Washington Battles Over Fiscal Cliff; Israel on Brink of War?; Fiscal Cliff Looms for U.S. Economy; "Flight" Drama of Salvation
SOLEDAD O'BRIEN, CNN ANCHOR: Welcome, everybody. Our STARTING POINT this morning, Middle East erupting, bombs over Gaza, rockets crashing in Tel Aviv, more troops on the move this morning. We're live in the Middle East on the -- the possible full scale eruption there of war. Plus, General Petraeus on Capitol Hill right now. It's the first time that we've seen him since he resigned over an affair. Will he put those questions to rest about Benghazi?</s>CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: And stirring clear of the fiscal cliff. President Obama welcomes congressional leaders to the White House this morning. Same people, same ideas on the table. Is there a new willingness, though, to compromise?</s>JOHN BERMAN, CNN ANCHOR: A tragedy in Texas. A freight train crashes into a parade float carrying veterans. And now, the question is: what went wrong?</s>O'BRIEN: Packed show for you this morning. The former Director of the Budget Office, Peter Orszag, is going to join us. Alabama Senator Jeff Sessions is with us. The actress Jada Pinkett Smith will join us and actress Kelly Reilly from the movie "Flight." It's Friday, November 16th, and STARTING POINT begins right now.</s>O'BRIEN: Welcome back, everybody. Our team this morning: Richard Socarides is with us. He's a writer for NewYorker.com. He's a former senior advisor to the president, President Clinton. Zanny Minton-Beddoes is with us. She's an economics editor at "The Economist". Will Cain is a columnist at TheBlaze.com. "EARLY START" co-anchor John Berman is with us, helping us out with news. Christine Romans is sticking around, helping us out with business. Packed table, packed show. STARTING POINT, of course, is the fiscal cliff -- 46 days and counting, we'll fall of the fiscal cliff. Although some people have talked about it now being a gentle slope.</s>ROMANS: Don't believe that. There's nothing gentle about it. If it's a slope, it's like a black diamond slalom course.</s>O'BRIEN: So, a gentle slalom black diamond slope.</s>ZANNY MINTON-BEDDOES, EDITOR, "THE ECONOMIST": No, a blue, a blue maybe.</s>O'BRIEN: A blue.</s>O'BRIEN: Nanny says maybe blue. But we're still talking kind of steep slope here. This morning, in their first post-election face to face, President Obama is going to host Capitol Hill top Republicans and Democrats and look for any room for compromise in the fiscal abyss, slope, stairwell, cliff. CNN's Jill Dougherty is at the White House for us with more. Good morning, Jill.</s>JILL DOUGHERTY, CNN FOREIGN AFFAIRS CORRESPONDENT: Hey. Good morning, Soledad. Well, one thing is that sure, that if they don't do something, everybody is going to end up paying a lot more taxes. So, that's a good spur. But right now, everyone is looking for the tone of this, what the President will do, how both sides come into it. And at first glance, it looks as if they're sticking to their positions but there are some cracks. You can so some hints of things that maybe they could compromise on. So let's start with the person who seems to be taking the strongest view from the Republican side and that is Senate Minority Leader Mitch McConnell.</s>SEN. MITCH MCCONNELL, (R-KY) SENATE MINORITY LEADER: We don't happen to think the government needs more revenue. Government spends too much as it is. But if Democrats are willing to reduce spending, strengthen entitlement programs which we all know are on an unsustainable path that threatens our own long term viability and the economic well-being of our children and grandchildren, then we'll be there. What we won't do is raise tax rates.</s>DOUGHERTY: OK. So raise tax rates -- that's a very specific phrase. They don't want to raise the rates. They are, the Republicans, talking about things like cutting loopholes, cutting deductions, things like that. The Democrats, on the other hand, say if you do the math, that doesn't add up to what is needed. And then from the Democratic side, you have that quandary of wanting to defend the entitlements that a lot of Americans depend upon. That's where you get people like Nancy Pelosi saying you can't simply do that on the backs of middle class taxpayer. So, that's essentially a lot of the debate right now.</s>O'BRIEN: Jill Dougherty for us this morning -- thank you, Jill. Let's get right to Peter Orszag. He is the former director of the Office of Management and Budget for the Obama White House. Today, he's going to appearing at a forum at the museum in Washington with other economic gurus, like Alan Greenspan and Paul Volcker and Erskine Bowles and Alan Simpson. It's nice to have you with us. So back in September --</s>PETER ORSZAG, FORMER DIRECTOR OF WHITE HOUSE OFFICE OF MANAGEMENT & BUDGET: Good to be here.</s>O'BRIEN: Thank you. I appreciate that. Back in September, you said, you're talking on CNBC, you said it's most likely that we're going to go over the fiscal cliff. And it seriously raised -- if that -- unless there is -- then there's that deal cut in January or mid-January, something like that. So you said first the cliff, then there will be some deal. Do you still think that's how it's going to happen?