could have done. >> paul: rancid deal. is it good for you, may not taste right. how much damage is there to the economy from this bill? >> i prefer the least rotten apple. [ laughter ] >> i think two big problems here. people who believe that the rich should pay more do not understand the effects of marginal rates. >> dollar of income you earn? >> it lower the incentives that you want people to take risks and to create. the other problem is, it does affect tax revenues. the guys with the green eye shades, if you raise the taxes we'll get this much more in revenue but if you lower the incentive of people to take risks generally that revenue doesn't come in. >> paul: so you don't get as

much as you think. mary, the economy seems to be -- the stock market loved this. they blew out the next day and based on the prospect something would get done. how long go market is recovering. the economy and job market still not great, 155,000 new jobs, but the economy does seem to be doing okay. >> i think that is probably okay. the economy will do okay. but when you have an unemployment at 7.8% and really stubbornly not budging, you want to do something that something more for the economy than just okay, muddling through. if you are president you can say why you are feeling it but there are lot of people feeling the slow growth. it's disappointing we weren't able to do something has more of a positive impact. >> there were a couple big words attached. one was uncertainty, the economy

needed certainty and the other was a prospect of a recession. i think the deal undoubtedly does avoid a recession. we're not going to have negative growth, but we are probably going to have growth as we have had for the last two years of 2% or less. we do have an economy, but we do have an economy that is bumping along the bottom. in terms of the certainty of the tax deal, yes, we do have that. on the other hand, the obama health care law is going to be implemented. "wall street journal" reported that 14% of small businesses actually understand it. there is huge uncertainty and dodd-frank which will be implemented in the financial industry. why do we have 2% growth? i think those are the reasons. we have some positive signals for the economy but not enough to pull it off. >> paul: if there is a silver lining that the public will begin to understand you can't

reduce the deficit with a tax increase, you just can't do it? this represents $600 billion, that is 7% max of what the deficit is. >> great point. by the way, let me step back that you and i, we have lived through these budgeted deals. almost none of them worked out really well. this the first budget deal i can recall dating back to reagan years there wasn't a pretense of cutting spending. there would be three dollars of phony spending cuts -- there was increased spending with extension of unemployment. now i think the republicans are a little higher ground as we go forward. you saw president obama in his press conference after he signed the bill saying this is only the first of many tax increases to come in 2013. i believe the republicans are not going to budge an inch on that.

i think they are going to say, mr. obama you got your tax increase on the rich. now, we have to turn to spending. >> paul, i really think that anybody who thinks this is a certainty is crazy. as steve just said, president obama is saying he wants more tax increases. there is no solution on the other side. there is no certainty out there. people are looking at very expensive obamacare and no way to pay for it. >> paul: if we can afford it after paying your tax bill, you might want to hire a lobbyist. it was awarded with $400 million in tax breaks in fiscal cliff deal. we'll tell you who the other big winners were when we come back.

>> president obama for his part praised this week's huge new tax increase saying that millionaires and billionaires will finally pay their fair share under the fiscal cliff compromise, that is unless they were smart enough to hire a lobbyist. those folks managed to get their taxes reduced in the deal, as congress handed out 78 million dollars in tax write-offs for nascar track owners 222 million dollars in tax rebates forum distillers, and 430 million in tax credit for hollywood producers, and

billions more in green energy give aways. so, mary, i thought this was about social justice, the rich paying their fair share. what happened? >> yes, the rich paying their fair share to her rich people. it's redistribution. >> paul: from the rich to the rich. >> well, we know this is basically how washington works. you have lots of lobbyists working on capitol hill and their job is to get money out of the rest of us and give it to special interest and that's basically what happened here. you remember way back when we when we started talking about this, lower the rates and broaden the base. that's not, you know, even remotely what happened here. it was really just more of complicating the tax code in order to help people who had effective lobbyists. >> paul: if you had talked to the hollywood producers who have their lobbyists, motion picture association, 430 million, they'd say we need

this, if we don't, they'll make films in new zealand or canada and we'll lose that business. wouldn't that be true of any business, too? you could say, yeah, if you don't give them a special tax favor they'll go elsewhere, too? >> yeah, well, i think, if you read through -- there was a summary of all the tax breaks, there was 19 single spaced pages long and i read through it new year's eve and after a while i felt like a sap. why am i not getting a piece of this action, a tax credit for walking to work and saving energy. but you know, everyone is in on it, paul. there's a 355 billion dollars child care credit. conservatives like that credit because it helps families, but there are tuition tax credits. there are adoption credits, a lot of these are pushed by the left as well because a lot of these credits flow back to community action. >> paul: but at least, that's true, dan, at least something like the child credit i don't support it, but at least it's broadly spread out across the population.

