Will the looming budget cuts further hurt the economy?

>>> we are t-minus four days and counting until $85 billion in cuts move from the federal budget , cuts the way a blind butcher would do it. washington still locked on the sequester standoff. some say it's like armageddon with the apocalypse on the doorstep and that is bad but critics say it's like chicken little . not that bad. either way , i'm sure someone somewhere is working on a countdown clock that we can debut before the end of the week. maybe some nice nbc animator. in washington , the house and senate finally back from a ten-day vacation and offering partisan plans to replace the cuts with zero chance of going anywhere. good job. here we're coming to terms with the reality that even if congress can strike a deal to stop the cuts over a decade, we're still going to be stuck with at least some of this year's $85 billion share. one hour from now, house speaker boehner will push the blame on the democrats arguing the house passed two bills to replace the sequester and the president is out with a break down of the cuts and warned that the cash-strapped governors no longer the cuts in place, the bigger the impact.

>> as governors, you're the ones who are on the ground, seeing firsthand every single day what works, what doesn't work. while you are in town, i hope you'll speak with your congressional delegation and remind them in no uncertain terms exactly what is at stake and exactly who is at risk. because here's the thing. the cuts do not have to happen. congress can turn them off any time with just a little bit of compromise.

>> congress has a month to act before the furloughs start. both of those educational and social service cuts won't be felt until the next school year and the cbo says agencies will push more than half of the cuts off until next year with hopes of washington reversing them. let's start with dan gross, columnist and global business ed tore for " newsweek ." interesting thought in "the washington post ." obama 's betting americans will be outraged by the cuts but if voters react with a shrug congressional republicans will have won a major victory in their campaign to shrink the size of government and the gop will likely try for more. what do you think about that, mike? the gop actually pull a jujitsu move and win this?

>> i don't think so. the reason is consumers may feel this. if you are an employee and you get furloughed you lose some business but businesses will feel it the most with construction projects that get ground to a halt, if, you know, air force stops writing new contracts, if airports are shut down. ports. these are the sort of things that affect large companies and ability to profit and of course those people have the ear of congress and the political culture much more than the individual does so i think that's what i would look for when business trade groups, lobbyists, companies themselves start saying, this is impacting the ability to get our work done to hire people. then you will see congress be more responsive. if it's an individual saying, or an individual doctor saying my medicare payment cut 2% or postal worker who got their hours cut by 20% for the week, the system doesn't respond to that.

>> politico points out that part of the problem here is the defense industry 's long-time champions on the hill are mostly out of congress . so out of the 30 house recipients of the largest campaign donations since 19 90, 11 are still in the house and 14 in the senate. perhaps of the problem is that they haven't brought a new team to support them.

>> the changeover in congress makes a difference but look to the states for difference. virginia , where the pentagon is, big navy installations, the republican governor is going to be suffering if the sequester goes in to effect. i was in utah last week. the government is the single largest employer including an air force base in the middle of utah with $1.2 billion in payroll per year and the governors of the red states are complaining about this pretty quickly.

>> well, dan , first i want to ask you as a " newsweek " ambassador to explain the cover. will an asteroid destroy the earth?

>> try to keep all the bases covered.

>> yes or no there.

>> wow. way to bury the lead. i can't believe we're talking about sequester when they're breaking that story.

>> if you think the budget cuts are going to be severe wait until you see that.

>> wait until the asteroid hits.

>> big tease, dan . i want to ask about obama 's strategy. recently over the weekend to sort of demagogue this hysteria. maybe he knows the asteroid is coming. forgetting the untruths of navy ships and criminals running wild in the streets because of the cuts, let's talk just about the impact of that kind of going back to the well, the hysteria well over and over again. the sequester has forced liberals to clarify the conviction that whatever the government's size is at any moment it is the bare minimum necessary to forestall intolerable suffering. i don't know that democrats are always going to have that well to go back to andfoururtherfurthermore, i don't know, is the president thinking we don't remember the senate passed two bills or the sequester trigger came out of the white house itself. how dumb does the president think we are?

>> the first thing to be switched off is the asteroid detector.

>> thank god.

>> this is what people do and people at companies do this. telling them to cut the budget, they say, well, i won't cut the free water and coffee. it's what charlie peters called the fireman first principle. we'll cut all of the firemen and then nobody will respond. this is how the game is played. i guess the question is how successful he is in playing it. so far the polls and could be just because obama is more popular or more likable than congressional republicans but they tend to take the blame for things that go wrong in washington .

>> right.

>> my ears perked up with the asteroid detector shut off. since i was little, that's an overpowering fear is the asteroid . not just the impact, the tidal wave . that's what you have to look out for.

>> what aren't you afraid of?

>> live in kansas to survive and then the dust. anyway, my question is about the sequester. so what strikes me here is the -- there's talk of republicans being able to or tea party wing of the republican party and not so much the business wing as toure said to maybe declare victory here but is there a long game here where they sort of psychologically need to be able to declare victory over something and then we have this next deadline, three weeks later, continuing resolution that funds the government or an opportunity to restore some of the cuts that will be implemented, you know, in a few days? is this really a two-prong process here?

>> they continue to go for more cuts and an irony and not spoken of enough, they have had kind of great success in restraining government spending . federal expenditures year over year up around 2% while revenues are up close to 10%. they got a lot of deficit reduction out of president obama in 2011 without any taxes being increased. they got a minimum of tax increase in the fiscal cliff. so, you know, if you take the long view over a couple of years, change in trajectory of federal spending, these guys seem to have won a few victories.

>> yeah, absolutely. i have no witty comment on the asteroid .

>> dead serious subject.

>> i know it is to you, steve.

>> to you.

>> i did want to point out you mentioned that republican governors and in general are very upset about a lot of cuts. my home state of virginia , one that could be the hardest hit an you see members of congress from that state, republican members of congress , sending out releases begging whoever to not impact their programs in their districts, their bases, their projects. so that will be another dynamic. but also, something else crazy happened in virginia over the weekend. as you know, there's republican governor. republican state senate . republican house of delegates and the state apparatus controlled by the republicans. they voted in a bipartisan compromise to raise taxes to fund critical transportation infrastructure needs and a promise to pave the way of expanding medicaid and bob mcdonald , the governor, worked with terry mauliffe to get that done. it seems to me like maybe the real action and the real progress is happening at the state level since the federal government is so deadlocked.

>> yeah. it comes back to business. not just virginia talking about the medicaid expansion. florida and ohio. health care is a gigantic industry in this country. especially in a place like florida and the hospital lobby, the doctors' lobby, they come to the governors saying you're insane for not taking the dollars. good for us and jobs. we'll still have to treat people. call that crony capitalism. seems to be facing reality and on the roads, you know, it's only at the national level that republicans seem to think that building roads is a bad idea. if you run a state and if northern virginia is the economic engine of your entire state and the population is growing, people complain, you better do something about the roads or then you kill the golden goose .

>> amen. dan gross! good hit. hope we have you back before the asteroid comes.

>> okay.

>> anybody know how long until --

>> all over the place. there's a thousand a day discovering. if it's more than 50 feet --

>> check this week's " newsweek ." they know.

>> thanks, dan .

>>> coming up, we are talking oscars. of course. the best stuff that happened during and after the show.

>>> up next, a bad time for another scandal in the catholic church . a top cardinal resigns just as an early conclave gets set to pick the next pope. we're taking it there in the spin.