</s>ORSZAG: I hope not. But I think there's still a significant risk. I mean, you just heard Mr. McConnell say that he would not support raising tax rates at all. Mr. Boehner has said similar things. The administration seems to be open to perhaps tax rates not going up quite as much as they initially proposed but they're still absolutely insistent on those tax rate increases of at least some size. So, you know, there's a lot that has to come together in a short period of time in order to get a deal. It's not impossible. But I think the risk of at least temporarily going over this cliff is significant.</s>O'BRIEN: So, Zanny Minton-Beddoes is with us this morning. She says it's not a cliff. It's like a blue slope on a ski slope. Christine says it's a cliff like a black diamond.</s>ROMANS: Big black diamond.</s>O'BRIEN: Other people have said it's a gentle slope like a sunny day slope down the hill. What is it, do you think?</s>ORSZAG: Well, I guess the problem is we're going to start going downhill and not know exactly whether it's a blue slope or a double diamond. You don't know exactly what's ahead of you, because we don't know how quickly a deal will come together. And I think that's the problem. If, you know, on January 2nd, the leadership of the Congress and the President say, don't worry. We've got a deal coming together, then that's kind of like the gentle slope, no big deal. If they're yelling at each other and throwing grenades at each other, anxiety and lack of confidence that will create makes it a much more challenging downhill adventure at that point.</s>ROMANS: And we don't want it to snowball. We can really go crazy to explain it in ways that people can understand. All these things are bad. And, you know, remember Congress designed it to be bad so that we wouldn't be sitting here, talking about it. I mean, that's what I try reminding people.</s>ORSZAG: Yes.</s>ROMANS: Can you tell me a little bit from the perspective of the White House and the administration? Tim Geithner, the Treasury Secretary, he does have some leeway of telling companies they can keep their tables the same at the beginning of the year. You could -- you could try to defer at least what workers would feel in the fiscal cliff for a few days or weeks if they wanted to. What leeway does the White House have to try to blunt this if there's no deal?</s>ORSZAG: Sure. That's not actually -- I don't think the withholding tables for the 2013 taxes are the problem in early to mid-January. There are two other problems, though. One is that we don't have a fix for the alternative minimum tax for 2012, which is this alternative tax system that rests aside the regular income tax and without a fix, you've got tens of millions of people that will be thrown on to that alternative minimum tax. The IRS can't even tax refunds for the 2012 calendar year in early 2013 without knowing what those parameters are. So, one of the big problems here is, you know, people go Christmas shopping often in anticipation that they're going to get their refund in January or February. And IRS won't really be able to do that without knowing what the AMT was for 2012. That's just one example. There are many others. But I don't think the withholding tables are at the top of the list.</s>O'BRIEN: Zanny?</s>MINTON-BEDDOES: Yes. The one other -- Peter, the one other problem that people talk about after the fiscal cliff is the debt ceiling. You know, there is this other unknown out there, which is the some point we will reach the debt ceiling and Congress will have to agree on raising the debt ceiling. Do you think that's going to come into these negotiations and are we going to have to mix our metaphors and talk about cliffs and ceilings?</s>ROMANS: Oh, no.</s>ORSZAG: Look, I think the administration would be making a huge mistake to reach an agreement over the fiscal cliff without also wrapping in the debt limit into that agreement. It makes no sense to have all of this drama play out in December and then have new drama in, say, February. What we should do is whether it's in one stage or two stages, we should have a comprehensive deal here that addresses both the fiscal cliff or slope or whatever you want to call it, and the debt ceiling at the same time.</s>O'BRIEN: So what's the deal? I mean, this is the $64,000 --</s>ORSZAG: Sure.</s>O'BRIEN: Everybody sounds nice and conciliatory. I think it's because the election has just ended. So, they're not screaming at each other.</s>ORSZAG: Right.</s>O'BRIEN: But when you listen to l the actual words, they're very inflexible. I mean, you heard McConnell.</s>ORSZAG: Right.</s>O'BRIEN: What we won't do is to raise taxes. You heard the President say, I have -- you know, I campaigned on this so we're going to make sure we do that. What's --</s>MINTON-BEDDOES: There seems to be a bit of leeway in the sense that -- can you raise tax revenue without raising rates? There's a lot of talk about limiting deductions. I'd love to hear what you think about how much scope is there to raise money about limiting deductions. What kind of deductions will go?</s>O'BRIEN: The President didn't run on that, right? The President ran on making people who are wealthy pay more. So, I feel like we have a nice tone but actually the positions seem pretty intractable to me.