usual, and can't get anything done, let's at least avert armageddon. >> joining me now, white house budget director, mr. lou. thank you for being here. >> thank you, candy. >> we are told by sources since the white house meeting on thursday and this morning, there has been no progress. do you concur? >> a lot has been going on since the white house on thursday night. >> there has been activity, but has there been progress? >> there has been activity and progress on two fronts. there is substantial discussions going on in the senate between the two leaders to make sure at a minimum congress has a way to take action and avoid default on the u.s. debt. that's critical. we don't think it's enough. we think the president said clearly we should do as much as we can to reduce the deficit, but we have to avoid the chaos that would result from default. >> you're talking about the mcconnell and reid way out of not having a -- it cuts 1.5, actually -- >> my understanding is what they are working on now would simply provide a mechanism for extending a debt and have a committee to work on the deficit. the president has been clear that we need to do more than that, and the time to act is now. in addition to that, there have been a lot of conversations going on among parties, the president said on thursday that each leader should go back to their own caucus and talk to each other and go back and forth with the administration and that has been going on since thursday. >> you talked to folks as well as the grand deal and the medium deal? >> yeah, there are a lot of conversations. >> conversations are not progress. where do you think that you have made progress? >> i think it's not insignificant that all the leaders understand that it would be irresponsible to get to august 2nd and not extend the ability of the united states to pay its obligations. >> do enough members of congress understand that? >> i think as we approach it, more and more seem to be coming to it. there will be a fringe that believes it will be playing with armageddon is a good idea, but i don't think that's where a majority will be. >> any white house meetings today with any of the principals? >> i have not been to the office this morning, but i think i will find out when i get there. >> okay. you seem fairly confident at the very least there will not be default on the 2nd? >> i have confidence that ultimately the responsible leadership in washington will not fail to take an action, where failure would mean interest rates that would amount to a tax on all americans when they buy a home or car, and it would create chaos in the world economy, and i am confident the leaders in congress know that's not an option pn. >> you have to make spending priorities and payment priority decisions, and social security benefits, and federal worker pay, and defense contractors. what are your priorities shoe not have the debt ceiling raised on the 2nd, when you have the bills that immediately come due? social security checks, federal worker pay, defense contractors? >> our plan is for the congress to do its work and the president to sign into law legislation that will make it possible for the united states as it always has to keep the obligations. we will be ready to deal with whatever happens. there is no plan other than meeting our obligations. >> certainly you must have discussed priorities, though, we have to pay this? >> the truth is this is a different situation the united states has ever faced. we have never gone into a situation where we didn't have enough money to pay our bills. we borrow 40 cents to a dollar right now. if the time comes when we lose the ability to pay our bills, there will be a cash flow issue that is very real, and that's why it's critical that congress take action before august 2nd. >> would you allow it to happen with the social security checks to go out? >> it's not a question of allowing -- >> but you get to decide priorities. there will be money -- >> there will not be enough money to pay all the bills. >> of course not, that's why we're talking about priorities. >> when we talk about priorities, it misses the question that it's unacceptable for the united states to be in a place where somebody owed money by the government can't be paid because we have not done our job. >> one of the things as you know that some republicans are pushing is a balanced budget amendment, a constitutional amendment to require a balanced budget under certain circumstances. this is what the president had to say the other day. >> i think it's important for everybody to understand that all of us believe that we need to get to a point where eventually we can balance the budget. we don't need a constitutional amendment to do that. >> but apparently you do need something to do that, because we're facing a meltdown you all keep saying, and yet there is not a deal and yet we don't have a deal that will raise the debt and forego a meltdown. what is so wrong with a balanced budget amendment? >> just to be clear, if not now when? congress needs to act. there is plenty of time to make decisions now. what these ideas do is say let's kick the can down the road so others will deal with it. the challenge is for washington now to do the job the american people sent us to do. the amendments, what it does, it would force us to cut social security and medicare, more deeply than the house resolution budget did. that's not what the american people want. i think the principle that really should be governing right now is that congress do the job that it was sent here to do, and the president wants to work with congress. he has shown a willingness to move substantially. we need a partner to work with and we need to get the job done and we need to get the job done now and we need to get as much done as we can do, because the whole world is watching. the u.s. credit rating is at stake, and our place in the world is at stake. >> what the debt most needs is a growing economy, and in that nature i want to read you something, and our source here is reuters. this is from a goldman sachs report that went out last night. following another week of weak economic data we have cut our estimates for real gdp growth in the second quarter of 2011 to 1.5% growth in the third quarter, and 2.5% in the fourth quarter, and we expect the unemployment rate to come down modestly to 8 3/4% at the end of 2012. what that means, of course, is you