Priorities

JOHN KING, CNN: You just heard from the White House. Now let's get perspective from the other side, the other end of Pennsylvania Avenue. Joining us is Democratic Senator Mark Warner of Virginia and Republican Senator John Thune of South Dakota. Gentlemen, good morning.

Let's start with the spending bill you are going to have to vote on today. And I will start with the Democrats, since you guys are in charge up there. These Cabinet agencies -- now, we need to fund the government -- but these Cabinet agencies, some of them are getting 9 percent, 10 percent, in one or two cases some of the agencies are getting 12 percent spending increases. Everybody out there watching this morning, I doubt we can find people saying yes, the family budget is going to grow by 9 or 10 percent next year. Why?

MARK WARNER: Some of these areas, like law enforcement, I think they need that kind of support. But on a longer term, I actually believe this process has totally gotten out of control.

I am a new senator. I came from being a governor, where we actually had to balance our books each year. And I frankly think that the only way we are going to get spending long term under control is to get this kind of bipartisan commission, Democrats and Republicans come together, go ahead and put revenues and spending both out there, and then come back and vote it up, straight up and down, similar to the Brock (ph) commission. I don't see how this process where everybody kind of lards on is going to actually ever come to an end unless we finally have the discipline to do a straight up or down vote across the board on revenues and spending cuts.

KING: So a former governor and a Democrat endorses the commission approach. I tried to get the president's economic adviser, he says he wants to do something about it, but he would not be specific. He would not say yes or no to this idea of a commission. Would the Republicans support that even if in the end you have to vote up or down on a package that could conceivably -- if we go back to the Bush model, the Camp David meeting, George H.W. Bush, could have some tax increases in it?

JOHN THUNE: Most would support the commission process. It doesn't mean the Republicans would vote for what the commission recommends. But I do think we have got to have a mechanism whereby we start getting control of spending.

In this case, however, I think the problem is, John, it's like closing the barn door after the horse is out. We have already borrowed $1 trillion to pay for a stimulus bill. We've got a $2.5 trillion expansion of health care that's pending before the Senate right now, and as you mention, these appropriations bills that are coming in, year over year at 12 percent. The consumer price index this last year is a negative 0.2 percent. That's what normally these things are pegged to. And so you are increasing spending at the federal level by 12 percent year over year, at a time when most Americans, as you mentioned, are having to tighten their belts. That is why we have been trying to stop this bill this weekend from being voted upon and send it back to the committee and come back with a reasonable proposal.

I don't disagree that we've got to fund government. Mark and I would agree with that. I think what I disagree with is these year- over-year 12 percent increases after having already passed a trillion- dollar stimulus bill, much of which is going to be distributed to the same agencies that will get the funding that will come through this appropriations bill.

KING: And so, again, you say you think some of it's a mistake and you've got to get serious and the sooner the better. Whose fault is it? Whose fault is it?

WARNER: Neither side has clean hands. I mean, I do think we have to recall what -- actually, your previous guest said, Larry Summers, eight years ago, this country had a surplus. We saw over the last eight years, a trillion dollars spent on the wars, off balance sheet, not...

KING: Let me jump in for one second.

(CROSSTALK)

KING: Let me jump in for one second. Let's assume...

WARNER: ... off the balance sheet. And I think at some point, we have just got to say time-out here. In short term, we are going to need to keep spending, because we have got to make sure that we get this economy headed back in the right direction. But we've got to have a plan in place which both sides can agree on, Democrats and Republicans, both are going to have to make some hard choices. I did that as a governor. Every governor around the country has to do that year in and year out, and I think we need that same discipline here. And the only way I think we'll get it done is if we say bipartisan, come together, vote it straight up or down, take our lumps, both spending and revenues.

KING: The former governor says that. But here is what Max Baucus, who is the chairman of the Finance Committee, which has a pretty big say in government spending, in federal spending, including the health care bill, which you're looking at right now. The idea of this commission where tough choices, a bunch of members of Congress, a couple people the administration appoints, you get together, you put it together, you have to vote up or down. That's tough. He says this, "This commission and its new fast-track process are truly dangerous. If we were to cede all of our responsibilities to this commission, we were to tie our hands so we could not amend its recommendations, then we would risk setting in motion some truly terrible policy."

Why is it that the chairman of your big important committee there, the speaker of the House on the other side, opposes this idea? If this needs to be done -- and forgive me, I am going to skip Senator Thune for a second, you have a Democratic president, you have an 82- seat Democratic majority in the House, and you have 60 Democratic votes or at least 58, not counting the independents, in the United States Senate. I will concede your point for now that let's say the Republican administration for eight years dug most of the ditch. You are in charge.

