[ chirp ] [ male announcer ] upgrade to the new "done." with access to the fastest push-to-talk and three times the coverage. now when you buy one kyocera duracore rugged phone, for $49.99, you'll get four free. visit a sprint store, or call 855-878-4biz. [ chirp ] that economic storm is cloetser to the shores every day. you can call me nuts. you can call me chicken little but the political battle over extending the bush tax cuts is blowing the storm bands over our head. you don't need me to tell you that our economy is on the brink of weakening again. you feel it every day. the latest cnn orc poll shows just 27% of you say the economy is in good shape. 73% feel that the conditions are pretty poor. while rays of hope peek through the clouds from time to time, the u.s. economy is fragile right now. families are facing long-term unemployment. there are foreclosures, higher student loan payments, higher medical costs, so the notion that you may have to pay higher taxes by next year could make you to decide not to spend money you otherwise would have spent. i get it. everyone wants lower taxes. you can't have lower taxes. for years and years your federal government both political parties mismanaged the books and spent more money than they took in. our tax system is broken. half the country pays no income tax and the rich pay as a percentage of their income less than the middle class does. we have a tax system that needs entire overhaul and we have a lot of interest to pay on the debt that we have accumulated which is why at least for the moment you can't have a tax cut. what president obama wants to do is extend the tax cut that you have actually been living with for about a decade. back during the final years of the clinton administration the u.s. had a budget surplus. in the year 2000 the federal government took in $236 billion more than it spent. in the presidential election that year then texas governor george w. bush running against al gore pledged to give that money back to the taxpayers. >> we don't believe the surplus is the government's money. we know the surplus is the people's money. we're going to send some of that money back to the people that pay the bills. >> and send it back he did. when he became president thugh temporary tax cuts in 2001 and 2003 known as the bush tax cuts. the first of those tax cuts were set to expire back in 2010 but the economy was still shaky back then so vice president biden and senator mitch mcconnell struck a deal to extend them for two more years for everyone. now those tax cuts are set to expire again at the end of this year. it is part of the so-called fiscal cliff that economists are warning the u.s. could go over if congress doesn't deal with it. president obama says let's extend them for another year but and this is the key point, n for everyone, just for what he calls the middle class, families earning less than $250,000 per year or individuals earning less than 200,000. >> i believe that we should make sure the taxes on the 98% of americans don't go up and then we should let the tax cuts expire for folks like me, for the top 2% of americans. >> now, you probably heard that republicans want them extended for everyone which means the battle comes down to whether 2% of taxpayers, the wealthiest among us should stand in the way of everyone else continuing to pay the lower tax breaks. this is a conundrum for some but not for fur i zakaria. he proposes an unusual compromise between the right and left that no one get a tax extension. i assume you don't plan to run for office. >> this is good policy, not good politics. >> why should nobody get a tax break? >> first of all, if we were to say all the bush tax cuts were to expire, it would be simply getting us back to the rates that everyone paid under bill clinton's years in office, eight years, during which the united states had record and robust growth. secondly, we do have a deficit problem. with he are spending more than we take in and this is one simple way to do it. if you let the bush tax cuts expire, the united states budget deficit goes down to basically the lowest in the industrialized world. you no longer have a deficit problem. you have a long-term problem relating to medicare and health care costs and all the things people are worried about disappear. i think the argument that the economy is so weak that it can't withstand returning to these tax rates is probably not true anymore. the economy has slowly begun to recover. if you look at the housing market, it is clear that it has bottomed out. consumers have paid down debt. at some point we're going to have to get the fiscal house in order. this is the best mechanism. i have a secret weapon here which is i wouldn't -- that's my starting position. if you were to come and say to me we don't want to put all of these tax cuts in, let's phase this in over three or four years, i would say fine. why not instead then do a comprehensive tax reform? >> why not instead then do a comprehensive tax reform in everybody from every party says it. we have seen the tax code, 73,000 pages. it is impossible for anyone to understand and it seems inherently unfair to almost everybody. why don't we do it? >> we don't do it because this is what congress doles out in return for campaign contributions. this is the institutionalized corruption at the heart of the american system. we don't do cash and brown paper bags and pass them under bridges the way that politicians in the third world do. we do it openly on k street. what we are doing is essentially the same kind of corruption. what congress does it raises money for its campaigns. a congressman gets $50,000. nobody it paying him 50,000 dollars because they want coffee with him. he is not that interesting. what they are getting in return is a specific line in the tax code which is why our tax code is 73,000 pages. the french tax code, ali, is 1,000 pages long. the german tax code is 500 pages