Below is a rush transcript of "Face the Nation" on July 31, 2011, hosted by CBS News chief Washington correspondent Bob Schieffer. The guests are Sen. Mitch McConnell, R-Ky., and Sen. Chuck Schumer, D-N.Y.
You can watch the full show by clicking on the video player above.
BOB SCHIEFFER: Today on FACE THE NATION, the news from overnight. There may be, may be a deal to keep the nation from going into financial default. Congressional leaders worked into the night and they'll reconvene this afternoon as the outlines of a budget plan finally begin to take shape and not a minute too soon. Wall Street suffered its worst week of the year and troops in Afghanistan were told they might not get paid.
SENATOR CHARLES SCHUMER (D-New York/Chair, Democratic Policy Committee): The country is in crisis. This is not a time for politics as usual.
BOB SCHIEFFER: But for the first time in weeks, there was real optimism, a deal may get done.
SENATOR MITCH MCCONNELL (R-Kentucky/Republican Leader): I'm confident and optimistic that we're going to get an agreement in the very near future and resolve this crisis in the best interests of the American people.
BOB SCHIEFFER: McConnell should know. He's the top Senate negotiator on the Republican side. And he'll join us this morning along with a top Democratic leader Senator Chuck Schumer.
It's all ahead on FACE THE NATION
ANNOUNCER: FACE THE NATION with CBS News chief Washington correspondent Bob Schieffer. And now from Washington, Bob Schieffer.
BOB SCHIEFFER: And good morning again and welcome to FACE THE NATION. Well, here's what it looks like is taking shape--a deal that would extend the debt limit through 2012, and would cut up to three trillion dollars in spending over the next ten years. First wave of cuts would total one trillion dollars and a bipartisan super congressional committee would have to determine the additional cuts by Thanks gave-- Thanksgiving of this year, or if they could not agree, Congress and does-- Congress does not act on the recommendations, there'd be automatic cuts to defense spending and entitlements. Senator Mitch McConnell, who has emerged as the key player in this deal is-- is here with us in the studio this morning. Senator, thank you so much for joining us. So how close are you?
SENATOR MITCH MCCONNELL: Well, I think we're very close, Bob, to being in a position where I can recommend to my members this is something, I hope they will support. We've come a long way since April. Back in April, the President was asking us to raise the debt ceiling with no spending reductions at all. Now I think the potential agreement that you just outlined is within our reach. We-- we will avoid default, avoid raising taxes, and begin to get the federal government's House in order by dealing with our biggest problem, which is we've been spending entirely too much.
BOB SCHIEFFER: The Republicans in the House wanted more than this it seems to me.
SENATOR MITCH MCCONNELL: Mm-Hm.
BOB SCHIEFFER: If they wanted more, why would they be willing to go with this now, do you think?
SENATOR MITCH MCCONNELL: Well, you know, my party controls only a portion of the government. We control the House of Representatives. We have a pretty robust minority in the Senate, but we're not in the majority, and we have a Democratic President. There's only so much you can achieve when you don't have the leverage of power. My view is, and I think it's the view of the majority of Republicans, both the House and the Senate, let's get as much spending reduction as we can possibly get out of a government that we don't control. And I think we're heading in the direction to reassure the American people that we're going to deal with our biggest problem which is that our spending has been completely and totally out of control.
BOB SCHIEFFER: Now this deal as I understand it, does not have any revenue increases in it, any closing of loopholes or tax reform our any of that. It's just spending cuts. Democrats have said before they got to have some revenue increases. But as I understand it, this super committee that you're-- that you're putting together, that once you get the-- these goals outlined, they will get together and they will decide how and when you cut these programs. Will they have the authority to consider revenue increases as well as spending cuts?
SENATOR MITCH MCCONNELL: Well, they're going to have a broad mandate to look across the federal government, including tax reform, which virtually every Republican I know thinks is a good idea to tackle tax reform. The President also wants to tackle tax reform. They can do that. We fully expect them to-- to-- to deal with entitlement reform. Bob, the trustees of the President's own-- Social Security and Medicare-- the trustees of the system that he appointed have had said repeatedly, including this year, that both programs have serious problems. They're simply not sustainable for next generation. So that has to obviously be part of what the joint committee comes back and recommends to the Congress. Let me also make the point, this is not another commission. You know outsiders on this. This is a joint committee of Congress, dead even between Republicans and Democrats. They will come back with a report of legislation, a piece of legislation will be voted on up or down in the House and Senate. If you're looking for an analogy, think of the base closing legislation of a few years ago.
