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Arizona Senator Jon Kyl Talking About the Consequences of the Fiscal Cliff

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HH: As promised, joined now by our favorite Senator, Jon Kyl of the great state of Arizona on his victory lap in the United States Senate after 18 years, and they’re not making it easy on you, Senator. They’ve loaded up your plate, and it’s no time for farewell parties.

JK: Yeah, it’s more like a demolition derby than a victory lap, I can tell.

HH: Well, let’s run through the, I mean, it’s a great way to go out. You’re knee deep in a nightmare of stuff. First, let’s start about the lasting one, these filibuster changes proposed by your, as you would say, your friend across the aisle, Harry Reid. What do you make of his suggestions?

JK: Well, I see even the President is weighing in on it now, and that’s very destructive for the creation of any kind of collegial mood to negotiate difficult issues like the fiscal cliff and things of that sort to be talking about, first of all, breaking our rules in order to change the rules, and doing it in a way that would deprive the minority in the Senate, whichever party that is, of having the right to offer amendments and have them debated and so on. I hope that cooler heads will prevail. I’ve talked to several of my Democratic friends who fear the way that this is going, and would like to see some resolution of it short of the way that the majority leader is going. My guess is that he wouldn’t do it until the beginning of the next session, but several of the people who have been here a long time have been quietly meeting to see if there is some way to avert this catastrophe.

HH: Now this reminds me in reverse of the Gang of 14, Senator Kyl, when in 2005, we got very close to having the so-called nuclear option detonated by Bill Frist. In fact, I was talking to you in Washington when word arrived that the Gang of 14 had gotten together and decided to avert that.

JK: Right.

HH: Is that the same kind of current that is sweeping through in the reverse image right now?

JK: It’s very similar, and that’s why this is also called the nuclear option. The nuclear option refers to the parliamentary procedure for a rule change that does not follow our rules, which requires a 2/3 vote to change the rules, but rather would simply have the majority use its raw power to overturn the ruling of the chair with 51 votes, thus changing the rules. The subject matter is also similar. In the case of the filibuster of judges, that was just restricted to judges. This would be eliminating one of the two filibusters that are available to Senators on legislation. And that’s a much more difficult, much broader issue, of course. And the reason it comes up is because you have to, the way the Senate works is you have to get consent to go to a bill. The leader brings it up, and then if somebody objects, you’ve got to get 60 votes to proceed to the bill. You also have to do the same thing to close debate and have the final vote on the bill. What he’s proposing to do is to change that rule at the beginning. And the problem with it is that it’s the only leverage that the minority ever has to negotiate the amendments that it wishes to offer. In other words, why agree to take a bill up if the majority leader is going to prevent you from offering any amendments, or is going to decide which ones you can offer?

HH: Sure, it’s just a stacked deck and a manipulated debate then.

JK: Right, right. Exactly. I’ll give you an example. Today, the Defense bill finally started, open for business. Amendments – I went down and I said I have an amendment to offer. Whoa, whoa, whoa, the majority said. What is it? Well, here it is. Well, we don’t like it. I said okay, but I’m going to offer it. You can vote it down. No, no, no. We’re not going to let you have the floor to offer your amendment in the form that it’s currently in. We want to negotiate with you to change it before we’re going to let you offer it. Finally, out of desperation, I said okay, I’ll tell you what. I’ll stipulate that I won’t get a vote on this until you agree, okay? Now should the minority have to give away its rights to get a vote on an amendment, or to offer the amendment it wants to? And I think the answer is if we’re the world’s greatest deliberate body, we should have that right. And it’s not members of the Senate we’re talking about. It’s speaking on behalf of our constituents. This is the right of a minority, and not just a political minority. Democrats are suffering under the same problem if the majority leader doesn’t want to take their particular amendment.

HH: You know, it’s interesting, Senator, in two years, and that flies by as you know, 18 years have flown by when you’ve been in the United States Senate.

JK: Yeah.

HH: …that they’ve got 10 vulnerable seats up, they’ve got a five member majority, but 2014 does not look good to them. I can’t really believe they want to play this game at this point.

JK: It’s very short term thinking. And you know, that’s the way it was back when the Gang of 14, that is. It’s probably a good thing that they came up and averted that disaster, because it would have created a very bad precedent in the way that the rules could be changed. And what we did is we compromised. We said okay, we’re not going to have filibusters of judges except in extraordinary circumstances. It’s still up to the individual to define. But it was probably a good resolution to walk us back off the precipice then. We need something similar now, because breaking the rules to change the rules is not a good way for the U.S. Senate to go.

HH: Now let’s turn to the fiscal cliff. I sense an increasing resignation almost to return to the Clinton tax rates across the board, and then negotiate again anew in the new year. What do you sense, Jon Kyl?