long. ours is 73,000 pages long. what does that tell you? we're giving away a lot of goodies in return for that cash. >> we may have the biggest tax code but you tend to point out that the american government compared to other developed governments is actually smaller. that is something i think people will find fascinating to hear. >> we have to keep in mind that when we think about america and we talk about tax rates and regulation, there are two-ways you can compare us against a mythical past that we don't really know about or just against the other rich countries in the world. if you look at the united states against the other rich countries in the world, we have a smaller government. we have lower taxes. we have lower regulations, so i am all for more regulatory reform, more tax reform. these are all important things. clearly that's not the big problem in america right now. the big problem in america i would argue right now is we haven't got our fiscal house in order. we're spending all of this money. to hear george bush talk about this as the people's money and so we should give it back, fine, it is the people's money but it is also the people's debt. we accumulated that debt doing things for people. >> because people want things from government sgr because people want things from government. they want medicare. they want medicaid. they want social security. >> let's show our viewers a chart of projected impact of some of the biggest things in the economy right now. when you look at the top group, that orange section, the yellow section is the bush era tax cuts. then you have that middle group, the orange section, which is a post 9/11 expenditures security wars in iraq and afghanistan, and the bottom is everything else including medicaid. the bush era tax cuts and the wars are half our estimated deficit, estimated debt. >> the important thing to notice is the bush era tax cuts and the wars as you say are about half of it, and that was in effect a policy decision that was a set of single set of policy decisions that could easily have not taken place. the blue, the other half, is an accumulation of loss of government programs that are frankly very popular and the reason they have risen is not because those programs have gotten bigger, it is because more of us have aged so the single most important reason that blue thing got bigger is medicare. more people have gotten older and since medicare covers them, more people are getting older. >> you're point is that's not a single policy decision we can take away, it is tougher. the other stuff is easier. let me go back to another point you made. that is six months ago i could have agreed with your position that it shouldn't be extended for anyone, these tax cuts. i am worried that given what is going on in europe and given the slowdowns in china and india, this is a couple billion people who are prospering at a greater rate and may be able to buy some of our goods and services and that we could be pushed into and i have had some economists tell me a 30% chance of recession. is this the right time to take that money away? >> so the ideal thing to do in my opinion would be not to try to stimulate the economy using tax cuts because the truth of the matter is people are not spending the money they're getting in the form of these tax cuts. we tried it. remember, the single largest part of the stimulus program was the tax cuts. before the stimulus bush and his last year in office and last months in office had the tax cuts and we've had two subsequent tax cuts. people aren't spending the money. they're paying down debt. they're maxed out. they're feeling poor. these tax cuts are not getting passed through to the economy. the best thing we can do is restore the federal government's fiscal balance sheet and let the government spend money on infrastructure, on broadband, on science and technology. ali, right now this week one of the most astonishing things happened. the federal government auctioned off debt. we tried to borrow more money. what turned out is the demand for american debt is overwhelming. if you adjust for inflation, here is what happened this week. people said to the american government we will pay you money to hold our money, so can we lend you money and we don't want interest rate. we will pay you a negative interest rate. we will pay you money. the federal government is getting all of this money as if it cannot find productive investments. we would be crazy, this would be the most mismanaged economy. it is fiscally irresponsible for us not to use this money to rebuild america. >> you have talked about rebuilding america for education and through infrastructure and other things. the criticism tends to be that the government can't seem to make the right decisions with regard to stimulus and spending it the right way and bblgz a whole bunch of little projects. will cain describes it as a christmas tree approach to decorating a stimulus. >> here is the answer and the answer is something that kay bailey hutchinson and president obama have jointly proposed which is an infrastructure bank. you take a certain amount of money from the federal government. you leverage it. you get a lot more from the private sector and you have an infrastructure bank that has a bunch of exports who determined what are the best infrastructure projects in this country and that means energy infrastructure, broadband, all of these things. guess what? congress doesn't want to do it because congress doesn't want infrastructure projects awarded on merit. they want it awarded on cronyism and political favors and bringing back pork to their project. the problem here again is that the best policy idea becomes politically unviable but we should -- that is the right approach. we do need -- the great deficit in america is that we have the worst infrastructure in the advanced industrial world, broadband, energy, physical. we have to rebuild it. >> thank