A novel about Vivian, a young Irish girl sent by rail from a New York City tenement to Minnesota in the early 1900s. She was one of thousands of abandoned children sent to live with rural families for a better life. But not all ended up in loving homes.
The Fed expects the U.S. economy to grow at 3.9 percent this year. A bipartisan group of senators considers a deficit reduction plan that could trigger new taxes. And protestors converge on the Wisconsin state capital over budget cuts. A panel of journalists joins Diane for analysis of the week’s top national news stories.
- Susan Page Washington bureau chief for USA Today.
- Jerry Seib executive Washington editor, The Wall Street Journal.
- John Dickerson chief political correspondent for Slate.com and CBS political analyst and contributor. Author of "On Her Trail: My Mother, Nancy Dickerson, TV News' First Woman Star."
Diane and guests explore Wisconsin’s intensifying budget battle which has brought thousands of public employees out to the state capital in protest of Republican Gov. Scott Walker’s plan to cut public-worker benefits and pass legislation that would nullify collective-bargaining agreements:
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. This week, President Obama conceded his budget limitations and sought consensus with Republicans. Furious protestors demonstrated in Madison, Wis., against the bill that curtails rights and slashes benefits from most of that state's public sector workers. And the Fed expects the U.S. economy to grow at 3.9 percent this year. Joining me for the domestic hour of our Friday News Roundup, John Dickerson of slate.com and CBS, Susan Page of USA Today and Jerry Seib of The Wall Street Journal. I hope you'll join us, 800-433-8850. Send us your e-mail to firstname.lastname@example.org. Feel free to join us on Facebook or Twitter. Happy Friday, everybody.
MR. JOHN DICKERSONThank you.
MS. SUSAN PAGEGood morning.
MR. JERRY SEIBHi, Diane.
REHMI must say the big story that is occurring out in Wisconsin, this huge protest in Madison, Susan -- all our e-mails this morning before the program, Facebook messages, Twitters. Here is one that really represents most of them. It's from Andre who says, "The main argument against the public unions and their members in Wisconsin is about fairness. Why do they have better benefits than other employees in the private sector? But benefits is only one side of the equation. Did the public employees negotiate good benefits in exchange for a lower salary? If so, should that not be taken into consideration when we argue fairness?"
PAGEYou know, one reason we're paying so much attention to this titanic battle in Wisconsin is this is about to come to other states, too. There are two dozen other states that are considering various ways to limit the power of their public employee unions with the idea of reducing cost to the state. States are in a terrible pickle now, you know? They have the increased services that people are demanding because times have been tough. Tax revenues are down because of the weak economy. The stimulus money for the past two years has been a big boost to states. That money is running out. So as governors around the country -- especially these new Republican governors, like Scott Walker in Wisconsin, they are really targeting public employees as a target of opportunity to save money.
REHMJohn Dickerson, Scott Walker said he had no other options.
DICKERSONWell, he's got a $137 million shortfall in his budget. Now, the Democrats would say, well, that's in part because he was part of the government that -- you know, the system that voted in a lot of tax cuts that caused that shortfall. He's -- what's at stake here is two things. One, the benefits, the -- and he wants to increase the contribution from these union employees to -- for their health care and their pensions. Now, he says they're relatively modest, and compared to other public employees...
DICKERSONRight. But compared to the average or other public employees across the country, they're actually -- Wisconsin workers would still be in pretty good shape. But the real key here is not just the belt-tightening. It's the question of collective bargaining. And what -- there are two things at play here. One, he wants to get rid of collective bargaining on everything but wages, and even that would be circumscribed, so that in the future, this belt-tightening could happen without a lot of fuss, without any -- but (unintelligible) necessarily having to sit down at the negotiating table and go through the long process. And that's both, what he's trying to do in Wisconsin, but also, as Susan said, this is inroads into union power across the country...
REHMAcross the country.
DICKERSON...in different states and, also, nationally.
