Is Pres. Obama's Deficit Reduction Plan a 'No-Brainer'?

This is a rush transcript from "On the Record," September 19, 2011. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: And as you know, 12 members of Congress, six Republicans and six Democrats, have been assigned to the so-called super-committee to figure out where to cut and where to find revenue. It's hard to make friends when you are trying to cut and raise revenue. We spoke with one of its members, Congressman Chris Van Hollen, Democrat from the great state of Maryland.


VAN SUSTEREN: Sir, I assume that you heard the president's speech this morning.


VAN SUSTEREN: One of the things he spoke about -- and I don't know if you know this, but I've spoken to a lot of wealthy Democrats who are not happy with the reference that he also made today about millionaires and billionaires having to pay their fair share. Are rich Democrats currently paying their fair share or not?

VAN HOLLEN: Well, the issue was making sure that very wealthy people, people making over a million dollars a year, pay essentially the same effective rate as most of the people who work for them.

VAN SUSTEREN: That's not the question! With all due respect because it's not new today and we'll get to the Buffett -- Warren Buffett's issue, but I'm talking about, are wealthy Democrats paying their fair share? Have they been paying their fair share for the last two, three, four years?

VAN HOLLEN: I think people who have been getting special breaks, special tax preferences are not paying their fair share. They're not paying -- sharing the responsibility and trying to address the challenges that our country faces.

What the president was doing was laying out a long-term deficit reduction plan and says that over a period of time, we have to reform our tax code in a way that eliminates preferences that benefit certain special interests and have disproportionately benefited very wealthy people.

VAN SUSTEREN: What do you think would be a fair share percentage of income -- earned income that the wealthy should pay?

VAN HOLLEN: Well, if you go back to the 1986 Reagan tax reform proposal, they had the same rate applying to both income on capital gains and dividends and earned income. So the last time we had a big tax reform proposal under President Reagan, that was the result. An equal tax rate applied to folks who earn most of their income through investments in the stock market and people who earn their income by working for wages.

If that was a good enough tax reform plan for Ronald Reagan, I don't know why it's not a good enough approach for Republicans today.

VAN SUSTEREN: So to see if I understand you correctly, that the issue with Warren Buffett is he doesn't earn his, like a salary, his income, but he gets it because he's been a successful man and he gets, for instance, capital gains from his, that that's why he's in a lower tax bracket. It's not like he doesn't have an earned income.

VAN HOLLEN: Well, Warren Buffet said it himself, that he gets most of his income through capital gains and dividends through investments. And in our current system, that's taxed at a 15 percent, a much lower rate than a middle-income taxpayer would pay or someone who was at the 28 percent tax bracket now.

So the point Buffett is making is that it's not really fair to tax income that is earned through dividends and capital gains at such a lower rate than wage income earned by people who are, you know, going to work every day and earning their living through the sweat of their brow. There's nothing wrong with earning your money, obviously, through capital gains and dividends. The question he properly raised was why should people benefit from such a lower tax rate on that income, compared to income earned from people making wage income?

VAN SUSTEREN: I think just -- I think some of the gripe with some of the wealthy people that I've spoken to is that by the reference of "fair share," it suggested they've been cheating, when they've been paying everything that has been asked of them. And I think that's probably a little bit of the rub, to create sort of -- and I hate to use "class warfare" because I hear it all the time, but that the reference to not paying their fair share is -- I think that's one of the issues for them.

VAN HOLLEN: Greta, that's ridiculous. No one's accusing people of not meeting their legal obligations. The point is the tax code as it's currently written provides a much lower tax rate for people who earn their income through investments, capital gains and dividends, than it does for many people who earn their income by going to work every day and earning a wage.

And what Warren Buffett was pointing out is that his effective tax rate is, in fact, lower than the effective tax rate of the people who work for him, including his secretary.

VAN SUSTEREN: All right...

VAN HOLLEN: So it's not that -- no one's -- Warren Buffett is complying with the law. All these individuals are complying with the law. The point he's making is we should change the law to make it more fair and to have shared responsibility.

VAN SUSTEREN: All right. Now, the -- everyone in this country is worried about jobs. Democrats are worried about them, Republicans, and if you're unemployed, you're really worried about the unemployment rate. I'm curious how you grade the February '09 stimulus bill for job creation, since in many ways, what the president has proposed is -- somewhat parallels that one. So what grade do you give the February '09 stimulus as it impacts jobs?

VAN HOLLEN: Well, you don't have to take my grade for it. All you have to do is look at the grades given it by nonpartisan groups like the Congressional Budget Office. They didn't give a grace, they just gave the facts, and they said that...

VAN SUSTEREN: But I mean...

VAN HOLLEN: ... the stimulus bill...

VAN SUSTEREN: But I'm trying to...


VAN SUSTEREN: I want your grade, though, because I'm trying to evaluate how good it is in your mind. And you know, if you give me a number, like, you know, did it achieve that which you wanted?

VAN HOLLEN: Yes. The recovery bill prevented the economy from getting a lot worse a lot faster. It prevented millions of Americans from losing their jobs. Are we happy with the current situation and the status quo? Of course not. But this is kind of like running down an escalator -- running up an escalator that's moving down quickly. If you hadn't done the stimulus bill, the recovery bill, you would be much farther down.

But even with the recovery bill, sometimes you feel like you're running in place because the economy was on a huge downhill slide -- 700,000 Americans were losing their job every month before the president was sworn in. So he inherited an economy that was falling through the ceiling. The recovery bill helped stabilize people. In fact, it has helped put people back to work. We now have very, very slow economic growth.


VAN SUSTEREN: You can see the entire unedited interview with Congressman Van Hollen at