can't make a substantial effort towards the debt, as opposed to the deficit with growth low, can you? >> it has been a difficult few weeks in the economy. there have been some external factors from the nuclear accident in japan to other things, and it made growth slower. there's still a consensus we will return to growth, but it's not enough growth and the president has made clear we need to stay focussed on growing the economy and creating jobs. >> do you agree that growth will be lower than you all thought? >> i would agree that the recent weeks have been slower than expected. we are still confident as are most forecasters we will return to growth and we will remain a growing economy. >> more than you had hoped, though, looking at it? >> there are things now that would make a difference. we do quite a lot in the first two years, the president and congress took action, and without which we would have millions more without work. we have pending proposals on the hill which would do a lot to grow the economy and create jobs, it should pass patten reform. the president made clear we need to look at extending the payroll tax deduction. the average american family has $1,000 in their pocket. there are things that we need to do to get them done. >> thank you so much. we appreciate your time. go to the white house and let us know what is going on. we appreciate it. >> thank you, candy. up next, we will talk to one that says his party should negotiate with democrats on tax increases or closing loopholes. senator lindsay graham right after the break. we all have internal plumbing. but for some of us with overactive bladder, our pipes just don't work as well as they should. sometimes, i worry my pipes might leak. but i learned there's something more i can do. now, i take care with vesicare. once-daily vesicare can help control your bladder muscle and is proven to treat overactive bladder with symptoms of frequent urges and leaks day and night. if you have certain stomach or glaucoma problems, or trouble emptying your bladder, do not take vesicare. vesicare may cause allergic reactions that may be serious. if you experience swelling of the face, lips, throat or tongue, stop taking vesicare and get emergency help. tell your doctor right away if you have severe abdominal pain, or become constipated for three or more days. vesicare may cause blurred vision, so use caution while driving or doing unsafe tasks. common side effects are dry mouth, constipation, and indigestion. so why wait ? 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[ male announcer ] we are insurance. ♪ we are farmers ♪ bum, ba-da-bum, bum, bum, bum ♪ south carolina, republican senator, lindsay graham. i think you just heard the director of office of budget and management say he believes republicans are beginning to understand that default is a own russ option. do you see any kind of coming together of republicans around a way that will avoid default? >> absolutely. i think the house will pass next week, cut cap and balance. it does three things. it will take the government spending in the near term back to around 2008 spending levels. it will have a cap on spending over the next decade to make sure we wipe out the debts in a 10-year period, and will require a passive of a balanced budget amendment out of congress, and those three things will balance the debt limit. those will pass the house unanimously. i would urge every democrat -- >> you can't pass it in the senate. you can't pass that in the senate, can you? >> i think so. they will never -- let me just say this. what is calamitous is the track we're on as a nation, we're becoming greece, we are borrowing 40 cents of every dollar. a child born today has $46,000 of debt. now is the time to do real things that will matter. 49 states have the requirement to balance their budget. i am convinced after being here since 1995, candy, neither party will balance the budget until there is discipline in the system, and the system that will bring discipline is a balanced budget amendment in the constitution, which i think will be ratified in a couple years. >> i must say, jacob lew just told us the conditions on the balanced budget amendment would require huge cuts in medicare and in social security. they have a majority -- the democrats have a majority in the senate. this does not at this moment in its current form sound to me like something that will pass in the senate. then what? >> well, we will negotiate the number of gdp spending is 18%, and the balance budget amendment in the house is going to limit spending of 18% of the gdp, which is the 40-year average. that's subject to being negotiated with republicans and democrats. the super majority to raise taxes is subject to being negotiated. i don't think what is subject to being negotiated is the idea of avoiding a balanced budget, when the president said we don't need one. what rational person could look over the congress in the past 40 years, and there's no plan going to achieve balance in congress unless the constitution is changed to make us do it. i am very willing to raise the debt limit -- >> what happens -- let's just say somehow that there is a balanced budget amendment -- >> you can adjust it. >> huge things happen. katrina happens. tornados run through all of the midwest, and then we start a war, and you have a balanced budget amendment. what happens? >> you can waive the provisions by two thirds vote of the national. if we get attacked, another 9/11, we have a cat cliz mick event that affects our economy, we can waive that requirement. i don't see how anybody who has been in politics as long as i have can look the people in the eye and say within the body we will find a way to do this. every two years, we jockey for the next election. the big deal they're talking about of cutting spending over the next ten years, still adds $6 trillion to the debt. the real deal to limit spending and get us in balance would be to limit our constitution. without that we will just talk to each other and run america into the ground. >> let's talk about the so-called mcconnell and reid plan, which is as i understand is not completely put together yet, but it would allow the president to raise the debt ceiling in three increments, between now and the end of next year, perhaps with spending cuts attached. as a last resort, would you vote for that in order to avoid default? >> i am sticking with the