The Beltway obsession with the deficit

>>> good morning from new york. i'm chris hayes . israeli rockets continued to strike gaza early this morning as the bloody conflict between israeli forces and palestinian militants entered its fourth day. after testimony yesterday by former cia director general david petraeus , senate majority leader harry reid has said he will not convene a special panel to investigate the attacks on the u.s. consulate in benghazi in september. we will be talking about both those stories in-depth on tomorrow's show. but right now i am joined by george gale , executive director of nation people's actions, which advocates for racial and economic justice , heather mcgee, vice president of the progressive think tank , new york democratic congressman and friend of the show jerry mather and msnbc contributor joy reed, managing editor of thegrio.com. on a conference call with donors this week, portions of which were posted online by abc news mitt romney blamed his loss to president obama on what he calls gifts the president had given to core democratic constituencies like students, women, and latinos.

>> what the president -- the president's campaign did was focus on certain members of his base coalition, give them extraordinary financial gifts from the government, and then work very aggressively to turn them out to vote.

>> just note that, you know, doesn't actually cost any money but side point. romney 's framing of the president's campaign strategy is, of course, offensive but it is also not entirely inaccurate. the president did, indeed, deliver on some of the major policy priorities of those core democratic constituencies. mandatory insurance coverage for birth control , making student loans more affordable, and deferring action, as i said on young, undocumented immigrants among other things. romney calls those gifts, and in many cases a majority of americans would call them good policy. what republicans seem to be picking up on is key components of the president's coalition exerted considerable leverage over the white house during the presidential campaign . know as we enter the fight over what i and some others are calling the fiscal curve the combination of tax increases and spending cuts set to start on january 1st , the question is will the left retain any of that leverage over the president, or has it disappeared? on tuesday, a group of union leaders and progressive organizers met with president obama at the white house . lee saunders, president of asfcme, the american federation of state, court and municipality state county and municipal employees said the coalition that re-elected president obama would remain intact to pressure lawmakers during the standoff over the fiscal curve.

>> what we're going to do is keep our members mobilized and organized in certain communities across the country. we're going to another campaign, we won the election but we're going into another campaign now.

>> for his part president obama reiterated on wednesday the election had delivered a clear verdict on the question of whether taxes should be raised on income over $250,000.

>> if there was one thing that everybody understood it was a big difference between myself and mr. romney it was when it comes to how we reduce our deficit i argued for a polled, responsible approach, and part of that included make sure the wealthiest americans pay a little bit more. i think every voter out there understood that that was an important debate. and the majority of voters agreed with me.

>> president obama met with congressional leaders yesterday to begin the talks and house speaker john boehner suggested the parties could reach broad agreement on revenue targets and savings from entitlement reforms to avoid the immediate budget cuts. the leaders said they would meet again after thanksgiving. all right, congressman mather , before we get to this political question , because i think the political question is really important. i think some of the stuff we saw in the election year really was the product of election year dynamics. and in a positive way.

>> that's why we have elections.

>> that's exactly right. people say that's politics. that's also known as democracy. that's also known as accountability. there's nothing wrong with it, right? before we get to the politics of that, and george i want to bring you in on that question, substantively, where do you want, what do you want to see? i mean if you're to say jerry mather , i make you emperor of america for -- for -- or emperor of these negotiations and you get to like sign the document and that's what we get, what is the end point you would like to see?

>> the end point i would like to see is something we're not going to get given the fact that republicans control the house, but, what i would like to see is much less of an emphasis on the deficit, which is a long-term, maybe medium-term problem, not an immediate problem, and a concentration of getting people back to work in curing this economy. i would like to see much more spending on infrastructure. let -- the government can borrow money at negative interest rates, they're paying us to take money off their hands, borrow more money as a temporary increase in the deficit frankly, use that to invest in infrastructure, schools, hospitals, roads, bridges, smart electric grid protection against hurricanes, whatever, which will make us more competitive in the long run.

>> right.

>> number one. number two, give money to state and local governments, as we did in the stimulus bill but haven't been doing since then so that they don't continue laying off police officers and firefighters, and teachers and so forth. and make investments in education in the next generation. and if we did that, put people back to work, get the economy moving again, if we got unemployment down to 5%, which is where it was in 2007 , that by itself would reduce the deficit by 40%.

>> yeah, that's --

>> that's what i'd like to see.

>> so short-term stimulus, combination of ways of focusing on getting --

>> long-term investments --

>> right.

>> because those investments in infrastructure are key.

>> right.

>> we used to invest close to 3% of gdp in infrastructure pre-reagan. now we invest less than 1%. china invests 9%. lo do you think is going to be more competitive 30 years from now in terms of efficient economy.

