2:19 pm
Thu November 8, 2012

'Fiscal Cliff' Will Change Terms Of Debate In Congress

Originally published on Thu November 8, 2012 4:02 pm





And I'm Melissa Block. The political landscape of Washington, after more than a year of campaigning and billions of dollars in political spending, is stunningly unchanged. President Obama is in the White House. Republicans control the House of Representatives. Democrats hold the Senate.

SIEGEL: Will relations between Democrats and Republicans in Washington change much based on Tuesday's election results? Well, yesterday, the Democratic Senate majority leader and the Republican speaker of the House offered some conciliatory, if cryptic, comments about breaking the fiscal stalemate. We're going to talk now about with a Republican legislator about the view from atop the fiscal cliff and other questions for his party.

Jeff Flake of Arizona is doubly credentialed to talk with us today. He is still a lame duck member of the House from the Mesa, Arizona area and he is also U.S. Senator elect. Congratulations and thanks for joining us.

SENATOR JEFF FLAKE: Hey, thanks for having me on, Robert.

SIEGEL: Let's first talk about avoiding the automatic spending cuts and tax increases that we call the cliff. Should we expect Republicans to accept some mix of either new tax rates that either go up for the wealthiest or, say, higher rates for investment income and capital gains that might have the same effect? That is, should we expect the Republicans to move off the Norquist line in the interest of compromise when it comes to increasing revenue?

FLAKE: Well, I think you saw the beginnings of that yesterday with Speaker Boehner saying that we're open to additional revenue coming in as long as it's within the context of pro-growth tax policy, which means lower rates, not higher rates.

SIEGEL: But what do you expect the terms of this dialogue - you know, the Democrats say it just doesn't add up when you take away all of the deductions that we now have unless you count a 15 percent rate for capital gains and dividends and interest as being one of the deductions you'd do away with. It just doesn't seem to add up. Should we expect the numbers to start moving here in private talks that are going on in the Capitol?

FLAKE: Well, I think you'll see a few things. Where does that top rate go down to? Obviously, what deductions and credits we get rid of. But when you start dealing with investment income, capital gains, you know, in the late '90s, we actually cut the capital gains rate significantly and had an increase in revenue. If supply side economics is in evidence, that's where it's really in evidence with cap gains.

So I'm not sure that we'll see a higher rate for cap gains, simply because I think that affects job creation.

SIEGEL: But in the very same 1990s you had higher rates, higher marginal rates for income taxes. Let me try to put the question this way. Do you expect the terms of this argument to start changing qualitatively over the next couple of months, or is it just let's pick up where we left off?

FLAKE: No, I do expect the terms of debate to change. One, because we have to. As you mentioned, we're standing on the precipice and that's when Congress tends to act in ways that it doesn't otherwise. We have no choice but to fix this and to give some confidence out there that we're going to deal with our budget problem so that people will continue to buy our debt.

You know, that's a very real concern. When you hit 100 percent of your GDP with your debt, that's usually the point of no return. We've got to instill some confidence out there in the markets that we're going to deal with this issue.

SIEGEL: Some other issues. On health care, Governor Romney campaigned saying that he would repeal much of the health care law, if not most of it. What should Republicans do in Congress? Should they say, look, we didn't like this, but we lost, it's the law, it's going to be implemented, maybe try to perfect it but not block it or do you go back on the barricades and try to undo Obamacare for another two years?

FLAKE: Well, there are parts of Obamacare that I think will probably fall of their own weight. Some of the issues, when it fully kicks in and what is going to be required at the state level to deal with this, states like Arizona will be hit really, really hard. And so I think there are some issues that will present themselves and I think the Republican way will be the way to deal with it. Other ways, I think we have to accept at this point we're not going to be able to appeal Obamacare.

SIEGEL: It's not worth, as they say in Washington these days, re-litigating the basic Obamacare, right?

FLAKE: Right. But there are certain things like, you know, we talk to businessmen and women all the time saying, you know, we're going to get right to 50 employees and then get a stop. So I think that some of the numbers and thresholds within Obamacare are going to be changing. I think both sides can agree on that. So there are certainly things that we can do.

SIEGEL: Immigration - you come from a state that's about 30 percent Latino. It has a landmark tough law against illegal immigration and your party nationally lost about 3 out of 4 Latino votes. Do Republicans need a comprehensive immigration law signed so that you can start competing for Hispanic votes?

FLAKE: Well, my record has been trying to get a comprehensive immigration reform law for 10 years. I worked with Senator McCain, Senator Kyl, Senator Kennedy, Felix Gutierrez(ph) and others and we came to the conclusion, ultimately, that until we get a little better border security, nobody's going to trust us to move ahead on the other items.

But as Republicans, we need to deal with this issue in ways different than we've approached it in the past.

SIEGEL: What's an example of dealing with it in a way different than you've dealt with it in the past?

FLAKE: Well, I do think that we need comprehensive reform. I do think that we need to deal with the very real problem presented by the Dreamers, those who are here through no fault of their own. I think the Republicans can get out front on that issue and offer a long term solution, not just the short term solution that's been put forward by the president.

So I do think that there are things that we can do there that put us out front and put us in better stead with a very important and growing demographic.

SIEGEL: Republican Congressman and Senator-elect, Jeff Flake of Arizona, thank you very much for talking with us today.
