CNN "State of the Union with Candy Crowley" - Transcript

Interview

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CORNYN: Well, we have to do this on a bipartisan basis because the American people have said that business as usual in Washington, D.C., is unacceptable, particularly when it comes to spending and debt and people worried about the high degree of joblessness.

But I think that start has to start not only with the recommendation of the Debt Commission, but also the president's budget, which under the law, Budget Act, he has to submit by the first Monday in February. That's the blueprint that should lay this out and we'll have to see what kind of commitment President Obama and his administration will make to cutting spending and dealing with this unsustainable debt.

WARNER: I actually give the budget commission a lot of credit for, you know, putting out some hard choices. It's kind of where the reality meets the campaign rhetoric about deficit reduction. And I think there's a lot in the plan that I could be supportive of. Listen, some of this stuff is not Democrat or Republican. Some of it's just math. For example, 50 years ago, eight retirees for every worker, now only two. Look, folks at 25 or 30 years old today aren't going to get Social Security at 65 or 67. We're going to have to raise the retirement age slowly, in a slow way that doesn't affect folks 50, 55. But this is just math. We've got to do some of these things.

JOHNS: Defense spending should stay on the table then?

WARNER: Listen, defense spending is going to have to stay on the table. Domestic spending, though, we need to take a big hit to as well.

JOHNS: All right. Now, Senator Cornyn, you actually have taken a pledge not to raise taxes. And if I can look at this American Tax Reform (sic) graphic we have, support for the commission chair plan would be a violation of the Taxpayer Protection Pledge which over 235 congressmen, 41 senators have made to their constituents.

So if you were, say, to sign on to the deficit reduction plan, then you would have to violate this pledge, wouldn't you? Could you do that?

CORNYN: Well, I don't think it's a question of, are the American people taxed enough or should they be taxed more? We ought to be looking at spending cuts. I mean, the problem that most families and businesses have when there's only so much revenue coming in the door, they have to trim their expenditures.

That's what the federal government ought to be doing, rather than looking for ways to grow the government and grow the tax burden and discourage job creation.

JOHNS: But could you support tax increases?

CORNYN: I certainly wouldn't start there. And I would say I would be disinclined to support any tax increases. I think we ought to look on the spending side.

WARNER: Joe, let me just add on this. We're not going to solve this problem on one side of the balance sheet alone. Yes, we're going to need to look at significant spending cuts, but at some point we're going to have to look at the revenue side as well.

I mean, I think one of the things the commission draft pointed out was that statistics that I don't think most Americans know. We collect $1 trillion a year in income taxes, yet we have $1.2 trillion in tax spending through tax loopholes or tax expenditures. Saying that we can't even look at that half of the ledger will never allow us to get the deficit reduction that we need.

CORNYN: No. We've seen an explosion in federal spending over the last two years through the stimulus plan and other huge growth in the federal spending. We have to go back to, I believe, 2008 levels and freeze the federal spending level at that level, and then look where the big money is, which is in entitlements.

Mark touched on Social Security. Medicare is out of control in terms of the spending there, and the debt burden on children -- our children and grandchildren. So we need to look at where the money is, and I think we ought to -- it ought to all be on the table.

JOHNS: The American deficit is one of the issues that probably caused problems for President Obama when he was on his Asian trip. And there are people who say he didn't come back with very much. He wasn't able to get South Korea, for example, to sign on to a free trade agreement. He wasn't able to really make any headway on the issue of American currency vis-a-vis the Chinese. I guess the question is, given America's financial situation, is this diminishing our place in the world, or is the president's trip simply a reflection of him being a weakened president, say, by the midterm elections?

CORNYN: I'm glad the president went to India, and these other places to talk about free trade. I wish we had passed the three pending free trade agreements that have been languishing in Congress because the administration hasn't gotten behind them yet.

I hope this represents a change in approach to recognizing that markets abroad create jobs at home. So I'm really glad to see that. Mark and I happen to be the chairs of the India Caucus in the United States Senate. Mark will be starting January the 1st, taking over from Chris Dodd.

So we -- I think we both applaud the president's travel there, his commitment to free trade, and making sure that India, the world's largest democracy, represents one of our strongest trading partners.

WARNER: Well, listen, I think it's good to see the president abroad standing up for America, and pushing back on folks like China, who I believe have been manipulating currency and putting American business at a disadvantage.

I want to see a free trade pact with Korea as well, but I think John and I would both probably agree that we want to make sure that those cattlemen in Texas get a chance to sell their beef into Korea and that American automakers ought to be able sell their cars into Korea as well.

We've got to recognize that the challenge we face in this global economy is in the past, the rest of the world had to wait for America to get its economy or its political act together, but right now there's a billion people in India and a billion people in China. They are rushing ahead. They've got a plan.

We ought to make sure part of that plan includes selling them our stuff so that we can grow our economy through exports.

JOHNS: One of the issues that has rippled the waters over there and here in the United States is the Fed essentially pumping $600 billion into the economy at a time when taxpayers seem to have said that they want less federal spending. Does the Fed have too much power? CORNYN: Well, I think we need to be concerned about the Federal Reserve diluting the value of the dollar. Look, I think we're seeing a competing vision in places like Germany and Great Britain, where they have signed on to austerity programs, not more spending of borrowed money.

