Bernanke: Quit the fiscal cliff theatrics

>>> bundle up, everybody. because it is cold out there. and with just 12 days to hanging our stockings by the chimney and 20 days until the dreaded fiscal cliff, there's a distinct chill in the air. after the exchange of new offers, the president phones john boehner last night for one what aide described as a tense call. the speaker today, he had a bit of trouble finding just the right word.

>> the president and i had a deliberate talk. i didn't say it was tense. the president and i had a pretty frank conversation.

>> okay, well, whether it was tense or deliberate or frank, it's clear it wasn't cheerful or chummy.

>> we spoke honestly and openly about the differences that we face. i was born with a glass half full . i remain the most optimistic person in this town. but we've got some serious differences.

>> serious differences, indeed. democratic s reason for the tension was nestled in republicans ' latest counter offer which included a permanent extension of tax cuts for the wealthy. yes, they're not just guilding the lily, they're gilding the gilded.

>> holding hostage the middle income tax cuts to tax cuts for the wealthy. that's getting really stale. it's getting really old. and the closer we get to christmas , it's really getting boring.

>> yes he who fiddled while rome burned. and even that hyperbolic of hysteria fed bernanke says this is already damaging the economy.

>> it's already effecting business investment and hiring decisions by creating uncertainty or creating pessimism. clearly this is a major risk factor and a major source of uncertainty about the economy going forward.

>> this is serious, and the time is running out. all we can agree on. but mister, i want what i want when i want it. eric cantor is willing to dig in his heels and keep everyone working over the christmas holidays.

>> the president seems to be walking us ever so slowly towards the cliff. we've said we're committed to staying here. we're going to stay here right up until christmas eve , throughout the time and period before the new year.

>> somebody get that man a corn cob pipe. but if mr. cantor and his republican counterparts want to ruin the holidays for everyone by holding the middle class hostage to the rich, well, santa's got a list he'd like you to know about.

>> coal is a lot heavier than toys. i don't want to have to come back here in two weeks with a bag full of coal for those too naughty to do the right thing for our children and families.

>> boehner and the boys, you better not cry, you better not pout. let's get right to our panel now. here in new york with us we're delighted to have sir richard wolffe , vice president and executive editor of msnbc.com. and msnbc contributor jared bernstein a former economist for vice president joe biden . and with us from washington is democratic strategist julian epstein. richard , i have to start with you. did the president run on raising taxes or did he not?

>> he did.

>> duss all the public polling show a majority support this strategy?

>> people support raising taxes on the super wealthy.

>> does speaker boehner need hearing aids for christmas ?

>> and possibly a dictionary or thesaur thesaurus. everybody knows how it's going to play out. it's just when. at some point the politics is inexrabble here. when it comes to this piece of it. if they really want to get what they want which is cutting what they call entitlements, what other call safety nets --

>> what others call earned benefits.

>> then they should go to that which is what they count as the most important things. get it over and done with. they know they're going to cave on taxing for the wealthy. get to what they really want. and make the president pay for what he wants.

>> jared , isn't the problem here that republicans keep changing what the primary concern is? originally it was the deficit. so the president says okay. let's raise revenues and let's cut some spending. then they say no it's not the deficit. it's job creation and we can't tax job creators. the problem is how do you have a solution to a republican problem that changes every day economics?

>> it's a great point. i often wondered about this. a lot of republicans for the last few years have been extremely critical of any kind of government spending that has to do with job creation . there's a mantra mong republicans . government doesn't create jobs. all of a sudden now with the tax increases and the sequester, the automatic spending cuts you have republicans saying my goodness if we engage in this -- if we go over this fiscal cliff we're hurting the job market . it's fascinating to see how they change messages day by day . another example is the increase in the medicare eligibility age. this is a big thing on their wish list. this does not save money. this raises the cost of health care if you look economywide. there's not a good policy reason to do this. but it becomes a trophy. a substantiveless trophy.

>> right. okay. julian , boehner 's office is denying that they asked for permanent tax cuts for the rich saying any talk of making any rates permanent is moot because part of their offer is doing comprehensive tax reform next year. are you buying that?

