Economic one. Host youre a veteran of the hill. When was the last time that congress was here between christmas and new years . Guest i dont remember but it happens a lot on budgetrelated matters. When i worked on the hill there were lameduck sessions but they did not go up this late. This is kind of chaos it is close to unprecedented. Ive never seen a speaker be pushed back on by his own party as hard as what happened to john boehner this week. Host let me read to you activists that helped John Boehners plan b saying that republicans must be ready to go over the fiscal cliff that includes no tax increases. Sbainer boehner and other Republican Leaders have been too scared about suffering publicly if the nation goes over the cliff and the tax sbikeses that are triggered in january. Now that the plan b has failed these conservative republicans should be empower you ared to make big demands and stop caving to the president out of fear. Guest that doesnt make much sense to me. You have to get it through the House Republicans then the president has to sign something, if that doesnt happen then you have very large tax increases a lot more than what they were talking about in their negotiating and you have the defense cuts that happen overtime and some other, nondefense cuts. You really have this huge amount of revenue, a lot of debt reduction. It is hard to see what demands the republicans can think will be easier to make come the new year. Guest plus, weve seen the president s approval level is at a high. And the poll should show that the republicans are going to be blamed if we go over the cliff and taxes go up. That is before the debacle with john boehner. It has been a bad week and it sounds like they are continuing to be a little delusional. Host it has been a tough week for the speaker. When you make a threat you better beable to back it up. Guest i think the only people that had a worse week was the wizards. This was a bad week for him and you cant shugger coat it at all. Host the guide to the federal budget, how big is the federal budget . How much money does the government take in . How much do we spend . How much is 167 trillion for the current debt . Guest spending this year will be 33. 8 trillion. The deficit of about 1 trillion that is for fiscal 2013. That assumes that somehow the fiscal cliff doesnt happen and we dont reduce the deficit by 600 billion. National debt, about 16 billion , debt held by the public as a percentage it is getting up there. Weve had it before. As we talked about two weeks ago it is not so much that the size of the debt it is how fast the debt is growing in comparison to the size of the economy. You dont want to pay off the debt but you want it to fall. Host how did we get to this point . Why is the Government Spending so much and under this president , weve seen the debt go up 1 trillion each year over the last four years. Where is it going . Guest there are two main ways to look at it. Right now, were still coming out of this economic crisis. So you have large debts for four years mainly because you have low revenues as people dont have jobs or they are getting paid less. Then there has been extra spending programs over the last four years but also, we have this mandatory spending programs that grow on auto pilot. Over the last four years they have grown because they represent the basic social safety net that we have when we enter recessions. So food stamps, medicaid, they spend more when the economy is bad. So i think that is the main thing to look at when you look at the last four years. There are some structural issues that we dont blame but look towards to explain why people are afraid of debts over the longterm. That is because our mandatory spending programs will be growing as the number of people eligible for them, mainly those who are in retirement or old age, that is going to swell as the generation retires. On top of that, you have Health Care Costs that grow quicker than the economy. They have been doing so in the last 40 years and continue to do so. When you combine the two things you look at a spending base that can be increasing greater than normal. To pay for that we have a tax code that has loophole deductions and really does not do a great job of raising revenue. Certainly the rates of this tax code have been cut over and over again over the last 10 years and that is decreased the amount of revenue the government is expecting to take in. If youre listening to us on cspan radio we have Stan Collender who writes a article on roll call and joshua gordon. What happens next as we reach the january 1 deadline . Let me share with you jonathan strong of roll call talks about anger in the republican caucus. He says, first of all, there is anger directed at conservative law make es. That fractures reaction means boehner is unlick to face significant challenge to his decision as speaker in the near term. The question is who is at the table . Does he negotiate from a position of strength when it comes to this next round with the president and senator mcconnell . He is at the table, senator reid, and others. Guest i am not sure that john boehner will be at the table. He said it is now up to the senate, i am going home. It is not taking my ball and going home, but it is doing as much as you can. He is literally looking to his republican colleagues in the senate to work with harry reid to get something acceptable. If he does, that will put significant pressure on House Republicans that did not otherwise exist. I want to push back a little bit. Since may, i thought that john boehner he made a speech back in december where he talked about 1 for spending cuts for every 1 increase in borrowing. Red meat for the tea party wing. It was clearly an attempt to say, i am your guy. It is not clear to me at the moment that, one, anybody would want the job, and two, that there really will not be a challenge. It has to come together very quickly. They do not need somebody to beat boehner. All they have to do is withhold 18 republican votes in