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Fixing The Budget, While Protecting The Middle Class

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ARI SHAPIRO, HOST:

Now, the negotiating table on the fiscal cliff seems pretty empty right now. A phone conversation yesterday between President Obama and House Speaker John Boehner was their first in a week. The biggest sticking point still seems to be whether tax rates for the wealthy will go up or stay the same. And, of course, if there's no agreement before January 1st, automatic tax hikes and spending cuts will kick in. Earlier this week, we talked to analysts on both sides of the divide, and yesterday, we heard from a Republican member of the House Budget Committee.

Today, we conclude this series on the fiscal cliff by talking with a Senate Democrat. Sheldon Whitehouse, of Rhode Island is on the Senate Budget Committee, and he joins us now from a studio on Capitol Hill. Welcome.

SENATOR SHELDON WHITEHOUSE: Thank you, Ari. Good to be with you.

SHAPIRO: OK. So, Senator Whitehouse, let's start with today's actions. Senate Majority Leader Harry Reid scheduled a vote on raising the debt ceiling. It didn't go anywhere. I think many impartial observers expected that it would go nowhere, and also see this as kind of a finger in the eye of the Republicans. Is this supposed to bring people to common ground?

WHITEHOUSE: Actually, what happened on the Senate floor today was that the Republican leader, the minority leader asked unanimous consent to move to a vote that would give the president the authority to raise the debt limit and would lift the shadow of another debt limit fight off the markets and the economy. And so the majority leader, the Democratic leader, Harry Reid, took him up on it and said sure. We will do what you suggest. And when he organized the vote, out came the minority leader - whose motion it was in the first place - and he objected to and proposed a 60-vote filibuster on his own proposal. So if anything, this is a fight between the Republican minority leader and himself, which makes it not very big in the partisan struggles within Washington.

SHAPIRO: I want to listen to two cuts of tape, both from yesterday, about the role that raising the debt ceiling will play in this entire fiscal cliff debate, and then I'd like you to respond to them. First, this is President Obama at the Business Roundtable yesterday speaking to a group of CEOs.

(SOUNDBITE OF SPEECH)

PRESIDENT BARACK OBAMA: If Congress in any way suggests that they're going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation - which, by the way, we have never done in our history, until we did it last year - I will not play that game.

SHAPIRO: OK. That, of course, was the president. And now here's a cut from Jason Chaffetz, Utah Republican, congressman who was speaking on this program yesterday.

(SOUNDBITE OF INTERVIEW)

REPRESENTATIVE JASON CHAFFETZ: That's an absolute nonstarter. There's no way we're interested in just allowing the federal government to continue to operate with a limitless credit card.

SHAPIRO: So, Senator Whitehouse, if Republicans insist that the debt ceiling will be a part of these fiscal cliff negotiations, is there anything President Obama or the Democrats can do to keep them from being so?

WHITEHOUSE: Well, I think we're talking a little bit at cross-purposes, here, because I think what we don't want is to have a set of negotiations over the various things that are happening at the end of the year that collectively have started to be called by the media the fiscal cliff, and then immediately roll into another set of negotiations on essentially the same topic, in this case triggered by the debt limit.

So I do think that an understanding that the debt limit will be allowed to increase should be a part of the conversation that we're going through right now on this budget and deficit question. Clearly, the Republicans would like to have two bites at the apple, and the more extreme members of the party don't really care about the full faith and credit of the United States. So it's a dangerous shadow to hold over the economy. And I think it should all be wrapped up in one negotiation rather than have to go through this twice.

SHAPIRO: Let's take a big step back. We asked Congressman Chaffetz yesterday, does the election matter? And he said it was a stasis election. From your perspective, does the election result inform the cards that each party has in this debate over the fiscal cliff?

WHITEHOUSE: Yeah, I think so. The president was not only re-elected; he was re-elected handily, winning the popular vote by a large number and swamping the Electoral College. In the Senate, it was an absolute blowout for the Democrats, and they only held onto the House, where they lost the popular vote, because they had engaged in so many redistricting games in the states where they control the redistricting that they had built safe districts for their members.

So it was clearly a huge Democratic win, and the message of that win was a simple one, and that is we need to protect the interests of the middle class, which have been overlooked in Washington while special interests got special deals, and special tax rates and special bailouts. And I think people were sick of it, and they associated the Republicans with a lot of those special interests and, you know, millionaire and billionaire deals.

