Obama warns GOP against threats to economy

>>> are we going to go over the fiscal cliff?

>> you know, i remain optimistic that there are enough people of good will in this town that recognize our economy will be much better off, american families will be much better off if we get this done. the most important thing we can do is make sure the middle class taxes do not go up on january 1st . and i'm pretty confident that republicans would not hold middle class taxes hostage to try to protect tax cuts for high-income individuals.

>> there is big news tonight out of washington where speaker john boehner and obama are talking. this is actually not nothing, not in this town. early last week they really weren't talking, and neither were their staffs. progress on what to do about all those expiring tax cuts and schedule spending cuts and that possible recession congress might create, totally stalled. but now today they are talking, and their staffs are talking, and they're even exchanging paper, real paper. news leaked today that in the last few days, there have been new offers and new counteroffers in the negotiations. but they sound, to be honest, not that different from the old offers. reports that mr. obama has gone from $1.6 trillion in taxes to $1.4 trillion but hasn't budged much on entitlements. mr. boehner really hasn't moved on taxes at all. he is still i'm told at $800 billion, although details on his offer are sparse. earlier today i asked michael steele , john boehner 's press secretary for details on the, quote, deal. i was writing quickly and meant to say offer, but i wrote deal. he wrote back we are not close to a deal. when these deals are reported, we tend to tell you about the numbers. obama is at $1.4 trillion in taxes. boehner is maybe 8 one billion. boehner was at 600 billion. but a major sticking point is not a number at all. a major sticking point is the debt ceiling you. might remember the debt ceiling, the dumb, anachronistic thing we have in which congress has to vote for the stuff that it has already bought. and if the vote doesn't go through, then america's economy goes boom. yeah. that one. that has become a huge problem in these negotiations. and for two reasons. first, a lot of republicans outside the negotiations on the hill, they have convinced themselves the debt court of appealing is their secret weapon . the way they see the negotiations going is this. mr. obama has leverage now because he really doesn't care if you go over the fiscal cliff or curb or slope, or whatever you want to call it. but in february we will hit the debt ceiling. and if we break through the debt ceiling we will unleash an economic hell on this nation. and no president would allow that, right? so that is republican leverage, as they see it. unlike them, obama is not willing to destroy the global economy . and so they figure there is no real need to cut a deal now, because if that deal, particularly if they deal includes concessions like taxes, just wait a couple of months, take the debt ceiling hostage and make everybody believe you'll shoot. this is making boehner weaker. it gives haas republicans an excuse to ignore the cuts the deal he makes. they say oh, we'll just wait it out. the concern that bainler cut a deal that he can't actually deliver, or at the last minute he'll back off a deal because he won't have the votes. the white house , by the way, they don't think the debt ceiling is republican leverage. when you talk to them, they are all steel right now on that subject. their position is simple, and they deliver it in the tone of voice bruce willis reserves for talking to terrorists. they are not negotiating. not on that. if republicans go over the cliff and try to open up talks for raising the debt ceiling, the white house says they will not hold a meeting. they will not return a phone call . they will not look at the e-mails. they will move to an entirely public strategy, rallying votes in the business community against the gop's repeated threats to destroy the economy if they don't get their way. recall obama 's speech to the business roundtable last week.

>> i want to send a very clear message to people here. we are not going to play that game next year. if congress in any way suggests that they're going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation? which by the way we have never done in our history until we did it last year? i will not play that game. because we've got -- we've got to break that habit before it starts.

>> so that's where all the debt court of appealing is playing outside the negotiations. inside the negotiations the debt ceiling is also emerging as a, and maybe even the key difference between the two sides. the white house wants to solve it forever. they've proposed congress simply gives them authority to raise it on their own. republicans not so into that idea. the problem now is one democrat told me it's kind of hard to compromise between on the one hand nothing, which is pretty much the republican offer on raising the debt ceiling, and infinity, which is pretty much the white house 's current position. but the white house sees it as a matter of grave responsibility. they are not going to accept some kind of short-term debt ceiling fix. five years, ten years, maybe that they'll talk about. a year? they say they're not doing that. they figure that if there needs to be a final showdown over the debt ceiling, a once and for all boss level battle, bowser style, it's better to do it now when they're at peak strength than to delay it until 2014 or 2015 when republicans might have more leverage. so yeah, the two sides, they're talking. but they're not close to a deal, not yet. joining us is jared bernstein, former economic policy adviser to vice president joe biden , an msnbc and cnbc contributor, and a man who is very good at finding the deal. jared , it's good to see you.

>> good to see you, ezra.

>> so let me start with the news of the day here. what do you think of the somewhat vague reports we're hearing about offers flying back and forth?

>> i think a little bit of it, and not a lot. when i read in the paper as i did this morning that there is some sunlight breaking out, i'm ready for tomorrow saying no. in fact, it's all darkness. i do think that the president's move to come down $200 billion on his revenue number is real and important. it's as you said earlier, once they start negotiating over numbers like that, some good things could potentially happen. on the other hand, there is some of this public negotiating going on. i thought speaker boehner 's comments today were uniquely pretty unhelpful because he made a bunch of statements that i think were factually incorrect about the details in his plan versus the president's, or the fact that the white house hasn't really been forth coming with spending cuts. that's actually factually incorrect. i don't think that helps. so little bit of progress. not enough.

>> why does the debt ceiling -- i'm sorry, why does the white house care so much about the debt court of appe l ceiling? why not worry about a year, six months later?

>> because if you think the fiscal cliff is fun, you'll love the debt ceiling. the economic havoc that is wreaked by the fiscal cliff is a very gradual thing, as you and have i discussed. going over it is a mistake. we shouldn't do it. but at least initially, if we can reverse it, it won't be so bad. if you default on the nation's debt on our treasury bills, that's not a fiscal slope. that's a cataclysmic economic event. not only are you stiffing creditors who believe they have invested in the safest debt in the universe, you're actually threatening to have to raise our interest rates through the roof in order to service our debt, which means absolutely a long-term recession. it's really quite a fatal step.

>> "the wall street journal 's" reporting that the white house is willing to do corporate tax reform in their new proposal. what do you think than in what do you think that might mean?

>> i think it's a neat idea. the white house is actually articulated a fairly detailed corporate tax idea in a white paper that didn't get enough attention a few years ago. and it's very much in the spirit of things that tax reformers, including republicans , like. lowering the rate on taxes and lots of people complain that our statutory corporate rate is lot higher than other countries. our effective rate , what corporations actually pay is quite low. and that means there is a bunch of loopholes. and to the white house 's credit, in their white paper that.

>> specify a bunch of loophole closures. the problem is my loophole closure is your beloved investment program. we'll have to see how that plays out.

>> i gave that white paper a lot of attention a few years ago. jared bernstein.

>> you are exceptional.

>> thank you very much for being here.

>> thank you, ezra.

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