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Rove, Trippi on prospects for reaching 'fiscal cliff' deal

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    Is there a path to reaching a compromise?

  • Duration 9:23
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Let's talk about the implications of the looming fiscal cliff.

Karl Rove is former top advisor to president George W.

Bush.

Joseph Trippi is veteran democratic strategists we thought it worked in the electoral map we thought the fiscal cliff get him in Iran and try to solve this thing.

Gentlemen welcome back unity that different challenge.

OK we've talked a lot about taxes really it's been the dominant conversation but since.

It's been a dominant part of the conversation let's start there.

The compromise how do you get to the compromise.

On the -- -- Joseph let's start with you.

Well look the president's asking from one point six trillion in revenue.

And really there's no way it.

That's taken a tax rates operates a 39%.

There's I think there's gonna have to be rate increase there's no way the Democrats are gonna -- for -- for less than a rate increase I think the 37%.

Might be good place.

-- seems to be some possibility for compromise.

But then the president I think it's gonna have to give and go down to the senate bill that says 20% tax -- capital gains and and dividends.

And I think the next place in the big one is going to be.

How do you deal with deductions and and in reforming some of that mine ideas.

Something I've -- seen I think the -- administration go for.

Which is happening capping all of them at 20% of -- if you let the deductions all stay the same.

You can take deductions for your -- is everything else but you can't lower your tax rate below 28%.

When you do it no matter how many -- that's a decent idea.

The -- -- -- friends gift from top -- that Democrats might be able to Michael for.

Well first let's be clear -- that there is this an attempt to get a lot more revenue this is of the president's now asking for twice amount of revenue that it was asking for last summer.

If you raise the top two rates back to the way they were under Clinton get 442 billion dollars.

If you do -- -- -- which the administration heavenly 82 would say.

If you're in the top two rates you only get to deduct 28 cents of of of each dollar of deduction that you got for charity or for.

More each or for anything else what that would generate as 584.

Billion dollars will be trillion dollar tax increase.

On the top.

Two brackets which means -- more than half of all small business income will be taxed at higher -- small businesses that file on the individual charter in those top two brackets.

And more and -- and who should we be doing this and we should we have a trillion dollar towards a new taxes and carry the -- marginal tax rate up to 40%.

Plus what the additional taxes there's a trillion dollars already in new taxes on obamacare most of them on the wealthy.

Plus then.

Hit a mom a -- side mean they'll be payment you know a top marginal rate of 40% and an effective rate that's 45 or six points ahead what they're now -- make believe you wanna get to the compromise.

Well look look there is indeed if there is an easy way to get there if the president last summer when he said I need 800 billion dollars in revenue.

Then there is a way to get there which is to say let us not discriminate between.

This let's go Simpson Bowles.

Let's not discriminate between kinds of deductions let's let everybody decide how much they -- -- use for whatever deduction may be wanna use for education maybe you wanna use it for your home maybe you need to use it for health care.

Let's -- -- it itemized deductions and certain amount if you Kapanen 25000.

Dollars.

You can lower all tax rates 20%.

Plus kill the the Alternative Minimum Tax for ever and still have one point three trillion dollars in revenue to force you good at 50000 dollars.

At cap it gives you roughly 800 billion dollar -- I like this idea when I first heard it but I think there's some real problems and unintended consequences for instance you wiped out charities I mean.

Our charitable giving -- changed radically by by that capital only 5000 dollars so I mean -- that's why I.

Like the idea of just you can keep giving to charitable or anything else which is lowering your rate to twenty you can't lower and lower than.

The 28 cents cents a dollar that Carl talked about -- just 37%.

That they.

Not 39 point six but raising that top -- to 37% is that going to fly and not Republican caucus in the -- -- -- going to be very hard to get to Republican caucus to go for rates they've offered revenue they said look okay fine you won reelection we'll give -- the 800 billion -- -- let's fight it in a way that has less of an economic impacts -- despite what -- -- and well Mario follows his lead and held it there senators obviously they're not -- officers -- house there's a difference between the senate and house -- not only got Coburn.

And corporate but you've got Rand Paul saying give the presence of tax rates and let him live with the consequences.

