This week on "political capital," senate finance reform committee chairman at boxes -- max baucus.
And lanny chan and margaret carlson on the fallout from the debt debacle.
We begin the program with senate finance committee chairman max baucus from montana.
Senator, thank you for being with us today.
Let's look ahead after the trauma the past couple weeks.
You have worked on tax reform, corporate and individual, much of the last year.
What are the prospects there will be a decent piece of legislation in the next couple months?
I think quite good.
We have spent years working on legislation, and we meet weekly talking about reform.
I and my staff, especially my staff, have spent a good deal of time with the treasury staff working at the details, different ways of configuring provisions, so a lot of work on reform.
Second, i think when the budget conference debate begins to do its work, i think it will be more likely that we will find some agreement there, and third, because there is a good willingness today to work together, better than has been the case in the past.
Do you see business and individual tax reform coming up before december?
I think will be comprehensive.
First, business is clearly important because we have to be more competitive.
Frankly, the failure to do reform is hurting the economy, no question.
But i think the individual as well, partly because some businesses are not c corporations.
After that, we have to simplify the code.
It is way too complicated.
What is your goal when you start to mark up a bill and report on the bill?
I would like to see discussions, drafts the beginning of this year.
I don't know exactly when.
I cannot give a date on marco, but we have to move quickly because the time is soon not becoming a friend.
How does this fit into the budget deal which has to be done by december 13? can what you are going to do play into that or doesn't have to be done later in separately?
I think it is a parallel track.
I think they both know the budget process very well, they both know the components, and i wish them very well.
They are very good people.
I am working with them, working with senator murray and all of the oversight committee to help with the tax components.
They may have numbers, they may use numbers that you have, then you fill in the details and the specifics later?
Yeah, they do the top line numbers and we do the details.
Will the tax reform be a net revenue gain or?
That is the question that has to be resolved.
What is your thinking now?
I think that is one of the pieces that is part of the solution, part of the bu puzzle.
It is revenue, entitlements, every thing is on the table.
I am moving as fast and thoroughly as i can to solve this.
I think it is important for us to listen to each other, to build bridges, and try to avoid some of these buzzwords that go around washington.
Would business tax reform be revenue neutral and the question be whether individual tax reform is revenue neutral?
The president's corporate framework is revenue neutral.
And thing is possible.
Let's see where we go.
Would you imagine putting a charge, five percent or more, on the earnings of offshore biden multinationals -- of offshore multinationals?
I think this country needs business reform that addresses overseas so-called trapped cash in a way that allows companies to bring that cash home, but in a way that is also durable, not just a one-off, but a permanent solution to income earned overseas that unfortunately some companies don't pay tax on because their operations are in tax havens or low tax jurisdictions.
That will create jobs in the united states.
They have to lower rates, but not lower pay.
No, no, no, companies over and over come to him say that.
What would you like the rate down to?
The high 20s, somewhere in there.
The bunnies tell us they are willing to give up major deductions they get to get lower rates, because they feel they are more competitive with a lower rate.
One small example here, a major california company just merged with a japanese company, a computer manufacturing company, and where do you think they incorporated?
Overseas, in the netherlands.
Because the netherlands' rate is so much lower.
Can you get below 30? look, because there are a lot of provisions that people like a lot, whether it is charitable deduction, state and local, whatnot, still i believe we can dramatically simplify the code and it will send a very powerful message to the country, hey, washington is getting its act together, and it will unleash a lot of pent-up energy that has not been realized to help create jobs.
Let me see if i can summarize.
You think you are numbers that can be given to the budget conferees and the actual legislation would go to the floor early next year?
Not going to say that will happen.
It will go to the floor next year?
No, i'm making a different point.
I am working with the budget committee to get the most definitive framework that the country can get.
Still in that, i am proceeding independently on reform.
chairman, with prescience you warned that the affordable care act was a potential train wreck.
Republicans cite that often.
The early rollout appears to be at least that if not more.
Is this intractable, will it get worse, or will it be rectified in the next couple months?
First, i said if they don't get their act together albeit train wreck.
They haven't, have they?
There are big problems, but anything this massive and huge will have dogs, and we are seeing bugs.
Look at the private sector.
With technology companies and software companies, windows for sample, all of that, a lot of patches to fix the bugs.
I have the utmost confidence that every ounce of energy is being devoted to solving and getting these patches out to fix the bugs, and we are a creative company.
Do you have confidence those glitches will be largely rectified by december 15? i do, i do, i do.
i spent a lot of time talking to the administration on this, meeting with dennis mcdonough twice a month, and and this is what we go over, frankly.
