Congress Reaches Fiscal Cliff Deal; Two New Yorkers Arrested with Means for Terror Attack
ERIN BURNETT, CNN ANCHOR: OUTFRONT tonight, Congress told America it saved the country from the fiscal cliff, but that doesn't add up for the USA is at the bottom of the canyon tonight. Plus, Chris Christie goes ballistic on the hated Congress and Speaker of the House John Boehner will show the outburst to you. And police say two New Yorkers have been arrested with the means and the know-how for a terrorist attack. Let's go OUTFRONT. Good evening, everyone. I'm Erin Burnett. OUTFRONT tonight, America or Homer Simpson. Like homer, we blithely skated to the precipice of the fiscal cliff believing we would sail into the sunset with a deal that made almost everyone happy, low tax rate, extended benefits. It sure sounds heavenly, but look what happens next. Yes, that's how it ends. That feeling of weightless euphoria, believes there was no way he would ever crash, there would be a last minute save. That was America today. The Dow surged 380 points on news of the fiscal cliff deal. Congress patted itself on the back. Why wouldn't they? That was a big reward. The problem is the truth. Congress sent America to the bottom of the chasm because like Homer, we're lying battered and bruised at the bottom. Why? Well, instead of cutting spending and raising revenue, which was original the point, the entire goal of the fiscal cliff, congress did the exact opposite, boosting spending and slashing revenue. They actually increased the deficit. That is the ultimate cliff dive. The Congressional Budget Office put these numbers out. They say the deal that everybody celebrated will actually increase deficits by nearly $4 trillion over the next decade. That's because by extending the Bush tax cuts for families who earn less than $450,000 a year, the deal cut revenue. Money that would have paid in taxes by $3.64 trillion and on top of that, it increased other spending by an additional $332 billion. That deal was really just a small Band-Aid on America's battered body. All it did was kick the can for two months on the automatic spending cuts that were set to go into effect today. The truth is, Congress didn't have the courage to deal with the problem now. And they left us sitting at the bottom of the precipice, but only they can get this country out. The problem is if the deal that they just did is the best they could do. On the last day of a lame duck session when a lot of people didn't have to worry about re-election, where the deadline the entire world was watching and judging them on, how can we expect them to solve the problem miraculously in two months at a new cliff deadline? After all, they've already had a lot of chances. You know, when you look back at this, it's pretty amazing. There was a debt ceiling in the summer of 2011. Remember that whole negotiation to try to get a grand bargain? They failed. This country got downgraded. They had another chance with the "Super Committee," which was charged with cutting the debt. It failed and that failure led to this fiscal cliff deadline, which was supposed to be so draconian and frightening that it would force a grand bargain on taxes and entitlement promises. We know there are a lot of smart and thoughtful people in Congress. People who know the right thing to do, might cost them re- election, and are willing to lose because of that. I believe that as an American citizen, but if this deadline didn't get them to step up, what will? OUTFRONT tonight, Bill Gross, PIMCO is the largest mutual fund. Bill, always good to see you. You know --</s>BILL GROSS, FOUNDER AND CO-CIO, PIMCO: Thank you, Erin.</s>BURNETT: It's sort of a depressing situation in a sense, right. You look at the -- it's kicking the can down the road essentially for two months. We got another cliff coming. We got the whole debt ceiling debate coming again. How dangerous is the current situation?</s>GROSS: Well, I think it's very dangerous. You just mentioned that the point in time where we have a debt ceiling, the government also has to have what they call a continuing budget resolution. They need to fix the sequester, which they didn't fix. So they have three data points in the next two months in which something has to be done. We've seen what happens in this particular case over a long weekend. So it's a dangerous situation and I perhaps not like Homer Simpson, I don't want to say do. But it's fair to say that taxes on all Americans have gone up here over the past few days. I mean, the average American wage earner earning $50,000 a year will pay $1,000 more in taxes over the next 12 months, so not only have they not reduced spending, but they've increased taxes for basically 100 percent of Americans.</s>BURNETT: Which is something obviously people -- you know, this isn't the time to do that. You may need to do that when the economy's stronger, but perhaps not yet. But Bill, how do we get to the -- you know, we've talked about how "Super Committee," right, they are going to cut $4 trillion. Simpson-Bowles said $4 trillion, all of that being a down payment on the much bigger problem that we face, which you've pointed out. The IMF has pointed out. It's a $16 trillion problem in this country. We can't even get a deal now that cuts anything. We've actually increased the deficit.</s>GROSS: We did that and as well, Erin, which hasn't been publicized. They continued $75,000 billion worth of tax breaks for TV and film, for, you know, basically Puerto Rican rum companies and for you know, other wind farm et cetera, et cetera, et cetera. The congress is in a gift giving mode and not in a reducing spending mode, which they need to do. You point out a number of the trillion dollars that they have to reduce. You know, they've basically raised $100 billion worth of taxes here on an annual basis. We think they have to reduce spending by two to three hundred billion dollars a year. It's a fairly pathetic situation in which the American public is having less and less faith in terms of their ability to act.</s>BURNETT: And I guess the question is what about people like you and your faith because as long as you still have faith, you buy American bonds, this country can still borrow for basically nothing and that enables Congress to keep spending money and saying there's no problem. Don't worry about downgrades, but at some point, people like you are going to say America may not pay us back. We can't necessarily trust America. I'm going to charge you a much higher interest rate. That could crush this country. Will that day ever come?</s>GROSS: Well, I think it's inevitable. At this point, to be fair, the Federal Reserve is buying about 80 percent of all treasuries that are issued. They're writing checks for a trillion dollars worth of fed purchases to fund the Treasury, but at some point, you know, investors and Federal Reserve will run out of check writing room. Inflation will increase and the deficit will just sink us down in terms of an economy.</s>BURNETT: Steven Englander at Citigroup said that the situation, the whole process that we just went through, which was, as you said, pathetic. It was so chaotic and the outcome so unsatisfactory that we're likely to see a further U.S. downgrade at some point. Again, I caveat it with the U.S. got downgraded and the interest rates haven't risen. But maybe that's because the rest of the world is even worse off than the U.S. right now and being relatively good is not being absolutely strong. So what's the likelihood you think that the United States gets downgraded again and in a way that could really affect all of us?</s>GROSS: Well, you know, Erin, agencies have stated that they would the firm ratings of negotiations lead to policies, which lower the debt to GDP ratios. It's a little technical and clearly, they have not. We have not seen that over the weekend. But I wouldn't expect the agencies to do, to hold things here. I mean, they've proven in the past to do the bidding of clients and governments as opposed to investors, but the important thing is that investors should wise up before the agencies wise up. You know, perhaps a few years down the road. The situation is definitely deteriorating and the happy, good feelings that Homer Simpson expresses, you know, in your opening cartoon, basically are something to be concerned about.</s>BURNETT: All right, Bill Gross, thank you very much. We appreciate your time, as Bill said, a pathetic situation and one that must be remedied. OUTFRONT next, the Chris Christie storm over sandy relief. He took a direct and ferocious stab at John Boehner. That's one reason some are calling for Boehner to lose his speaker's job tomorrow, the showdown. And the development in the health condition of the Secretary of State Hillary Clinton.