you for joining us and setting off the show well. fareed zakaria is the host of gps. republicans claim the president's plan to let the bush tax cuts expire for the wealthy will hurt job creating small businesses. how many small businesses would really be affected? plus romney's economic advisor explains how cutting tax rates can be done without costing you more money. later, i have been saying that i am going to name names of the problem solvers. the first name i am going to name is the person at the root of our political problems in this country. [ male announcer ] if you believe the mayan calendar, on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? familying earns less than $250,000 a year or individuals earning less than $200,000 per year. according to mitt romney, this is what he said, successful small businesses will see their taxes go up dramatically and that will kill jobs. he said that on july 9th. remember that democrats say the only reason republicans want those tax cuts extended for everyone including the top 2% of earners is because they want to protect their wealthy donors. that of course is a tough charge to defend against so republicans need a better reason to want the tax cuts extended for the rich and calling it a job killing tax increase is arguably more effective. just because romney and the rest of the gop make that claim doesn't make it true. christine romans host of your bottom line joins me. why is the debate about personal income tax rates have anything to do with small business? >> it does. the irs allows small businesses to report business income on their personal returns and those businesses can be structured in different ways. for example, limited liability companies, partnerships, and s corporations. it is all very technical and each as their advantages and disadvantages. you don't have to be a tax accountant to understand what the debate is all about. all of these are flow-through entities because the business profits flow through the company back to the owners. those folks pay taxes on those profits at the individual rate. millions of american business owners do this, ali. >> how many of those millions of small businesses that use this flow through would be affected by letting the bush tax cuts expire for top earners. >> very few. most of them don't make enough money to be taxed at the highest income levels. in fact, congress's joint committee on taxation, the bipartisan group in congress knows exactly how many small businesses would be affected, just 3.5% of all small business filers would find themselves there at the top of the income tax bracket. that's 940,000 people. that means a vast majority of small businesses in the country, 96% would not see higher taxes under the president's plan. >> if mitt romney wanted to be more accurate, he could say something like 3 approxima.5% o successful small businesses will see taxes go up dramatically. what is his claim that returning taxes to the 2001 levels or that 3.5% is going to kill jobs? what's that about? that may not be true either because some of those so-called small businesses are often anything but sml businesses. these are not mom and pops. these are not the corner dry cleaner or the eye glass shop. we're talking in some cases about law partnerships, hedge funds, about celebrities who incorporate themselves in order to protect their assets against lawsuits or to write off expenses. many others who are simply people who work on their own. many of the 3.5% of of small businesses who would be affected are not job creating businesses in the first place. unclear that they would kill or create fewer jobs as a result of the tax cut expiring. in fact, in 2009 of the 400 richest taxpayers, 237 would be classified as small businesses because they reported income from one of those flow through partnerships or s corporations that christine was talking about. i want to bring in steven moore, an editorial writer with the wall street journal and enjoys telling me why i am wrong each week and i suspect you're about to do it again. i will give you a shot in just a moment. first, i have a little more to say about whether small businesses are as conservatives claim going to get hurt by the failure to extend the tax cut to the rich. let us for a moment assume they are, that some percentage of the 940,000 businesses are in fact job creating and that the expiration of their tax cuts will cause them to make less money. here is my proposes the solution. it is not for everyone and i am sure some accountants will disagree with me. say you file as an s or llc. why not switch over and become a standard corporation, a c corporation, and that way your business pays taxes at a lower corporate rate, you pay yourself a reasonable but not outrageous salary, below 200,000, and you could lower your personal income tax that way. i am just proposed a workable solution for a percentage of the 3.5% of all small businesses who may be affected by the expiration of the tax cuts and solved the job killing prosecute problem. tell me why i am wrong. >> you made my point that the taxes absolutely do affect behavior. what you described is exactly what will happen because under obama's proposal we'll actually have a higher tax rate on small businesses than we do on big corporations which makes absolutely no sense. why would we tax a small business with income of maybe a million dollars at a higher rate than general electric? you're right. what will happen under what obama proposes is a lot of those companies will become corporations. i am not sure that's a good idea. here is my fundamental problem with what you and fareed were talking about earlier on the show. i just think when you look at the income that is being targeted for these higher tax rates, you know this number, i have heard you say it before, 53% of that income is business income. it is not salaries. it is business income. a lot of that money gets reinvested