>> schieffer: today on "face the nation," republicans say "cut taxes and replace medicare with a new approach." democrats say, "bring it on." wisconsin's republican congressman paul ryan is the architect of the republican plan. virginia democratic senator mark warner is part of a bipartisan group working on a different approach. we'll ask both if the two sides can find a way to get together. and can they find agreement to raise the debt ceiling and keep america from defaulting on its debt, a development that could set off a worldwide financial crisis and hit every americans' pocketbook? it's all ahead on "face the nation." captioning sponsored by cbs

"face the nation" with cbs news chief washington correspondent bob schieffer. and now from washington, bob schieffer. >> schieffer: and good morning again. we begin with congressman ryan who is back home in the city of parks-- jamesville, wisconsin. congressman, thanks for joining us. here's a little news. treasury secretary tim geithner told "meet the press" this morning that republican leaders have privately told the president they will not stand in the way of raising the debt ceiling. that, of course, the debt ceiling... if you don't raise it, the government would have to go into default on its financial obligations. have your leaders told you that they have told the president that? >> no, they haven't, but what they have also told me they've told the president is that, in addition to raising the debt limit, we want financial controls. we want cuts in spending accompanying a raising of the debt ceiling. that is what i believe they've told the president. >> schieffer: the way the treasury secretary is telling it

this morning, they have just assured the president they would not play around with the country's credit rating. >> nobody wants to play around with the country's credit rating. nobody wants to see defaults happening, but we also think it's important to get a handle on future borrowing as we deal with raising the debt limit. nobody is saying we want to see default. we just want to get cuts in controls and spending going forward. that's what we've been telling the white house. >> schieffer: so, what you're saying there's no news here that... >> no news as far, as i'm concerned. >> schieffer: what they've been saying publicly. you're confident of that. you're confident of that? >> i am confident of that. i told tim geithner that myself. >> schieffer: okay. congressman, you heard the president's speech. you didn't like it very much and said so. but then, the president was out talking to some campaign contributors out in chicago, and it turns out the conversation was recorded-- about your plan

and about you, he was using words... he basically said you were irresponsible. i want you to hear what he said. >> so, when paul ryan says his priority is to make sure that we're, you know... he's just being "america's accountant" and not trying to, you know, be responsible, i mean this is the same guy who voted for two wars that were unpaid for, voted for the bush tax cuts that were unpaid for, voted for the prescription drug bill that cost as much as my health care bill but wasn't paid for. so it's not on the level. >> schieffer: what about that, congressman? >> look, i could go point by point on all of those things, but i don't see how productive it would be to get into a partisan bickering match with the president. i'm just not going to do that because we got things to do. the way i look at things, bob, is we have divided government right now. we have work to do, problems to solve. in a divided government, i think it helps if we treat each other

with respect. there's plenty of time for campaigning. look, the president doesn't have a primary opponent. he doesn't even have an announced republican opponent yet. there is plenty of time for him to do campaigning later. right now, we got things to do and problems to solve. it would be more productive if we put the campaign rhetoric aside and get on to focusing on treating each other with respect. look, both parties have done this to each other. i'm not saying only one party does this. but i think the tone gets set at the top. i think it would be more productive if the tone set at the top was one more of mutual respect, one more of getting things done and coming together to solve problems. >> schieffer: you know, that is a little bit different than what you told charlie rose right after the president's speech. you said "i guess we're going to have to do this without the president. we're not getting any leadership from him." you seemed to be saying then that you weren't even will to go sit down with him. are you now will to go sit down with the other side? >> of course i am. i wasn't saying... i was not saying... we've never been invited to sit down with him. what i was talking about at the time was he appointed a fiscal

commission last year to come up with solutions. they came up with solutions. he disavowed their solutions. now, he's coming up yet another commission to come up with solutions. my point is we need to lead and we shouldn't be delegating these tough decisions to other people to make. we've got to make tough decisions to save our country from a debt crisis, to get this economy growing, and to pay off our debts so our children get a debt-free nation. we're putting actual ideas on the table to fix these problems. we're not asking other people to do it. my point is, if our leaders are not actually leading, that doesn't get things done. so we're going to lead. we're putting ideas out there. we're not kicking it to other people to make decisions like other commissions. that's the point i was making when i was talking to charlie rose. >> schieffer: you have two very different approaches that are now out there. the president wants to raise taxes on the wealthiest americans. he wants to keep medicare in place. the big part of the savings in your plan is to do away with medicare, replace it with private insurance that would be

subsidized by the government. and you actually want to lower taxes on the wealthy, even lower than the bush tax cuts, which were enacted during the bush administration. i guess the question i would have, congressman, why do these rich people need another tax cut? i mean, they're already rich. they seem to be doing pretty well as it is now. why cut their taxes some more? >> first of all, we're not talking about cutting taxes. we're just not agreeing with the president's tax increases. i guess that's the new definition of tax cuts. we're saying keep tax rates where they are right now. get rid of all those loopholes and deductions, which are mostly enjoyed by wealthy people, so you can lower tax rates. we're taking a page out of the play book of the fiscal commission, the president's fiscal commission supported by a majority of democrats. broaden the tax base, lower the tax rates for economic growth. a simpler, flatter fair tax code more internationally competitive so we can create jobs. this isn't tax cuts. it's tax reform targeting our revenues at where they are right now.