REHMAnd so, Jerry Seib, what happened is that the Democratic state senators left the state house. Where did they go? What are they going to do?
SEIBWell, everybody seems to think they're in Illinois. And, you know, who doesn't want to be in Illinois in February, you know?
SEIBSo they left, so that -- because, constitutionally, they can't act on the governor's budget unless there is a Democrat around to participate. But another thing happened, Diane Rehm, which was -- what happened yesterday was that the Democratic National Party started to weigh in on the part of the public workers in Wisconsin. You saw the Democratic National Committee and Organizing for America -- which is the political apparatus that Barack Obama built up in 2008 and that continues to operate under the Democratic National Committee -- start to weigh in on the side of the public workers in Wisconsin, which is significant because it turns it into, not a Wisconsin fight, but, in every way, a national fight.
SEIBI think, in part, that's because, as John said, the fight turned from a discussion about pensions and health care benefits to a question about collective bargaining and right to collectively bargain in Wisconsin. And that puts a different cast on it. I wonder if Gov. Walker maybe took a step too far when he went to that length in Wisconsin.
REHMAnd, just to let our listeners know, we'll be doing a full hour on this issue of collective bargaining on Monday. Susan.
PAGEYou know, political opportunity, really, for the White House, for the president, for Democrats, generally, because unions have not -- which are an important part of the political base for Democrats, have not been entirely happy about steps the administration has taken, including the budget that the president put out on Monday. Here's an opportunity to stand on the sides of unions and to get union workers really fired up for next year's midterm elections. But there's a risk, too, because it's possible that Gov. Walker will succeed. And, if he does, this will embolden governors elsewhere to try a similar attack.
SEIBWell, and I think there are couple of other risks, too, which one is -- you remember President Obama himself rose federal workers pay because he said, my budget's in a mess, too. I had to. And there are Democratic governors out there who are going to want to do similar things. So I think there is some downside risk.
DICKERSONPaul Ryan, the House budget chairman, said -- and who's from Wisconsin -- said, you know -- and private employees look at the benefits union workers get and think, hey, you know, they're getting it pretty good. We've all had to tighten our belts. Why do they -- why are they griping? And so that what you end up then having here is a repeat of the national conversation we're having, which is, you know, the protected class -- the government protects a certain class, and regular people out in the world are out there fighting and the government's, you know, paying it -- taxing them and then protecting these other kinds of workers.
DICKERSONAnd so, quickly, this gets into the philosophical debate we're having in a larger way. Also, one other point on the politics, the president shows one state to go to right after he delivered his State of the Union...
DICKERSON...and it was Wisconsin, a key swing state count.
REHMLet's talk a little about the president budget he conceded this week. It falls short, Jerry.
SEIBHe did. He put out a budget that cuts the deficit from $1.6 trillion this year to $1.1 trillion next year, and then it declines slowly after that. The level of government spending is still historically high. It's 23 percent next year, which is down a little bit from 25 percent this year, but it stays high. And, in large measure, that's because he did not choose to go after entitlement programs, the big ticket items -- Social Security, Medicare and Medicaid. He freezes other programs for the 10-year period. And, actually, if you look at his budget, the spending on all those other things that Congress fights about, including defense, declines slightly over the next 10 years. But Medicare goes up 71 percent, Social Security goes up 72 percent and Medicaid goes up 115 percent.
SEIBSo, in essence, he kind of dodged the -- what everybody knows is the big fight, which is over entitlements.
REHMBut there have been accusations out there. Everybody's playing a game of chicken, Susan, that Republicans are waiting for the White House to go first. White House says Republicans ought to go first.
PAGEWell, that's certainly true. Nobody wants to go first on these very politically difficult steps that probably have to be taken on Social Security, Medicare and Medicaid, which are programs that just threaten to eat the federal budget for the period looking forward. The criticism, I think, of President Obama is that, you know, one reason you're president is because you're going to show leadership. It's hard for anybody but the president to show leadership although, of course, he needs a partner across the aisle. And the other is that he failed to take advantage of this deficit commission that he himself had appointed, that had come up with a very tough plan that got majority support on this commission, including some important Republicans who were -- he chose not to really build on the recommendations that they had made.
