Senate Budget Committee Chairman Kent Conrad, a North Dakota Democrat, said in an interview on “Political Capital with Al Hunt” airing this weekend on Bloomberg Television that Congress will approve President Barack Obama’s tax-cut agreement with Republicans though he hopes estate-tax provisions will be altered.
(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
AL HUNT: And we’re back with Senator Kent Conrad, the chairman of the Senate Budget Committee. Thank you for being with us, senator.
SENATOR KENT CONRAD: Glad to do it.
HUNT: You are supporting the tax cut deal, some $857 billion over the next couple years. Do you think it’ll be enacted? And will it be changed any over the next week or so?
CONRAD: First, I think it will be enacted. Second, I think it will be changed and, hopefully, improved.
HUNT: In what way?
CONRAD: Well, first of all, the energy - the renewable energy program will be renewed. I was told last night that’s going to be put in the package. It had been left out. Very, very important to renewable energy in this country. I’m delighted that that’s going to be put back in the package.
I hope the estate tax provisions are changed, because they went too far on estate tax relief.
HUNT: Can I ask you, how do you justify that, for the wealthiest Americans, when average Americans are having a hard time making ends meet?
CONRAD: I find it impossible to justify, because this is a gift - if it was continued over 10 years - of $100 billion to the wealthiest one-quarter of one percent, Al. And, you know, I’m in favor of estate tax reform. I proposed in my budget going to $3.5 million a person with a 45 percent rate. But this goes much beyond that.
HUNT: Do you think it’ll be changed on the Senate floor or more likely to be changed in the House or -
CONRAD: I think more likely to be changed in the House. It needs to be changed, because, frankly, we just can’t afford that kind of giveaway to the very wealthiest among us.
HUNT: Let me ask you about deficit reduction. There was a Bloomberg poll out this week that shows Americans, by big numbers, they’d like to cut the deficit. They oppose cutting major domestic spending programs. They oppose cutting the defense budget. They’re against any entitlement reductions. They want to keep tax breaks. They want to keep farm subsidies, and they’re against any gasoline tax. And all they’re for is higher taxes on the rich and means-testing Social Security.
Can you get anything done on the deficit when the public has this sort of feeling?
CONRAD: Well, we need to get something done, because we are on a completely unsustainable position. We are borrowing 40 cents of every dollar we spend. But the notion that apparently people have - at least in this poll - that you don’t have to touch entitlements, which is the biggest part of our spending, you don’t have to touch revenue, which is half of the equation, that you can’t touch defense, that you can’t touch all of these other programs, means you cannot solve the problem.
HUNT: Well, how can elected officials solve the problem if that’s what people think?
CONRAD: They have to be prepared to sacrifice their political careers to do what must be done for the nation. Look, if we fail to get our deficits and debt under control, America will become a second-class nation. We are going to slip over the abyss into a fiscal crisis that is as sure as we sit here.
So the American people need to think very, very carefully. If you are borrowing 40 cents of every dollar you spend, can you really solve that problem by not touching any of the big spending or any of the big revenue?
HUNT: You voted for the Bowles-Simpson deficit reduction plan, along with 10 of your colleagues, but you’re also meeting with a group - a bipartisan group of senators now, in which you’re trying to come up with some deficit reduction plan. How would it differ from Simpson-Bowles? How would you tweak it? How would you change that? And how would you change that ratio of spending cuts to tax cuts?
CONRAD: Well, the first thing, we’d start with what the commission has laid out as a blueprint and then listen to our colleagues about what is necessary to actually achieve an agreement.
HUNT: Can you see some major changes - or not major changes, but the sort of changes you’d make in Simpson-Bowles, as you sit down with these colleagues and start to go through this?
CONRAD: You know, I have a list of things that I’d like to see improved. Look, I think the domestic spending cuts went too far, because mandatory spending is really where the problem lies. That has now become about two-thirds of our budget, the so-called mandatory accounts, Social Security, Medicare and the rest. We’re going to have to achieve savings there. And we can do that without hurting Medicare beneficiaries.
HUNT: Are you getting any receptivity on - on the compromise from your Republican colleagues as you begin these sessions?
CONRAD: Yeah, I mean, I think people are very open to getting a result. And everybody knows, none of us can get it precisely our way. And we’ve got a huge educational job to do with the American public, because obviously, when you say poll numbers, as you just did, it says the American people don’t want to do any of the things that you actually have to do to solve the problem, we’ve got a big challenge.
HUNT: As you know, you also will have very - fairly early next session - a need to increase the debt ceiling. What do you think has to be done before the votes can be mustered to take that very, very painful act?
CONRAD: That’s a very timely question, because yesterday I was at the White House with members of the fiscal commission meeting with the secretary of the treasury, meeting with the head of the Office of Management and Budget, and we told them this is going to be the decision point. When the debt limit has to be extended, there has got to be an agreement to deal with our long-term debt challenge, else extending the debt limit will not happen, but for short periods of time.
HUNT: So some time a budget deal has to be in place, if you want to get a real debt ceiling -
CONRAD: I believe so.
HUNT: Do you - were they receptive to that idea?
CONRAD: You know, it’s always hard to say what is in other people’s heads, but they listened very carefully.
HUNT: The administration also is considering a major tax reform initiative next year. Is that a good idea? And can it be a revenue-raiser?
CONRAD: It is a very good idea. I think it’s a central idea to the debt commission, dramatically reform our taxes, reducing tax expenditures, lowering rates to make America more competitive. It will also generate additional revenue, so it has a lot of merits. Our tax expenditures are $1.1 trillion a year.
CONRAD: So if they are meaningfully reduced, we can use money to lower rates, to help make America more competitive, and we can also use some of the money to reduce the deficit.
HUNT: What changes would you like to see in the Obama administration with this new environment, both in policy and in personnel? What kind of people would you like to have him bring in?
CONRAD: I would like to see senior people who are very cognizant of our fiscal situation and our economic conditions. You know, Larry Summers leaving, that - along with Peter Orszag - that leaves some big holes, and I’d like to see some gray hair, people with a deep understanding of how the economy functions, and also relationships here on the Hill. That’s critically important.
HUNT: Senator Kent Conrad, thank you so much for being with us, and we’ll be back with the last word.
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