Falling off the fiscal cliff

>>> a victory behind him, democrats are feeling more confident in talks with republicans about the fiscal cliff . many on the left have been vocal in calling for the president not to buckle on the issues of tax increases on the rich and no cuts to entitlements like social security and medicare . many key players are talking more defiantly on these issues since the election. nancy pelosi for example flatly said she wouldn't go along with a deal that didn't raise tax rates on the rich. let's watch the former speaker.

>> we've seen talk about a possible compromise that would leave rates the same but cap deductions for high income earners. is that something that's acceptable?

>> no.

>> not at all? no way?

>> i mean, the president made it very clear in his campaign that there is not enough -- there are not enough -- what you just described is a formula and a blueprint for hampering our future.

>> okay. senate majority leader harry reid said social security should be completely off the table. let's watch the senate leader.

>> i've told anyone that will listen, including everyone in the white house , including the president, that i am not going to be part of having social security as part of these talks.

>> okay. the president is feeling the pressure to stick to his guns but how much room does he have to reach a compromise before the end of the year? and will the left support one if he does? most importantly, what is the risk to the country of not reaching a deal in the near future ? jared bernstein, senior fellow at the senior of budget and policy priorities and an msnbc contributor, vice president of biden's chief economic adviser and joan walsh , editor-at-large of salon. i was trying to get the facts and understand it. the congressional budget office , nonpartisan says if we go off the cliff january 1st which means we let those taxes terminate, the tax rates to go back up again for everybody back up there where they were before this past president was here f we let those cuts go in definition and else places, there will be $560 billion cut in the deficit but a 4% cut in the gdp throwing us technically right into recession. is that you're belief if we don't do anything between now and january 1st this country will go into recession, jared ?

>> it is my belief if we go over the cliff and stay over the cliff . if we're able to hammer out a deal, even if that deal isn't completely stamped and approved on january 1st , there is the possibility of a very temporary trip over the fiscal slope, if you will, and then a reversal. but if we go over the cliff and stay over the cliff i'm pretty sure we'd be looking at recession.

>> what about the impact on world markets and money markets in new york, et cetera , et cetera , what would it do about the confidence of the united states ' ability to deal with fiscal matters, if we go over the cliff in any way?

>> yes. if you look at those markets today you'll see they're pricing in a solution. that's why treasury bills have a yield of 1.6%, historical low. if those markets believed, as i described it, a deal was in the offing just wasn't signed on january 1st we'd be okay with a temporary trip over the cliff , which i think would be a terrible outcome but would be better than a total can kick. if we go over and stay over, markets will punish us.

>> let me with-g with joan . when you look at these numbers and the decision -- let's start with the issue. last summer you and i went through this with the debt ceiling that came apart. there was a good deal from the republicans and they walked away with from it. the president wanted $800 billion in revenue and they got a ton of spending cuts. this year we got it from "the wall street journal " yesterday morning, they'll settle for a 1-4, in other words take $1 in tax increases for $4 in spending cuts. jared and i were talking this afternoon about the possibility, what i think would be a liberal deal, 50/50. trillion in increases, mainly from the rich, and a trillion in cuts. what kind of a deal do you think is fair?

>> first of all, that deal could be fair it just depends on what gets cut and what goes up. that's what we're all arguing about, i think. i have been -- for 20 years i have been watching my democratic presidents reach across the aisle for compromise and get their arms broken. so i think it's time for people like myself on the left to say, we really will not -- we don't want to see a deal that cuts made care and cuts social security . i think that the democrats have a lot of leverage right now. as jared says, it's a fiscal slope, it is not a cliff . if we let the tax cuts expire, they expire. then democrats come back in the early next year with middle class tax cut and restore the tax cuts for the middle class only. they leave that top 2% with their taxes up. that's smart politics. i think --

>> what about economically?

>> i don't daik.

>> i want him to follow up on that, what you think would happen if joan 's scenario played out.

>> come on, jared .

>> i think if it were clear to markets and clear to employers and all the other economic actors out there that a deal like joan described was in the offing, i think we would basically be fine. listen, the leverage is really important. joan has a point. the idea that income tax rates have to expire on the top 2% of householdings makes a ton of sense and a very important development here. it's bad for grover norquist but good for america and should be the end of asymmetrical tax policies where rates only go down, they never go up. look, there may ne ed to be some entitlements on the table. the president has already done so in his 2013 budget with medicare and medicaid . niece are cuts largely to providers. they don't affect beneficiaries, particularly vulnerable beneficiaries and that's okay.

>> the left wants -- they won the election. which is fair. i think you should get a 60/40 deal after an election, even if a divided government . if you win the election, you should get the best deal. my best deal would be the president put his teeth marks into the neck of the rich right now and say, your rates are going up, buddy. i'm not going to go sorting around looking for deductions and screw the temples and churches around the world. i still want you to give to charitable groups but i'm taking your rate up where it was under clinton when you were fat and happy so you have no complaints. we're going back to where we were in the '90s. i think if you did that, i think those on the left would say, i'll do that if he does that. if he pulls back and says, geez, we'll just go with deductions. the left will say, if that's all you're doing to them, you can't do anything to us.

>> you can't do it with deductions. you absolutely can't do it.

>> even if you could --

>> even if you could --

>> even if you could, he's right.

>> joan , your thoughts.

>> even if he could, you're right. we can't do it that way. we shouldn't do it that way. on the other side, i don't think, though, even getting top tax rates going up and capital gains rates going up, i don't think the left should be silent while we say rate -- if we raised the eligibility age for medicare . that's a terrible idea. it actually increases the deficit in the long run, at least for states and local governments. and it takes the healthiest people, the youngest old, if you will, out of the medicare pool and leaves the medicare pool with the sickest oldest old. i mean, it's absolutely crazy policy and really mean.

>> respond to that. isn't she right on the merits that you don't save anything when you force people to stay away from the hospital or doctor for a couple years?

>> i completely agree with what joan said. if i had my druthers we would lower the eligibility rate because medicare is better than the private sector. here's another thing that i think should, i guess, sweeten the deal is one way to put it for progressives and i think it's important for the economy. let's also include a couple measures of jobs programs in a temporary 2013 measures to help help -- to take advantage of some of this momentum we already have in our economy. dpis cal relief to states, maybe something off the payroll tax holiday, maybe something on the unemployment insurance . you know, that's another way in which this deal, i think, could look good to people on the left.

>> i think a little -- a spoonful of sugar helps the medicine go down, by the way. somebody once said, i forget who.

>> mary poppins .

>> the three of us could do it.

>> stay over an hour and get it done. jared bernstein, joan walsh , congratulations for brilliance again and happy thanksgiving.

>>> up next, the art of power from someone who really knew how to use it. there he is, the guy on your $20 bill . "hardball," the place for politics. you