the house. He would get an absolute majority and would not be elected speaker in the first round. Robert williams says that we need to cut spending. Sequestration was a democratic deal. Deal with it. Guest i would call that a deal between the Republican Congress and president. The whole point of sequestration, if we remember, was not to have to take effect. The point was to have such a bad outcome that the Super Committee that was created in the august 2011 debt ceiling deal be so afraid of the sequestration that they would reach a bipartisan compromise that would reduce deficits by the same amount that sequestration was expected to, but in a much more balanced and sensible way. Democrats and republicans were unable to reach an agreement and that is why you have this sequestration. Sequestration was never intended to be policy. It was intended to be so bad and foolish than democrats and republicans would be forced to agree to something. Obviously, that calculation perhaps mistook the level of disagreement there was between republicans and democrats on this issue. Host Stan Collender and joshua gordon. Democrats line, good morning. Caller good morning and merry christmas. I do not believe this congress is going to be able to deal with the fiscal cliff. The next congress, unless they Reform Senate filibuster rules and also and you can tell me whether this is a dream come true what if nancy pelosi and john boehner kind of got together and nancy pelosi told boehner he could bring the votes for his speakership and then maybe together could isolate the tea Party Section of his group and take away some of the radical left of her group and bring the moderates together, support him for speakership. Me, being a democrat, i would not get everything i want, but the republicans would get everything they wanted. By the time reelection came up they would have seen there was a lot of progress made and maybe they could not run primaries on those guys that decided to run to the middle with policy they laid out together. Host thank you for the call. Guest so many things. Basically, you are assuming that john boehner would be elected speaker in a democratic house. It is not likely that they would give him their votes. It is far more likely, quite honestly, that the democrats would like to see continued disruption on the republican side. Either way there would be a muchweakened speaker or he would be deposed. Host this president haas tried to give him some cover and boehners party made him look foolish. Agree or disagree . Guest i agree completely. This is something that has to take place, a conversation with the Republican Party. I started to say this before the election day. The first step in the fiscal cliff ought to be a republican discussion about what they were and were not willing to do. That did that seem to take place until earlier this week. The conversation was inconclusive. The one thing that has not happened yet, democrats have provided the votes on a lot of budgetrelated matters over the years but it was only after the tea party gave boehner permission to negotiate with the democrats those circumstances have to happen. We see you pushed as hard as you could. We now need to get something done. Were going to vote against this but work with the democrats. Host we have spoken to a number of republicans who say that the problem is spending. The government needs to cut spending. That is where we need to go in terms of reducing the deficit. Guest that is true, we need to cut spending, but there is some conflicting other couple issues. We to cut longterm spending on retirement programs to make them more in line with economic growth, not make them grow that much more quickly than economic growth. All the things that the Republican House has passed, cuts, have the Discretionary Spending and nondefense Discretionary Spending. So i think it is true you have to be serious about longterm mandatory spending reductions, but you cannot get there only by reducing spending. You have to do something on taxes. Really, plan b was about tax cuts, not spending. It seems to me the only with the Republican Party will get major spending cuts passed is it they also agreed to new revenue. Otherwise, the president cannot be out there continually only cutting spending while leaving all of the bushever tax cuts in place. Host let me share with you what emily etherege writes. She says it is almost certain that Social Security will be part of the deal. Continued murkiness has groups concerned. Democrats are critical of the president putting this issue on the table. Republicans say it has to be. Guest despite the conversations about the grand bargain, it was never going to happen, there had not been enough preparation. One of my predictions from my column in 2012 was predictions for next year. What i am telling everybody is we are not going to get a big tax reform package next year because it takes two years to enact. Without that, we will not get mandatory spending changes. That means the grand bargain is two years off. It cannot be part of the fiscal cliff at all. If there is one, it will be a figleaf. Something small to get people political coverage to cut the tax increases to be canceled. Host why is it so much harder today than it was in 1986, when her of writing was able to forge a compromise on tax reform . Guest where do you want to start . Communications are very different now. The internet, cable tv, informing people differently. You have a different situation with the leadership. The 1986 tax act took three years to enact. Congress was a lot less partisan, the country was less divided. Also, that was different in the sense that it was opposed to be revenue neutral. At the end of the day, whenever they changed, it would bring in the same amount. Now there is a general consensus that tax reform will have to bring in more revenue. That makes it a far more difficult process. In addition, the country has gotten older. More people are on medicare and Social Security and medicaid. That is where the voting