Senator Graham and OMB Director Lew on "State of the Union"

Senator Graham and OMB Director Lew on "State of the Union"

By State of the Union - February 13, 2011

CROWLEY: Joining me now from Greenville, South Carolina, Republican Senator Lindsey Graham. Senator, thank you. I'm not sure if you got to hear the breaking news at the top of the show, but essentially the military council has said that they have suspended the constitution and that they will be conducting things for the next six months or until there are elections.

Is that an OK timeframe, do you think, as far as the way the U.S. is looking at it?

GRAHAM: Well, I think from our national security interests, this election in Egypt is going to define Egypt in the region for decades. And Mr. ElBaradei said it could take up to a year to get democratic institutions in place. Just think what they have to do going forward. There really is no independent judiciary, there are no political parties. The constitution has been used basically to outlaw political parties. So I'm looking for a free, fair, transparent election that would get the full flavor of Egypt. And a rushed election could help an organization like the Muslim Brotherhood, so my advice to the Egyptian people is, take your time, reach out to the world at large. A lot of people want to help you. And I'm not so sure you can do all the things you need to do between now and September to have an election that reflects the full will of the Egyptian people and to create democratic capacity. But that will be up to the Egyptian people.

CROWLEY: I was talking to an administration official yesterday who talked about being -- there being two different clocks in Egypt. And one of them goes slowly, because it says you are building a democracy from the ground up here. That is not easy to do. We saw that in Iraq under entirely different circumstances, but nonetheless, it takes time when every institution needs to be redone.

GRAHAM: Right.

CROWLEY: And then there is that other clock, that is the impatience that you saw in the square, the impatience that you feel from young people and from their parents. And so you have to find that sweet spot, do you not, between going too slowly to satisfy protesters who could just as easily show back up in the square, could they not?

GRAHAM: You know, that is a very good analysis. And I think your network has done an outstanding job of informing the American people what's going on in Egypt.

Yes, where is that sweet spot? There will be a desire to look backward, to hold Mubarak accountable. How much money did he steal from the Egyptian people? Should he and those around him go to jail for abusing the Egyptian people? That's going to create friction with the army, because the army has been very close to Mubarak institutions, the Mubarak presidency.

So as young people, the Muslim Brotherhood talk about looking backward, that may create some friction going forward.

We know what the people are against in Egypt. We don't yet know what they are for, so there is a lot of friction when it comes to capacity building. You know, how much can you get up and running before September to make the election really meaningful? So I would err on the time of going slow, building capacity, and as the desire to look back grows -- which it will, to hold people accountable -- that will create friction among the army because a lot of the generals in this army have lived pretty well during the Mubarak era. And I don't know how much they are going to be into letting people go back and hold him accountable.

CROWLEY: Well, and yet these are also the people who the U.S. has mainly been dealing with.

GRAHAM: Absolutely.

CROWLEY: Certainly during the last 18 days, and obviously over the course of the last three decades.

When you look at the idea of Egypt recreating itself, what do you worry about most? Because I have seen people say, I worry about the U.S. intelligence gathering. Egypt has been so helpful, particularly when it comes to Al Qaida and Iran, what's going on in Gaza. I have had other people say, you know, this was the door to other Arab countries. What worries you most that the U.S. will lose or might lose?

GRAHAM: Well, as we develop a new -- if we can pull this off, if the Egyptian people can create a democracy in the heart of the Arab world, it will be a more significant contribution to civilization than the great pyramids. It really will have a long-lasting effect.

I worry that we'll rush to an election where the Muslim Brotherhood, who is the most organized but doesn't represent the true will of the Egyptian people, will have a disproportionate effect. I worry about the army. Will the army hold together? Will the young officers accept the rule of the senior people? Will the army really subordinate itself to civilian control as this new democracy unfolds?

You talked about intelligence. I worry about our own intelligence services understanding what the heck is going on. When the DNI of the United States says the Muslim Brotherhood is mostly a secular organization, that sent chills up my spine. It makes me wonder, do we really know what's going on in Iran? And if Iran gets a nuclear weapon, all hell breaks loose in the Mideast. So I worry about what happens in the next six months to a year in Egypt affecting our relationship with Saudi Arabia, with Jordan and Israel.

Now is the time to stand by Israel without equivocation and help the people in Egypt to form a democracy. But at the end of the day the order, the task they have chosen will be very difficult but doable.

CROWLEY: And it could backfire.

GRAHAM: Oh, let me tell you, you've got Jordan and Saudi Arabia are thinking we have thrown over our friend in Egypt. Well, Mubarak was a good ally. He did bring a calming influence. The army has reaffirmed the peace treaty with Israel. But at the end of the day, people in Jordan and Egypt -- excuse me, Saudi Arabia, need to get the message from Tunisia and Egypt. And that is that you've got to give your people more say, a larger voice in society.

