Compromising on the fiscal cliff

>>> cycle," my friends. congress could be ready to compromise with the president?

>> you saw it first here on friday. america 's top spy caught in a secret affaiaffair. i have the irony. i spy there's more to this story.

>> petraeus or no petraeus, someone is facing tough questions this week during congressional hearings on the benghazi aattacks.

>> i'm krystal ball. big city mayors are getting defensive about looming cuts. can we slash spending without slashing thousands of hometown jobs?

>>> i dove into the republican "twilight" zone and nearly lost my mind. the real truth on "the cycle," monday, november 12th .

>>> we kick off this week on "the cycle" with no upcoming election and no massive impending storm to warn you about. let's take a moment to enjoy the calm.

>> nice.

>> all right, enough of that. we enjoyed the peace for about as long as washington did. there's an unfolding story of the resignation of cia director david petraeus that broke on "the cycle" on monday. when the lame duck congress waddling in tomorrow, there's aa promise of a con sill to her tone. steve, can you fall off a sloef?

>> it feels really good, exactly.

>> they start to tackle the nation's debt. there's fear of sbimgtsment cuts and, of course, tax reform . the president is packing a he schedule with high profile meetings to try and get something done. tomorrow labor leaders, wednesday business leaders and corporate executives, and friday congress aal leaders from both sides of the aisle. we start with rob cox at reuters breaking news. rob, do you expect compromise or continuing to fight?

>> well, i do expect compromise, but remember, the fiscal cliff is one artificial construct cooked up by the congress and the president to basically get us to think about a much bigger problem, which is what you pointed out. entitlement reform and tax reform and all the big issues and putting america into the accounts. the problem is the president -- i mean, you know, frankly has all the leverage here. so he doesn't need to compromise that much to get half, if not three-quarters of what he wants.

>> i think the president is feeling that he has the leverage. one thing we've seen is he's going to take this message to the people. it seems to me he's learned a little bit from the fights he had before, leaving it all in washington giving the republicans a lot of leverage. making it a national fight and bringing in the voters makes it something with more leverage. did he learn? is he going to play this fight out differently?

>> if there's anything he learned from the election but not just the national election but where you had the referendum where people were very, very happy by and large to let the rich pay more. i think you're going to see the president is going to dig in his heels on this issue about the wealthy paying more, even though actually that's not going to solve the long-term issue about america 's fiscal problems. i think it's a messaging issue. the president let's face it, over the fiscal cliff and the president and democrats played it up the right way, which is it was the republicans that refused to tax millionaires, i mean, i don't see how the democrats lose on that one. i see how the republicans lose big and big-time.

>> rob, i mean, you mentioned that the president has some rench, dut doesn't he also have a little responsibility here? i think the complaint has been that he's sort of been a little too happy to let congress duke this out and hasn't really been a leader on this issue. does he have to come to the table in addition to democrats and republicans and bring some leadership to this issue as well?

>> yes, he does. absolutely. one of the great failings many argue of the first term is he didn't deal with boles simpson and didn't put his weight behind it. he didn't show leadership on that front. he can still do this. we can go over the fiscal cliff. now i'll rescue it and come back and cut a deal.

>> you are speaking steve's language.

>> i hope that's not what happens, because, you know, the grading agency, the markets, people will freak out and temperature won't be good. it will show the world we're dysfunctional and it's all about gridlock and partisanship. that is bad for america and all of us. i think the republicans have to realize the position of strength that the president is starting from here.

>> rob, it sounds like they're starting to recognize it. you had the interview in the " wall street journal " this weekend, where mcconnell said he's willing to pay the ransom. meaning he's willing to sign off on higher taxes for the wealthy, which obama is demanding. the democrats have the leverage and the republicans recognize that and the republicans will compromise in some way on the tax issue. my issue and question is this. there was a civil war in the republican party the last time republican members of congress voted for a atax hike in 1990 under george bush sr . is this a situation for the next six weeks republican leaders pretend there's no deal coming and pretend they fight it tooth and nail . we get to december 29th and dictator obama forced this on us. is that the game mcconnell and boehner play here?

>> i think they know that game won't play well. they have to play it. everyone has to take a sacrifice here, and when you do the numbers with america 's finances to keep the entitlements entact, if slightly different from today, to keep social security intact and get the economy back and growing, everyone has to take a little bit of a hit, whether it's the private equity guy with his carried interest exclusion and the $750,000 home morn tax deduction , which is completely absurd. that doesn't help the middle class . they all have to happen. if everyone is -- you saw bob corker last week or over the weekend. there are a lot of sensible people out there. i think sensible minds will prevail. this is just a fiscal cliff. it pushes it off to july 4th to be patriotic with an agreement and framework to work towards a big deal . it is only this artificial construct we're talking about now. what we need to get for everybody to be happy and the markets to be happy and the chinese and the japanese and the bonds and everybody else to be happy is we need to know that actually america 's finances are on solid footing, will be on solid footing. medicare is there in some form. social security is there in some form. that's what everyone has to work towards. the lift that people will have in terms of optimism, i think, would be great for the country and for the economy.

>> so, rob, the realist sticking point is revenue. where would a deal come from? i actually want to take the politics out of this. let's pretend such a proposal would be feasible. one thing floated is instead of looking so much at the income tax rates to actually impose a carbon tax . what's been proposed is a $20 per ton carbon tax that would lower the deficit or cut the debt by 50% in 10 years and discouraging fossil fuel consumption which is something good. the con is it's not a progressive tax . if you don't offset that by strengthening or keeping from where they are, like medicaid and the welfare system, but i wanted your thought on whether that's feasible economically and whether it's good for the country?

>> yeah. both sides -- there are a lot of people on both sides that have argued for a carbon tax and a gas tax , too, for example. that's highly aggressive. if you're a plummer driving around you pay more if you're an investment banker that doesn't drive around because you maybe you take a plane. it's totally do-able and makes sense. it's a market mechanism . if you tax the kinds of behaviors you want to discourage, which is what we do with cigarettes, with alcohol, you know, we don't do it with debt, by the way. we encourage taking on debt. if you were to actually create something that worked where you could, i don't know, give the people the most hit, again, the people who travel who are hard-hit as it is, it could work. you know, there are all the sorts of problems with a lot of smokestack industries , and we have a real problem with manufacture inning this country. there's some sort of reckoning with that. it makes sense. everything has to be put on the table. my worry is everyone focuses on the fiscal cliff and not the big thing that it's designed to address.

>> rob cox , thank you very much.

>> pleasure.

>> up next, the media's new shiny object, the scandal involving sex and spies. that leads us to ask the crucial question, why would a man risk everything for sex? we'll tackle that next as we roll on for monday, november