I bring members of congress to him so he can see this is an issue that needs to be done.
The irs commissioner appointment has been suspended 2.5 months.
When will you hold hearings and when will he be confirmed?
Well, so far, i think he is a good man.
I will do my best to get that hearing right away.
My job is to not let others life in the hearing for him.
Will he be confirmed this year?
I think so.
The irs needs a very good man, and it looks like at this point he is the man for the job.
Chairman baucus, thank you for being with us.
When we return, we will speak with white house omb director sylvia burwell.
? welcome back.
Joining me now as white house office and management and budget director silvio sylvia mathews burwell.
Thank you so much for being with us.
We have been through one political economic trauma.
I'm sure you had some sleepless nights, but we have a lot of budget and debt deadlines looming.
Given the polarization, why will it be different?
Hopefully having been through what we have been through and seeing the ramifications of that, especially with regard to the shutdown and what that meant economically and to people with individuals in terms of how they interact with their government, i think we are hopeful and we see signals and a bipartisan basis a shutdown is no longer on the table.
How much will it affect your economic forecast and how much will it affect unemployment?
One of the things we will have to work through is what that means.
One of the things that cannot happen because we had a shutdown is we were not able to close the government books for the year.
Now that everyone is back, that is one of the first tasks at hand to do.
To close the year's books and think about how we set our baselines for the following year.
Looking ahead to the legit, the senate budget negotiations, which are very important coming you do a report december 13. what is your realistic expectations as to what will come out of that, in a broad sense?
I think what we are hopeful for is having a conference will return, one, to regular ordering process will work in terms of how these things have hope happened, and i think we are hopeful many issues will be on the table, both big and small.
The president budget has a wide range of issues in it in terms of long-term deficit reduction, in terms of the ability to lie out the sequester and do the deficit reduction in a way that we believe is healthier for the current economic recovery and taking care of some of our long- term problems, as well as other issues like corporate tax reform which we have mentioned in the budget and that the president mentioned recently as part of talking about a grand bargain.
And what we need to do to grow the economy.
Let me tell you what paul ryan and some of his allies are talking about.
They say there is a deal to be made, that they would accept the president's proposal on entitlements, meaning medicare, return for alleviating much of the sequester.
Does that sound like a good deal for you?
I think we actually thought of a larger deal, a deal that included both revenues as well as entitlement issues.
As we think through what we're going to do, we want to understand what is the sign of the package that people are talking about.
Ballot have to include revenue also?
-- that would have to include revenue also?
I think when one thinks about the long-term issues, deficit reduction, when you look at a president's budget, that was a one point $8 trillion proposal, 1.2 trillion was to shift the the sequester, and then an additional 600 billion.
To do those kind of long-term changes, you have to think about it in a balanced way over time and include not just tied but also revenue.
Do you have any realistic idea of what the scope could be over either one or two years if such a deal came about?
When one things about the conference can do, the conference can think about a 10 year deal that includes some of these bigger issues we are talking about or think about a smaller approach, which would be more like one or two.
I think either are possible.
I think what we have seen in the last weeks and months is one cannot predict what will or will not happen in terms of where people will go and what you can get.
I think what we need to do is go in with optimism, put everything on the table, and see how far we can take moving the economy forward using fiscal policy.
Let me ask about the next eight weeks and how involved the president will be.
Leon panetta, one of your predecessors at omb and also former white house chief of staff, says the president -- these are his words -- canola or walk away from the table, and if he feels republicans will not deal with him, he, "ought to be able to delegate that responsible it it to someone who can do it." your reaction?
The president and the administration have been engaged and been engaged since i entered the administration five months ago, in terms of whether it is dinners, meetings, conversations, calls, with both sides of the aisle.
You expect the president to be deeply involved in these negotiations?
I expect the administration and the president will do what we have been doing to this point and continue to do, and that his engagement in the way we have been in gauging as well as a clear articulation of our principles.
That is what the president and the administration did leading up to where we are today.
As well as the budget, you run the office of management.
The administration just saw a management debacle.
Your primary responsibility, the rollout of obamacare frustrated millions, including my own son who went to try to sign up.
What can omb do in supporting the implementation of these exchanges to make sure this is rectified?
This really was awful.
First i would start with what the president said in terms of his disappointment about the problems and challenges you articulating.
The administration has put together a team deeply focused on the issues of how to fix those problems.
Second, in terms of one of the things that omb thinks about, programs and policy, focusing on large issues.
One is what the affordable care act set out to do, and that is provided a product of affordable insurance for those who are uninsured.
On that front, i think we are making strong progress.
But if people cannot sign up, get affordable care, can you guarantee the public that by december 15, say, which is a little over two weeks before they can really join, that these problems will be largely rectified?
