Debt Deal Now, Cuts Later?
KAYE: In a little over half an hour, President Obama will sit down again with Democrat leaders of Congress on the debt ceiling crisis. And though time has grown shorter since last they talked, the prospects for real action seem greater. Keyword, "seem." Months of behind the scenes work by senators of both parties is suddenly emerging as a possible way out of a standoff that could lead to the first ever U.S. government default in just 13 days. A blueprint from the so-called "gang of six" would aim for $3.7 trillion in deficit reduction over ten years and $500 billion in immediate savings. It would rewrite the tax code, lowering income tax rates, but closing all manner of loopholes and write-offs. It would force down spending on entitlements, Medicare and Social Security. And while there's no way a bill of that size could get passed by August 2nd, just having it out there may be enough to get an increase in the debt limit before the Treasury has to start stiffing its many creditors. Watching all this from a safe distance is former labor secretary, Robert Reich, now professor of public policy at U.C.-Berkeley and author of numerous books, including "Aftershock: The Next Economy & America's Future." Mr. Secretary, thank you so much for your time on the program today.</s>ROBERT REICH, FORMER LABOR SECRETARY: Hi, Randi.</s>KAYE: If you were in that White House meeting in just about a half an hour from now, what would you tell both sides?</s>REICH: Well, I would say very simply that a failure to raise the debt ceiling is not a small matter. It means that we are not paying interest on our obligations. It means, therefore, that any further loans and lenders are going to demand huge interest from the United States. It's going to hurt our future faith and credit. In fact, it really would bust the faith and credit of the United States altogether. And every American would suffer as a result. This isn't a matter of just a few people being out of Social Security or out of Medicare. Those checks would not go out, by the way. But all Americans would suffer because of the higher interest rates that would result.</s>KAYE: So many plans, so many numbers -- it's sort of getting hard to keep track of it all. But we have talked about the "gang of six" plan. But there's two more actually in the mix. We have the House Republican "cut, cap and balance" plan -- which just passed yesterday, as you know. We also have the McConnell/Reid Senate plan. That one would actually let the president raise the debt limit in three installments between now and the 2012 elections. What do you think of that plan? Is that a solution or stopgap or worse?</s>REICH: It's a stopgap. It's not worse than a stopgap, Randi. But it certainly is way of kicking the can down the road a little bit. Remember -- on the mind of most Americans today is not the budget deficit and it's not the debt ceiling. It is jobs and wages. Those are the big issues. And most Americans are saying to themselves -- according to the polls and also just a little casual empiricism, talk to people around you, and they're saying when is Washington going to get on with the business of getting jobs and wages back on the front burner? Well, Washington presumably has to get by this impasse, this debt ceiling impasse, before it can turn to jobs and wages. And hopefully it will.</s>KAYE: What is the best case scenario, do you think, as you look at all of this on the table? What's the best-case scenario for the country and really also for the president?</s>REICH: Over the long term, we do have to bring down the budget deficit. There's no question about that. In the short term -- that is over the next year -- we should not be doing budget deficit reduction because, remember, businesses are not spending. Individuals, consumers, are not spending because they're so worried right now about their own plight. They're having big mortgage interest that they have to pay. Not only that, they also are worried about their jobs and wages. They're still not out of the gravitational pull of the great recession. Government spending -- whether you like it or not -- is necessary to make up for the reluctance of individuals, consumers and businesses to spend. Otherwise, we're going to be mired in the recession for years. But I would say once we get by the recession, in fact, hopefully next year, maybe the year after, once unemployment starts coming down, then by all means, let's focus like a laser on getting the budget deficit down.</s>KAYE: Robert Reich, thank you for your insight and your time. Take a look here. This is where it all happened. First, a millionaire's girlfriend is found dead hanging from a balcony. Then his son dies after falling down the stairs. It all happened the same week. So, are the two connected? That story is next.