in family-owned businesses and manufacturing companies and that maybe have 50 or $100 million of assets but are not corporations, and here is my problem. look, you're right. small businesses, there are tens of millions of small businesses in this country. a lot of them don't make any money at all and a lot of them are just maybe one or two employees. the major employers in this country do make more than 250,000 and they're the most likely to put out the help wanted signs and i just think it is very detrimental to raise the taxes at them at a time when we have such high unemployment. >> i know that it is that detrimental but we just got the conversation started. come back for round two. we'll take a quick break. enjoy the next few months because are you going to get hit with a tax bill you didn't see coming and we'll continue the battle when we come back. iness, do more business. in here, opportunities are created and protected. gonna need more wool! demand is instantly recognized and securely acted on across the company. around the world. turning a new trend, into a global phenomenon. it's the at&t network -- securing a world of new opportunities. ♪ [ feedback ] attention, well, everyone. you can now try snapshot from progressive free for 30 days. just plug this into your car, and your good driving can save you up to 30%. you could even try it without switching your insurance. why not give it a shot? carry on. now you can test-drive snapshot before you switch. visit progressive.com today. i am about to bust a big myth that letting the tax cuts expire is a job killer. steven is with us. only 3.5% of all small businesses, a number under a million small businesses would see their taxes rise under the president's plan. many of them are not employers. forget the idea whether you want taxes raised or not. isn't the gop misleading with this definition of small business because they are including doctors and lawyers and including celebrity and hedge funds and people who do not create jobs wh their bush tax cuts. is this not just a canard that is about taxes? you know what business hiring is about. it is about demand. if a company can make more money hiring people, then it will regardless of its tax burden. >> look, i thought christine did a nice job of laying out the situation with who pays what and how small businesses actually pay the personal income tax rate. i thought that was very well done. i think what you guys are missing first of all, look, the top 1 or 2% we're talking about, they already pay half the income tax in this country. it is not as if they're getting away scott free. they shoulder the burden of the tax code already. a second point that i think is important to understand, i bet there are a lot of business men and women watching this show right now, ali, and i bet what they will tell you and i talked to them all the time and you do, too, if they make a profit f they make a half a million dollars on their company, you know this, they don't generally go out and buy yachts or buy a ferrari. they plow that money back into the company. this is what my dad did. he was a small businessman and ran a successful company. the more you tax those people, the less investment income they're going to get in their business and the less they will put in the business which means less investment and less hiring. i just don't see why -- look, i want the rich to pay more taxes. i just think the way to do that is grow the economy and you don't grow the economy by raising tax rates. >> you won't drag me into an argument about the fact i want to grow the economy. we want the sail thing. without scaring the viewers off let's discuss this for a second. one of the things that prompts businesses to spend more money is that if you pay a higher amount of money to take the money out of the business than you would if you invested it in some fashion, machinery or employing people. wouldn't it stand to reason that it should cost you more if you wanted to create an incentive to create jobs to take that money out rather than hire more people? >> i got you on this one, ali. i got you. you're exactly right. we want companies and we want people to reinvest money in businesses. i think you and i can both agree the dumbest thing now would be to raise the capital gains tax. what you're doing with the capital gains tax, capital gains is money that people invest in businesses and invest in stock when you increase the capital gains tax and you're reducing the incentive for people to invest in in those businesses and under the obama proposal on the tax on the rich 60% increase in the capital gains tax is a tripling of dividend tax, you can't be in favor of that. >> you will have to come back next week for that argument. right now we're talking about the bush era tax cuts. >> that's part of it. ali, that is part of the increase in the taxes is the capital gains dividends and small business taxes and all is one package. >> you perhaps unwisely admitted that you were watching fareed and me have a discussion so you will remember the time at which we created more jobs in the recent past was when our tax rates were substantially higher than they were now. this tax cut, this bush era tax cut has been in place for ten years and i have heard you say this has not been the record ten years of job creation in america. why is it that we think under higher taxes during the clinton administration we created more jobs than we are doing now under lower taxes? >> well, look, bill clinton did a lot of good things for the economy and a republican congress. we cut the deficit, cut spending, didn't increasing like you were talking about, cut the capital gains tax to 20%. we had free trade agreements. we had fiscal discipline. i am not saying that all that matters for the economy is low taxes. what i am saying is we should have a world class tax system that lowers tax rates. let's get rid of all the deductions that rich