Stocks suffer steep drop amid worsening economic news

This is a rush transcript from "Your World," June 21, 2012. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST OF "YOUR WORLD": Well, stocks selling off, new signs the economy is slowing down, as a key read on manufacturing suffering its worst drop since last summer.

Does this worry, this overall environment, Congressman Chris Van Hollen, of course the Democrat on the Budget Committee?

Congressman, good to have you.

REP. CHRIS VAN HOLLEN, D-MD.: Neil, it's good to be with you.

CAVUTO: Dicey environment. Do you think we slipping into something, Congressman, something worse, a slowdown, maybe even a recession?

VAN HOLLEN: Well, obviously, the European situation has been very worrisome. And if the contagion were to jump across the Atlantic, it obviously would have a negative impact on the economy.

Ben Bernanke, the chairman of the Federal Reserve, has been watching that. And he has said, very recently, that the Federal Reserve would be prepared to take countervailing actions.

But the reality is we need to focus on what we can with respect to the American economy, which is why we should take up the president's jobs bill, which is still sitting on the shelf here in the House of Representatives, and take other actions like pass the transportation bill, because, in two weeks, the authorization to invest in our transportation system will expire. That will hurt the economy...

CAVUTO: But is it bigger than that, though?

VAN HOLLEN: ... hurt jobs.

CAVUTO: Do you wonder -- you mentioned, sir, the Federal Reserve, it provided this $267 billion gift yesterday to this Operation Twist.

I don't want to get arcane, but it was more stimulus from the Fed to buy Treasury notes and securities in the market and try to goose this puppy and it is not working, big sell-off again today, big fears that U.S. banks are about to be downgraded again today.

You almost get a sense that we are sinking fast here. What do you think?

VAN HOLLEN: Well, I don't think we are sinking fast.

I think Europe is obviously fighting a really tough problem and they need to get on top of it in a systematic and sustained way. And obviously, the Germans are key to that, Angela Merkel is key to that. Hopefully they will be able to put together a plan to begin to stem the tide uncertainty, but we have limited leverage, as you know, Neil, over what happens in Europe.

CAVUTO: Right.

VAN HOLLEN: So we have to do everything we can to shore up our own economy right here at home.

CAVUTO: Then let's talk about what you guys can do. And you have always tried to find a middle ground to try keep the dialogue going forward. And I people who either agree or disagree would commend you for that, as do I.


CAVUTO: But I wonder whether we are getting the hint of a middle ground deal, sir? And by that, I mean that this willingness on the part of some Republicans, some -- and I could be wrong on that -- Grover Norquist might say otherwise later in the show -- to look at closing tax loopholes and special allowances and breaks and sign on to that, not necessarily with signing on to moving tax rates north again...


CAVUTO: ... would be enough to get you and your fellow Democrats to the table on some of these cuts.

But it has got to be mutual, in other words that you have both got to I don't know, jump off that fiscal cliff at that same time. Is that where we stand? Is that what this is about?

VAN HOLLEN: Well, I hope our Republican colleagues are going to -- are moving in that direction.

My guess is Grover Norquist will tell you that everybody is firm on the pledge and they still oppose the idea of even one penny of new revenue going to deficit reduction. I hope you hear otherwise from him.

But you're absolutely right, Neil. In order for us to deal with these issues, we have to do two things, one, get the economy in gear right now, because every day you have a soft economy, not only are people out of work, but the deficit gets worse.

Second, you need to deal with the long-term deficit situation in order to ensure long-term economic growth. To do that, you need a combination of cuts, not today and deep, but steadily over a period of time, and we support those cuts. We did $1 trillion of cuts on a bipartisan basis last August. There are additional cuts and reforms that need to be made. But the...


CAVUTO: But your Republican colleagues, Congressman, say they are willing to entertain this pact, not all of them being quoted here, but here is what they fear, that Democrats are going to hoodwink them, that they are agree to cuts, but they are not going to do their part of the bargain, so then Republicans will have egg on their face with the base by agreeing to what is a tax hike to some, just a revenue closer to others, but by and large, they are going to be snookered. And they fear you are going to snooker them. What do you say to them?

VAN HOLLEN: Well, no. I support the framework that Simpson- Bowles, the bipartisan Simpson-Bowles commission came up with, which says that we need to reduce our deficits.

So the cuts would go to reduce our deficits. The additional revenue will also go to deficit reduction. And our argument has been we need a balanced approach, because if you say from the beginning that you are not going to get one penny of additional revenue, it does you have to whack everybody else harder.

That is why you would have to transfer more costs to seniors on Medicare, median income $23,000. I don't think that we should be asking seniors to take on additional risk and cost when we're not asking...


CAVUTO: But you think we are -- but you think we are closer to something? You think we are closer to something?

VAN HOLLEN: Well, I'm not sure we are.


VAN HOLLEN: I think Grover Norquist may be able to report on his meeting.

CAVUTO: All right.

VAN HOLLEN: But the reality is, Neil, 98 percent of House Republicans have signed a pledge.

CAVUTO: All right.

VAN HOLLEN: And under the interpretation of the pledge, if you close one tax loophole or get rid of one subsidy, you cannot use that dollar to reduce the deficit under the pledge. That is a violation of the pledge.

Hopefully -- maybe Norquist will be changing his interpretation, which would be great.

CAVUTO: We will see.

VAN HOLLEN: It would be healthy.

CAVUTO: We will see.

VAN HOLLEN: Thank you. All right.

CAVUTO: All right.

VAN HOLLEN: Well, that would be great.

CAVUTO: All right.

Congressman Chris Van Hollen, always good seeing you. Be well.

VAN HOLLEN: Likewise. Thank you.

CAVUTO: All right.

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