Pres. Obama's Plan for Avoiding Fiscal Cliff
BLITZER: One of the most pressing issues right now for the president of the United States, how to avoid what's called the fiscal cliff. The president is planning a series of meetings with outside groups before sitting down with members of Congress. I'm joined by our chief White House correspondent, Jessica Yellin. Jessica, what's the strategy here?</s>JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT (voice-over): Hey, Wolf. Well, you know, the president said he felt that one of the problems in his first term was he got stuck in, basically, a headlock with Congress. And he clearly doesn't want to start there in a second term. So, in the next two days, he's meeting with labor leaders, progressive groups, business and opinion leaders, essentially, to get Democrats on the same page and shore up his own base before talking to Congress. Now, afterwards, you can expect them to send out selling the message, pressuring members of Congress to pass whatever comes up the negotiations. Also, Wolf, to press the president on their own agenda for the fiscal cliff.</s>BLITZER: The Democrats, as you know, Jessica, they are certainly not all on the same page, are they?</s>YELLIN: No, they're not. And you know, we focus on how this is a struggle between the White House and Republicans. It's also a struggle within the Democratic Party. Some Democrats, they say, taxes should go up for families making $250,000 and more like the president. But some say that hits too many middle class families, especially urban and suburban areas. They want the line to be higher, $500,000 or a million dollars and more. Those are the people who should see their taxes go up and then close deductions for those people, too. So, there will be challenges within the Democratic Party to get everyone together as well as within the Republican Party and some of those labor leaders meeting with the president also want to make sure he doesn't touch Social Security, Wolf.</s>BLITZER: The president repeatedly says he wants taxes to go up for people who make $250,000 a year or more. So, is that negotiable?</s>YELLIN: That's big question. You know, that is the official position of the White House. Last week, the president repeated that people making 250,000 and up must pay more was his phrase. He didn't say what rate they must pay. But the question is, will the president move of that? You know, he has made clear, the president has, that he learned lessons from negotiating in his first term. And one theory is, he could be playing tough with this line and maybe it will be move. He does have a forcing mechanism this time around. Taxes automatically go up if Washington does nothing. So, he has extra motivation on his side to force a deal, maybe that number could change.</s>BLITZER: Because if Congress does nothing between now and the end of the year, taxes go up on everyone, not just on the wealthy, middle class families. Everyone will see a hike in their taxes starting January 1st.</s>YELLIN: It gives him more leverage.</s>BLITZER: Yes. All right. Thanks very much, Jessica, for that. Let's dig a little bit deeper right now into these crucial negotiations. Our CNN contributor, former Bush speechwriter, David Frum, is joining us. He's the author of a brand-new e-book entitled "Why Romney lost?" Listen to Grover Norquist. As you know, he's a powerful guy here in Washington, got a whole bunch of Republicans out there to sign a pledge that they would never raise tax rates, taxes. Listen to what he said this morning on CNN.</s>GROVER NORQUIST, FOUNDER AND PRESIDENT, AMERICANS FOR TAX REFORM: There's a compromise to be made. Maybe we don't get as much in spending restraint as the Republicans want, but raising taxes on, you know, a little bit doesn't solve the problem of the massive spending problem that we have.</s>BLITZER: So, is there an opening here? Am I hearing an opening from some of these Republicans, these conservatives in terms of raising tax rates as the president is demanding? You heard Bill Kristol what did he say (ph). What do you think?</s>DAVID FRUM, CNN CONTRIBUTOR: Well, first, I have a feeling of unreality about this whole debate. Eighty percent of Americans pay more in payroll taxes than in income taxes. We have a payroll tax holiday right now that saves those people, saves all of us who earn income two points of payroll tax on the income people earn up to $110,000 worth of income. Now, that holiday expires at the end of this year. And Washington completely accepts that as a fact. Nobody is perturbed, nobody cares. All of the focus is on the prospect of an increase in income tax rates for people who earn a great deal more. And it's a sign of how separated the debate in Washington can be from the debate in the country, that the payroll tax is not a big deal, and the prospects of these income tax rate increases are such a big deal.</s>BLITZER: People are going to feel a pinch with an increase in the payroll taxes.</s>FRUM: Some economists think that that one expiry alone could be a shock of a half or three-quarters of a point to GDP. And if that's right, in an economy growing at two percent, that shock is bigger news than this whole discussion --</s>BLITZER: OK. Here's what you wrote on the "Newsweek" and "Daily Beast" website today, "If social conservatives can shift their way from the urge to ban and condemn and instead think about how to support and encourage, they can be a rich source of inspiration for the larger conservative world and the Republican Party in the years ahead as conservatives and Republicans face the challenge. How can the party regain its historical role as the champion of the American middle class?" So, you're giving some serious advice to these social conservatives.</s>FRUM: Yes. One of the things that I've been very disturbed and maybe this point of other payroll tax strive (ph) at home is that the conversation we've been having in the Republican Party has been to say we were not wrong about the Ryan Plan. We were not wrong about the 20 percent tax cut. We were not wrong about our very ambitious plans to pivot before this recession is over to deficit reduction. The only thing we were wrong on was the immigration issue. And that is a very easy way to think if you're economically comfortable. But all of those other issues I think and I argue in why Romney lost are much more important to what happened to Republicans and not just in 2012 but in 2008 and in elections before that. And one -- I mean, there's a lot about social conservatism to be unhappy about. It can be culturally reactionary. The impulse to ban everything that people don't like is a retrograde one, but at least, they are the part of the party that connects the party to the aspirations of the middle class, which it could otherwise drift away from.</s>BLITZER: We got to go now, but we're going to continue the conversation on what you call the conservative entertainment complex down the road. Stand by. We're going to continue that conversation as well. Fascinating material from David Frum. Thank you, David. So, how well are General Petraeus and Paula Broadwell handling all the public scrutiny? Up next, I'll ask a close personal friend of both of them, our own David Gergen. Stay with us. You're in the SITUATION ROOM.