And I think there's a very strong message coming out of this election. The Republicans don't want to admit that there was that message because they know they're running against the current of American popular opinion when they hold out for, say, tax breaks for the top two percent. But I think it's a pretty undeniable fact if you go to people who are not, you know, in the game like Representative Chaffetz and I are and ask people what they think about how this election turned out, I think they'd say the Democrats won.

SHAPIRO: And polls show that if Congress does not reach a resolution - in poll after poll, Americans say they would blame Republicans. I've heard many Democrats, as you've implied, say that Democrats have the upper hand in this negotiation. Treasury Secretary Tim Geithner said the White House is prepared to let the deadline pass without a deal, knowing, of course, that Republicans would share perhaps more than half the blame for that. Is the Democratic Party ready to see this unresolved? And if so, is that good leadership?

WHITEHOUSE: I think the test of leadership in this particular financial and budgetary question is, first and foremost, how things turn out for the middle class as a result of the deal. And if the choice is between a lousy deal for the middle class, because everybody's gotten panicked about the fiscal cliff and will settle for anything on December 31st, versus a deal on January 15th, when that Grover Norquist oath has largely evaporated because the tax rates themselves have moved and, as a result, we get a much better deal for the middle class, then I think it's worth a couple of weeks of potential uncertainty in the market and potential uncertainty for folks about where their rates are going to be. They can all be cleaned up in the deal that two weeks later.

So I think going beyond January 1st, this is not a fiscal cliff in the sense that January 1st happens and it's all the way to the desert floor like Wile E. Coyote. This is a thing that increases very, very, very gradually over the months and the years that no action would have to take place in order for those projections to come true.

SHAPIRO: A lot of economists have said not reaching a deal on this could lead to a second recession. So far, Wall Street has been pretty stable. Stocks aren't going crazy.

WHITEHOUSE: To be precise, Ari, what the economists are saying is that not reaching a deal, ever, on this - that's what the CBO prediction is: If you never reach a deal, then it could lead to a recession. But I don't think there are any economists who predicted if you reach a deal on January 15th, that's going to - or January 30th, or even February 15th, that that will cause anything like a recession.

SHAPIRO: So I hear you saying that no deal is better than a bad deal. What are the chances that President Obama agrees to what you would consider to be a bad deal and Democrats don't go along for the ride?

WHITEHOUSE: I think there's always that chance, but the president, I believe, has indicated, pretty strongly, that the core parts of the defense of the middle class that we're trying to effect here, which are leave Social Security alone, don't cut Medicare benefits and make sure that the highest-income Americans are no longer paying lower tax rates than middle-class Americans and are paying a fair share into the economic recovery - he's been pretty ironclad on all of those. And he has reason to be, because if he just leaves things alone, that's the way the law turns out on January 1st.

So we're pretty confident that there's not going to be a lousy deal struck. If there is a really lousy deal struck that attacks Social Security or injures Medicare or doesn't deal with the long holiday from tax responsibility that so many high-income people have been on, then, you know, I think there may prove to be a problem then. But I just think, practically, that's not going to happen.

SHAPIRO: Yesterday, House Speaker Nancy Pelosi said raising the eligibility age for Medicare should be off the table. You wrote a letter to President Obama and published an op-ed in Politico, saying benefits should not be cut. To me, that sounds like you're a little nervous that the White House is going to negotiate some things that the Democratic Party is not happy with.[POST-BROADCAST CORRECTION: Nancy Pelosi is the House Minority Leader.]

WHITEHOUSE: Well, I think that's a possibility. I think the purpose of my letter was also to speak, obviously, primarily to the president because he's the chief executive, but to everybody who is engaged in this discussion - because I felt that the Medicare benefits discussion was veering off course and that people who were just pure deficit cutters were looking at this as just an entitlement program and just something that if you were responsible, you had to look at cutting, just for the sake of looking responsible, and all of that. And I think the key fact in all of this is that the American health care system is wildly inefficient and expensive. Eighteen percent of GDP compared to our most inefficient competitor internationally at 12 percent, so there's an enormous amount of savings that we can and should achieve in our health care system. Forty percent of those savings come back into the federal budget, and that should be the target. To go directly at Medicare and Medicaid, when the problem is cost in our health care system overall, is a fundamental misdiagnosis of the problem. And treating it that way is ultimately economic malpractice.

SHAPIRO: We're talking about the fiscal cliff with Democratic Rhode Island Senator Sheldon Whitehouse. And you're listening to TALK OF THE NATION from NPR News.

