HH: Hour number three of the program begins with United States Senator Jon Kyl, the second ranking Republican in the United States Senate and our favorite Senator. Senator Kyl, welcome, good to talk to you.
JK: Thank you, Hugh, always good to be with you. Thank you.
HH: Can you give us an update on where we are, because Harry Reid left me very confused this afternoon.
JK: Well, we’re in a couple of different places, which is why it may seem kind of confusing. Both Republican Speaker John Boehner and Senate Leader Reid are laying down their respective positions in the House and Senate, with votes to be taken on those two proposals on Wednesday. That means that Republicans in the House have an opportunity to pass what is a Republican proposal, and Democrats in the Senate can pass what the President and Harry Reid have agreed to. Now a problem with that is that every time we do this, our folks get hardened in their positions. They obviously have to debate it, they say the things that they need to say, and the positions harden. And it’s more and more difficult then to eventually pass something on a bipartisan basis. So at the same time that these two leaders are moving forward, as they should do, because there’s no more time to waste, we’ve got to get stuff on the floor to vote on it. But at the same time, they are also working in a bipartisan way to see whether there’s a way to bridge the differences so that instead of taking the partisan votes, we can end up actually passing an extension of the debt ceiling so that before August 2nd, the markets know that there is not going to be a default.
HH: Now Senator Kyl, I’m very confident we’re going to do that. Are you?
JK: That we will avoid default?
JK: Yes, I am.
HH: Okay, and so with that background, we get into the partisan wrangling a bit. I know about the supercommittee, and I’m comfortable that you and Senator McConnell will put three rock-ribbed, anti-tax people on there. But I’m not so sure about the House. And this committee worries me. What do you say to that?
JK: Well, you mean you’re not so sure about Nancy Pelosi or John Boehner?
HH: Well, I think…
JK: I think John Boehner’s going to do the right thing.
HH: Well, he offered $800 billion dollars in revenues last week at the White House, and it kind of spooked me.
JK: Yeah, and I’m not exactly sure what that was, either. But, well, you can debate this a couple of different ways. First of all, what’s the alternative? And I haven’t seen a plan…you know, people say well, how about the regular order? The regular order has not produced a budget now going on three years in the Democrat-controlled Senate. And so the regular order has not produced results here. So the question is if we give half of what we need to do in order to get the debt ceiling extended through the election, that’s about, say, $1.2 trillion dollars, and we could get that much in savings that would take us through, roughly, the end of the year. Then the question is, how do you force savings that go the rest of the way, to about $2.5 trillion dollars? And you could rely on the committee process, which hasn’t produced anything so far. You could rely upon negotiations at the White House, which I would argue are exactly the wrong way to proceed, or you could do what Reid and McConnell are suggesting, and Boehner has embraced, which is a select committee of equal members of Republicans and Democrats, House and Senate, with the mandate to come back before the end of the year with specific recommendations which would have to be vote on up or down, like the so-called base closing BRAC commission, before the end of the year. That’s not guaranteed to produce a result, but give me a better idea.
HH: Well, why give up the filibuster? Why give up the rule of 40, because that’s what really spooks me, is that I’ve always looked at the Senate as being the stop gap. You almost stopped Obamacare, and it was only because of brazen tactics that it got through.
JK: Yeah, I kind of think you’ve got to rely upon the Republican House to be the stop gap here. It’s true that Republicans in the Senate, with 41, could also filibuster, but the object here is not to go into it with the commitment to stop something, but rather trying to figure out a way to get something passed. We have an opportunity here to actually reduce spending further, get the debt ceiling extended through the election without raising taxes, which was Obama’s first goal, and if we go into it committed to actually trying to achieve a result, it just might happen. If there’s a filibuster, then with a 60 vote requirement, we’re probably not likely to get that.
HH: Well then, here are my two major concerns, and I’ll lay them out for you. One is that there are some Defense spending hawks in the Senate and in the House, your friend, Tom Coburn, my frequent guest, and I like him a lot, is a Defense spending hawk. And then you’ve got some people who hate the mortgage interest deduction, and who hate the charitable deduction. And I could see them cobbling together a bunch of Democrats, and 40 Republicans, to gut Defense spending, and take away the deductions, and say we need to do it per Doc Coburn’s rhetoric, which is we’re at the edge of the cliff.