This could be a good thing for the region or it could all fall apart. If it falls apart in Egypt, who knows where it ends, what kind of forces does it unleash in the Mideast. So you get one chance to get this right.

To the protesters, I know you have had a tremendous effect on the future of Egypt in the last 18 days. My advice would be to go slow, form political parties, take that energy that led to bringing this regime down and chart a brighter future that is based on religious tolerance and secular democracy. And those things are not certain yet, by any means.

CROWLEY: Senator, while Egypt was busy reformulating itself, CPAC, which is the, as you well know, a collection of conservative groups, was holding a meeting in Washington, talking about spending cuts and the like. But they also had a straw poll that I just wanted to show you the results of over the weekend.

Ron Paul came in first with 30 percent. Mitt Romney next with 23 percent. And then down the line, Gary Johnson, Chris Christie and Newt Gingrich. There were others, obviously a lot of others that I'm sure you know personally that are thinking of running for president. Is there anybody on this list that you look at and think, I could go with this guy?

GRAHAM: Well, you know, at the end of the day, I'm looking for the most conservative person who is electable. And that person is yet to emerge. Mitt Romney is probably the frontrunner among traditional candidates. Ron Paul is a well organized, has a lot of energy behind his ideas. But whether or not he could win a general election, I think, is a big if.

We have got a tall task as Republicans. We're going to have to win independent voters. They are very much looking at the Republican Party anew. We are getting a second chance with the American electorate. We did well in 2010. And I think President Obama is beatable, but we have got to nominate someone that can win over independent voters, who do want smaller government and less spending, but understand there is a role for government. So over the next few months, we'll see who can pick that mantle up and run with it, the most electable conservative. No one quite knows yet.

CROWLEY: Tis the season. Thank you so much, Senator Lindsey Graham. We really appreciate your time.

GRAHAM: Thank you.

CROWLEY: Up next, we'll get perspective on how the events in Egypt will shape the Middle East with two former ambassadors.


CROWLEY: Joining me now here in Washington, White House budget director Jacob Lew.

Thank you for being here.

The president tomorrow puts out the fiscal year 2012 budget. People are already lost. Why are we doing 2012 in 2011 and all of that.

So let's get down to the basic question, who's going to get hurt in this budget?

LEW: You know, Candy, this is a very difficult budget. The budget saves $1.1 trillion over the next 10 years in domestic spending. It reduces, as you said in your introduction, $400 billion, which would bring us down to the smallest government as a size of the economy since Eisenhower was president.

The challenge we have...

CROWLEY: At what cost?

LEW: The challenge we have is to live within our means but also invest in the future. As the president said, we have to out-educate, out-innovate and outbuild in order to compete in the next century.

In order to do that, we have to make tough tradeoffs. And you listed a few of the examples. There are many, many more. There are scores of programs that are being reduced.

And I think it's important to note that we're beyond the easy, low-hanging fruit to say that it's all waste and fraud. We're reducing programs that are important programs that we care about, and we're doing what every family does when it sits around its kitchen table. We're making the choice about what do we need for the future? And I think the budget does a very good job of it.

CROWLEY: So, such as? Tell us some more...


CROWLEY: ... where are the cuts?

LEW: I can tell you that in -- even where we invest, we've had to make some tough decisions for cutbacks.

So in education, we invest very seriously to make sure that 9 million students can go to college using Pell grant, to make sure that K-12 education -- we have 100,000 new teachers who are trained and experienced in science, technology, engineering and math.

But we also have cutbacks. In order to pay for the Pell increase, one of the things we're doing is saying there will be no more Pell grants for the summer; they will be for the school year only. In the area...

CROWLEY: No summer school Pell grants from the government?

LEW: Yes, and in the area of graduate student loans, interest will start building up while students are in school.

CROWLEY: Now they graduate, and then the interest starts?

LEW: Correct. Right. All told, there's $9 billion in those proposals this year, and that will make it possible to make sure that 9 million students can go to college.

CROWLEY: So you have said in an editorial you wrote that the budget is an expression of our values and aspirations.

So if I look at this what we call discretionary spending, things we don't have to spend on, you want to cut back community development block programs. That creates jobs in communities; it helps them with infrastructure, that kind of thing. Home heating assistance; education, as you just mentioned. You're also going to do -- the Great Lakes Restoration Fund Initiative is getting a pretty healthy cut in what they get from the feds, eight states involved, in trying to keep the Great Lakes economically viable.

What does that say about our values and aspirations?

LEW: Well, what it says, Candy, is that we really do have to do what every American family does; we have to start living within our means.

Our budget will get us, over the next several years, to the point where we can look the American people in the eye and say we're not adding to the debt anymore; we're spending money that we have each year, and then we can work on bringing down our national debt.

You know, the notion that we can do this painlessly is -- it's not possible to do it painlessly. We are going to make tough choices.

