US Spending Cuts Loom; Effect of Cuts; US Spending Cuts
QUEST: So, the midnight deadline is nearly upon the United States. The cuts will start to take effect. They will be slow before they actually really are noticed by most Americans or the rest of the world. Ali Velshi is in Washington where he's joining us. Ali, I -- look. I understand your position, which basically says it's a blunt rather than the surgeon's knife.</s>ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Right.</s>QUEST: But it is only half a percent of GDP, the economy's going to be growing at 2, 2.2 percent, cuts are coming anyway, and they can't agree.</s>VELSHI: Yes, I'd love to have what you're drinking to suggest the economy's growing at 2 or 2 percent. You saw the remarkable slowdown at the end of the fourth quarter, at the end of the year in 2012. I'm a little worried that those might be optimistic. I've been working off of the same numbers. Now, I'm actually worried that it introduces a whole new level of uncertainty. We're talking about $85 billion in cuts. Everybody says you can find $85 billion in cuts, but we're looking at ten years, $1.2 trillion in cuts, and you know what happens if you take the US debt and you take it out decades? It still doesn't solve the problems. So, not only are cuts coming, as you say, not only are taxes going to be increased, regardless of what Republicans say, we actually need to do all that while encouraging greater economic growth, which means putting people back to work. None of this helps this circumstance. This is just outside of the realm of the stuff that we're supposed to be doing.</s>QUEST: All right. So, in that -- well, I don't -- I would take issue on a lot of what you just said.</s>VELSHI: OK.</s>QUEST: On the grounds that they've been at it for two to three years and beyond, they've failed to do so, they've always had this gun, if you like, to the head --</s>VELSHI: Yes. Yes.</s>QUEST: -- of the political process, and they've consistently ignored that --</s>VELSHI: Richard, if you're a --</s>QUEST: -- something has --</s>VELSHI: -- if you're a drug company --</s>QUEST: Something has to give!</s>VELSHI: -- and you're trying to find a cure to a disease and you've been at it for three or four or five or ten years, you're going in, you're doing experiments, you're doing all these things --</s>QUEST: No --</s>VELSHI: When you say they've been at it for two or three years, they've been at nothing. They've had deadlines. They've been saying they've got deadlines. They've been pushing deadlines back. But nobody's actually done it.</s>QUEST: Right.</s>VELSHI: You know what we need to do? Only two -- there's only two things that need to happen in American.</s>QUEST: Yes.</s>VELSHI: One is we need to reform taxes and two is we need to reform entitlements.</s>QUEST: No, come on!</s>VELSHI: That's it!</s>QUEST: You can't have it -- you can't have it as simple as that, because that's exactly the sort of panacea that every politician comes out. We've heard them on this program --</s>VELSHI: It's their only job.</s>QUEST: We heard it from the president.</s>VELSHI: When you get into a taxi, you finish your show and you get a taxi in London, that dude's only job is to get you to where you need to go in exchange for the money he gets paid. The government's only obligation - - the government's only obligation is to create a budget and spend their money according to their priorities. You know when the last time we passed a budget in the United States was? 2009. Americans have gall looking over to Europe and criticizing what goes on over there. We haven't had a budget -- we run on something called a continuing resolution --</s>QUEST: Right, but hang on --</s>VELSHI: -- which is an extension of the last budget for four years, five years now.</s>QUEST: I could go on for much longer, and I guess you could, too, and there'll be plenty more opportunities for that --</s>VELSHI: I'll be right here, just bring the camera back --</s>QUEST: Ali Velshi in Washington.</s>VELSHI: If Felicia's shot goes out, just come -- click back to me, I'll still be talking.</s>QUEST: Well, there's always -- there's Poppy Harlow, as well. Listen, if they have their words, you and I will never get a chance to say anything. All right, many thanks, Ali Velshi, who's in Washington. Jeffrey Sachs says America's automatic spending cuts won't have much economic impact internationally or even nationally. Put that in your pipe, Ali Velshi. I spoke to the director of Columbia University's Earth Institute and asked him whether it's better to start this process now.</s>JEFFREY SACHS, DIRECTOR, THE EARTH INSTITUTE: I think the process of getting the deficit under control is a good one. I would prefer to get it under control by more revenues rather than spending cuts, but the truth is that neither the White House nor Congress really talked about any alternatives to this for the last year and a half until the last couple of weeks, when the blame game started. So, this is just about the most predictable thing that's happened in Washington for a very long time. I think it is a -- it's not a good result for the White House or the Congress. It is time to get the deficits down, step by step, but I personally think --</s>QUEST: Right, but --</s>SACHS: -- the US would be wiser --</s>QUEST: -- but hang -- but you see -- but you see, this is the problem. Everybody says a better way should be found. Well, since 2011 and beyond, they've failed to find that better way. This is what happens if you paint yourself into the corner.</s>SACHS: Well, you're absolutely right. And I think that while it's easy for Democrats to point fingers at Republicans and Republicans to point fingers back at Democrats, the truth is that President Obama campaigned in 2012 on making almost all of the Bush tax cuts permanent. Those tax cuts were not affordable when George W. Bush introduced them a decade ago, they were not affordable when they were extended in 2010, they were not affordable when President Obama campaigned to extend them again, so we arrive in 2013 with a big deficit, without adequate revenues. Well, what do you think is going to happen? You're going to have to cut spending.</s>QUEST: OK.</s>SACHS: So, I don't really appreciate everybody pointing fingers at each other, either. I'm with you on this, Richard, that if you don't tax, you have to cut spending. Of course, I think the big mistake was that politicians on both sides, because their populistic, because they're appealing to the American voter, to here's more money, here's more money, end up without the money to fund a basic level of government services for a lot of important programs like education, like infrastructure, things that are falling apart in America.</s>QUEST: But with that in mind, are you worried that the -- that the economic effect of the sequestra will translate into ripple effects internationally? Is this going to have ramifications outside of the United States?</s>SACHS: I doubt it. I don't think it's that big. I think the consequences are in the US. I doubt that it's going to have big effects in the short term in the US. I think it's just another step of America not investing in its future. In other words, I don't see this as a major short-term macro-economic calamity, I just see it as sad that a rich country chooses to cut taxes and then not spend on education, on infrastructure, on clean energy, and so on. Now, I do believe, by the way, that the cuts in the military side are long overdue. I'm more concerned about the civilian investment side in our infrastructure and in our kids. The budget for the Pentagon easily can absorb these cuts, I say bravo on that.</s>QUEST: Jeffrey Sachs, who always makes such good sense, and we're always delighted to have him on this program. As the day moves on, of course, we will continue to watch and follow these cuts. On Monday, Detroit was named America's most miserable city. Now, it's been declared a state of fiscal emergency. Michigan's Motor City finally has run out of fuel, gas.