people take. that will force them to pay higher taxes. i just think you will put america at a competitive disadvantage if we are raising our rates on businesses when people can invest in other countries where rates are lower. >> so tell me this, then. if he with just make this a fair conversation about whether or not you should raise rates on everybody or not on everybody, you are one of these guys who believes not just in low taxes but that the deficit is crushing. fareed agrees, too. he thinks that has an impact on consumer psychology. i am not sure i am with either of on you this. assuming it does, president obama's solution lowers the debt substantially more than yours. >> let me give you one statistic on this tax increase on the rich. even if you believe the most optimistic numbers which is that this is going to raise $70 billion a year, by the way, i don't think this will raise any money at all because i think it will hurt the economy. even if you do that, here is the question i have for you and fareed. where will you get the other 93%? that is to say this only reduces the deficit by less than 6%. so it is not a solution. anybody who is out there watching the show that thinks soaking the rich is the way to reduce the deficit, it is not true. >> all i set out to do was say that this thing, this business about small business, job killing stuff is not accurate. i am kind of with you. >> you have to get small business men on this show who will tell you. >> i have had small business men on the show and that's why i invited you. i do agree with you. the amount of money in the grand scheme of things between taxing the rich and not taxing the rich is actually quite small at this point. >> you know why? this is still a middle class country where most of the wealth in this country is still in the hands of the -- >> we would like that to be the case. that's another discussion for another week. i am not sure that's the direction we're going. it is a direction we would like it to be. thank you so much. i don't feel too badly bruised by that. coming up, i promised to name names and i am going to start. this time it is not for doing the right thing and protecting america from the storm that's approaching, it is for standing in the way. it is just one name. it is the name at the top of the list, the person most responsible for partisanship and polarization in america. stick around. i am coming back and i will tell you who it is. great shot. how did the nba become the hottest league on the planet? by building on the cisco intelligent network they're able to serve up live video, and instant replays, creating fans from berlin to beijing. what can we help you build? nice shot kid. the nba around the world built by the only company that could. cisco. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world. the new new york works for business. find out how it can work for yours at thenewny.com. [ male announcer ] if you think even the best bed can only lie there... ask me what it's like when my tempur-pedic moves. [ male announcer ] ...talk to someone who owns an adjustable version of the most highly recommended bed in america. ask me about my tempur advanced ergo. ask me about having all the right moves. [ male announcer ] these are real tempur advanced ergo owners. find one for yourself. check out twitter. try your friends on facebook. see what they have to say unedited. goes up. goes up. ask me what it's like to get a massage anytime you want. goes down. goes down. ergonomics. ergonomics. [ male announcer ] tempur-pedic brand owners are more satisfied than owners of any traditional mattress brand. [ woman ] ask me why i'm glad i didn't wait till i'm too old to enjoy this. [ male announcer ] start asking real owners. ask me how to make your first move. ♪ [ male announcer ] find out more about the tempur advanced ergo system. ♪ tempurpedic. the most highly recommended bed in america. i have been telling you about the economic storm making its way to our shores. the headwinds may be unavoidable. congress's refusal to act to protect the u.s. economy on the other hand is entirely avoidable although not likely, at least not before the election and by then it could be just about upon us. this week the republican controlled house voted to repeal obama care for the 33rd time. it is the latest example of scorched earth partisan politics that have taken the place of serious discourse. whether you agree or disagree with the president's health care plan, that vote was absurd and an outrageous waste of taxpayer time. i wonder how my bus would feel if i told hemi wasn't going to work today because i wanted to to make a point. he would tell me to look for another job. the point by the way in case you didn't already know is republicans don't like obama care. i know that. you know that. we don't need political messages. we need results. this is dangerous for our economy. the politicians, particularly uncompromising highly partisan ones, don't simply drop out of the sky and land in washington. someone hires them. someone pays them. someone encourages them. that someone is at the root of the problem. that someone could end the partisanship and that someone could get our politicians doing what they are supposed to be doing. you may not want to hear this. that someone is you. the one person that can really make a difference now as these economic storm clouds approach our shores is you. why are you doing this? a couple of reasons probably. first, you want it all. you want all the benefits of government, medicare, social security, unemployment checks, maintained highways, homeland security, loans to buy a house or go to college but you don't want to pay for it or at least you don't want to pay more for it. you want lower taxes. so do i by the way and number two, you're having trouble getting past the politics and voting real adults into office who are willing to act on what america needs. the politicians