REHMBut, you know, it was interesting to hear former Sen. Alan Simpson say, I think the president did just fine, John.
DICKERSONWell, it's interesting. On the -- to your point about the game of chicken, it's funny. There are several games of chicken going on, and so we're going to have to come up with a kind of an Escher painting to explain the various games of chicken 'cause there's the -- the entitlements game of chicken, which I'll get back to in a second. But there's another game of chicken about reductions in expenditures that are going to be required for the continuation of government, and that's a fight that has a deadline on March 4. But...
REHMAnd Boehner says we may not make it.
DICKERSONWe may not make it, which means government shutdown, and that this is -- they're about to go away for a week. So they're going to have about four days to button this all up before they can continue...
REHMWhy are they going away for a week, John?
DICKERSONIt's -- they must get back to their constituents to find out how all of this talk is playing, so they can then know what to do when they come back. But let's go back to entitlements for a second and what Alan Simpson said. And, you know, Mitch McConnell said a similar thing, which is that this may have to be done in private, that the president tried on health care -- one of his -- parts of his push was that, because health care costs, the inflation related with health care is what's driving these deficit numbers in the future. He said, we've got to reform health care. Huge, bloody battle, got something passed. It will tinker with the long-term cost. But this was the main reason. And so he did lead in that regard, and he got bludgeoned for it.
DICKERSONSo Mitch McConnell has said, look, I wouldn't negotiate on entitlements in public either. And we've seen that Mitch McConnell had a lunch with the president that was not on the president's schedule. The president said in his news conference, I'm not going to do a lot of this negotiating, maybe, in public. And so there is a thought that this may be like the tax deal the president worked out with Republicans last year, which he referred to six times in his news conference, in which basically, it was -- a lot of it was cooked up behind the scenes by Joe Biden and Mitch McConnell. The president weighed in at the last -- but when he weighed in, it was three-fourths down the road. He weighed in just for the final part, not at the very, very beginning. And that may be the template for this entitlement conversation.
PAGEAnd you do see this gang of six senators meeting privately, very interesting --two Republicans, three Democrats -- some very powerful figures who are close to President Obama, working on their own plan, reported in The Wall Street Journal yesterday in what looked like a scoop to me about...
SEIBYes, thank you.
PAGE...yeah, about an approach that would be -- that would tackle Medicare and Medicaid, would tackle Social Security. It would tackle the tax code...
SEIBWell, basically, it -- they were -- they're trying to -- this group of senators that Susan's referring to -- and I do think this is a big game in town now, maybe the game -- would -- is trying to come up with a bill that would essentially set targets, the targets that the president's deficit commissions set out for reducing spending in these areas and increasing revenues. And, if they're not met, the Ways and Means and Appropriations Committees would just have to do across-the-board cuts.
REHMJerry Seib of The Wall Street Journal, Susan Page of USA Today, John Dickerson of slate.com and CBS. Short break, right back.
REHMAnd welcome back to the domestic hour of our "Friday News Roundup." Here's another e-mail, this from John in Ocala, Fla. Or is it Ocala? Anybody know?
REHMYou think it's Ocala, okay. "Who says Madison, Wis., is not Cairo? Elections in this country do have consequences. The failure of progressives, union markers included, to hang together in 2010 leaves us all hanging now. If everyone who voted in 2008 voted last year, John Boehner would be weeping in private, and a real stimulus might be ameliorating the crises in Madison, Sacramento, Albany, Tennessee, et al. It is only 20 months until we get a chance to take back our government." I'm going to open the phones because we have a caller in Wisconsin I'd like to hear from. Good morning, Thomas. You're on the air. Thomas, are you there? Oh, he hung up. He said talk shows are anti-union and anti-state employees. Is that true?