we're just not signing on to all the tax increases that the president is proposing. on medicare-- let me just the he will you, no change would occur to anybody 55 years of age or above. the problem is medicare goes bankrupt in nine years. unless we do something to save it, it won't be there for future generations like my generation. the ideas we're talking about for reforming medicare is a system that works just like the one that i have as a member of congress that federal employees have. it works like the prescription drug benefit works now for seniors, which has proven to lower costs and expand choices. and also it's an idea that has come from both parties in the past. it has... traditionally had bipartisan support in the past. i would simply say the president had one idea he gave us on wednesday, which is have this board of 15 people that he appoints ration and price control medicare for current seniors. we just don't think government rationing on medicare is the answer. we think we should keep the promise to current seniors and people ten years away from retiring, but then, reform the system for the next generation so that it is safe and solvent for current seniors and for future generations because medicare is going bankrupt. >> schieffer: let me go back to

what you said there at the top. you say you're not for cutting taxes. but am i misinformed? i thought you were talking about lowering that rate for the top income tax payers back to 25%. isn't that a tax cut? >> in exchange for losing your deductions. so in exchange for using the loopholes and deductions that mostly higher income earners use. what we're saying is keep tax revenues where they are. don't lower tax revenues, but clean up the tax code so that it works. if you have really high tax rates, what you end up doing is penalize small businesses. you have to remember, bob, most successful small businesses file their taxes as individuals. most of our jobs come from these small businesses. the president is proposing to raise the top tax rate on these small businesses to 44.8%. we don't think that's good for jobs or economic growth. when we tax our employers a whole lot more than our foreign competitors tax theirs, we lose, they win. we don't want that. just like the fiscal commission, the bipartisan fiscal commission said-- lower tax rates, broaden the tax base for economic

growth. and that's exactly what we're proposing. >> schieffer: i guess the part that i don't quite understand, and i take your proposal to be a serious one but the part i don't understand... >> thank you. >> schieffer: is if the country is going bankrupt, if the country needs to borrow 40 cents of every dollar that it spends, how do you help that by reducing the amount of taxes that the richest people in the country pay? it would be seem to be that's where you get revenue. how do you justify that? >> two things. two things-- number one, we don't have a tax problem. our revenues are going back to where they have been historically. we have a big spending problem. spending is growing at a very unsustainable rate. so let's focus on spending. the other thing i would say is massive tax increases-- the president's proposing $1.5 trillion in tax increases. the democrats in congress are proposing $2 trillion to $16 trillion in tax increases based on the three budgets we brought to the floor the other day. we don't want to slow down the economy. we need to get spending under control and economic growth and

job creation. we don't want to give up one to get the other. raising tax rates on anybody, especially successful small businesses, slows down the economy, loses jobs, and if you have lower economic growth, you have less revenues and it puts you further behind. we want more tax revenues, but we want to get it by expanding job creation, by expanding economic growth. so the secret to success here is economic growth and job creation through tax reform-- not tax cuts, tax reform-- at the same levels get better economic growth which we get more revenues. and also focus on the problem. the problem is spending. the problem is how much we've been spending and how we spend it. we have to reform those. that's what we really want to be focusing on here. >> schieffer: let me go back to the debt ceiling and that question which we talked about at the very top here. you're saying that they're going to have to be some spending cuts agreed to. >> that's right, and controls. >> schieffer: and controls before republicans will be willing to vote to raise the debt limit. tell me specifically what those conditions would be.

