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Arizona Senator Jon Kyl On Why the Deficit/Debt Ceiling Talks Broke Down

Friday, June 24, 2011

HH: As promised, joined now by United States Senator Jon Kyl, the Republican whip in the Senate, and the Senate Republicans’ delegate to the now, I guess over, deficit/debt ceiling talks. Senator Kyl, always a pleasure, good to talk to you.

JK: Thank you, Hugh, good to be with you and your listeners. The talks are in abeyance at the moment.

HH: All right, before we go to that, I do want to get an update on Arizona and how the fires are going there. I know a lot of listeners are concerned about the state and how it’s progressing.

JK: Yeah, well, it’s bad news and good news. The bad news is that Arizona has now had its worst fire season ever. The big Wallow fire in our beautiful White Mountain area, has now burned over 530,000 acres. I think that’s something like 850 square miles.

HH: Wow.

JK: It’s bigger than the state of Rhode Island, beautiful, beautiful mountain area. We have the whole Chiricahua is about 230,000 acres that have basically burned themselves out. The fire is essentially contained, because there’s nothing more to burn. And the most recent one, the Monument fire, started right close to the border, and has gone up toward Fort Huachuca, an Army base, and the town of Sierra Vista. They think they can stop it there, but it’s already destroyed something like 60 homes and six or seven businesses.

HH: Now your colleague, John McCain, caught some heat for saying look, this could have been the work of people at the border who were not there legally, drug smugglers, coyotes, or illegal immigrants, and he caught a lot of hell for that. What did you think of that, Jon Kyl?

JK: Well, he was correct. I was right there. And the question was, what can we do about these fires? How can we stop them? And he said well first of all, we can prevent them from happening. He said there’s several things we can do. For example, a lot of these fires are said to be, or we have substantial evidence, they’re caused by drug smugglers and illegal immigrants. And he went on to point out, and we’ve been told this for years by Border Patrol, by Forest Service, by sheriff deputies and so on. I mean, this is not a big secret in Arizona. But particularly those down near the border, not the big Wallow fire, to be clear, but they’re started for diversionary reasons, in order to stay warm at night, because it gets cold up there in the desert, and by accident. There are numerous fires in Southern Arizona that authorities believed were started by illegal immigrants or drug smugglers.

HH: All right, that’s clarified. Now I hope that Red Cross and other efforts are availing to the people displaced there. Now Senator, let’s talk about this debt ceiling talk. What happened today?

JK: Eric Cantor and I concluded after yesterday’s meeting that the Democrats had decided to hold virtually every cut that we had identified and agreed on, tentatively, to be sure, but the agreement was these were things where we could reduce spending. And we’d spent two or three weeks really working hard to identify a lot of money. We’re talking hundreds of billions of dollars. But that none of the things that affected any kind of the health programs or Medicare, for example, could be done unless Republicans agreed to significant tax increases. Well of course, a tax increase would be the absolute worst thing to do to our economy right now, and would be very negative with respect to job creation. And we’ve always said this is not the time to do it, if ever. So forget about tax increases as part of the problem of too much spending. Eric decided that he just wouldn’t show up at the meeting today, and issued a statement to that effect this morning, noting the fact that we had made it clear from the beginning that we weren’t going to raise taxes, it would never pass the House of Representatives, and the Democrats had been told that, they knew that, and yet they were making this argument. And so the Vice President decided not to have the meeting today. I think he’s thinking about how we might at least try to quantify the things that we have agreed upon, tentatively, so far, so that if the President himself wants to get in the game here and decide whether he’s going to insist on taxes or not, at least there’s a basis for he and, say, Speaker Boehner, to discuss the issue and decide what they want to do.

HH: When you say hundreds of billions, Senator Kyl, is there enough identified cuts to get the debt ceiling high enough under Speaker Boehner’s one dollar in cuts for one dollar in debt ceiling hike? Is there enough to work it there?

JK: We haven’t reached agreement on enough, but there is potentially enough out there. It would depend on, I mean, we’ve talked about cuts on the mandatory spending side. You know that that’s where two-thirds of the money is. And we’ve also talked about setting the budget limits for at least the next two years. That’s on the discretionary side. And the combination of those two things, if we’re serious about it, can achieve the savings that would be at least a dollar for dollar for the roughly $2.4 trillion dollars that would be necessary to extend the debt ceiling through the end of next year.

