Debt Ceiling Become Latest Pawn in Battle Federal Deficit
ALI VELSHI, HOST: I've got a message for everyone, from Tea Party supporters to backers of President Obama, if you are serious about dealing with our long-term debt in this country, then it is time to acknowledge that we need to talk about tax increases and spending cuts. I'm Ali Velshi. Welcome to YOUR MONEY. The debt ceiling has become the latest pawn in the battle over how to reduce our federal deficits. The Obama administration insists not raising the debt ceiling would be catastrophic, yet a number of Republicans are not blinking. Will Cain is a CNN contributor. Will, listen to this, I was among those in attendance this week when speaker of the house John Boehner made clear that he wants to see spending cuts equal to any debt ceiling increase. Listen.</s>REP.  JOHN BOEHNER (R-OH), HOUSE SPEAKER: We should be talking about cuts in trillions if we're serious about addressing America's fiscal problems. And these should be actual cuts, real reforms to these programs, not broad deficit or deficit targets that punt the questions to the future. And with the exception of tax hikes, which in my opinion will destroy American jobs, everything is on the table.</s>VELSHI: Will, what serious conversation about debt reduction begins by absolutely taking the possibility or discussion of tax hikes off the table?</s>WILL CAIN, CNN CONTRIBUTOR: Not very many serious discussions. I don't know. I remember when I was little; my dad took me to a car dealership Ali and said, this is how you buy a car. I remember they wrote the numbers down on a piece of paper and passed them across the table. My dad's number I'm sure was excessively low. That's the only explanation I can give for Boehner's statement, opening with a very aggressive fear that you know that you will fall back on later. But to the point that you are asking, yes every serious conversation has to have both included. That is why I look to guys more like Tom Coburn. You can't question Coburn's ideological position, he is conservative. But he understands reality.</s>VELSHI: I hope you're right. That's what people around me at that speech were saying. That it's an hoping salvo. Jeanne Sahadi, senior writer with CNNMoney. Jeanne, we wanted to keep our debt at the level that it's at right now, not reducing it just simply keeping it from growing just through spending cuts, we'd have to cut our spending by 35 percent, that is about 1.2 trillion dollars or basically our entire government's budget for discretionary spending, including defense. Now to achieve the same goal of keeping our debt where it is just through tax increases, so forget about spending cuts, the government would need to take in 50 percent more in tax revenue. Bottom line is it seems to me that we have to do both. As I explained earlier, it's simply not feasible to seriously tackle our debt without both spending cuts and increasing revenue. Although you will continue to hear some conservatives say, this is a spending problem, not a revenue problem. I know this, you know this when is Washington going to start reflecting this?</s>JEANNE SAHADI, SENIOR WRITER, CNNMONEY: Well I think under a couple of scenarios. One if we have a bond market crisis, which is not necessarily likely but that would definitely inspire people to get busy negotiating and compromising. The other might be if Americans stand up and say, you know what? I don't want a third of the federal budget cut. I want to have some of the federal budget cut but I'm also willing to pay a little bit more in taxes. Board members of the Concord Coalition, which is a deficit watchdog group, said something really smart this week. The board is made up of formal lawmakers from the left and the right and they basically said, look, neither party has the muscle or the public trust to push through a one-sided solution. They don't have the votes for it. So bipartisan solutions are mandatory, it's not an option. Compromise shouldn't be seen as giving up or conceding too much --</s>VELSHI: Well it seems like it does feel like that these days. Let's bring Roland in. Roland Martin, CNN contributor. Roland, treasury secretary Geithner says August 2nd is really the day he runs out of options to keep America from defaulting on its debt. Part of me wishes he never said that. Because somehow I think on August 1, we are all going to be around here wondering what is going to happen. But it is this climate of fear. Is it necessary for politicians to finally reach a meaningful compromise by threatening that the worlds going to come to an end? Is this not the business of Washington? And frankly, don't Democrats have some bigger role to play here in saying, all right, we get it, we have to cut a lot and we need some tax increases?</s>ROLAND MARTIN, CNN POLITICAL CONTRIBUTOR: Ali, I'll give you this example. There are people sitting at home right now, they have been extending paying their light bill, paying their phone bill. And until the light company or the phone company sends them a notice saying, at 5:00 p.m. on Friday, your lights are going to get cut off unless you pay this bill, then people actually respond. That is the American way. We operate by fear. We wait until the last minute. We sit here and procrastinate. That is what we do. We're very good at that. We're not all about planning and being proactive and going on the offensive. When I watch this conversation, when you listen to speaker Boehner, first of all, he throws out trillions in cuts. But he won't specify. I think it is dangerous just to say trillions in cuts. When you also say, frankly, we're not going to have tax increases. Now, understand this, you have Republicans who will even suggest that if you get rid of oil subsidies, that's somehow a tax increase. And so they tack anything on as a tax increase. Democrats also don't want to be honest on this conversation as well. This is the biggest problem that we have. The last point Ali, the American people have got to stop sitting here playing around as well. They can't say, I don't want anything cut. Oil companies are saying it. American taxpayers are saying it. And so we have the same problem every single year.</s>CAIN: Ali, let me say, Roland's right on one point very specifically. Winston Churchill just once said, you can count on the American people doing the right thing once they've exhausted every other option. We need these emergency situations to do the right thing. So, yes, I don't think this is being overplayed. In fact, I would say if we do not raise the debt ceiling and we force short-term cuts, we hold the debt ceiling hostage well then you get ready for depression. That's where we are. Our economy is that fragile. The debt we've accumulated is that great. We have to cut.</s>VELSHI: But your fellow conservatives know that, right? I mean the fact is we know there are some people playing games with, we're not going to do this or that. The people you talk to understand that we're going to have to arrive at some compromise both on the debt ceiling and some kind of debt reduction plan?</s>CAIN: Yes. And let me try to explain their position, I talked about Boehner's poker hand earlier. This is the other problem. Whenever you have given Washington an extra dollar of income, they have made that an extra dollar of spending. It comes in, they spend it out. We need to see that extra dollar of tax increase will go to reducing the deficit. We have no history to suggest that will happen.</s>MARTIN: But also the other issue is when you hear Republicans say, oh, tax cuts are somehow going to spur the economy, it's going to cause people at the top income levels to begin to hire, and that's also not true.</s>VELSHI: Is that true, Jeanne?</s>SAHADI: Tax cuts help the economy? I think that Democrats and Republicans both have a point. Republicans are ready to raise taxes too much, you can hurt economic growth. Democrats are ready to cut spending too much you can hurt economic growth. Will is right because we don't have the public trust that the tax dollars will be used well. And if our taxes are increased, that that's what it will be used for. That's a hard intangible that both parties are going to have to work with because eventually if we come up with a bipartisan solution we are going to have to sell the public.</s>VELSHI: Well this is going to be a much easier conversation when we have specifics to deal with. What exactly do you want to go up in taxes and what exactly are you prepared to cut? I think we all agree, this is a much better conversation to have on specifics than in theory. Jeanne, Roland, stay where you are. Will, stay where you are. It's a basic concept. Your tax dollars are simply not enough to sustain your government. So I'm going to show you exactly where your money goes and why Washington does need a whole lot more of it up next.