this stuff for hollywood and nascar, this is the most egregious special interest. >> i understand that, but the way the game is played if you're going to do credits for social things, it's hard to fight the ones for the discrete corporate breaks as well because everybody in washington understands that they're all in the same kind of corrupt game to get the credits out of the taxes and that's why tax reform is going to be so difficult. >> paul: steve, one of the themes hereof this bill is increase in taxes on small businesses who often pay at the individual rate in order to channel that money to big business through these tax favors. how do you see it? >> yeah, i completely agree with that. by the way, you know, dan, you should have invested in the algae industry because that's another one that comes out ahead. what infuriates me most about this, paul, is the huge give away to the green energy industry. and you know, you're talking about subsidies to algae, biodiesel and then the wind industry got a massive tax

credit, a kind of tax subsidy and there is a hypocrisy issue here, paul, because the left keeps saying, oh, the taxes don't matter, businesses don't make decisions based on taxes and that's okay to raise taxes, but the wind industry and the algae industry can't possibly survive if we don't give them these tax benefits. i think the republicans should attack that hypocrisy. >> paul: steve, you said the left or five, six republican senators voted for the tax extenders bill in the finance committee. >> great point. >> paul: both parties have their fingerprints on this, and the question i have, why would republican favor something like this? >> well, air exactly right. you know, the iowa senators were very much for this chuck grassley, i don't know when it was that iowa became an energy state, but they now thrive on wind subsidies and ethanol. and so, it's a big problem. i guess i disagree with dan on one point, i think the tax

code is so rotten right now, it's just so filled with special interest, you've got -- i think it makes the case for tax reform, dan. i think it's just, people are going to say blow the whole thing up and start over again. >> paul: dan? >>, but that's the reason they won't do it, because so many got a piece of the action and makes it so difficult. >> paul: can you argue this, mary, increases or decreases the likelihood. >> it decreases for sure because once you get that special interest, i mean, we know this from public choice theory, that special interest becomes so much more powerful and will use 24/7 as power to protect that, that carve out. >> paul: steve is arguing the worst the better. it gets so bad a answer, anger. >> my answer to that is argentina. (laughter) >> this is always mary's trump card. she always goes-- it can get worse.

>> let me discuss one thing that i think what really scares me about the whole algae and sludge tax credit is that these politicians don't seem to understand at that we're sitting on a gold mine of natural gas and fossil fuels and that's what we need to exploit if we're going to get this economy moving. >> paul: okay, still ahead, john boehner elected this week to a second term as house speaker. now what? can he work with a president who hasn't been very much interested in compromise and can he keep his own party behind him? a look ahead to the 113th congress and the prospect for tax, immigration, and entitlement reform when we come back. the capital one cash rewards card gives you 1% cash back on all purchases, plus a 50% annual bonus. and everyone but her likes 50% more cash, but i have an idea. do you want a princess dress? yes. cupcakes? yes. do you want an etch-a-sketch? yes! do you want 50% more cash? no. you got talent. [ male announcer ] the capital one cash rewards card

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>> respect to our constitution, with faith in

the american people, with hope for the future of our country, i present the people's gavel to the speaker of the house, john boehner. may god bless you. [applause]. >> jamie: john boehner was reelected to his post capping off a tumultuous we cannot to mention a bruising first term as house speaker. with another debt battle brewing, showdowns looming on tax and entitlement reform. can he take on an emboldened president obama while keeping his own party in line? so, steve, very difficult week. everybody's critical of john boehner, but yet, rehe elected as speaker. why is he reelected if everybody is so critical? >> yeah, boy, that must have been a tough speech for nancy pelosi to give, by the way. look, i have been a defender of john boehner. i think he did an exceptional job when he was minority leader in 2009 and 2010, paul, really giving very strong principled opposition to the

kind of policies that barack obama was promoting at that time, the stimulus bill, obamacare, and so on, holding the republican caucus in line on principled grounds. i think where republicans need to go now is look, we know barack obama is looking at governing from the left. we've seen that just the last few weeks, i think that republicans have to be very principled in opposing those policies and paul, one other thing, they have to get back to the growth message. isn't it interesting that in the last five weeks, nobody, neither party, has really been talking about what's good for the economy, how do we grow jobs and make the private sector more prosperous? >> well, steve goes back to 2009 and 10. 2011 and 12 weren't good for the republican house in terms of tangible accomplishments, they were great on liberal governments, but all you could say for it. how does boehner make the next two years better than the last two? >> well, on the-- he has already said there will be no more secret negotiations

with the president, no more grand bargains, that he intends to go through normal legislative order. >> paul: do you agree with that? >> i completely agree with that. >> paul: why do you agree? >> because for one thing it distributes responsibility if public. people have to vote on things, have to take a position, it can't just be negotiations, no one can understand. the smoke and mirrors of washington. >> paul: transparency there. >> there is a transparency there and allows people to stand up and defend positions they're taking on either side of the aisle. and i think we need a lot more of that, paul. i think we need something beyond john boehner being the face of the republican party. i like mr. boehner, too, i don't think he can carry the ball for the entire party. >> paul: talking younger people, marco rubio, florida senator, and take the lead on immigration, others on tax policy. do you agree with that idea get out of the smoke-filled room? >> oh, absolutely. the president's shown he's not negotiating in good faith in those rooms and what he's done