power is, and that makes things but more difficult. Guest when you are looking at this specific deal in you want to know why they cannot get together, one of the things people forget, they have already done a fair amount of shortterm spending cuts. The budget control act, which cut almost 900 billion from Discretionary Spending, you have the sequester which sets the baseline norm for Discretionary Spending. Not having that 2 trillion of additional spending cuts on the table for this deal makes it harder to do. There is only so much cutting you can do in a short 10year time period, especially as the economy is recovering. If you look at health care legislation, tinkered with medicare to the degree that, while it did not fully reform medicare or set it on a sustainable path, there were cuts to medicare in that legislation that is making it harder to include 10year savings for this current deal. It is almost impossible to find the size of savings in medicare over the next 10 years that could appease the republicans, i think, on this. That is something that is not greatly appreciated. Host that is what johnston says on twitter. Guest mathematically, it is one of two things or both. You could also say we are taking in less than we are spending. The question is, commitments like medicare and Social Security, are these things we want to continue to do, and if so, are we willing to pay for them . Maybe we did not know what these things would cost. Maybe we did not know additional benefits would be provided. Maybe we did not the there would be loath to Small Businesses and students. The question is, are these priorities we want to pay for . If not, are we willing to cut them . That is the essence of what is going on. It is not just a mathematical thing. You can say it is the revenue or spending or a combination of the two. Josh is right. There has to be a combination of both. Host next phone call. Caller i had a couple of things i wanted to bring up. What was the tax code that the gentleman brought up . Long ago i was talking to my senator and representative about this tax code reform. Nothing ever seems to be done. It just seems to get worse. You almost have to have a cpa now to do your taxes. I will make a suggestion on this. Do away with the payroll tax holiday. Basically, all that does is for Social Security. People working really do not need it, and the employer does not need it. And the bush tax cuts, they talk about this hurting the rich and famous, but basically, people have 401ks, iras. After the depression, things did not get back in line until 10, 15 years later. Host another point on this, we cannot get tax reform with the current congress. They do not have the capacity. Guest i am not ready to write it off completely. Host you are more optimistic than Stan Collender. Guest we had a disagreement on this last week. There is an underlying consensus on the hill that we need to do tax reform, mainly because you have these tax expenditures which have grown in size. We lose as much in revenue to tax expenditures that we taken through the individual income tax, and there is consensus that you need to start broadening the base and getting rid of some of these deductions and credits and expenditures, and that allows you to not raise rates higher than they would have to go, if that is the only way you focused on revenue. It really is a winwin, where republicans can say they have lowered the amount of government interference in the economy by getting rid of these tax expenditures, and democrats can say they are bringing in more revenue, which will allow them not to cut Social Security as much as they would like to. Host kevin on the republican line. Good morning. Caller my question is, when does our currency become almost worthless . When we get to 80 of our gdp spending . What is the purpose of gold . I know what the purpose of gold in fort knox was. Reprinted our money but backed up with gold. What is the purpose of the gold in fort knox, what is it being used for, and what is the value of the gold in fort knox right now . Guest i do not know about you. It changes based on Commodity Prices around the world. Thank you for saying at least that there is gold in fort knox. Most of the time they say that we are being fooled. Lets get back to a couple of things. The value of the money, the question cannot be answered as you put it. A lot depends on the dollar amount and what is happening around the world. If you look good interest rates, the demand for dollars continues to be pretty high. Therefore, the dollar is relatively well valued, and were doing pretty well in that regard. The same thing with interest rates. You hear about people talking about bond market vigilantes. Tell me where there are. Interest rates have been going up in the other direction. To get back to Something Else that we were talking about a few minutes ago. Tax expenditures, tax breaks, deductions and credits that you were mentioning, they are as billable to individuals as some of the mentor programs to those as on the spending side. They have as much Political Support and will be as difficult to get rid of or change. That is the reason why tax reform will be so difficult here. If there is a provision still in the tax code coming is there because it has Political Support and it will be difficult to get rid of. Host one of our viewer says, how well wall street react to the fiscal cliff . We know there will be a deal. Will stocks dropped anyway . Do you follow the market . Guest i do. It is possible the market will reflect displeasure or concern or worry about going over the cliff. It is important for the average american to not focus so much on the daytoday gyrations of the stock market. You can be sure, politicians will be focused on it. One in this for getting a deal would be if all street has major crops days in a row. That might convince people who might otherwise think they could get a better deal to get a deal done. In that sense, it could be an actionforcing response. In the sense of what is happening i