>> no. i think it's important right now to step back and understand the stage craft that the losing side in these debates always has to go through. i went through two of these negotiations very intimately when i was a staff government reform committee in '91. it's slow walking. when one side realizes they've lost debate but not able to go to their caucus and tell them they lost. in boehner 's case because he's a weak speaker at the moment. what they have to do is pick the process up to the 11th hour to show their caucus they did everything they could possibly do but they have no option but to agree to the other side of the debate. everybody agrees that the obama administration has won the debate on the met ta issue right now. and that is the tax rates . they won the debate. once you solve that issue, it's a question of finding another 500 or 600 billion in tax cuts . which i think the two sides are not that far. but they can find that money. the point here is i think this deal is largely done. and i think this is mostly theatrics. and all a function of the fact that boehner is a weak speaker and he has to slow walk his caucus into this position that they've lost when everybody already knows they lost the debate.

>> but jared , here's the question. the president appears to still be compromising or willing to compromise even though as julian just says, there's really no engagement from speaker boehner in terms of substantive change. we had the president talking of increasing from 400 to 600. he's talking about corporate tax reform. all of these things are things the president is compromising on. what's boehner doing?

>> actually, i think that there is no deal absent compromise. and i agree with what julian said and richard said the deal is essentially done. but the deal will involve increased tax rates and certainly higher revenue on the upper income folks and it will involve spending cuts and entitlements will be on the table. the corporate tax thing is interesting. this is a plan the white house has had for awhile. basically revenue neutral. but that's something the white house has had in its pocket for a i while.

>> do you agree that with jared 's point that ultimately this is stage craft and not substantive policy.

>> i do believe that everyone knows the contours of the deal. but between here and there, between now and getting the deal done we can see a lot of turmoil in the real economy and the markets. not that the marketing really matter, but just look what happened with the debt ceiling debate. we all knew that america wasn't going to default on its debt, but getting there was incredibly painful. it was damaging. it damaged the economy as well. and that's when you see someone like bernanke making these warnings. republicans should know this. they are the ones who keep saying what we need in the tax code is certainty. tax rates need to be permanent. this is a tremendous amount of uncertainty when we know what the outcome is. so just do it.

>> julian , to richard 's point, the head of the imf has warned the administration here that if this matter is not resolved soon, there is going to be collateral damage globally. does speaker boehner take cognizance of comments like that? or is he simply focused on persuading his own caucus to buy what he's offering?

>> we've seen republicans willing to strap the bomb to their chest and blow up the entire environment. we saw that in october of '08 when the markets caved and we needed the t.a.r.p. reform. we saw it in july of 2011 . i think they realized they have no leverage in this case. so i think it's different. and i think the key thing here to the point about slow walking the caucus, it also goes to the idea that to the victor goes though spoils. it is only at the end of the day going to show him and the republicans to be weaker and to have less leverage which giving obama more leverage on two things to your question. one is the debt ceiling extension issue which is the point that the president has made. he's not going to allow the republicans to hold this economy hostage. and another round of debt ceiling negotiations. i think he has to hold firm on that. the other thing i think the president has to hold firm on is getting stimulus in this plan. to jared 's point, republicans have been making all the arguments if you cut too much you're going to hurt the economy. that's what the democrats said during the stimulus debate which jared was a leader on in 2009 . it's a point i think they're still relevant on.

>> let me just amplify those excellent points. one thing i have heard and i'm very happy about this is that the white house and these negotiations has been holding firm on the stimulus piece of this package.

>> the 50 billion additional.

>> there's 50 billion on infrastructure, an extension of unemployment. something like a payroll tax check boost there. i don't know if all those pieces stay in place. at least what i've heard is that they've been holding firm on that. and that's good news. because remember there's an economy out there. and unemployment is still too elevated. and the output gaps are too large. we forget about that. this is pure self-inflicted nonsense when you're looking at an economy catching a bit of momentum.

>> that's right. and the point here is that the --

>> very quickly.

>> the debt is a long-term problem. the immediate problem we face is unemployment.

>> indeed we do.

>> so we're dealing with the long-term problem, not the immediate problem here.

>> i wish that speaker boehner was listening to all three of you. thank you all so much.