The question is, do we do it in a way where, while we're making the tough tradeoffs, we're making the critical investments so that we have a future that creates jobs for the American people so that we can outcompete in the world of the 21st century.

CROWLEY: Here's the problem, I guess. If you are a graduate -- let's take one of your examples. You're a graduate student; you are, right now, getting loans. You don't have to pay those loans or any interest on them until you graduate. But now you have to pay -- or it accumulates, I'm assuming -- you have to pay interest beginning on day one of grad school, and that makes it so that you can't go to grad school.

LEW: Well, let's just be clear. Interest will build up, but students won't have to pay until they graduate. So it will increase the burden for paying back the loans, but it will not reduce access to education.

That's, I think, part of how you can responsibly have a plan that deals with the challenge of solving our fiscal crisis, getting out of the situation where the deficit is growing and growing, but also investing in the future.

We have a responsible budget that will cut in half the deficit by the end of the president's first term. It deals with all parts of the budget, and it's a plan which we look forward to presenting it to the Congress and getting a bipartisan discussion going on how to achieve it.

CROWLEY: The president had a debt commission. They put out a big long report on how to get out of this -- of the debt -- not the yearly deficit but the accumulative number that we are in the red, which is in the trillions, $14.1 trillion, I believe, is where we are. And yet very little of that is reflected in this budget.

Why was there a debt commission to begin with, since everybody seems determined to ignore what you heard Alan Simpson call the big four, Medicare, Medicaid, Social Security and defense. I know there are cuts in defense, but the commission found many, many more. Why even bother if this document isn't going to reflect it?

LEW: First, I would say that the commission did a very important job. It framed...

CROWLEY: But everybody, kind of, says that.

LEW: It framed a discussion which is very much influencing how everyone working on the budget going forward thinks about it. There's more on the table, more that's open for the kind of civil discourse that we need in order to make the tough decisions.

In our budget, there are many, many ideas that one can look to the commission where they took leadership, medical malpractice, corporate tax reform, pay freeze for the federal government. There are many, many provisions in our budget which were part of what the commission proposed.

I think it's a mistake to say that the commission's report did not have an impact. It had a very significant impact.

CROWLEY: But, basically, they say, look, discretionary spending, great; we should cut back plenty of things, but what about Medicare?

And where are you on -- where are the big ideas for the big programs that suck money out of the economy? LEW: Well, I think, if you look at the entitlements, we have some important policy in this budget. There's a provision that, for the last number of years, Congress has passed on a bipartisan basis to make sure that the payments to doctors under Medicare don't get cut. The problem is, if the payments to doctors are cut, their willingness to treat Medicare patients would go down.

CROWLEY: That doesn't cut the budget, though.

LEW: Well, when you put it on the national credit card and you say we're not going to let those changes take effect, it increases the deficit.

CROWLEY: But is that the big kind of thing that they talked about on the debt commission?

There's nothing about Social Security.

LEW: We have $62 billion of savings to pay for dealing with that provision in Medicare over the next two years. That's real money; $62 billion is real money.

CROWLEY: It is, but...

(CROSSTALK) LEW: In terms of Social Security, let's also be clear that Social Security is not contributing to the short-term debt. Social Security is a separate issue. It's something where we have an obligation to the American people to make sure that Social Security is sound for this generation and the next generation. And the president said he wants to work on a bipartisan basis to deal with Social Security.

CROWLEY: But there's no -- there's no big ideas, I guess, no big, OK, we're going to bite the bullet here; Medicare needs to be means-tested; Social Security -- you know, the amount of income that you pay Social Security taxes on should go up. There's nothing like those big things that really...

LEW: Well, I disagree with that. The president took office and we were on a path where the deficit was growing over 10 percent of our economy. Now, he's put forward a plan that will bring it down in the middle of the decade to a sustainable level.

That is a big idea. Because, as every family knows, if you're having trouble paying your bills, you have to stop adding to the balance. And he has a plan that would do that. He's called it a downpayment and it's a responsible downpayment, and he's extended his hand to work on a bipartisan basis to deal with the long-term problems. I think we have to get that accomplished in the next few years.

CROWLEY: I need a yes or no from you about the 2011 budget, which still hasn't been passed. House Republicans believe they can take $100 billion out of that, right now, for this bill that goes until next October.

Is that doable -- not the way they want it. Is it even doable to take $100 billion out of that budget?

LEW: Candy, we have a responsible plan that's before Congress. We look forward to working with Congress. We think that there is a way to reduce spending. We all agree we need to reduce spending...

CROWLEY: By $100 billion?

LEW: ... and we have to do it in a way that's consistent with our values and invests in the future. We look forward to working with the Congress on that.

CROWLEY: $100 billion, yes or no?

LEW: We look forward to working with Congress.


CROWLEY: Jacob Lew, thank you so much. Appreciate your time.

LEW: Thanks for having me.


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