is basically made deals and then as the republicans got closer and closer, he pulled the football away and you know, they can't go on like this. i think it's very important that they, going forward, don't let themselves be set up as nearly obstructionist. you know, he's going to try to say this they are going to damage the faith and credit of the u.s. government by threatening default and that that's going to harm everybody. he's going to really try to make them to be the villains and i think they have to turn this around and demonstrate to the american people that the spending is just not something that can go on. i mean, you know, there's simple charts you can put up this that show what happened to the numbers. they led the debate in december be all about tax, tarksing peop taxing people who had a lot of money be the right way to solve the problems and they let it be about that. >> paul: we had a presidential election, dan, where spending was on the agenda and the

public said, you know what? so what? >> i'm not sure they said that on spending. the only thing he wanted to increase tax rates on the rich and i'm going to take slight issue with mary. i think there's something useful in obstruction over the next two years, the president made it clear he does not intend to do business with this congress, he intends to push his agenda by any means possible and i look back to the 1990's or even the reagan years when george mitchell was the senate majority leader and he used a lot of procedural techniques to oppose policies back then, committee members using investigations to raise problems in the reagan and bush administration. i think the republicans should do that to the obama administration. >> the problem with that strategy is that we have a very sluggish economy and if they are seen as obstructionist, the president's going to be able to blame the failure of the economy on them and in 2014 they're going to lose the house and he's going to be able to go ahead with his--

>> but, mary, the president is saying, as he is, any spending cuts have to be accompanied with more tax increases and the republicans don't want to vote for another tax increase because it will hurt the economy and you agree with that, how do we avoid gridlock. >> i'm not saying he they shouldn't try to block them. i'm saying they shouldn't let themselves as being painted as the problem and sitting there trying, all this have rhetoric about how the only thing they want to do is destroy the president. they have to get the facts out there in front of people to show them that. this is not about them being obstructionist, this is about them trying to save the united states from becoming greece, or argentina. >> well, steve, briefly, how important is the revolt, the conservative revolt against boehner briefly? >> you know, there's a lot of agitation, paul. it's not just the republicans, the dozen or two dozen that are angry at boehner. they're also being touted by these outside groups on the right and by the way, in some cases i think that some of

those criticisms are unfair, but the first job i think that john boehner has to do is reunify the party. if john boehner agrees to any new taxes i think this mini revolt will be a full-scaled revote. >> thanks to all of you, we have to take one more break. when we come back, hits and misses of the week. .so asasass [ male announcer ] research suggests cell health plays a key role throughout our lives. one a day men's 50+ is a complete multivitamin designed for men's health concerns as we age. it has 7 antioxidants to support cell health. one a day men's 50+.

>> time now for our hits and misses of the week.

steve, first to you. >> shame on chris christie, the new jersey governor who ripped into the republican congress because they haven't approved the sandy disaster relief bill. paul, this is a bill that's filled with pork, 60 billion dollars, only about a third of that money goes directly to the victims. if chris christie wants to blame anyone he should blame chuck schumer the senator from new york who put all the pork in this bill. a lot of people are going to get rich from this bill, paul, but it's not victims from the hurricane and the storm. >> paul: mary. >> a miss for former vice-president al gore of the party that thinks the rich should pay more in taxes. for his attempted tax dodge this week. he sold as part owner of current tv, they sold to al-jazeera, and he tried to get the deal inked before the end of the year so he could pay the 2012 rates instead of the new higher rates. that seems a little hypocritical to me. >> paul: okay, mary.

dan? >> i have a big miss for u.s. secretary ken salazar ordered a little company drake's oyster out of the national park, so there would be no humans there, would be turned into a wilderness. the problem is that drapes bay are the suppliers of oyster, and no alternative suppliers, and california is coming apart at the seams. >> paul: remember, if you have your own hit or miss, please send it to us at jer@foxnews.com and be sure to follow us on twitter at jer on fnc. that's it for this week's show, and thanks to my panel >> on fox news watch.

reelected speaker of the house bone bone. congress approved a deal to avert the fiscal cliff. will the media actul what it does. no spending cuts until later. the house of representative delays the vote to give more reloaf to victims of super storm sandy and causing a reaction almost as violent as the storm itself. >> last night politics was placed before the serving of our citizens it was disgusting to watch. >> did nbc's meet the press host take the anti-gun agenda too fall. the names and addresses of legal gun owners. there is a gun ban colume and advocating deadly violence against the nra and republican leaderships. war in afghanistan going on

70,000 u.s. troops is there . media interest is mia . get mr. global warming al gore sales a fail would cable channel to another country. >> judy miller and richard gadel and jim pinkerton and contributing editor of the american conservative mag wreen and justin duck am. i am john scott fox news watch is on now >> there is no substitute for the wisdom of the people. we are here as their servants. as speaker i help you carry out your oath of office that we are about to take. because in our hearts weno