How Washington could reach a deal on fiscal cliff in 24 hours

>>> i think they won the election. they must have forgotten that republicans continue to hold the majority in the house. but, you know, the president's idea of a negotiation is roll over and do what i ask. we need to find common ground , and we need to find it quickly.

>> good morning. it's monday, december the 3rd here in new york city . the christmas tree all lit up. with us on set, msnbc contributor mike barnicle , pulitzer prize -winnering historian jon meacham , author of " thomas jefferson ." "fortune's" assistant managing editor leigh gallagher and political analyst , former chairman of the rnc, michael steele . and i'm willie geist . joe and mika have the day off today. there's so much to talk about, but we do have to begin with the ties, if we could. it's not just mike. mike's getting all the focus here this morning, and that is inexcusable.

>> could i just say, in the words of speaker john boehner , we need to find common ground here, and we need to do it quick.

>> there ain't going to be any between these two ties, my man. over here, good news, jon meacham will be number one on "the new york times" best-seller list this weekend.

>> hear, hear.

>> his book, "jefferson." bad news is he's going to get there wearing that tie with bunny rabbits on it. here they are. could we get a text poll?

>> can i just tell you, i got this from harold ford .

>> that explains a lot.

>> so there you go.

>> that means it's free at both ends.

>> it's a disgrace to michael steele who dresses so well each and every day.

>> look, i just show up and play, baby. that's it.

>> you're doing a good job with that.

>> got the pocket square . steele's going for if.

>> congratulations on the book.

>> thank you.

>> going gangbusters.

>> thank you. it's been fun. i've been out talking to folks, and everybody's been really, really nice.

>> why are people so thrilled? i'm not saying this to give you crap.

>> i can tell.

>> why are people so thrilled by thomas jefferson ?

>> i think because he's the one founder people can imagine talking to. and i think it has to do with his versatility. you go to monticello, and you feel you're kind of in conversation with him. he's a very vivid figure. it's hard to imagine having a drink with george washington . barnicle did it. and you can tell.

>> he was a good guy.

>> and john adams , barnicle wrote a couple columns about him back in the day.

>> and his son. i knew his son when his son was in day care .

>> john w. adams . yeah. but i think it's his renaissance question. and then i think also he representeds the best of us and the worst of us. and i think people, when we're being honest with ourselves, we all know we have our hypocrisies, and we have our contradictions. and the fact that someone who had such evident contradictions is still worth paying attention to i think resonates.

>> and there's some contention over the weekend about how great a man thomas jefferson is. we're going to talk about that a little bit later.

>>> but we've got big news this morning. four weeks from today is new year's eve when the fiscal cliff comes. lawmakers now have less than a month to compromise and to avoid a year-end deadline that would trigger massive spending cuts and tax hikes for just about everybody. behind-the-scenes negotiations at a stalemate. both sides went public yesterday on the sunday morning shows to make their cases. treasury secretary tim geithner predicted republicans would eventually come around to accept a tax increase on the highest earners.

>> you think we'll get a deal by the end of the year?

>> i do. i do. the only thing standing in the way of that would be a refusal by republicans to accept that rates are going to have to go up on the wealthiest americans . and i don't really see them doing that.

>> if the republicans say sorry, no way are we going to raise rates on the wealthy, you guys are willing to go off the fiscal cliff ?

>> if republicans are not willing to let rates go back up, and we think they should go back to the clinton levels, a time when the american economy is doing exceptionally well, then there will not be an agreement.

>> but house speaker john bigger is digging in himself, admitting talks are going nowhere . speaker boehner also described the moment when secretary geithner first showed him the president's opening offer.

>> i was just flabbergasted. i looked at him and said, "you can't be serious." i've just never seen anything like it. you know, we've got seven weeks between election day and the end of the year. and three of those weeks have been wasted with this nonsense. right now i would say we're nowhere, period. we're nowhere. we've put a serious offer on the table by putting revenues up there to try to get this question resolved. but the white house has responded with virtually nothing. they've actually asked for more revenue than they've been asking for the whole entire time.