i am holding responsible are actually pandering to you. you think i am wrong. i know i will hear from you, and you know i will respond. i will get to that later. first i want to bring back christine roman and bring in the sharp conservative mind of contributor will cain as well as norm ornstein, a resident scholar at the american enterprise institute although he describes himself as a centrist. will, i kept you in suspense. get your gut reaction. >> you, you folks, you're the problem. i agree 100%. >> i have never heard that in history. >> say that, christine, the voter. >> the voters. we borrow $3.6 billion every day to keep our standard of living in this country the way it is. we scream about earmarks and people expect to elect someone to come home and bring them jobs. >> they are jobs, swimming pools, schools. >> you hear people talking about big government and you hear this a lot especially in election year talking about big government and they hate it and they don't want to you touch their medicare and you hear all of this talk about wh we want from our government and then they turn around and vote people in office who are just rushing for the status quo which is getting elected for another four years and not really planning for america. we have been spending beyond our means for so long that now when we're really in a tough spot again it is all of those bad choices up to now that put us in a worse spot. >> and we may not want to vote for the people that do that to us. help out. it is a pile-on here. the voters put them into office, the politicians, and how do we stop the blaming and start solving our problems? if the voter is listening and hasn't turned off the television because i just insulted them, what can they do. >> part of the problem is that politicians have learned that if you do straight talk, if you tell them this is going to hurt and this is going to cost you something, it gets you bounced from office. so we have to in some ways educate voters and i think the second point you made is a particularly critical one. it is true on the first point, nobody pays retail any more. we all like things at a discount and that's the same with government. we keep leeching out of the system the problem solvers. look at the number of people who lost in the last election because they voted for tarp which i believe is going to go down as something that saved the global economy from a catastrophe at least as bad as the great depression and anybody who pops up, some bows owe who says i don't speak politician, i am not like the rest of them, i have all the answers and it is easy and won't cost you a dime somehow gets to the head of the line. that can't go on. >> we have two separate problems we're focusing on now. one ishe voters tendency to want something for nothing, asking for all of these government entitlement policemans and spending programs and not wanting to pay for it with the requisite tax rate. the second problem is one norm has written about and you have talked intimately about and that is partisanship, the idea that because necessity have become so idealogically extreme we can get nothing done. here is why i want to pause. i know norm has considered this fact, the truth is america is partisan. that's why politicians are partisan. they simply reflect who we are. >> the public is getting more partisan and indeed it now reflects what we have seen in washington for a while. the one place i might disagree with you slightly is i think it started at the elite level and now it is metastasized out to the public. the other problem we have is not just voters. what choices do voters have? most of them now come in primaries. that's true in the house and even in most cases in the senate. the primaries are dominated by small elite who is are more ideological and more extreme than the mass of voters are and then have you another problem which is a mass media that refuses to say when people have gotten too partisan or obstructionist and instead it is on the one hand and on the other hand and they all do it. >> we glorified them. the crazier the things you say, the more likely you are going to get booked to be on television. >> yeah. >> the fact is quite frankly, look, aren't everyone's taxes going to have to go up or the government is going to have to get a lot smaller or the economy is going to have to grow gang busters from some new invention we haven't seen or a combination of the three and why won't anybody in washington say, look, your standard of living, norm, right now, the way it is, it is not going to be like this. i promise yu it will be bad or really bad. that's it. >> we're coming right pack and continuing this conversation on "your money" in a minute. there are a lot of warning lights and sounds vying for your attention. so we invented a warning you can feel. introducing the all-new cadillac xts. available with a patented safety alert seat. when there's danger you might not see, you're warned by a pulse in the seat. it's technology you won't find in a mercedes e-class. the all-new cadillac xts has arrived, and it's bringing the future forward. send a note stay informed catch a show. make your point make a memory make a masterpiece. read something watch something and learn something. do it all more beautifully, with the retina display on ipad. [ feedback ] attention, well, everyone. you can now try snapshot from progressive free for 30 days. just plug this into your car, and your good driving can save you up to 30%. you could even try it without switching your insurance. why not give it a shot? carry on. now you can test-drive snapshot before you switch. visit progressive.com today. >> let's bring christine back and will cain and norm ornstein, a resident scholar at the american enterprise institute although he describes himts as a centrist. norm, i love the point we systematically leech the compromisers out of the system in favor of partisans. will cain, are