balance -- i don't have any confidence that anything republican or democratic leaders is going to lead to the solutions that we need. it never has in the past. i am looking for a win-win. i am looking for a way to raise the debt ceiling, and we need to, but we need to address fundamentally what got us into debt. cut cap and balance will get us out of debt over time. i think that's going to be the republican position. to me it's a very sound position -- >> it's a position, but is it a solution? i think we -- >> i think so. it's the only solution. >> it just doesn't -- honestly, it has been out there for a while. we have heard of the cut cap and balance. it has not caught steam on the democratic side. you all are staring down the face of this default, and you say this is our position, and as the white house says here's our position. where is the give? you said at one point you might go for revenue increases. do you still stand by that? >> here is what would happen if we had a requirement to balance the budget. both parties would have to do it. there would be no excuses. you have to do something about entitlement spending, and it's 57% of all spending is medicare and social security and medicaid, we would have to address that in a bipartisan fashion. we have to make hard decisions. i would be willing to close loopholes. the ethanol subsidy, i would be willing to eliminate that, and some of that money would go to retiring the debt. i would go to closing the loopholes, but i will only do that in a context to balance the budget. i have been here since 1995, and i know what is going to happen. if we passed a balanced budget it would get ratified by the states and we would get the country back on track. if we don't do that, we are kicking the can down the road. >> frank: i could get a yes or no here because we're running out of time, if you cannot get the senate to pass what the house shirley will, you will allow the u.s. to go into default or go into a plan b. >> i am going to focus on plan a, it's the real deal, not a big deal. >> if it helps at all, the white house is not budging either. it's hard to know how you all will come to any agreements. senator lindsay graham, thank you for joining us this morning. >> thank you. up next, why rudy guiliani is considering another run for president. >> i think that i probably have the best record in terms of having done something similar to what the country needs done right now. 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[ female announcer ] charmin ultra soft. announcer: when life's this hard, it's no wonder 7,000 students drop out every school day. visit boostup.org and help kids in your community stay in school. in the republican presidential field we have a handful of not quite candidates conducting uncampaigns, which is sometimes a prelewd to a real campaign, and sometimes just an interesting activity or a way to drive up speaking fees. rudy guiliani is one of the not quiets. the former new york mayor went right to the top of the polls, but early results were disappointing to put it mildly and guiliani dropped out after the first few primaries. the man that gained national prominence and accolades for his in your face take charge approachuring 9/11, is patient on the new journey. he says he will decide by september. whether it's his new approach or the familiarity of his name, guiliani is doing all right in new hampshire, and he is third behind mitt romney and michele bachmann. i caught up with him at a harley davidson shop in new hampshire, really. our conversation is next. in here, the planned combination of at&t and t-mobile would deliver our next generation mobile broadband experience to 55 million more americans, many in small towns and rural communities, giving them a new choice. we'll deliver better service, with thousands of new cell sites... for greater access to all the things you want, whenever you want them. it's the at&t network... and what's possible in here is almost impossible to say. personal pricing now on brakes. tell us what you want to pay. we do our best to make that work. deal! my money. my choice. my meineke. mr. mayor, thank you f forjoining us. great spot to meet up with you. >> great setting. >> you said you would get in if you had the best chance to beat president obama. >> uh-huh. >> let me get into your thought process about this, if there is one. >> i am not sure how much, but we will find out. >> why, for instance, would you be better than mitt romney? >> well, i can tell you why i think i would have certain strengths. i think that i probably have the best record in terms of having done something similar to what the country needs done right now. i look at the other candidates, and they have all done very impressive things, but none of them really had to take over a city, one of the largest economies in the country and one of the most complex when it was in terrible trouble and turn it around and have definable results. i am not just saying it or believing it or thinking it, i could show that we started with one million on welfare and got it down to 500,000, and we turned the deficit into a surplus, it's what the country needs right now. >> so you think the best person to beat president obama is someone with a turn around expert, is basically what you are saying, somebody who has governed? >> i think it would help given what the issues are right now, the economy, and i think that to look at it as objectively as he can. the economy is in very, very difficult conditions. it has been that way for a long time. president obama has presided over the longest string of high unemployment since the great depression and has not done much about it, and promised to do things about it, and said the things he did would bring unemployment down like the tremendous stimulus, and the tremendous trillion-dollar stimulus was to get us down to 7% unemployment, and it's at 9% unemployment. horrendous results. >> you have people like mitt romney, and tim pawlenty, and jon huntsman, they all have governed states and have a record saying i helped with unemployment and this kind of thing. i am just trying to figure why -- you're trying to decide why you have a better chance to beat president obama, and i am trying to decide why you would think that given that they also have records? >> they have records and impressive records, but i don't remember their states being in the kind of cond