WARNER: I think what we're seeing is both sides don't have clean hands in this effort. And I think what we're going to need to do, the only way we will get the hard choices made both on the spending side in terms of cuts and potentially on the revenue side is if it's bipartisan.

What I see -- I am a new guy in the Senate. But it seems like everything kind of divides at the door in terms of Democrat/Republican. If there is ever a time to kind of chuck your D hat and R hat, it ought to be now. And on this kind of effort of getting our deficit under control, I think this would be the time for that kind of bipartisan approach.

And frankly, I do think there are some who say don't want to change the system, but this is a moment of crisis. This is a moment -- I think the American people realize it. I think the markets, the international markets are looking at whether we will be willing to take the steps to get this deficit under control over the long haul. It's not going to happen -- you know, we didn't dig this ditch in a year, we're not going to dig out of it in a year. It's going to take some time, but we have got to start down a path that will actually get us to a straight up or down vote.

KING: And do you believe we could start down a path to real deficit reduction without some tax increases? Again, I want to go back to the George H.W. Bush model. Many believe he lost his job as president of the United States because conservatives got mad at him because he broke his "read my lips, no new taxes" promise. But he did put the government on a path that allowed President Clinton, the Democrat, to balance the budget. Can you do it? Can you have real deficit reduction without at least some temporary tax increases?

THUNE: I think you have to start with spending. I mean, think about this, John. Here we are. We are going to be voting today in the United States Senate on an appropriation bill that increases spending 12 percent over last year when the consumer price index was a negative 0.2 percent. You've got to start there.

THUNE: And what I would say is -- and Mark is right, I mean, Republicans share some of the blame. When we were in charge, we did not control spending well enough either, but we look like pikers compared to what's going on now. I mean, you have a Democrat president, as you said Democrat majority in the House, Democrat majority in the Senate. All of them have their foot on the pedal. I mean, this thing is -- they are driving this thing over the cliff, and somebody has got to put the breaks on.

And what we are trying to say is, let's put the breaks on the spending side. Obviously, there is revenue in spending. These components, they interact, but until you start dealing with the spending issue here in Washington, D.C., we are never going to get our fiscal situation under control, and we are never going to be able, I think, to see the kind of economic prosperity that we have seen in the past. We can't continue to borrow and spend at this rate.

KING: I am going to assume that the Democrats have the votes to pass this today, and this bill will pass, the Republicans will complain, and they will move back to the health care debate. And one of the key questions there is health care costs are going up like this, and can you bend it? Can you start to bend that cost curve? As you both know, there was a report this week from an Obama administration, the actuary for the Medicare and the Medicaid program. He raises some questions about this, as to whether the Senate plan or any of the plans as it now stands truly bends that cost curve. Do you believe it does, or does more need to be done?

WARNER: I think more needs to be done. And frankly, earlier this week, a group of freshman senators put together a whole series of amendments that did not get a lot of attention in terms of the headlines, but were all about cost containment, all about more price disparity, all about trying to take programs that work in the private sector and bring them into the health care system in terms of what the government spends, trying to lower administrative fees. And we have got broad base support from it. We've got support from the business community, the Business Roundtable, National Association of Manufacturers, consumer groups. Even some of the hospital groups came forward and said we need more around cost containment.

Because what I have not heard from my Republican colleagues who say let's start over again, which I may be new to Washington, but that means let's just punt the problem for another 10 years -- if we do nothing, the biggest single driver of federal deficit is health care spending. Medicare is going to go bankrupt in eight years if we don't do anything. Average Virginia family, average South Dakota family in a decade will pay 40 percent of their income on health insurance premiums. And I'm a -- I spent 20 years in the business world. If America can't drive down our health care costs, the biggest single I think restraint on American business, no matter how productive our workers are, are our health care costs. We pay twice as much per capital as any other industrial country in the world.

So we have got to make cost containment -- and that has been my statement from the beginning of this debate -- cost containment has to be the driver.

On that actuary report, it did also include the fact that it does expend Medicare's life for nine years, and the actual referee that I think both sides perhaps have problems with at times but has been called the referee for this whole health care debate, the CBO, has said this plan -- and it's got to get rescored now as it's kind of -- as that final package compromise comes together -- this plan will actually lower the deficit $130 billion in the first 10 years, over $500 billion in the second 10. And the CBO has said that close to 90 percent of Americans who get health insurance through private sector will actually see their premiums either decrease or stay the same. Is it perfect? No. But we have got to start moving this one-sixth of our economy spend, which is right now a crazy basis of fee for service, into a more rational approach, and I think the health care bill is headed in that direction.