BOB SCHIEFFER: So, and-- and-- and that-- let's just talk about that just for a second so people understand. The way the base closure thing works now is it used to be Congress would vote whether to close this base or whether to close this base individually. It got to where that was just almost unworkable. And so, what they did was they drew up a list, a committee draws up a list of bases that have to be closed and then the Congress votes on it up or down.
SENATOR MITCH MCCONNELL: Right.
BOB SCHIEFFER: And, if they vote it down, then it goes back and they-- they put in a new list. So that's what you're talking about here. You're talking about spending cuts. You're talking about tax reform that would all be in one package, the Congress would then vote on it up or down.
SENATOR MITCH MCCONNELL: Yes.
BOB SCHIEFFER: And-- and that's how this would work.
SENATOR MITCH MCCONNELL: The-- the committee would have a-- a broad look at the most serious problems, the ones that have been the most intractable, the ones most difficult to-- to pass, put together a package in a thoughtful way, and I-- I believe all four of the leaders will appoint individuals to this joint committee that are serious about dealing with the nation's biggest problems. And we're not talking about kicking can-- the can down the road. We're talking about this calendar year. Before the year is out, Congress would be voting on this recommendation.
BOB SCHIEFFER: But it would, if the Congress-- this committee in its wisdom decided to include some tax increases in that package, they would have the authority to do that.
SENATOR MITCH MCCONNELL: The committee has a broad mandate to look at the entire spectrum of concerns and certainly tax reform is something both Democrats and Republicans think is long overdue.
BOB SCHIEFFER: But they would have the authority to say eliminate a deduction on say people's interest that they pay on their mortgage. If they-- if they chose to do that, they would have that.
SENATOR MITCH MCCONNELL (overlapping): Yeah. Well, the whole idea behind tax reform is to lower the rates--
BOB SCHIEFFER: Yeah.
SENATOR MITCH MCCONNELL: --and remove a lot of the preferences. And I think there's a pretty strong bipartisan feeling that that would be a very good thing for the country. It would be good for economic growth. The President himself has talked about our corporate tax rate is now about to be the-- the highest in the world. It makes us uncompetitive. We've got a jobs problem in this country. We need to have a competitive country and tax reform would be a big part of that. We also need to have entitlements still there for our children and our grandchildren. And at the rate they're going, Bob, they aren't going to be there.
BOB SCHIEFFER: I mean, obviously, there are going to be some in the Tea Party, especially in the House, that are not going to go for what-- what you have just talked about. I noticed this morning Lindsey Graham--
SENATOR MITCH MCCONNELL: Mm-Hm.
BOB SCHIEFFER: --Senator Graham of South Carolina is saying, he thinks the deal as he understands it now may be moving in the wrong direction. Are-- are you convinced you can sell enough Republicans just in the Senate on this to get it passed?
SENATOR MITCH MCCONNELL: Well, I'm sure there will be both Democrats and Republicans who in the end find the-- the agreement wanting in one way or another.
BOB SCHIEFFER: Mm-Hm.
SENATOR MITCH MCCONNELL: But I believe there will be a strong bipartisan support for this. Again, this deal has not been finalized yet. But I think we are very, very close to something that I could comfortably recommend to my members and I believe the Democratic leadership will be doing the same.
BOB SCHIEFFER: Do you think that Speaker Boehner, he's going to have to depend on Nancy Pelosi to get him some democratic votes over there in the House to get this passed. Is that--
SENATOR MITCH MCCONNELL (overlapping): Well, we're going to have to get Democratic votes in the Senate as well. I mean, neither-- you know, neither party has hammerlock on the entire Congress, and we're going to have to work together to get this job done for the American people.
BOB SCHIEFFER: I-- I understand there's also a provision in here that calls for a vote on the balanced budget amendment.
SENATOR MITCH MCCONNELL: Mm-Hm.