I just think that there -- house Republicans are gonna try to find a way to give him the money he wants the 800 billion dollars.

I really don't think this is serious when the president walked into the tree -- six that's not gonna sell.

On the democratic side.

Right now I don't -- it doesn't -- -- it doesn't raise rates not gonna have no way -- let's turn to spend we've talked so much about taxes we have not talked about spending.

Where is the spending that Republicans.

Compromise wise think that they.

Need to get to -- look it let's let's be clear about this Republicans view this is a spending problem if you take a look at outlays.

In 2008.

When we went into the economic difficulty FY oh wait.

There were two point nine trillion dollars in -- today -- three point eight trillion for FY thirteen.

Revenues were 2.5 in 2008.

They're two point nine today so we're back above the revenue level we had before 400.

That nearly 400 billion dollars more in revenues.

But we are you know nearly 900 billion dollars more in spending and that's that's the trajectory were odds -- Republicans.

Are emphasizing savings we've been there they've proposed 600 billion dollars.

In Medicare and other health savings.

You but they have to be fundamental reforms we just can't simply take the current system that's going broke and spend less on we -- find fundamental reforms and allow us to save money.

Democrats don't want to touch.

Or haven't talked about it but what about means testing for the top tier raising.

-- is that doesn't seem to be factoring in yet but what about means testing for the upper spread I think that the president and Democrats.

We'll compromise -- -- I think we'll look at doing means testing I think that's a real possibility if they can get the rates -- other exhibits if it's part of a bargain to get rates to 37 or -- up in there.

And we -- you -- says they're not the parties aren't that far apart on manager mandatory cuts.

I think the Republicans are -- are offering 300 billion.

The Democrats -- offering 250 billion so I think we can -- we can close the gap there I think they can close on on means testing.

I think the CPI.

As part of the bargain in good revising those securities -- were -- revising this Consumer Price Index.

Could be on the table if if we get the higher rates I mean this is part of trying to reach that compromise so we're talking about.

The one I think it's really not gonna happen are very tough would be.

Raising the age 267 I mean even though it's under fifty for people under -- part of the reason is if you delay it.

Sit out there till when it would come into effect when people under fifty reach 67.

You don't save a whole lot you just delay that they hit that's gonna happen you don't really save a whole lot Indian in you you're shifting costs.

Those people would have to be on obamacare -- some other health care if you -- health care from someplace in that gap between 65 and 67.

It's not clear that that's -- -- to Democrats it's not clear that that's a he'd be very efficient -- of addressing the problem and I don't think they're gonna do it.

I guess I mean and we started with let's solve this problem on the compromise side.

But what will we -- -- the continent there are -- no.

Things that -- that and I think there is some means tested some Democrats can accept a -- -- -- to change in the how we calculate taxes and benefits using a different nature of inflation.

We can probably get that -- but that if it does get passed its 200 billion dollars.

There's a big gap between the sides to Republicans have offered health savings and other mandatory savings.

And the change in the CPI that's one point one trillion dollars in savings and a mandatory side.

The White House is offering 600 billion on the discretionary side the Republicans are offering 300.

Billion dollars over ten years.

That -- the White House is offering one point seven but there illusion or this is the famous let's assume we're going to be fighting in Afghanistan and Iraq for the next decade.

And then let's assume that we're not at all we've saved him mostly basically a -- in seventh.

Between the -- -- knew we were never gonna spend anyway.

Plus the interest on the glass and it's also the interest that you save on the the you don't.

It pain on all -- -- on all the so do the things that we have agreed to by I think there's a lot of agreement can get the 37.

If you can if they give to get here you've agreed he does -- intercept he's saying you can't sell to how well that's what's the problem with the three of us talking about it is that I don't have to go back to Maxine Waters and and and Democrats.

In the house and -- Carl doesn't have to go back to some of the members of the house that will reject.

The rate increase that's the problem -- at the end of the day.

It to get a deal President Obama has to be able to strengthen ironically enough.

His partner in this it's such high hopes for solving this in this very ten minute segment leave it to.

He doesn't have to go doctor Maxine Waters and I don't need to go talk congressman -- -- we would do it again thank you very much.

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