KING: If this freshman group has some success, is that enough progress for Republicans to say we'll come onboard and try to work with you some more, or is this to the point where the Republican message is that unless you're willing to start over, Mr. President, we're going to try and do everything we can to block this?

THUNE: Well, we hope there are some courageous Democrats -- and maybe Mark Warner will be one of them -- who will step forward and help defeat this really bad idea.

Republicans are not for doing nothing. We have a number of solutions that according to the CBO actually bend the cost curve down. But the ironic thing about this whole debate is, doing nothing would be better than doing what they are proposing to do. Because as Mark said, the whole objective ought to be to bend the cost curve down and to lower costs. You now have the Congressional Budget Office saying this health care proposal the Senate is considering will increase costs, bend the cost curve up. You now have the CMS actuary saying the very same thing. And you have got the CMS actuary also saying that about 20 percent of your hospitals are going to close, 17 million people are going to lose their employer-based coverage, and that the Medicare cuts that are proposed in the bill are unsustainable over time.

I mean, this was a devastating week in terms of this proposal that is currently before the Congress, and it needs to be defeated. We do need to start over, and we do need to focus on what Mark just said, and that's cost containment. Unfortunately, this bill does not do that.

KING: Your Democratic colleague from Virginia, Jim Webb, voted with the Republicans on the question of this Medicare savings or cuts -- people used different words depending on your perspective on the bill. Again, is that a place where your leadership needs to go back to the drawing board?

WARNER: First of all, I welcome John to help us work on this cost containment package. We've already got a couple of Republican co-sponsors. Again, broadest base of support, business, consumers, even some of the providers. Makes sense. The remarkable thing is, on the Medicare savings -- and I think we have to find these Medicare savings. And in effect, what some of my friends on the other side are saying is we can't touch Medicare, we can't touch the rate of increase. Well, if we can't do that, we are simply rearranging the deck chairs on the financial Titanic in terms of health care costs, going to send our country down, send our country down.

I believe -- and a lot of the savings that have been proposed have actually been proposed by the health care providers themselves that have said that if we actually start to change the way we pay for health care -- I mean, think of the system we have got right now, John. We basically pay for volume. Hospitals who have high readmission rates get paid more than hospitals who do a better job of keeping you out of the hospital. We have got to make sure that we no longer have this fee for service basis. We have got to make sure that we actually pay providers for the health care outcomes, not simply the volume of tests that you get, the number of drugs you receive, the number of nights you stay in the hospital.

And this effort -- this bill, perfect? No. And we are going to have to come back and fix it some more in terms of changing the whole financial incentives. But this notion -- I may, again, as I said earlier, I may be new to Washington, but I have heard that, you know, let's start over is simply code for let's punt for another 10 years on a problem. That if we punt for another 10 years, you know, it will be a financial disaster.

KING: Let me call a time out and give the Republican senator the last word here. Address any of that, if you will. But I also want to ask you, the president is meeting tomorrow with these bankers at the White House. I was in your state earlier this year, and ranchers, small businesses in rural America say, wait a minute, those are our tax dollars that went to bail those guys out, and I can't get a loan when I go to my bank up the street. What does the president need to do to fix that in South Dakota and elsewhere, small-town America where small business and farmers are having trouble?

THUNE: Well, I think the main thing the president can do right now and the Democrat leadership in the Congress can do is do no harm. I think the reason that banks aren't lending and that small businesses are not investing is they are -- they see this policy uncertainty over Washington. They see more borrowing, more taxing, more debt, more spending, and in the health care bill, they see their premiums going up.

And I think the banks around the country, small banks and large banks for that matter, are being very cautious. They are worried about credit quality. They are worried about value of collateral. They are making decisions that they have been told by regulators they need to maintain cash reserves. I think everything starts freeing up if we can take this $2.5 trillion health care bill off the table, start over, start doing something that actually drives health care costs down, do away with this climate change energy tax that is going to crush the economy, and especially in places like the Midwest, do away with some of these policies that create more spending, borrowing, and taxing, which are all bad for the economy.

KING: Senator John Thune of South Dakota, Mark Warner of Virginia. I like when the Senate is in business on Sunday. You guys can come in again another time, and we will invite you back as these debates go on.