JK: Yeah, and I agree with you. That is a matter of grave concern, because I’m concerned that out of 12 people on this select committee, they’d have six Democrats committed to cutting Defense spending. And if you just found one Republican, then, who has been willing to agree to do that, then Defense could be in big trouble. That is the biggest concern. I am concerned about that. I grant you that, Hugh. Now I’m just trying to figure out, granted that concern, and there are other concerns, there’s no guarantee that we’re going to succeed here. If you start with the premise that we’ve got to extend the debt ceiling at least temporarily, then the question is how do you get enough vote in the House and Senate to do that without, as Obama insists, raising taxes, and without going through the end of the next election, because there’s no way to get enough savings to cover that amount of debt ceiling increase? It’s a question of poor alternatives, and to some extent, putting your faith in a process that is certainly not guaranteed to produce results. But I’m not sure what the next best alternative is.
HH: Well, is the reality that we have to have an election to clarify where we’re going, the President has to stand for a referendum on his stewardship, which I think is going to be very clear, and we have 23 Democrats and 11 Republicans up in the Senate. So why not just declare a truce and go home, but not let a supercommittee decide this for us, because I think we’re going to win this next election.
JK: Here’s how I would answer that. We’re going to lose the next election if we’re blamed for the state of the economy. Right now, Obama owns it. People have finally figured out it’s no longer George Bush’s fault. Obama has made it worse…much worse – unemployment, deficit, debt, spending, by any measure, Obama has made it worse. He owns it now. He has one chance to solve his electoral problem of owning the economy in a bad time, and ordinarily, presidential nominees don’t get reelected in a really bad economic situation. So what’s his solution? Have a credible case to blame Republicans for the state of the economy. How does he do that? He’s already said Republicans refuse to say yes to anything, it’s the Tea Party guys in the House who will not agree to extend the debt ceiling. So if we take any action which results in the market crashing, the European market going to heck, which then affects our market, the rating agencies downgrading our bonds, all the rest of it, which results in a worse economic condition, he then has the ability, he will claim, to blame Republicans for being equally responsible for the bad state of the economy. Now that wouldn’t be true, but at least it’s a case that he can make, and I don’t want to give him that case. That’s why the folks on our side who say let’s go ahead and default, have the election in 2012, I think aren’t counting on the fact that we’re going to lose the election in 2012 if we are also blamed for the state of our economy, which I think is still going to be bad by then.
HH: You’ve sold me on that. Senator McConnell sold me on that last week, and I believe that that’s a very prudent…and prudence is required here. I just, what leaves me still chilled is that we’ll also lose the election in 2012 if we end up gutting Defense or raising taxes, and it wouldn’t take much under the supercommittee to effect that.
JK: Yeah, raising taxes, absolutely. I wish I could say that I was confident we would lose the elections if we reduced Defense spending. I’m afraid we have been asleep at the switch making the argument that we’ve got to protect Defense. When I look around, I mean, I go down to the floor and I give speeches saying we cannot cut Defense spending, and I look around and I don’t see anybody on the floor helping me, Democrat or Republican, and that is a huge concern. I absolutely agree with you, Hugh, and that is the area of most concern about this committee. But the answer to that is to make sure that Republicans get back to the Reagan position of peace through strength, and get off of this notion that Defense can take just as much of a hit as everyone else. Defense has already taken its hit. Secretary Gates, no less, who just left the office of secretary of Defense, said Defense has been cut enough already. That’s a direct quotation. It cannot afford any more cuts. But Republicans have got to stand up to that point of view.
HH: Last question, Senator Kyl, you sat through all those hours of negotiations with your old colleague, Joe Biden. I don’t think you’ll say anything bad about the Vice President. But I’m curious about President Obama and what was implied in our conversation, his willingness to risk a financial panic for political purposes.
HH: Do you think that’s real?
JK: The President of the United States is concerned first and foremost with getting this debt ceiling issue beyond the next election. He doesn’t want to have to face it during his reelection campaign. That’s his most important objective here, and that’s why he says he’ll veto any shorter term extension. What we’ve got to do is be responsible here and say we’re not going to extend it the full time unless we have equal amount of savings. The President hasn’t been willing to do that. So we’ll only extend it in an amount commensurate with the degree of savings that we’ve been able to achieve here. And that means we’re going to have to have a temporary extension, and then go at it a second time to do the rest of it. I understand the President doesn’t want to deal with this in his election campaign, but frankly, if the American people are focused on the need to reduce spending, that’s not a bad issue to have out there.
HH: Senator Jon Kyl, always a pleasure, thank you, Senator.
End of interview.