And in essence that's what this represents more of. And so I think Congress needs to look at that, and to figure out, are there limits we need to place on the Federal Reserve's authority here? Fed independence from politics is important, but this is the American people's money, and this is our economy. And so we ought to be able to look at that as well.

WARNER: And I just believe that, you know, the Fed is basically using its last tool, a little bit of quantitative easing, and, again, if that's against China, which has been manipulating its own currency, I think it is a tool to be used.

But we have to acknowledge that government has used its tools. We've used monetary policy about as much as we can. We've used federal stimulus about as much as we can. Part of our challenge is, how do we get the positive part of America's economy, the fact that corporate America today is healthier financially today than they were before the recession, $2 trillion in cash sitting on their balance sheets? How do we get it off the balance sheets, back reinvested?

JOHNS: OK. Hold that thought and stand by. Coming up next, is a compromise on extending the Bush tax cuts on the horizon? I know we all want to talk about that. Stay with us.

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JOHNS: We're back with Republican Senator John Cornyn and Democratic Senator Mark Warner.

So, Senator Warner I guess the question for you is, the White House does know about this plan. Have they signed onto it?

WARNER: I don't think anybody's signed on to it. But let me tell you the basis for it. First of all I think we all agree our middle class, the 98% of Americans, their tax cuts ought to be extended. Then I start with the premise that actually both the Democrats and the Republicans have a point on the top 2%. Democrats are right that permanent extension adds $700 billion to the deficit. Republicans are right, we shouldn't take the money out of the economy right now.

The problem with the two-year extension is -- I'm new in the Senate but most of these contrary extensions have a tendency to end up becoming permanent and most economists would say given folks like me an additional tax cut might not be the best value. So I say how can we use dollar for dollar the revenue we take for a two-year extension on the top 2% and use it for targeted business tax cuts to get parts of the literally $2 trillion in cash sitting on the side lines on the business balance sheets back investing in the economy.

It would be a great way to engage with the business community.

JOHNS: So, Senator Cornyn is this something you could sign on to, basically tailor it toward credit toward business?

CORNYN: The most important thing the economy needs now is certainty. The reason why we have so much money sitting on the sidelines waiting to be invested in the private sector is because of the turmoil and churning they've seen coming out of Washington with the power grabs, whether it's spending money we don't have on the stimulus bill, the health care bill that cost $2.6 trillion or $7 trillion. The financial regulatory reform bill punts the ball to the regulators to write the rules that haven't been written yet and people wonder what are the rules of the game.

So I think, we don't need to raise taxes on anyone during a fragile economic recovery including the people who report their business income on small individual tax return, small businesses.

JOHNS: Let me move on right now, because I have got a three or four other places. One of the things I found was on Twitter this week, you put up a tweet, one of the most controversial issues in the congress right now, "I support earmark moratorium. We hear you America!"

So is it pretty clear that the Congress, Republicans in both the House and the Senate are signing on to an earmark moratorium?

CORNYN: Well, I heard the president say he's in favor of that, while we reform the system. And certainly we know House Republicans - or I hope our friends on the Democratic side will join us in changing the way we do business in Washington. That's the reason I thought the message was so important.

We need to listen to what the American people told us in this election, they don't want business as usual. They want us to change on spending and debt and that's part of the solution I think.

JOHNS: But don't you give the president of the United States, in this case Barack Obama, the power to decide what Texas gets in terms of federal money?

CORNYN: I think what we do, if we eliminate earmarks, is we control the purse strings in Congress. We cut that and put that money that would otherwise go to earmarks toward deficit reduction.

JOHNS: Where are the Democrats on this?

WARNER: My view, I'm a new guy in the Senate, in the two years I've been here, if there's anything I've fought for, I put my name on it, full transparency. But I agree with John, if we're going to get rid of earmarks and everything is done with it, so be it.

JOHNS: In this lame duck congress another thing that could, might not come up is highly likely to be talked about again is "Don't Ask, Don't Tell." Do you see the congress during the lame duck session repealing "Don't Ask, Don't Tell?"

CORNYN: Joe, there are two things we have to do in the lame duck session, one is to pass a continuing resolution to keep the federal government operating until January when we come back into session with the new people who have just been elected on November the 2nd. The second is to deal with this tax increase issue, which would result in a $3 trillion tax increase unless we continue current policy.

Now, we can debate how long that will be. I would love to make it permanent myself.

JOHNS: It sounds like a no on "Don't Ask, Don't Tell." CORNYN: Well, I just think -- I don't think there's a lot of time. And I don't think there's a lot of appetite to try to jam stuff through. The president said he wants to pass a new S.T.A.R.T. treaty in a lame duck session. I just don't see that happening.

JOHNS: Senator Warner?

WARNER: Who knows what's going to happen in the lame duck. I am glad to see that the Pentagon has finished its study and it looks like they're going to come out and say that we can change this policy, which I support changing the policy and changing the policy will not affect military readiness. I think that Pentagon study and report is very important.

JOHNS: Will it take down, say, the defense authorization bill, which is the real question, or do you have to pull it out in order to get it through in some type of an omnibus legislation?

Is it -- I mean, is it just a simple question of logistics -- quick answer, if you will?

CORNYN: Well, "Don't ask, Don't tell" is not -- not military policy. It's congressional policy. It's the law of the land. So I expect we're going to have a continued debate about this when we see the full report from the Department of Defense on how this impacts military readiness.

JOHNS: December 1st.

All right. We're out of time on this. Thank you so much, the both of you, for coming in.

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