JK: Well, I hope not. I hear some Republicans even saying it. Now that’s the mantra of Patty Murray, who is going to be the new budget chairman for the Democrats, and she’s currently their campaign committee chairman. And she says, well let’s go ahead and drive off the cliff. Let the rates for everybody go up, and then when we propose to cut them for a few, namely what she calls the middle class, then we’ll be heroes to the middle class. If the Republicans want to oppose this, why, let them. Well, that doesn’t even speak to the effect on the Defense bill, on the Defense spending, which would be whacked, would get 50% of the cuts that go into effect of roughly $500 billion dollar reduction on spending for the Defense Department over the next ten years. But she apparently doesn’t care about that. So we can’t go over the cliff is the bottom line. We have to find an alternative to it. And when I seem some Republicans saying well, let’s go ahead and go over the cliff, surely we’ll figure this out next year and it beats making a compromise with the Democrats…

HH: Well, Senator, you’re talking to one and I’ll tell you why. Talk me out of it, because I figure the President has already said he will restore the Defense cuts. He can’t allow the Defense cuts to go forward in the New Year.

JK: I don’t believe him. Do you believe him?

HH: The House Republicans…yeah, I do, because I do think that the American people aren’t stupid when it come to Defense.

JK But do you know what he has to do in order to do that? He has to come up with $109 billion dollars in savings. He’s not going to do that. He’s going to say I’ll tell you what. If you’ll increase taxes so that 50% of the $109 billion comes from new taxes rather than savings in spending, then I might consider restoring the cuts. That’s his stripes.

HH: If he is that foolish and that dangerous with regards to the national security, the American people ought to know that. But I’m afraid we’ve given away all the leverage with Tom Cole going to the floor of the House yesterday and saying give the President what he wants. That’s, I mean…

JK: I agree. That’s terrible. We shouldn’t do that. But you know, caving is not an argument for caving.

HH: (laughing)

JK: And look, here’s the deal. What does going over the cliff mean? It means that the capital gains rate has been increased…

HH: Yes.

JK: The dividends rate is going up to 40%, the estate tax rate goes to 55%…

HH: Yeah, but you can’t…

JK: And the highest marginal rates are going up 40%. And then you add the Obama stuff on top and it’s more than that. I mean, is this a good idea? That’s what happens if we go over the fiscal cliff.

HH: Oh, it’s a disaster, but buying into his view of the world is a disaster as well.

JK: Well, it depends on what his view of the world is. If he’s talking about raising tax rates, that’s the same thing as going over the cliff. I agree. We can’t agree to that. We might as well go over the cliff if that’s what he’s saying. But I think we can talk him into raising revenue through other means than raising tax rates.

HH: Well see, that’s where, if you pulled that off, I’d applaud you. But I don’t think he’s going to do that. I think that we’ve got to prepare the American people for the fact he’s really about politics, not about economic growth, and that when you’re about politics, all he cares about is putting you guys in a terrible position.

JK: I don’t disagree with that. I just think it’s very important if we can possibly do so to avert it, because once the capital gains rate goes up, once the estate tax rates goes up to 55% and so on, and the highest marginal rate goes up, we’re not going to get them back down. And what’s the effect of that? It kills business. Business investment dies on the vine, and that’s what we are expecting to happen in order to get our economy going again.

HH: Well, I don’t disagree with you on the impact. I just do not have an ounce of optimism about the President’s desire to do anything serious. And given what some of our friends have said, they’ve destroyed the ability to negotiate, I think, on the part of the House.

JK: Yeah, well, and if you’re saying there is a point at which the price to pay is greater than the effect of going over the cliff, there is such a point. That’s true. But I can’t think of much worse than a permanent increase in the top two marginal rates, capital gains, dividends and the estate tax. I mean, you tell me how better to harm small business that roughly one million small business folks who pay as individuals, not as corporations…

HH: Raise the debt limit, removing any chance of entitlement reform, throwing on the…

JK: Well, no, no. Well, I mean…

HH: If he did that, that’s worse.

JK: Yeah, well, I’m never going to remove any potential chance in entitlement reform. But again, that takes an action of the President to achieve, and I’d like to try to create some way forward to do that.

HH: And 30 seconds, Senator, are they working, is someone talking to you, to the responsible people? Or is Senator Reid truly the voice of the Democratic Party at this point?

JK: No, this is pretty much between the Obama folks and the Speaker and his folks, Speaker Boehner.

HH: And are you an optimist?

JK: Not at the moment.

HH: All right.

JK: Ordinarily, yes.

HH: Come back next week, Senator Jon Kyl. We’ve got to stay in touch through this incredibly perilous period.

JK: Thank you.

HH: Thank you.

End of interview.

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