PAGEWell, conservative talk shows, I think, would probably take an anti-union pitch on things, yeah. I don't think this talk show does. This talk show is a panel of journalists, as you know.
REHMThis -- here's one that says, "Wisconsin isn't about saving money. It's part of a conservative mood to break public unions, the last bastion of labor, the last reliable ally of the Democratic Party that can even begin to match the right for campaign support."
SEIBWell, you know, that's why, I think, this is such a complicated issue because, on the one hand, you have genuine fiscal crises in the states. And there are -- and California started this focus on public employees and pensions because there are some fairly outrageous costs in this California state budget. On the other hand, public employees tend to be big supporters of Democrats and tend to give a lot of money, nationally, to Democrats. And so Republicans look at this as a target of opportunity to go after a big Democratic political base.
SEIBAnd Democrats look at this and say, that's what this is really about. It's an attempt not to fix states' fiscal crises, but to undermine an important part of the Democratic base. And, you know, maybe both things are actually true. But that's what's -- that's why this is so emotional, and it's why it's going to be so hard to sort it out.
PAGEBut it's certainly true that elections have consequences. And just look at Wisconsin. President Obama won Wisconsin easily. I think he got, like, 56 percent of the vote in 2008. And yet, in the midterms, they lost the governorship. They lost a Senate seat. Republicans now have control of both houses at the legislature. That's what's made this fight possible to wage and, maybe, even win.
DICKERSONOne other thing that the governor's detractors would note is that he exempted police from his new approach. And that's because they supported him in the election and the public employee union didn't, and they -- that's something that adds to the political tension here. But one other tiny, little point is that this is also about pace, which is that the union -- one of the things the unions are saying is, gracious, we -- this is happening so fast. And, you know, that's a big part of what the global conversation about deficit reduction is, is why does it have to happen so very fast? Yes, there's an emergency. But there needs to be some prudence about the way we go about that.
REHMWe have several e-mails like this one, saying, "Wisconsin would have a budget surplus if the legislature had not voted for tax cuts for corporations."
SEIBWell, that's the argument that you're going to hear in a number of states. There are -- were tax cuts enacted in the good times that, now, people will say, if those hadn't been on the books, we'd have a bigger rainy day fund. I guess, on the other side, there are a lot of states that got carried away, spending in the good times, and now they're paying a price for that. The -- you know, this goes back to John's point about how rapidly this is happening. You know, states fell off a cliff starting in 2008. And they've fallen farther and faster than anybody ever imagined. The federal government has all these cushions that it can use to absorb that kind of fall. States just don't. And so this is very real time because state governments and state budgets are very real time.
REHMLet's talk about the overall spending debate that brought some bad news for John Boehner. Susan?
PAGEWell, we've seen this unbelievable debate in the House over -- for the last three nights, the debate on the floor of the House has gone past midnight -- they broke up about one o'clock this morning -- debating hundreds of amendments to the spending bill that needs to pass by March 4, which is when the funding for the federal government runs out. And it includes any number of proposals by some of these new Republicans that John Boehner opposes. And he lost big on one particular measure this week, which was on this -- what's called an alternative fighter jet engine for the F-35, where -- which he supports because parts of it are built in Ohio, provides jobs in Ohio, his home state. But Tea -- some of these Tea Party freshmen joined with some Democrats to vote it down.
SEIBVery big deal. Very fascinating vote, 100 Republicans, 123 Democrats combined...
SEIB…to kill off a proposal that the new Republican Speaker of the House wants and has said many times that he wants to have happen. And so you had the Defense Secretary, Democrats and Republicans in the House all combining on a spending cut. And the -- you know, people have been looking for bipartisanship for, like, the last three years. They -- actually, we saw it this week. It's pretty amazing.