HH: Well then, their insistence on tax hikes is totally without a necessity, if that is, if they’re willing to go along with the Boehner rule.

JK: Well, that’s our opinion. Now I think they would argue that they want to make less in the way of cuts. So that means that they need to add some revenue in there. So when I say yes, it’s there to be done, I can see a way we could get there, and so can Eric Cantor. The Democrats would rather not cut as much, and instead supply the difference with taxes. One problem with that is that whenever you start raising tax rates, and think you’re going to get all of this new revenue for the federal government, the taxpayers involved change their behavior, and the government never ends up taking in as much revenue as it thought it was going to take in.

HH: Sure.

JK: And that’s exactly what would happen here.

HH: Is one of the changes you’ve identified the Medicaid error that was identified this week that would allow an additional couple of million Americans to be eligible for Medicaid because they’re no longer going to count…

JK: No, the Democrats think that’s a fine thing, and they have not been willing to look at things like that.

HH: So they really will not go back on that?

JK: No, and there are things that are in Obamacare, for example, that we’d like to address. And of course, that’s all off the table, as far as they’re concerned.

HH: What kind of taxes do they want to raise, Senator Kyl?

JK: Well, you name it. I mean, we’ve got a whole page full of things, but they especially would like to pick on their favorite culprits, the oil and gas industry, which of course provide us with the gasoline for the cars that we drive. There’s a special provision that applies mostly to retailers and manufacturers. Well, those are the kind of businesses that we want to get healthy again so that they can hire people, put them back to work. There are just a variety. One of their favorites is to reduce the value of contributions, or deductions, for example, such as you might get from a contribution to charity. I don’t think that’s the kind of thing you want to discourage in this country.

HH: No, it’s not. Now I’m curious if you think that they are sufficiently Machiavellian, that they will allow a market panic to try and play to their political advantage. I am very worried Nancy Pelosi doesn’t think she’s ever going to get the gavel back unless some table turner arises, and that she wouldn’t be unhappy to see a thousand point drop in the Dow to blame on the Republicans. What do you think, Senator?

JK: I don’t think that Secretary Geithner wants that to happen, but I don’t think that they’re averse to scaring seniors or veterans, or anybody else that relies upon federal spending to say look, if we get to the point where we’re in default, then of course that means we can’t spend money on a lot of things. And they can decide what it is that they don’t want to spend money on. And you can bet that they will all be politically important constituencies.

HH: So is there any chance, in your mind, of a tax hike getting through either the House, or in your case, the 40-plus votes they need in the Senate?

JK: No.

HH: Okay.

JK: I mean, House members just got elected with a lot of support from mainstream America saying reduce government spending. It’s wasteful Washington spending that’s the problem. And just think about this for a minute. When the Democrats had 59 Senators, and I think a majority of 40, I’ve forgotten what their majority was in the House, they could not even get through a tax on millionaires. Every Republican voted against that, and five Democrats voted against it in the Senate. So if they couldn’t pass it then, how are they going to expect the Republican-controlled House to pass it now?

HH: So what is the end game that you see here, Senator Kyl, because obviously, the August 2nd date’s out there.

JK: Yeah, it is. And I don’t know. It seems to me that the President has kind of gotten himself in a box by saying that there have to be tax increases to address this excess spending problem. And one answer, of course, is for him to say okay, you all don’t want to do that, but we’re going to fight that battle eventually. I mean, he is the one who’s said that’s the battle we’re going to fight in 2012 elections. And I thought that’s where we were going to fight it.

HH: Well, then my last question, Senator Kyl, I just want to be clear, the report this week is that Obamacare included an error that allows millions of Americans to be eligible for Medicaid at a cost of about a half trillion dollars over ten years. And the Democrats are unwilling to even fix that as part of this?

JK: Well, what I don’t want to do, Hugh, is to talk about specific items that we have talked about.

HH: Okay.

JK: There’s still a chance that these negotiations could get back on track, and we could figure out significant savings about things. But I will say as a general proposition that any change to Medicaid, Medicare, anything like that, they said the price would have to be an increase in taxes.

HH: Wow. Senator Kyl, good luck, I hope you guys do not blink. The Republicans can’t, and it sounds to me like you’re saying that’s not going to happen.

JK: That’s not going to happen.

HH: Jon Kyl of Arizona, always a pleasure, thank you, Senator.

JK: You bet, Hugh. Take care.

End of interview.

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