>> what are the chances we're going to go over the cliff ?

>> there's clearly a chance.

>> lindsey graham said the same thing yesterday, michael steele . he said he thinks we are going to go over the cliff . i think everybody at this table has worked a few deals in his or her life. how much of this is posturing for negotiation, how much of it is a real chance that we're going to go over the cliff ?

>> about 80% of it's posturing. i think a lot of it let's see how big yours is versus mine in terms of their plans. and the reality of it is --

>> well.

>> yeah.

>> in terms of their plan.

>> that was nice.

>> but the reality of it is, they're going to wait till the last minute, last possible moment. as they always do. it's the washington way. there's a lot of dancing around the edges, a lot of noise and sabre rattling. the president put on out a plan. his initial salvo was a smack in the face, a reality check to the republicans saying i won the election, and now deal with this. but boehner , to his credit, came back and said, you know, this is ridiculous, and this is not the way we're going to negotiate. and you've got others like grover and certainly lindsey graham and other members out there who have been very strong at first saying no, we're not going over the cliff , this is crazy. others saying you want to go over the cliff , we'll go over the cliff but republicans should be careful here because if you fall into that trap and take that bait, and the president calls your bluff on it, then all of a sudden, this comes to your lap, not the president. because geithner and others are setting this argument up very nicely. look, we've put this wonderful plan out here. everybody in the country, the polls say top 2%, you know, should get their rates up. and if it doesn't happen, it's on you. so the messaging is going to be critically period where they're all doing the dance.

>> we've been to this movie before in 1995 .

>> does anybody know, leigh , what happens january 2nd , we go over the cliff ? are we suddenly out of $500 a week?

>> it's gradual. i mean, the actual impact will be gradual. but we're already starting to see, you know, a financial impact just by pushing it to the end here, which we will do. i do think we'll push it right to the very end. you have companies who are selling shares and stakes in, let's say, private companies now even though they think they might get a better price next year because they want to get the deal done now because they don't know. so there are deals being done at lower prices where people are taking hits. i mean, this is not, you know, the main event , but this is happening on the sidelines, and we haven't been begun to get to the tail end of discussions.

>> there is a lot of -- if there's any money due you next year in life, you know, you want it now.

>> you want it now. you have to take a hit.

>> there's a flow of capital.

>> yeah.

>> into the sidelines again.

>> and the argument, michael , from republicans is they're saying we are, in fact, open to raising taxes on the highest earners, but that's in the form of closing loopholes and looking at capital gains and things like that. we just won't touch the marginal rate .

>> absolutely. that goes back to the argument of a year ago. so this is not a new position for republicans . we have said before that, you know, we can get there by closing the loopholes and things like that. but it goes to the point that i made last week on the show, and that is that the republicans have been in this room before. they've been in this space where they've negotiated with democrats on tax rates , increases for spending cuts. and as i've said before and as everyone knows in town, you get the tax rate increase now. the spending cuts never happen because future congresses don't execute on those spending cuts. and unless the deal includes cuts now, it's going to be very hard for republicans to swallow because of what happens in two years, certainly with tea party republicans who were sent to congress to hold the line on spending. it was not to go in to raise taxes at all. that was not part of the bargain in 2010 . it was not part of the re-up in 2012 . so boehner 's got a little bit of a box to deal with. partly presented by the president. partly presented by his own base. i say let boehner be boehner . let him negotiate the best possible way out of the box. which is what i think you're seeing happen now.

>> you mentioned grover norquist . he's making a new prediction, by the way. let's listen.

>> understand how ugly the next four years are going to get. everything in obamacare that obama didn't want you to focus on or think about, the 90% of his trillion-dollar tax increase was pushed over till after he got himself safely re-elected. all those regulations you're now hearing about, okay, those all hit after the election. we've got four bad years of regulation taxes. he wants to add higher taxes to that. tea party 2 is going to dwarf tea party 1 if obama pushes us off the cliff .