what do you want before you're willing to do that? >> we don't really see this as "before;" we see this in conjunction with. we're not interested in negotiating through the media. there are many different ways of putting caps on spending. the budget we propose has three different kinds of caps on spending: discretionary spending and law. those have worked. republicans turned them off in the 1990s. they were successful. we should go back down that path again. global caps on total government spending, and there are debt caps and lots of different ways of controlling spending. we also think we need to lock in the gains that were achieved in the continuing resolution and get some spending cuts there, and carry those savings on into the future so we can actually save money. what we're saying here is spending cuts and controls in conjunction with raising the debt limit. that's what we've been saying all along. >> schieffer: let me ask you this then-- if you do not get those agreements... mr. geithner said this morning he thought may 16 would be the time when we run out and we'll have to do this or start defaulting on the t-bills. what, if you don't get the

agreement you're talking about, let's say, before may 16, then what do you do? >> well, he's also said it's beyond may 16. i don't think may 16 is a hard deadline. we still don't know... >> schieffer: that's what he's talking about. >> there are things treasury can do to get more time. i reject the premise of the question which is we should just ignore the spending problem and keep raising debt. we shouldn't ignore the spending problem. it is why we have this debt problem in the first place. so we need to work together to get spending under control while we deal with this debt. the reason the debt ceiling is being hit is because spending has been going on unchecked in the past. we want to make sure that we deal with this in the future. so i don't accept the premise that we just can't get spending under control around washington. if that's true, then we're going to have a debt crisis. >> schieffer: do you accept this that you won't answer the question about what you're going to do if you don't get those agreements before may 16. you won't say whether or not you're going to vote on a bill just to raise the debt limit. >> i do not... no, we won't

raise it... just simply raise the debt limit. we will vote to have spending cuts and controls in conjunction with the debt limit increase. i don't see may 16 as a hard, fast deadline. i think tim geithner would probably agree with this. the key is we shouldn't accept the premise that we have to rubber-stamp a debt increase without any spending controls. i think a lot of democrats agree with me on this. >> schieffer: congressman, thank you so much for being with us this morning. >> thank you, bob. >> schieffer: we hope you come back to see it. we'll be back in one minute with virginia senator mark warner. thought about computing, n e we thought about boxes. on a smarter planet, computing has left the box. generating 2.5 quintillion bytes of data every day. today everything computes. which means we need to think differently about computing. how we manage it. how we deliver it. how we design it to run a railroad spot a trend. spot a market change and act on it. a smarter planet is built with smarter computing.

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you just heard what congressman ryan said. what is your reaction to that? >> bob, i think it's dangerous to kind of roll the dice on the debt limit. i mean, frankly, unlike the government shutdown, which i've got to tell you i was embarrassed for the congress and for the country that we allowed us to get to that 11th hour with the back-and-forth tit for tat. we can't do that with the debt limit. you get close to that debt limit, and you could actually scare the bond markets. they could end up raising interest rates, which would dramatically cut back on the recovery-- not just in terms of the government spending, but somebody going out trying to get a loan, trying to close on a house, a company trying to hire a new employee. this is literally, potentially, lighting the match that could burn down the house. i hope our colleagues on both sides will go ahead and raise the debt limit. some-- i know congressman ryan and others have said that we need some level of down payment on spending cuts. we're looking at trying to include that in our bipartisan approach.

there's one thing we've seen, particularly looking at the government shutdown proposal, is if both political parties start at either end of the spectrum and fight, the only people who really lose in that are the american people. we're saying on this big issue of debt and deficit, we need to start out of the center, start with a bipartisan plan and build out. >> schieffer: what i thought was interesting about what congressman ryan said this morning-- because treasury secretary geithner was on two television shows this morning and said flatly that republican leaders had assured the president behind closed doors that they would vote to raise the debt limit ceiling. and yet, mr. ryan, who is a key player over there in the house, said no way, no how. he said nobody had told him that. i find it hard to believe that they might have said that and not tell congressman ryan. >> it's hard to imagine anybody that responsibly understands the consequences of dealing or failing to raise the debt limit, particularly with the

uncertainty in europe in terms of the sovereign debt crisis going on in countries like ireland and greece and now portugal; with the uncertainty in the middle east, the idea that we would in effect roll the dice with the world economy by getting into this brinksmanship, i think, would be beyond the pale. there are clearly members particularly a number of the new members in the house who have said they will draw the line and not raise the debt limit. my only hope is that saner and cooler heads will prevail. >> schieffer: let's talk about your group. you've been meeting now for months. are you anywhere close to having something that you think is a solid plan that could be taken seriously in both houses? >> bob, we're very close. i give congressman ryan credit for a serious plan, but i think what you saw... what we've seen in the reaction to congressman ryan's plan is he basically says "no any revenues of any kind." he says defense spending is walled off. that means the only place that he can go to get the... his deficit reduction is really this massive transfer of more

responsibility onto our seniors in terms of paying for health care. now, that's one approach. it's not an approach i think that the vast majority of americans would want. what we're doing is we're saying everything has to be on the table-- entitlement reform, dramatic spending cuts, looking at tax reform, yes, the way he talked about lowering rates, excluding and getting rid of some of the tax expenditures, but where we'll raise additional revenues. i think if we start with a bipartisan plan, i think there's a whole host of folks in both parties that want to be for something, that is something that would start as a bipartisan effort. i think the importance what we're doing is not only to take on the issue of debt and deficit, but i think to once again demonstrate that actually congress can work. >> schieffer: you are a democrat, senator. you are a conservative democrat from a very conservative state, virginia. do you think that we can solve the deficit problem without raising taxes in some way? >> bob, i think you've got to look at both sides of the ledger.