you taking issue with the premise that partisanship is bad. >> we have done this before. i think that is the assumption at the beginning of the entire conversation. >> can i restart? >> you're changing the game with hyperpartisanship. we have two issues going on here. one, voters wanting something for nothing and two, partisanship. the culprit is the same. it is you. it is the voter. it is the viewer. that being said, what has enabled the wanting something for nothing is bipartisanship. it made people think they can have high entitlement spending and low taxes. look, bipartisan's favorite tool is handing out goodies. now that you want to correct that you need bn bipartisan ship to correct it. >> i love the critique, partisanship, to get the services we want and continue to rack up deck if am paraphrasing properly. >> in the book i did with tom mann, it is worse than it looks. we don't criticize partisanship. it is part of our system. what's happened is strategic obstructionism and i would go back and say if you want to look how it can keep us from having everything, the 1990 budget agreement that george herbert walker bush put together with democrats helped to bring us back to a balanced budget along with the deals that democrats and republicans made with bill clinton in the 1990s. that also gave us pay-as-you-go budgeting where you couldn't increase something without cutting something else. let me finally say in defense of voters, we have those plans that christine was talking about on the table from simpson-bowles and rif land and i believe they would accept it. you get a super committee together and mitch mcconnell does not put on one of the three vee up conservative people in the gang of six. if he had one of them on we would have a deal now and not wo be here discussing this. >> if all of these lawmakers and especially the hyperpartisan lawmakers could somehow hide under the cloak of comprehensive tax reform, nobody could say i did anything bad. if they could all get together and make it lo like no one was raising your taxes and no one was cutting your services, we were just hitting a reset on the way we are in america, that's the only way we can do it if nobody has to say. >> if partisanship or hyperpartisanship is who we are and we as voters or you the viewer are the one to blame, who does reset that? who the hero we're looking for? >> right or left, i don't care, i want somebody that can get it done. >> the most simple answer is it is a concept. it is a concept of responsibility. unfortunately responsibility usually comes through the guise of crisis. will you see europe come to terms with the concept of responsibility. it is not a hero on a white horse and his name is ronald reagan or fdr. it is forced. it is the people forced to come to grips with responsibility. i don't know how that happens without crisis. >> full circle to my blaming the people for the mess we're in. i like you all by the way. you pay my bills and watch the show so don't take this personally. thanks to all three of you. what a great conversation. up next, mitt romney wants to lower your taxes. sounds great. what does he have to take back from you in order to pull it off? one of his key economic advisers joins me next. [ male announcer ] this is the at&t network. in here, every powerful collaboration is backed by an equally powerful and secure cloud. that cloud is in the network, so it can deliver all the power of the network itself. bringing people together to develop the best ideas -- and providing the apps and computing power to make new ideas real. it's the cloud from at&t. with new ways to work together, business works better. ♪ mitt romney wants to lower income tax rates across the board. despite president obama's recent calls to extend the bush era tax cuts for nearly 98% of taxpayers, romney says the current administration is pushing bigger government and he is out to change it. >> look, new democrats have done good things. a lot of republicans have done good things. this old style liberalism of bigger and bigger government and bigger and bigger taxes has to end and we will end it in november. >> bigger and bigger taxes has got to end and we will end it in november. >> romney's plan would reduce rates by 20%, making the top income rate in this country 28%. the bottom would be just 8%. the tax policy center, an independent research group says the cost of romney's plan would be high. in other words, it would cost money to give you money. a report out this week shows it would be nearly impossible to cut income tax rates without making concessions in other areas. that's not really news, but this report gets pretty specific. the only real way to do that is to reduce or eliminate some of the very deductions that, well, you have been a little attached to. for things like interest on your mortgage deductions, paying alimony or for help paying for college. romney camp says reducing taxes will stimulate entrepreneurship, create jobs and help reduce the deficit. agree or disagree, this is your money we're talking about. kevin is an american economist who has done extensive work on u.s. tax policy. also an unpaid economic adviser for the romney campaign. good to see you. romney says his tax cuts would be paid for through economic growth and curbing tax breaks, microsoft mostly on high income folks. let's talk about how much revenue is lost through romney's tax cuts, the immediate effect is less money, does his campaign expect to to be made up through revenues generated through economic growth and how much through tax breaks? >> you have to understand that it is very, very easy to lower marginal tax rates, which are the things that influence the decision at the margin without having a tax proposal that reduces revenues. as long as you go after all of the tax breaks that are written into the code. some of them very, very specific like you goat have a big tax deduction if you put a solar hot water