reduction plan. The key to that is to have the revenue combined with cuts. Again we did $1 trillion in cuts already. We should look for additional cuts and reforms. We may have differences on how we get there. But we should do that.

CAVUTO: That is why Republicans are saying it is disproportionately on the revenue side. What do you make of that?

VAN HOLLEN: Well, here's the thing, Neil. We did $1 trillion in cuts. That was 100 percent cuts.

What I have said is we should accept the essential framework of Simpson-Bowles, in terms of the total amount of revenue they have in their deficit reduction numbers, plus the cuts. I think that that is a bipartisan product. It's the result of bipartisan negotiations.

I think our aim should be to have a plan that has that amount of total revenue and those spending cuts. But I should be clear that Simpson-Bowles numbers, their starting point assumes the revenue you would get from raising the rates to the higher income level. They do not propose to do it that way. But that's revenue included.


CAVUTO: OK, Congressman. I just want to be clear.


VAN HOLLEN: There are two issues. One is having a balanced plan that has enough revenue to get us to $4 trillion in deficit reduction.

CAVUTO: Right.

VAN HOLLEN: It is hard to do that with just $1 trillion in revenue.

CAVUTO: I understand where you're coming to get to the $4 trillion. We can sort out the details, how the other components are there. But it sounds to me like central to the Democratic negotiations here will be that you look at a rate hike for the wealthy, or in other words, let the rates for the rich go back to Clinton era levels, and limit their deductions.

VAN HOLLEN: Well, in terms of the rates, it is a question of math, Neil. What I think the president is kind of saying is to Speaker Boehner is, look, the tone, the mood is good, but let's see your plan, because the president has had his plan on the table. This has not been a secret. What we are saying to Speaker Boehner is, here is what we think we need in revenue as part of a balanced plan.

CAVUTO: Gotcha.

VAN HOLLEN: We think you get there by raising the rates to the Clinton era levels. We think that is what the math shows you have got to do.

If you have got an alternative way, we will look at it, we're not shutting the door on anything, but we think the way to do it is to have the rate return for high-income earners to Clinton era levels.

CAVUTO: OK. Congressman, thank you very much. Have a safe weekend.

VAN HOLLEN: Thank you. You, too. Have a happy Thanksgiving.

CAVUTO: You as well.

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