long before i was in politics, i spent 20 years in business. i built companies. you've got to look-- the revenue side, you have to look at the spending side. we're looking at a ratio of $3 in cuts for every additional dollar in revenues. the revenues we're talking about literally are coming from lower rates where we can lower our rates on individual and on corporate rates back to where they're much more competitive on a worldwide basis. but we're getting rid of a number of the tax expenditures. i mean, a fact that i'm not sure most americans realize-- we collect about $1 trillion a year in income taxes, yet we have $1.2 trillion a year in income tax expenditures, deductions-- many of them that are popular-- charitable deduction, home mortgage deduction. if we would cut back on some of those, we could actually lower rates and still increase revenues. >> schieffer: so that's where you would get the additional revenues by eliminating deductions, not raising taxes. >> we're not talking about raising taxes. >> schieffer: what about the...

congressman ryan's plan, of course to, you know, he not only wants to keep the bush tax cuts in place, but he does talk about... he says it's not a cut. he talks about reducing the rates. will that fly? >> bob, i guess we ought to disagree and be able to disagree about our solutions, but we shouldn't be able to disagree about the facts. the facts are right now we are spending at an all-time high, close to 25% of our g.d.p. being spent on the federal government. but our revenues are at an all- time low-- at about 15%. you know, it doesn't take a math wizard to figure out that delta can't be sustained, so we need both a way to have the tax code generate more revenues, we need to bring spending down, and we have to do it in a way that still protects certain investments where we can grow our economy. one of the things that congressman ryan's plan did-- it cut back about 25% of our investments in education. it cut back about 70% of our investments in alternative energy. and with gas approaching $4 a gallon, i'm not sure that is in the best interest of a long-term economic growth.

we've got to have all three legs of the stool. we've got to have a tax code that's more efficient. we've got to cut back on spending, but we still have to have an economy that is going to grow. >> schieffer: do you think that president obama's speech helped or hurt the effort to get a bipartisan solution? i know it caught the folks working with you a little bit by surprise. but was it a help or did it hurt? >> i think the president laid out his vision in real stark contrast to where congressman ryan laid out his vision. what we've got now is two competing visions. what i hope is that doesn't devolve into the democrats versus the republicans again. we saw what happens when that takes place when we got to the 11th hour on the government shutdown, and most americans scratched their heads and said "why can't these guys get their job done?" what we're trying to do with a bipartisan group is say, let's start with something that takes a lot of the ideas from the simpson/bowles commission, puts everything on the table. let me assure you we'll make

everybody mad with our approach- - democrats, republicans, independents, because we're touching every part of the problem. all the entitlement programs, looking at how you make social security more sustainable. we're going to lay this out. our hope and prayer is that the people of good will from both parties will basically check their democrat hat and republican hat and say let's take this on, because my belief is this debt and deficit crisis is our single biggest national security issue. >> schieffer: i did hear you say you're going to have to reform social security to do this. >> part of this is just math. 16 workers for every one retiree; 50 years ago and three workers for every retiree now. >> schieffer: thank you very much, senator. back with some final thoughts in just a minute. somewhere in america, there's a doctor who can peer into the future.

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>> schieffer: finally today, before we get too far in the new debate on spending, just a word about last week's news. the so-called "historic compromise" that prevented a government shutdown and cut an astounding $38 billion from this year's budget. whether or not you thought the cuts came in the right programs, that's a big deal. $38 billion is a lot of money. or is it? well, thanks to the congressional budget office and some great reporting by "the washington post," it turns out the government won't be cutting $38 billion in one year after all. no, the real cuts will be more like $352 million. you heard me right. $352 million, not $38 billion. the rest-- mostly smoke, mirrors and accounting gimmicks. example-- when projects like the capital visitors' center came in under budget-- it was supposed to cost $621 million and actually cost less than $600--

auditors called the unspent leftover money a spending cut. "the washington post" found that in 98 cases where the government had allotted money to federal agencies that was never spent, in each case, it was called a spending cut. on big-ticket items like aircraft carriers, whose full cost won't come due for five or six years, the entire cost was deducted as a cut in this year's budget. we bemoan the fact that government can't break its spending habits, can't do what it needs to do. but what i find more disappointing-- is "appalling" too strong a word-- is that try as they might, neither side can seem to find a way to tell the truth. back in the minute.

>> schieffer: we'll see you next week on "face the nation." captioning sponsored by cbs captioned by media access group at wgbh access.wgbh.org ,,,,,,,,