>> george you were just arrested last week i think in the offices of senator dick dush v, illinois senator. now someone might say well, why are you going after senator dick durbin ? he's your friend. he's your ally. he's a democrat, he's a progressive democrat in the senate. why weren't you in his offices getting arrested?

>> i think that first obama term was like a dress rehearsal for progressives. we got some stuff right but at the end of the day it was like we got him elected and we thought he would govern and we'd work in unison and this time around we've got to inject way more more post oosh election accountability. so yeah senator durbin is a great ally of ours but he's been part of this gang of six or gang of eight depending on the story, and you know, really trending in the wrong direction.

>> a bipartisan group of senators in the house who had been working to the to try to hammer out some kind of deal they could take to the full senate.

>> they seem to be backing away from the senate. they've got a shot at doing that. i think we need to in this second chance, we're past the dress rehearsal , is actually get out on the streets, put tension, two of the big things that president obama did that he didn't plan on doing, would block the keystone pipeline , added tension in the relationship and the dream act work. and those were both times where people actually put tension into the relationship, put people on the streets, and made the administration react. and i think this time around it can't just be a handful of them doing that. we need a broader set of folks.

>> what's your ask in that office?

>> i think we want to broaden the conversation. feels like completely the wrong place. we started off with deficits. that was the frame. we should be talking about the jobs deficit and like a fairness deficit. so how do we expand the number of revenue options on the table? nobody is talking about financial speculation in this debate. so you know, obama's now got 1.6 trillion on the table which is certainly better than where we were last year. but why not add the financial speculation tax which if you went with congressman ellison's bill that would be $3 trillion over ten years, close more tax loopholes, tax shelters , cayman islands , generate real revenue.

>> we have a graphic here that shows some of the, some of the revenue options, and one of the things that always gets said is, and ed conner here said that's a carbon tax . there are different proposals. we could raise taxes on income over $250,000. that's on the table from the president. we could repeal capital gains tax break, financial transaction tax. or we could limit --

>> u.s. figures are annual --

>> little over ten years, yeah. little over ten years. so there's -- and again, depends on how you structure this and what the actual number is, right? but you can -- you can end up in a situation where you can get a lot of revenue. one of the ways in which the conversation has been constrained is this idea of well, can't all be on the revenue side. who says it can't all be done on the revenue side. taxes as a percentage of gdp are the lowest they've been since the 1950s .

>> and we have already done it all on the spending side.

>> that's right.

>> that's one of the things that is sort of detracting the conversation always misses is that we have actually done, because of the debt ceiling deal the budget control act, about 1.5 million in spending cuts.

>> trillion and a half.

>> trillion and a half, sorry. a trillion and a half in spending cuts. and we are, you know, we have discretionary budget caps right now which has been a longtime conservative aim and we are looking at, you know, in the out years, the lowest amount of federal spending, you know, the share of our economy in about 50 years. and that just doesn't make any sense if you look at what's actually going on with the working middle class in this country.

>> and one way --

>> that's before any spending cuts that they're out to negotiate.

>> exactly. we've already done it.

>> one of the ways to look at it is like elections have consequences, right? and like they won and -- provoked the debt ceiling crisis and we got the budget control act. that was a bill that reflected their priorities and the mandate they interpreted as having when they ran and those are locked in 1.5 trillion cuts now we just had another election. and the democrats whooped up on them. and so it's like the, the, the centerpiece of the conversation should be shifting, but joy as someone who covers this, i don't feel like the centerpiece has shifted except on the one issue the president mentioned, which is taxes at the top.

>> right. it's interesting because i think that it is a beltway fetish, - of tackling the deficit. and i think that is both, in washington, on capitol hill , but also in the media. the media, the beltway i think has bought into this idea that deficits are the primary conversation we should be having. but if you look at it as a historic matter, you know, what did fdr do wrong after injecting a huge amount of stimulus in to the economy he gave into the temptation to attack deficits than he did austerity which plunged the country back into a recession. what did europe do wrong? they responded to this huge economic crisis with austerity and in the case of great britain they went into a double-dip recession. their economy is flat-lined because of austerity. so, you know, president obama has a great opportunity to not make the mistakes of history and not make the mistakes of europe. austerity doesn't work. the other issues and we talk about that budget fight, what you're saying accurately that after 2010 , we're going to try austerity, we're going to do what the republicans want, which is cuts, we found out how difficult it is to find things to shave off the budget . there are only a few things to cut. there's defense, there's social security , what are the big items in the budget ? there isn't a lot out there.

>> particularly when you talk about noun defense discretionary spending which is basically the lowest level of spending in a generation. but congressman i want to hear about what the policy, how politics, i think there's some consensus at the table about what broadly division went ahead towards so the big question is how to get from here to there. [