Sen. Saxby Chambliss (R-Ga.) is a member of the Gang of Eight, who has been trying to establish a bipartisan framework for deficit reduction, taking major inspiration from Simpson-Bowles. We spoke on Thursday morning about the prospects for the fiscal cliff and deficit reduction. Here's the transcript of our conversation, lightly edited for length and clarity. 

Sen. Saxby Chambliss (R-Ga.) at a fiscal cliff event in October. (Peter Foley -- Bloomberg)

Suzy Khimm: How do you think the election affects the path forward on the fiscal cliff?

Saxby Chambliss: First of all, I'm still getting over that Tuesday night hangover. Needless to say, I wasn't too excited about the result. When you step back and look at it from the standpoint of the fiscal cliff and standpoint of long-term debt issues — with the status quo being there, we know who the players are, we know what the players think. We now have the opportunity to benefit from a status quo election — the Gang of Six, now the Gang of Eight has been meeting throughout the election year. We have the opportunity to exert pressure in the right places and hopefully achieve some good results. 

SK: Tell me more about what the Gang of Eight has been discussing lately.

SC: From the recent standpoint of the election and which place to go, we haven't worked out any specifics. We have gotten into the weeds on some of the issues — obviously the most contentious issues are revenues and entitlement reform. We don't have any kind of agreement. That's not been our purpose leading up to the election. We intentionally didn't want to have agreement — we didn't want to put either candidate in a peculiar position. We continue to discuss the options, and the discussion has gone very well to try to achieve a $4 trillion [deficit-reduction] package. 

SK: Last year, during the debt-ceiling talks and after with the supercommittee, there were attempts to reach a similar grand bargain. It didn't work out, and we still have the same players. What's different now?

SC: There are several things that are different: With the supercommittee failing and the challenge that was given to them — it was an indication of just how difficult this is. Everybody wants to address the issue. There are constituencies that have to be listened to. There are different philosophical approaches that create wide gaps. That's what the supercommittee experienced, and we experienced some of that. We're up against a wall — December 31 deadline by which something has to be done. If we don't do it, the consequences are going to be drastic. Congress usually acts when we have our back against our wall. I think that's going to force everybody to the table. 

SK: But what if Congress simply deals with the short-term effect of the fiscal cliff, putting off spending cuts and extending some if not all of the tax cuts? They could avoid the fiscal cliff without touching the long-term structural deficit. 

SC: We have a tendency as a body to just push things down the road. We can't do that any longer. I was watching the news this morning and looking at Greece. That's exactly where we're headed. There are riots in the streets. It's either going to be done by us, using this opportunity we have now, or the people we sell our bonds to are going to [respond]. You could see riots in the streets of the United States if we don't do this right. We have the opportunity right now, and it's imperative that we do, primarily through a $4-5 trillion package over 10 years. 

SK: When do you think that tipping point be be, if we don't deal with the long-term deficit and just avert the fiscal cliff? When will we start to see the effects?

SC: I think you'll see them immediately. The world is watching us. We are the leader of the world from a financial standpoint. So goes the U.S., so goes the rest of the world. We look at Europe right now, and they as a whole haven't managed their finances very well. At the end of the day, the European and Asian markets, the bond markets in other parts of the world, are looking to the U.S. to address our very serious problem in a real way. 

If we just kick the can down the road, I assure you that the markets are going to respond in a very negative way. We have a position as the financial leader of the free world. It creates a lot of pressure — that's okay. That's what leadership is all about. The president has been totally AWOL on this issue — he's just been out of touch with the seriousness of the problem. It's time for him to get engaged and enact leadership — he just got elected by the American people to do.

SK: Yesterday, Speaker Boehner made a speech saying that Republicans should be willing to raise additional revenues through tax reform. What did you think of his comments? 

SC: I talked to the Speaker yesterday morning — he told me what he was going to say. I was very impressed then. I commended him then, as well as after the speech. That's exactly right. There is no silver bullet to this problem. You've got to have reductions in spending, you've got to have entitlement reform, you got to have tax reform. Revenues are 15 percent of GDP — it's still in the range of the lowest it's ever been. The way you get the number up is through invigorating the economy. I liked what the Speaker said, that we don't need to raise tax rates. We need to actually lower tax rates through the Simpson-Bowles approach. That would generate additional revenue. 

What's difficult is getting into the weeds. All of this sounds good from 30,000 feet. In  the weeds are what programs going to cut, what tax credit and deductions are going to be eliminated. That's when it becomes very difficult — It's going to require hard and tough votes. The Speaker has given a very strong indication that he's willing to lead, to do what's right for the country. I just hope Harry Reid and the president will — Reid didn't say that in his comments yesterday. But the president and the Speaker are the two 800-pound gorillas here. Hopefully they will begin discussions in the short term. 

SK: Do you think that Speaker Boehner's remarks about raising "additional revenue" meant that he was willing to offer more revenue upfront through eliminating tax exemptions, etc., outside of the dynamic effects of tax cuts on economic growth?

SC: Well, I think you're going to have ask him about that. I don't think there is any way to not have additional revenue on the table from a CBO-projected standpoint. That's what the markets are going to pay attention to. You can't just rely on dynamic scoring. Energizing the economy is key. You're not going to energize it by raising tax rates. 

What the Speaker was very clear about was that instead of raising rates, we need to lower rates. That's certainly what going to be the conservative view on this, if he's going to get votes necessary in the House. If we start raising rates as president's talking about, you start losing votes in the House and Senate. If president wants more gridlock, so be it. I hope he will take a cue from his leaders [in Congress].

SK: Going back to the short-term, to what degree do we need stimulus now to counter the effects of the fiscal cliff?

SC: From a stimulus standpoint, we don't need to be spending any more money. We've seen that the Keynesian approach did not work then, and it won't work now. We need to respond to the marketplace. CEOs around the country are sitting on a lot of cash because of sequestration, as well as failure to address  the long-term debt issue. You're going to see that cash flow back into marketplace from a capital standpoint. That's going to create jobs. Stimulating the economy through spending won't work — that's been proven. Stimulating it through real responsible tax reform will.

SK: But the argument against letting the sequester take effect is a Keynesian one, because it would take government spending out of the economy while it's still weak. Isn't that what the market's worried about, not just long-term deficit reduction?

SC: I think the market's concerned about both. If you allow the sequester to kick in, the market's not going to respond well. They're looking for leadership, not just numbers. Are we going to do it arbitrary, across-the-board, spending cuts and reduction? if we are, that's not leadership. That's not what we're looking to the United States for. We need to reduce spending by this amount in the right way in an overall balanced approach.