>> so basically, jon, what grover norquist is saying there to members of the tea party set who have been elected, who were elected, is, you know, we're going to take everybody who is against us into a primary on your right.

>> right.

>> on the republican side .

>> right.

>> so the threat has been issued already, even before we begin negotiating what the package will be.

>> oh, yeah.

>> this is like political terrorism .

>> well, it's certainly a clear bargaining position. i remember three years ago talking to a longtime member of the house who was running for the senate. and we were talking about something else. and at the end of the conversation, i said, is it really as bad as everybody says? is it worse than when you came in? which was in the late '80s. and he said the central difference is in the caucus , the republican caucus , the fear is not a democratic challenge, it's a primary challenge . and it's the first time i had ever heard the term "to be primaried." he said, "you don't want to be primaried." you can ask senator lugar about this. it's real. and so it's becoming increasingly difficult to cast one or two compromise votes, even early on because of this echo chamber that kicks in. and to me what's so scary about it is the president's second-term clock moves faster than everybody else 's clock in the system. because everybody else in the system has another election. and obama doesn't. so as his capital goes down and his vision gets wider historically, everybody else 's vision is getting narrower to that -- not even to election day in '14, but of the primary day.

>> so with all that said, leigh , you look at the deal, as michael said, the president came out big, not only does he want taxes to go up on the wealthy, but he wants stimulus spending. he wants the power to raise the debt ceiling. where is the middle ground when you look at this? who blinks on these questions of taxes?

>> well, i mean, everyone's doubling down and waiting for the other side to blink first. and that's why we're going to push this to the end. i think michael makes a good point. we don't know what's happening. this could be all choreographed. we don't know what's happening with the side conversations. both sides will probably give. i mean, i think everyone knows that's going to be the case. but, you know, the president has a lot of leverage. he, of course, doesn't have absolute leverage, but he has more than he had. we learned a lesson in 2001 with the debt ceiling negotiations which went terribly. he's coming out of the gate with pretty strong rhetoric.

>> michael , if you took grover out of the equation here and you lowered the flame on the tea party republicans in the house, how long do you think it would take john boehner and president obama to work out a deal?

>> 24 hours .

>> yeah.

>> about 24 hours . boehner has the deal in his head he wants. his problem is he's trying to figure out how he gets that deal, not just in the room but then out of the room. with his caucus . and that's just the reality of it. i mean, you've got, again, republicans feel burned on this. republicans also feel engaged on it simply because that's what they ran on. and that's been a big part of the fiscal argument for republicans for the last two or three years has been controlling the spending, the size and growth of government. controlling the ability of the government to confiscate more of your wealth, to trust more on the middle class and the working class , small business owners. and that's really kind of the link. and that argument, you talked about being primaried, that's the central primary argument that will be -- hit them upside the head in two years when they run is wait a minute. we sent you to control spending, yet you increased taxes. it's not increasing taxes on the wealthy, it's just blanketly you increase taxes. so you've got all this noise going on. and boehner 's got to try to figure out a way to give these guys some cover but know he's got to cut the deal. to your point, leigh , about how do you begin to pull it from the big plan to a smaller plan, that's really what the white house and boehner quietly are talking about.

>> and what we don't want also is i think a kind of down payment deal that sort of makes it a two-part deal that just delays everything.

>> i think you're going to get some of that. i think you'll probably get the big deal for the middle class . okay, we're going to take that off the table. and graham and others have said that. we know we're not going to raise taxes on the middle class . let's let the bush tax cuts stay in place for the middle class . and then it becomes a little bit more of an interesting conversation when you're only dealing with a smaller percentage of the plan as opposed to the big piece right now.

>> so how does he -- how does john boehner save face ? you talk about he has to take a deal out of the room. how does he get a deal in which taxes are raised on the get something on t he other side, but then his caucus can still say well, you gave and taxes went up?