I think the administration is working deeply on the problems that exist and it is also important recognize there are other places and ways in terms of whether those are the phone numbers, the navigators, and other tools and choices people have to do that.
I think also, from an omb perspective, it is important to recognize in addition to the issue of health care for the uninsured, the issue of the blue avenue children up to 26 being covered, the issue of pre- existing conditions, all of those are being worked on at a very successful way in terms of reducing cost.
Cautiously up to mistake it will be rectified by december 16? i think we will make progress on the issue.
Sylvia burwell, thank you so much for being with us today.
And we return, we have a full bloomberg roundtable.
? welcome back.
We have a full bloomberg roundtable.
Margaret carlson, lanny chan, and clive.
The debate in washington, republicans argue the government ought to get out of the way and let the markets rule.
The nobel prize for economics was given to an intellectual leader.
Democrats say we ought to have government involvement to correct the market efficiencies.
The intellectual leader of that is robert shiller, who also won the nobel prize for economics.
And a way.
A lot of people are saying it was a copout, but the truth is both of these guys as economists rather than political commentators have got big pieces of the answer, big pieces of the truth.
Markets are very efficient at processing markets, which they are.
Schiller says sometimes they don't do that perfectly, which is also true.
Both of those things are correct.
I think you have to embrace both sides to understand what is going on.
They are not as contradictory as some people say.
And there is no bigger honor and economics than getting the nobel prize.
Not me ask about a more contemporary issue, which is the shutdown and the almost default which was over at it this past week.
How much did it cost the economy?
In the short term, the shutdown and the threat of default probably cost between half a percentage point and a percentage point of gdp growth in the current quarter.
That is where most of the estimates are coming out.
That was a serious blow.
I think the bigger issue, myself, is the longer-term damage, the repetitions of what we have seen.
So if we go through it again in january, you ain't seen nothing yet?
Yeah, if we get to default, it would be a cataclysm, just running through this process again and again, creating uncertainty, making investors nervous about buying u.s. debt.
I think the costs will build up.
It is a big deal.
Did we really see nervous investors?
We kept talking about them, but the markets, other than one day, did not really seem to expect anything bad to happen.
It was beginning.
You saw the beginnings.
The problem is in this type of situation, the triggering event is hard to predict.
I think the markets did feel in the end this problem will be solved.
Maybe they were too optimistic, i don't know.
One of these days, maybe it won't be resolved, they will go to the edge and fall over not meaning to.
At any rate, i think that is the problem, the markets did think they will pull something out at the last minute, and they did.
But how confident will they stay if that happens every time?
I would not take it for granted.
We won't, because we will have you back to tell us about it.
Lanny, we are into did what it negotiations.
Should democrats give on entitlements, rain in long-term entitlement spendings, and republicans give on the higher revenues?
First of all, i think people have to remember that republicans gave on revenues as part of the fiscal cliff package at the end of last year.
The democrats give anything?
We have to get entitlement reform.
Absolutely democrats need to come to the table on entitlement reform.
How that republicans?
They should have escutcheons about tax reform, but not independently.
They have to give some if anybody's going to talk to anybody else.
That picture of paul ryan and the gang did not bode well.
He towers over murray, it was not a happy picture.
I think republicans have tasted led.
-- i think republicans have tasted blood.
The tea party caucus should be called vampires.
They love the drama and it will be hard to bring them along without anything that does not include revenue and huge spending cuts.
We have been through a pretty big political trauma the past two and half weeks.
Was it a big winner or loser?
There were no winners.
Harry reid was ever present, but republicans dug themselves into a really big hole.
Harry reid occasionally shoveled a little bit of dirt on top of it, but he did not look like a leader.
He looked like a reactor, and he had the winning hand.
By the way, i would say that joe biden not being there was good for joe biden.
And a big loser?
Everybody, even us.
No, margaret, not you.
Maybe me, but not you.
The mac and economy.
We will be right back here in a few months with uncertainty and difficulty with economic mission.
I would argue that john boehner was a big winner, consolidating support with the right, which i think will strengthen his hand going into negotiations.
Do you suspect that ted cruz and the tea party have been strengthened by this?
I hope so.
I think there is a real sense that what they asked for was too aggressive and we ended up with a package they probably could have signed off on earlier.
At ted cruz's fundraising committee, they think that he won huge.
Inside the caucus, he is a winner.
Outside, he is a pariah.
You will be in iowa with a full wallet.
What a terrific and rambo with the three of you.
Thank you so much and thank you for watching.
We will see you again next week.
"political capital" is a production of bloomberg television.