Senate Minority Leader McConnell to Democrats: Let's not play Russian Roulette with the economy

This is a rush transcript from "On the Record," July 16, 2012. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Now to Capitol Hill, Senate Minority Leader Mitch McConnell warning the Democrats not to be playing Russian Roulette. What is he talking about? We spoke with Senator McConnell a short time ago.


VAN SUSTEREN: Senator, nice to see you, sir.


VAN SUSTEREN: Looks like a little bit like the showdown at the OK corral over these taxes. Senator Patty Murray says that she's essentially going to let all the tax cuts expire and put it on the Republicans that the Republicans are raising taxes for everybody.

MCCONNELL: Look, this really ought to be about the economy. We know we've got a fiscal cliff coming at the end of the year. If everybody's taxes go up and the sequester kicks in, you're going to have a major recession.

So we ought to quit playing games with this and settle the country down. And step one would be say, Let's extend the current tax rates for one more year. And during that year, do what everybody on a bipartisan basis says they want to do, which is to have comprehensive tax reform. It'd take about year to do that correctly.

Secondly, we need to sit down and figure out if we want to turn off the sequester, how to pay for it. We had a lot discussions last year about how to pay for these kinds of things. They're all still on the table. We ought not to scare the country half to death. They've got enough uncertainty going on with 40 straight months of unemployment above 8 percent.

VAN SUSTEREN: Well, it seems to me both parties have a little bit of selling to do to the American people. The Democrats have the problem in that according to the -- what they propose, president proposes, where taxes go up for everybody over $250,000, that means that the government is financed for eight days. And so they need to sell the American people why the eight days offsets any sort of stimulus effect of having people use that money for business.

The Republicans, on the other hand, need to explain why the people who are very wealthy who may not need tax cuts, why they would feel so inspired to use the tax cuts to create more jobs.

MCCONNELL: Well, you certainly made the point about the president's proposal. It doesn't do anything for deficit reduction, just pay for the government for four or five days. So it's not a serious proposal. It's all about class warfare.

Our point is, when the president says we're going to raise taxes on people making over $250,000 a year, he in fact hits over a million small businesses that don't pay taxes as corporations, they pay taxes as individuals.

VAN SUSTEREN: Meaning the money goes through them personally.

MCCONNELL: Yes. They are -- they are corporations organized in such a way -- S Corps, LLCs -- that they pay taxes at the individual rate. That is some of our most successful small businesses in America. In fact, it's 53 percent of small business income and 25 percent of the workforce.

And here we are going after the biggest job creators in America, small businesses, under the guise of raising taxes on rich people. It's just a nonsense proposal. It'd be bad for the economy. We ought not raise anybody's taxes and the end of the year and use that year to begin to rationalize the whole tax code, which really needs it. Corporate tax rates now in America are the highest of any country in the world. That's not competitive.

VAN SUSTEREN: Well, let me take the other side, is that -- is that why should the American people believe that Washington really is going to reform the tax code? It has had many opportunities and people have known it's been bad and it hasn't been done. And if you do the tax cuts, extend them fully one more year, that still doesn't sort of build in the stability that money business operators need in order to make plannings about capital investments.

MCCONNELL: Well, comprehensive tax reform is actually something Democrats and Republicans agree that we ought to do. It's just that you can't do it in a couple of months. It takes about a year to rationally work our way through it. Ronald Reagan and Tip O'Neill did this on a bipartisan basis in the '80s. It's time to do it again. This is one of the things that we actually agree on, it's just that you can't do it on the back of an envelope over a couple of months.

VAN SUSTEREN: Who's going to blink first? I mean, because this really is sort of a showdown. Either the Republicans are going to blink first on this or the Democrats on this tax. Right now, the Democrats have sort of drawn the line in the sand, saying, Either Republicans agree to our way, or we're going to let all the taxes go up and stick the Republicans with the blame.

MCCONNELL: Look, I don't think playing Russian Roulette with the economy is a smart thing to do. We need to be responsible here. Everybody knows what we need to do at the end of the year. We need not to raise anybody's taxes, particularly do we not want to raise taxes on almost a million of our most important and effective small businesses.

That would settle us down in terms of the fear that rates are going up. And then sit down and talk about how -- if we want to turn the so-called sequester off, there are ways to pay for that. Let's do it as responsible adults and not play Russian Roulette with the American economy.

VAN SUSTEREN: Can we have that done before the election, I mean, before the lame duck because, you know, the American business people, whether you raise the taxes or not, they're sort of sitting on the sidelines, trying to figure out what to do. And every month that goes by as we watch what goes on in Washington, business people really feel apprehensive about making decisions.

MCCONNELL: Well, the House is going to vote, and I think they will approve extending the current tax rates. We are going to make sure we have that vote in the Senate. I can't guarantee the outcome, but I know there are at least six to eight Democrats in the Senate who've said they don't even agree that $250,000 over is rich.

In fact, they're having an internal debate about what's the definition of rich. Some people say a million, some people say 250, some say 500.

Maybe we ought to just come together and extend the current tax rates for a year with an important commitment of the American people that we're going to do something we say we're all for anyway, which is to go through comprehensive tax reform again because we're in an uncompetitive situation with a corporate tax rate that's the highest in the world.

VAN SUSTEREN: All right, let me turn to another topic, the Disclose Act. Your thoughts on the Disclose Act?

MCCONNELL: Well, the latest absurdity. I mean, here they've managed to come up with a bill that's opposed by everybody from the ACLU to the NRA. It's got broad-based opposition. Why? Because it's designed by our Democratic friends to try to punish people who are supportive of Republicans and advantage their biggest ally, the labor unions, which The Wall Street Journal says have spent over $4 billion in money on campaigns over the last six or eight years.

So it's a kind of jerry-rigged proposal to give the government information it needs to go after its political adversaries. And they've already been doing that through the IRS, through the SEC, through the FCC, through the White House itself, which was floating a memorandum that they were going to send out to all the government contractors telling them, in effect, You better disclose, the implication being you won't be able to do business with the government, an outrageous proposal.

It was defeated tonight, and they'll probably make us vote on it again tomorrow and it'll be defeated again tomorrow.

VAN SUSTEREN: Am I correct, reducing it to sound bites, if this is correct, that the Republicans see it as the Democrats wanting transparency as to Republican contributors but not to Democratic contributors? Is it -- is that an unfair...

MCCONNELL: No, that's basically it. And what they want to do is have a carve-out for groups that are supporting Democrats so it doesn't apply to them and only apply to groups that are more likely to support Republicans.

VAN SUSTEREN: If it were across the board, including the carve-outs, would you be in favor of it, including the Democratic carve-out, the transparency?

MCCONNELL: Well, this is small group of those who are involved in the overall political discussion. And I think it's an interesting debate as to whether or not so-called 501(C)4 social welfare organizations should go down this path. If you do, it's going to cover a lot of people.

There was a Supreme Court case right on point back in 1958, NAACP versus the Alabama, where the state of Alabama was trying to get its hands on the donor list and the membership of the NAACP, and the Supreme Court said no.

So that's an interesting debate to have. Most political contributions are already disclosed, those to candidates, those to parties, those to super-PACs that support the presidential candidates. We all know who's contributing because they're already disclosed.

VAN SUSTEREN: Senator, thank you, sir.

MCCONNELL: Thank you, Greta.