</s>ORSZAG: Look, a deal here has to involve two components. One is on revenue and there is revenue that you can get from cutting back on deductions and exclusions. But I think, to my mind, the deal here is that marginal tax rates go up a little, maybe a percentage point or two. And maybe you raise the $250,000 threshold up a bit. So, will the House Republicans really blow up a deal if the threshold is $1 million to make it up in the marginal tax rate increases one or two percentage points? You couple that by broadening the tax base by cutting back on exclusions which -- and deductions, which is admittedly a lot easier to say than it is to do. But it is possible to do. And then the second component is there is going to have to be some kind of entitlement reform in order to get that debt limit increased. And to my mind, the most promising avenue for action is Social Security. Not because that's the biggest part of our fiscal gap. It's not. But because the parties are so far apart on Medicare and Medicaid, everyone -- you want to talk about happy talk, people say we have to address health care costs and their ideas for how to do so are so diametrically opposed --</s>O'BRIEN: Right.</s>ORSZAG: -- that there's little room for a deal there. On Social Security, on the other hand, at least the sort of span of options is not quite as wide and I can imagine, hypothetically, at least, imagine a deal coming together on that.</s>O'BRIEN: We'll see. Well, Peter Orszag, nice to talk to you about it. We appreciate your time this morning. Thank you.</s>ORSZAG: Good to be with you.</s>O'BRIEN: Thanks. The stories making news. John has got that.</s>BERMAN: Thanks, Soledad. Israel may be on the brink of war this morning. The violence in Gaza intensifying overnight, Palestinian militants launching hundreds of rockets into Israel territory, targeting Tel Aviv now. The Israelis countering with air and artillery strikes in more than 300 terror targets in Gaza, while calling up thousands of reservists for a possible ground war with Hamas. Ben Wedeman joins us live right now from Jerusalem. What's the latest, Ben?</s>BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT: John, within the last hour and a half, air raid sirens did go off in Tel Aviv. According to one police spokesman, there was an explosion, but it probably was out at sea, not actually hitting the town itself. Now, there was a relative respite in the bombardment going both ways in Gaza while the Egyptian prime minister, Hesham Kandil, was in the strip for a brief visit. However, as soon as he left, it appears that the amount of rockets being fired out of Gaza, the Israeli air strikes into it, ratcheted up. And, of course, Israel does seem to be preparing for some sort of ground invasion into Gaza. They called up 16,000 reservists for that. We know there are a lot of tanks being stationed on the outside of Gaza. What we see is similar to what we saw in 2008-2009, several days of intense air strikes followed by a ground incursion -- John.</s>BERMAN: All right. Ben Wedeman, things showing no signs of letting up right now in the region -- Ben Wedeman in Jerusalem. A parade honoring veterans ends in tragedy in Midland, Texas. At least four people were killed when a train slammed into a float packed with veterans and their spouses yesterday. More than dozens of other people were taken to the hospital yesterday. We don't know what caused this crash. Union Pacific says the track's lights and crossing gates were working and the train sounded its horn before the crash. President Obama touring Hurricane Sandy devastation in New York, flying over ravaged neighborhoods in Queens and comforting devastated homeowners in tents and in the street of Staten Island yesterday. The President also assigned a new point person for the Sandy recovery effort, New Yorker Shaun Donovan, who is the Secretary of the Department of Housing and Urban Development. Another prominent Republican is ripping Mitt Romney. New Mexico governor Susana Martinez says his claims that President Obama won the election by giving gifts to young and minority voters sets back the Republican Party. The GOP's most prominent Latina member went on saying her party has "to start electing people who look like their communities. We have to make them part of the solution, and the way you do that is by listening to them." Now, "The Daily Show" was also getting a piece of this action over the whole gifts comment. Take a look.</s>JON STEWART, HOST, "THE DAILY SHOW WITH JON STEWART": How on earth did Mitt Romney find out about the extraordinary bag of gifts that we got -- show them to everybody in this? What did Obama give us? Oh, bag of weed. That was nice. Oh, food stamp cozy. Contraception variety pack!</s>O'BRIEN: Very funny.</s>BERMAN: There you go.</s>O'BRIEN: Still ahead this morning on STARTING POINT, has the coverage of the David Petraeus scandal gone to far? We'll debate that with Howard Kurtz and Lauren Ashburn. That's coming up next. And new information out moments ago about Hostess. We're about to lose those Twinkies and those Snowballs. Is it forever? We'll talk about that.