BOB SCHIEFFER: It doesn't say the balanced budget amendment has to be passed by both Houses, as the Republican version did. Why-- why are you putting that in there? I mean--
SENATOR MITCH MCCONNELL (overlapping): Well, we--
BOB SCHIEFFER: You know it can't pass.
SENATOR MITCH MCCONNELL: We-- we hope it would pass. I mean, it's the best kind of long-term straitjacket. It-- the-- our government has certainly demonstrated in the last few decades that it's not very good at controlling its appetite for spending. And the balanced budget amendment would be a good kind of long-term mechanism to put this kind of financial straitjacket on our country that desperately needs it.
BOB SCHIEFFER: The Wall Street Journal not exactly a-- a liberal newspaper took a pretty tough go at you Republicans yesterday on their editorial page. One of the things they said was "The debt limit hobbits should realize that at this point the Washington fracas they are prolonging isn't helping their cause. Republicans are not looking like adults to whom voters can entrust the government." How much do you think the Republican Party has been hurt by all this, senator?
SENATOR MITCH MCCONNELL: I-- I don't think we've been hurt at all. The American people wanted us to do something about-- about out-of-control spending and the opportunity presented by the President's request of us to raise the debt ceiling is going to produce what many people will believe is a complete change in the trajectory of the-- of the federal government beginning to get spending under control.
BOB SCHIEFFER: What-- what do you think has caused this to be prolonged so long? It seems to me now that every major issue that the Congress has to confront, it-- it-- it develops into something like this. Is it just there is a divide in the country that's wider than maybe even many of us thought it was and-- and Congress just reflects that? It just seems that Congress just doesn't work very well anymore.
SENATOR MITCH MCCONNELL: You know, Bob, we've always had robust political debate in this country. I mean, what-- what we've got going on now kind of pales in comparison to what Adams and Jefferson used to say about each other and what Adams and Hamilton said about each other. We've-- we've got a history of robust political debate, but this country has always come together at critical moments, and we're at one of those critical moments right now. And we're going to come together and we're going to get the job done for the American people. We're not going to default for the first time in our two hundred and thirty-five-year history. We're not going to engage in job-killing tax increases in the middle of one of our toughest economic times ever. We're going to begin to reduce spending and get our books in order and head America in the right direction, so we have a great country for our kids just like our parents left behind for us.
BOB SCHIEFFER: Some people say the Republican Party has been held hostage by the Tea Party. One-- one of our Facebook followers just sent in an interesting analogy and said, "Why are Republicans allowing freshman congressmen to control this debate." And this person said, "It's like letting the teenager in the family run the family budget." I mean, now there-- there's some truth in that.
SENATOR MITCH MCCONNELL: Look, we don't have any more internal differences in the-- in the Republican conference in the House and Senate than they do in the Democratic conference in the House and Senate. There are different points of view. We come from different parts of the country. We have different philosophies. One thing Republicans all have in common, they want a smaller government and they don't want to raise taxes. And on that issue I think Republicans are broadly united.
BOB SCHIEFFER: Do you think you can get this done by Tuesday?
SENATOR MITCH MCCONNELL: Well, we're going to get it done very soon. This country, as I said, is not going to default. And we're going to come together in the best interests of the American people and get this job done.
BOB SCHIEFFER: Senator, thank you so much for--
SENATOR MITCH MCCONNELL: Thank you.
BOB SCHIEFFER:--coming by today. I know it's a pretty busy time.
SENATOR MITCH MCCONNELL: Thanks, Bob.
BOB SCHIEFFER: Thanks a lot. We'll get the Democratic side of this when Chuck Schumer sits down at the table here in just a minute.
BOB SCHIEFFER: And for the other side of the story, one of the top Democrats in the Senate, Chuck Schumer of New York. Senator, thank you.
SENATOR CHUCK SCHUMER: Good morning.
BOB SCHIEFFER: Well, I guess I'll just start by asking you, are you as optimistic here as Senator McConnell is?
SENATOR CHUCK SCHUMER: Well, look, let's put it like this. I feel a lot better today about the ability to avoid default than I did even yesterday morning. And default would have such disastrous consequences to our nation for a decade to come. The fact that the leaders are talking, even if I'm sure hardly anyone agrees with everything they're going to come up with, is a good thing.