heater on your roof and some of the general like state and local tax deduction that most people take advantage of. most economists have been saying for years that when a what we need to do is stop having the government reward you, if you do this, but not that. with all of the confusing tax breaks and rather just have a very, very simple code that takes a lot of that stuff and limits it and then, lowers the rate a lot. so for example, very sim 78 example, suppose have you a dollar in income and the government said, if you spend 50 cents on apples, then we won't tax the apple expenditure because we love apples so much, so then have you 50 cents left over of taxable income. if we need 20 cents of tax, you have to charge a pretty high rate to get that 20 cents, 40%. but if we didn't deduct apples, then we are taxing the whole dollar, then we get the 20 cents with 20% rate. so the whole point -- and people would no longer be eating way more apples than they would want to otherwise. so the whole point about the tax system is that it tells you to do this and not that. and if you make the government happy and do exactly what they want then well reward you. but if you don't, then we won't. what romney wants to do is clear out all that muck and have a nice low rate that influences people's decisiones. it is sensible. everybody in every party should want to do that. >> we should have another discussion on this. that's a very valid discussion. for instance, we give people a break to take a mortgage and buy a house. that sounded like a really neat idea way back when. now we find that it contributed to some of the mess that we're in. but are you talking about taking away things like that, the mortgage interest rate deduction? >> there again, have been a lot of proposals on how to do this to limit disruption and maximize the economic benefit. governor romney thinks he needs to work with members of both parties to figure out exactly how to get enough roll back of deductions to achieve the marginal raid deductions he is looking for. he is confident he can do that. i know he's right because i have seen a lot of different calculations, including bull simpson guys got the rates way, way down. >> here is the thing then. let me ask you this then. i started this show by criticizing republicans for any tax increase, but particularly the failure to want to extend the bush era tax cuts for the wealthiest americans, job killing. it is a word that republicans use all the time. so how do you use tax reform to create jobs? i'm not asking you to address the job killing criticism. how do you use tax reform to create jobs, given that you just told me that tax reforms shouldn't be used to get people to behave in certain ways? >> right. they shouldn't be used to get people to buy apples instead of oranges. that's not what tax reform should do. what tax reform should do is set a bunch of clear rules and get government out of the way and let private sector to siekd. romney's plan will succeed for two reasons. obama hasn't told us at all what tax rates will be. he add super majority in the senate and here we are in looking at december where the tax code expires and we are uncertain as it what happens the next year. so clarity is the first thing. if governor romney gives us clarity with his pan when it passes, then everybody who is worried about what the future looks like will know, we can optimize against that and then start to grow again. so people don't know what the heck their tax rates. ing next year. and that uncertainty obama creates is harmful for the economy. people can work more, invest more and grow the economy and that will create a lot of jobs. >> we had marginal rates more than ten years ago, higher marginal rates plor than ten years ago, and people created jobs and invested more. and for the last year they haven't, and we've had lower rates. >> that's an absolute valid point. you have to understand that tax rate isn't the only thing going on. it was a much different world then than now. but i think the crucial thing right now costing us jobs is that our corporate rate is the highest in the developed world, i think the third highest on earth. the only two countries left friendly on earth are gee ghianna and the congo. so firms say, let's relocate over here and they are not bringing jobs here. romney wants to cut the corporate rate down to 25%, that will create a lot of jobs. it wasn't a problem when clinton was in office because when the rate was 34%, then increasing to 35, average around the world was 40%. >> so we are relatively higher now. >> yeah. right now the ocd average 24%. we are giving away a huge tax disadvantage. >> but you are conceding it isn't the only thing. lowering taxes doesn't just equal economic growth. that's sort of the point ways coming to. what a great conversation, kevin. i appreciate it. senior fellow and director of economic policy stud ice at american enterprise institute. now, i pointed the finger at you, now your turn to point the finger right back at me. be kind. actually, don't be kind. it is more fun when you're not. up next, i will show you how you and i will debate this up next. so i can get three times the coverage. [ chirp ] [ manager 2 ] it's like working in a giant sandbox with all these huge toys. and with the fastest push-to-talk... i can keep track of them all. [ chirp ] [ chirp ] [ male announcer ] upgrade to the new "done." with access to the fastest push-to-talk and three times the coverage. now when you buy one kyocera duracore rugged phone, for $49.99, you'll get four free. visit a sprint store, or call 855-878-4biz. [ chirp ] okay i'll be the first to admit, eye have been hard on you today. your congress renices to save us from the potential economic storm headed our way, but i have point mid finger at you as the protagonist as the problem. because i think you have the ability to fix it. if i'm wrong, tell me. tweet me right now. or find m