PAGEActually, two -- there were two cases of different kinds of bipartisanship on the House. One was this thing where the Tea Party got together with liberal Democrats on this Pentagon program. But in some of these amendment votes, it was a coalition of Democrats and moderate Republicans against the Tea Party. So it's kind of like a floating bipartisanship on some of these issues.
SEIBYeah, it's fascinating because it's not breaking down along nice, neat lines...
SEIB...the way a lot of us -- including me, I have to confess -- thought after the election.
DICKERSONAnd what's -- so match the lack of nice, neat lines with the short amount of time they have to get this dealt with before the operations of the government run out, and it suggests peril. It also -- leadership in the House had -- at one point, when they scheduled this vote with all of this kind of planned chaos, the idea was let the freshmen Tea Party guys do their thing, get out there, run around on the field, exhaust themselves and realize that the process does not really work. In other words, you have to get majorities to kill all these things as much as you want to.
DICKERSONWell, in this case with this one specific thing, the chaos worked against House leader, against John Boehner. But the notion that there is -- that forces are a little bit out of control of the leader also comes into play when you think about a government shutdown. Because his ability to, in the end, say, okay, guys, we don't want to have a government shutdown. Let's make this deal and we'll fight another day. That is challenged by the fact that things may be a little less in his control than under another (word?).
REHMIf you had to predict today, John Dickerson, would you predict a government shutdown?
DICKERSONOh, no. I don't do predictions. I would say this. I would say that just as President Obama was terrified of having taxes go up for everybody if there wasn't a tax deal last year, I think Republican leaders share that sense of worry about a government shutdown. I think that's...
PAGEThey all remember what happened in 1995, the last time the government shut down. And what happened then was Republicans in Congress got blamed. It was a disaster for the Republican majority then. So I assume that they'll work out a deal, but you can't be sure.
SEIBI don't think so. But, you know, people never intend to start wars either, and they start all the time. But I think that -- is what's very important here -- and the reason you can't make this prediction -- is that something changed this week. For the last several years, the House was a place where all the Democrats voted together and all the Republicans voted together on just about everything, and so you could predict. And the action was all in the Senate, and, if you knew what was going to happen in the Senate, you knew it was going to happen in Washington. Well, that's not true today. So it's hard to predict.
REHMHmm. Let's talk about why President Obama granted broad waivers to four states to carry out the health care law. How come, Jerry? And what does it mean?
SEIBWaivers that would allow insurance companies to continue selling policies in those states that offer benefits below the line that was drawn in the new health care bill, which actually doesn't go into effect until 2014. And so what the administration was saying was, we recognize that if we enforce those regulations now that some of these insurance companies will simply pull out of those states, and people will be without any insurance at all. We'd rather give you a waiver and let people build up to the benefit levels that are going to be required in 2014. The question is, when that date arrives, will those insurance companies still be around?
SEIBOr will they have hightailed it out of town?
REHMSo does this, however, weaken the whole health care law, Susan?
PAGEWell, I think for advocates of the health care law, it's disappointing because this is one of the fundamental tenets of this approach to health care that was adopted in the new law. But I think it reflects a political calculation on the part of the administration that they are fighting on all fronts on the health care law. They're fighting against repeal efforts in the Congress. They're fighting in the courts. And they're trying to minimize the number of fights they have to wage simultaneously. This gives them a little breathing space with some of these states.
REHMHow about the Obama administration also approving Arizona removing 250,000 adults from their Medicaid rolls, John Dickerson?
DICKERSONYou got me on that one, Diane. I'm not -- the -- I don't know the politics of that. But I just wanted to...
DICKERSON...follow up on Susan's point, which is that they want to show they are not ideologically hard-set around this health care. Because, to the extent that the president would allow this kind of tinkering with these waivers also allow the changing in the 1099 provision that helps small business, it shows that he is willing to fix. As he said in the State of the Union, I will be happy to tinker with some things, which takes the steam out of the notion that the only way to fix it is to kill it.