Senator Whitehouse, we've talked a bit about whether Democrats will go along with whatever President Obama proposes. On the flipside of that, there are real questions about whether Republicans will go along with whatever House Speaker John Boehner proposes. Now, I know you're not part of that club. But being in Congress, what do you see? Does the president have a solid negotiating partner who can represent his own party's views?

WHITEHOUSE: I would hope so. I think the choice for the Republican Party, right now, is a very clear one. They can either run off the cliff with the Tea Party lemmings or they can dig in their heels and have responsible and mature voices in the party, say, no, we're not going to do that, enough of that. And I think the business community, the big business organizations, like the U.S. Chamber of Commerce and the NFIB, have an important role to come in and tell the Republican Party, which they sponsor primarily, look, fellas, this is serious and we don't want any more of this clowning around. And we expect you to straighten this out, and there are going to be political consequences for you if you don't.

And I think if the speaker gets that kind of backing, then I think that they can overcome the resistance of the Tea Party. But I think it is a problem for them on the Republican side. It's the problem that the election exposed, the candidates who the - the extremist candidates that the Tea Party forces to be Republican candidates in the primary elections then lose when the American public gets a look at them in the general election.

SHAPIRO: Yesterday was the first time in a week that Speaker Boehner and President Obama talked on the phone. From the outside, it doesn't look like a very intense pace of negotiations. Are you confident about the level that the talks are happening, the pace the talks are happening now?

WHITEHOUSE: I am. I think that at the staff level, people are very, very engaged in trying to come up with different ideas. I think the president has laid out exactly what it is that he wants. He is waiting for the House to make a detailed counteroffer. They haven't managed to pull one together yet. But as the clock ticks down, his position only gets better and the middle-class values - the middle-class programs that we're trying to defend here, I think their position improves. So I'm actually pretty satisfied with the pace of what's going on. And when it comes time for the leaders to actually close the deal that staffs have worked through, then I think it's - that's when you'll start to see more activity.

SHAPIRO: OK. So this week, the White House had its annual congressional holiday party. And I have to ask, were people standing around munching lamb chops and drinking champagne and talking about the fiscal cliff? Like, was it icy in there? What was the tone?

WHITEHOUSE: No, it wasn't icy at all. It was very, I thought, friendly and cheerful and many of the Republican members of Congress, who spend their time on the floor pillorying and criticizing and attacking the president, were there happily working away at the lamb chops and the champagne.

SHAPIRO: As were the Democrats, I'm sure, even if they don't pillory the president quite so much. This sort of gets to a central question. I put out a call for questions on Facebook, and Tim Viola(ph) asks something that, I think, a lot of people want to know. From your perspective, he said, how much of what the public hears on the fiscal cliff is accurate versus political posturing and semantics clouding what's actually going on behind the scenes?

WHITEHOUSE: I think that the - to go back to the example I used earlier of the, you know, Wile E. Coyote plunging cliff...

SHAPIRO: Right. Plunging to the desert floor.

WHITEHOUSE: And when you step over it on January 2nd, it's a long zoom down to the desert floor and a puff of dust at the bottom. That's the image that the fiscal cliff tends to create, and it's simply an inaccurate image. The Congressional Budget Office said that if you go past January 1st and don't resolve the budget issues and the things that happen January 1st all happen, then over the following year if nothing gets done, it will have a really degrading effect on our economy.

SHAPIRO: We have to wrap this up. But I hear you saying...

WHITEHOUSE: But I don't think that anybody believes that's going to happen.

SHAPIRO: You're not saying, relax, we'll reach a deal. You're saying, relax. It'll be fine if we don't reach a deal.

WHITEHOUSE: Relax. It'll be fine if we don't reach a deal until January or February or sometime in there.

SHAPIRO: All right. Senator...

WHITEHOUSE: Ideally, ideally, we'll reach that deal before January 1st. But people shouldn't panic.

SHAPIRO: Senator Sheldon Whitehouse, thanks so much for your time.

WHITEHOUSE: Thank you, Ari.

SHAPIRO: Senator Whitehouse is a Democrat on the Senate Budget Committee, and he spoke to us from a studio on Capitol Hill. Tomorrow, it's TALK OF THE NATION: SCIENCE FRIDAY for a look at the evolution of laughter, and Neal Conan will be back in this seat Monday. This is TALK OF THE NATION, from NPR News. I'm Ari Shapiro, in Washington. Transcript provided by NPR, Copyright NPR.

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