Transportation secretary: There are consequences to this sequester

>>> there are literally teachers now getting pink slips , getting notices they can't come back this fall.

>> we're not making this up, david, and we're not making this up in order to put pain on the american people . we are required to cut a billion dollars.

>> what do you make of secretary lahood, a republican, blaming republicans for this?

>> shame on ray lahood . no. listen. i understand. but i think there's a bob woodward piece in the "post" this morning that gives the tick-tock about who really -- the idea for sequestration was. and we know whose now it was. it came from the white house and the president's aides.

>> 19 past the hour. joining us now from washington , the secretary of transportation, ray lahood . also with us, assistant editor and columnist for the "financial time times", jillian tett. mr. secretary, how seriously should we take how we're going to feel these cuts if they go into effect?

>> well, look at when it comes to transportation, we have to cut a billion dollars. $600 million from faa. that's why we announced there will be a slowdown and delays from flights. we'll have to furlough air traffic controllers which is the largest number of people at the faa. we're not doing this because we like it, we are doing it because we are required do it. it is in the law so we're sending up a warning flare, not to scare anybody but just so that people understand there are consequences to this sequester and it can all be avoided if people in both parties would embrace the president's plan, which is well over $86 billion in savings and take a look at the president's plan. it is a good one. it saves the money that needs to be saved and it doesn't take a meat axe approach.

>> i think some of the republicans don't agree, they have issues with taxes and feel like they've been rolled on in the past and don't want that handed to them again. stla a fair argument and that the white house is now using scare tactics to corner them?

>> we're not using scare tactics , mika. we're sending up warning flares to people that these cuts have consequences and here's what the consequences are. that's what we've put out. not to scare people, but just as a warning that there are consequences. this all can be avoided -- the president has a plan. it cuts well over $86 billion. republicans should take a look at it, move towards it. if they don't like it, sit down and talk about it. there's still time . we have a week now. all these members of congress are coming back from their districts and they have a chance this week to meet half-way and work this out. the way they did with the financial cliff, by the way.

>> mike barnicle .

>> mr. secretary, your name was on the ballot for many years and i'm sure you realize that many people in your old district and around this country look at this issue and look at the conversation on both sides of the aisle over the past couple of weeks and wonder about competence and governance and people in washington being consistently unable to get anything done. the larger issue of anybody with a family and a checkbook can't figure out, you people can't take 3 cents out of every federal dollar? you can't do this without gutting vital services? where is the competence here on both sides? is there any?

>> of course there is, mike. and look -- i go back to what i said before. the president has put out a plan and it cuts well over the amount that sequester is requiring. and look at, if republicans don't like that, come to the table. let's have a discussion the way that we did so we averred the financial cliff. this can be done. it's been done in the past and there's a plan there. it's a pretty good plan. if you don't like some parts of it, then let's talk about it. but there has to be a discussion this week so that people do have the confidence in their leaders that these things can be avoided.

>> you think something a's going to get done this week?

>> i do, mike. i really do. i'm optimistic about this. i just think there is an lot of share pain that's going to take place starting on march 1st if this sequester goes in. i don't think anybody really wants that to happen.

>> all right, secretary ray lahood , thank you very much.

>> thank you.

>>> jillian, are we going to have a deal? i think he's overly optimistic.

>> one thing i would say, when you look at this airline issue, it strikes me as a lot of political drama and theater involved in this. the thing about airline or queues at airports, they're very visible. they make great television. checks going out to the unemployed doesn't actually make great television. but there's nothing like having crowded airports bringing emmemories of 9/11 to get people panic stricken. i think it is 50-50 whether they get a deal at the end of the week.

>> i don't know if you saw jeff sax's chart. it is fascinating. the chart actually shows that even with the sequester cuts, discretionary spending will be love what the president projected in his own budget in 2009 . as a percentage of gdp. which means that all of this terror that we're hearing about, it seems like it is all cooked up.

>> not to reference another network, but candy crowley pointed out in her earlier interview with lahood that even if they cut all the budget they're still $500 million above they they were four, five years ago. in terms of whether there will be a sequester, my biggest fear is that they're going to find some sort of deferral agreement and we're going to have this conversation multiple times. even if this goes into sequester, it doesn't solve any of the big problems we have in the macro.

>> mike, spending is double as tom coburn said over the past decade. government spending in these areas doubled. $500 million more now spent than we were spending several years ago. and we're told this is the end of the world if we cut 3 cents out of every dollar, a dollar that has been hyperinflated over the past decade in government spending .

>> what is going to happen, what is going to be the mindset, sequester occurs march 1st and it continues for a period of weeks and months as they argue back and forth and nothing really much happens to daily life in america?

>> unless we get those airport queues.

>> you really think that would be the catalyst to get this turned around?

>> no. but i think if you're trying to use something to demonstrate -- call me a cynic.

>> by the way, we have to be really careful about that. because you know what? that's the sort of thing that a staffer suggests that's two cubed by half. then someone starts figuring out how they moved tsa employees around to make lines longer in new york, washington , chicago, los angeles . and then suddenly it blows up on the administration.

>> it will make great tv but i don't think it will have the residual effect that they perhaps diabolically are planning on. because if you've lost your job, if you're working a job that pays you two-thirds of what you were making four years ago and you are you a lucky to have that job, you're not flying anywhere. you're driving to the grocery store and you're damn glad that you can pay the grocery bill. people standing in line to go to orlando or chicago? you say i don't care about them.

>> the other thing to look for right now, apart from these whole political drama is what the market is going to do and the rating agencies are going do. it is worth remembering over the weekend we had one shock in europe in terms of rating agencies downgrading the uk. the u.s. has already been downgraded but there could be a lot more debate on that issue which is going to affect the whole debt dramas, too.

>> all right. so bringing it down to every day life and our wallets, brian, you are looking at a study of habits, spending habits.

>> bank rate says that 24% of america has more credit card debt than money in the bank and 16% have neither. so basically 40% of the population are in jeopardy of complete failure any moment and 60% are doing just fine. and so -- that's why i want to bring it full circle to whether it is gas prices coming together with a payroll tax hike, you're not going to know -- if sequester kicks in and people lose jobs, you won't know exactly where the pain is inflicted so it will be this pointing finger roundtable of what's hurting the consumer.

>> but the irony there is, if you look at credit card debt right now, actually credit card balances overall are back where they were ten years ago because americans have actually paid off a lot of debt already. many ordinary consumers are saying we've got control of our household finances, why can't congress?

>>> coming up, did the president propose even deeper cuts in his budgets than what's on the table in the sequester? economist dr. jeffrey sax rejoins the table with some numbers that could change the budget debate.

>>> also ahead, legendary music producer clive davis is standing by in the green room . he'll join the conversation ahead on " morning joe ." [ male announcer