>> where i think you'll see it, and i think you're beginning to see those pieces fall into place , when you have voices, if you will, within the caucus , and not just in the house caucus , but in the senate caucus as well, sort of backing this idea that, okay, here's our option. the cliff or the plan. and i think that, you know, when you have graham and others sort of saying you know, yeah, the cliff becomes a real reality for us, people don't really want to go there. they don't want to have to take that risk. and i think there may be some opportunity there to bring some of the caucus members around. remember, he doesn't have to have 100% of them. he needs enough to cobble together with nancy pelosi 's number to get the plan through the house.

>> it's a little like lucy and the football on the spending cuts.

>> yes.

>> we had one deal where you got a commission that was going to make recommendations, and we saw how well that worked out. everyone loves simpson-bowles except anyone who's been elected to office. who matters in this conversation. so isn't it plausible the shape of the deal is we do what obama ran on on the tax cuts , on the tax increases, and we're going to study the future spending cuts? isn't that probably the face-saving way out?

>> that's the face-saving way.

>> and everyone's skeptical of that.

>> everyone's skeptical of that. it's fax reform, which is, again, part of that conversation in the background. but i actually think simpson-bowles is a little more of a way out for the gop than some folks may think. i mean, i think that generally the public, conservatives included, like the ideas that are at least enunciated in the plan there. i think certainly more conservative members in the house and the senate have spoken favorably of it. so it gives you something, at least as a framework, to begin the conversation. and i was surprised in the campaign that neither the president nor mitt romney actually took that as sort of a bull whip to kind of shape the argument.

>> talking like that, that's why you're referred to as former republican national chairman.

>> funny.

>> there's an interesting, you know, i don't know, third rail option -- i don't think it will come to this -- but there's sort of a -- let's say we go over the cliff . the republicans , you know, do not -- they hold firm. we go over the cliff . then we'll no doubt reinstate the tax cuts on the middle class . so then they could have political cover for actually taking credit for the tax cuts . even though -- of course, we don't want it to come to that. that would destroy the markets, i think.

>> oh, yeah.

>> do you have any idea of how many times willie and i have taken this particular show over the cliff ?

>> we did it about 6:01 this morning. lay on the gas. by the way, "the wall street journal " is calling for republicans to call the president's bluff on. we'll get into that later.

>>> coming up, in ordford ceo alan mulally . also nbc political director chuck todd , "the new york times," the lead story on her front-page story on the winners and losers in the big game of government subsidies . also, ed burns is going to be here.

>> our guy, ed burns .

>> the great ed burns a little later.

>>> and up next, mike allen with the top stories in the "politico playbook." but first, bill karins with a look at the forecast. hey, bill.

>> hey, willie, good monday morning. i've called these temperatures ridiculously warm. a lady sent me an e-mail and said you know what's ridiculous? i've had my air conditioning on in arkansas in the last two days in december. it's been that warm especially in the middle of the country, and it's spreading to the east. there's a lot of fog out there this morning. look at these numbers. if i showed you this weather map in june, you'd say typical temperatures for this time of the morning. this is december. it's ridiculously warm. as far as the fog, watch out along san antonio all the way into south texas from pensacola all the way across the gulf coast into areas of mississippi and dense fog along the carolina coastline down to north florida and coastal georgia. then i think some of the worst of it as far as airports go today, we've got to watch o'hare, midway, also through cleveland, possibly indianapolis and detroit. right now visibility hovering around a quarter mile in chicago. also milwaukee, you're down to less than a quarter mile . that's when you really start to notice huge airport delays. so the forecast today, the warm air finally makes it into new york city , philadelphia. look at washington, d.c., near 70 degrees. you won't even need a jacket this afternoon. the rest of the southeast looks very warm after the fog burns off. near 75 in atlanta. i mean, this is as warm as it gets for december across this country. numerous record highs will be set. even chicago, you have an outside shot of your warmest december temperature ever. you're watching " morning joe " brewed by