PAGEYou know, what happened in Arizona was that the new health care law prohibits states from tightening their current eligibility standards for Medicaid. States have different standards. But it -- the rule -- the law said you can't make it harder for people to get on Medicaid. And what HHS Secretary Sebelius told Arizona was that they don't need a waiver to bump these 250,000 poor adults, poor childless adults, off the rolls because they were included under a program -- a demonstration project, that expires in September. So the ruling by the federal government was, this doesn't -- the law's prohibition doesn't apply to you. I think it's one more case where the administration is trying to avoid fights they don't have to wage.
REHMHmm, hmm, Jerry.
SEIBAnd, I think, John makes a good point, which is to the extent they're going to show, we're going to be reasonable in implementing this law. They remove some of the argument for throwing the whole thing out, and, I think, that's very important, not just today, but for the next two years.
PAGEBut what their critics say is, doesn't this show the big flaws in the law...
PAGE...that you have to grant all these waivers for the system to work?
SEIBRight. If the law were so good, you wouldn't have to waive anybody from its requirements. They're also, by the way, waiving the requirement for some companies at the same time. So lots of people are getting kind of either a pass or flexibility on the law already.
REHMJerry, talk about the Fed's forecast that the economy is going to grow faster than previously said at 3.9 percent.
SEIBWell, what the Fed said was that the -- they actually said the range of growth for this year is 3.4 to 3.9 percent, a little higher. I think the previous one was 3.1 to 3.6 percent. So it was a sign that the Fed has looked, this month, at the way the economy is expanding and saying, it's not bad and it's a little better than we thought -- 3.9 percent, if that's what it is, is pretty healthy economic growth. The problem is it's not really enough economic growth to start really recreating the jobs in the numbers that are necessary to climb out of the unemployment hole. So you look at that as an economic number, and you say, that's a sign of a sort of slow but healthy recovery. If you look at it politically, you say, that's not enough to really get jobs back to where they need to be for President Obama to feel comfortable.
REHMJerry Seib of The Wall Street Journal. You're listening to "The Diane Rehm Show." John Dickerson.
DICKERSONWe also should note that this was the two-year anniversary of the stimulus bill this week. And this is something very important because what the Fed said was, yes, there will be growth, but not -- as Jerry said -- not a lot of jobs coming out of it. And so this -- and the prediction was that unemployment could be, you know, around 7 percent. Now, it -- will the president, in the celebration of the stimulus -- Democrats weren't celebrating it necessarily except when pressed. Nancy Pelosi did and White House spokesman, Jay Carney, said it met its goals. But what Republicans are doing is showing what the goal was from the White House at the beginning -- a little bit unfair -- but, anyway, their prediction about unemployment rate, that it would be around, you know, eight. It isn't.
DICKERSONAnd so where the unemployment rate is, when the president is running for reelection will be, perhaps, the most important number that affects his reelection. And so this Fed report, while it was -- you know, the growth numbers is relatively healthy. The prospect for unemployment is a big political problem for the president.
REHMWhat about the interest rates? Could we see a rise in the interest rates?
SEIBWe could, but I don't think the Fed minutes that were released this week don't suggest that. They're not particularly worried about inflation yet. And they're going to continue to do what they're doing to pump more money into the economy, which they wouldn't do if they thought inflation was just around the corner. So that suggests that the Fed is going to stay pretty much where it is, which will keep interest rates low overall. The problem with that has been that there's so much economic uncertainty, that even low interest rates haven't convinced companies and people to go out and spend very much money. So, yes, low interest rates. But they're not really working that well.
REHMInteresting new book from Sen. Scott Brown of Massachusetts -- the Republican who took the late Sen. Ted Kennedy's seat -- a book that reveals a great deal. Susan, you had talked to him.
PAGEI interviewed Sen. Brown and read his book. I interviewed him yesterday. Sadly -- but the interview is embargoed under the agreement that I signed with the publisher until Monday, so I can't talk about the content.
REHMAfter the "60 Minutes" piece.
PAGEAfter the "60 Minutes" piece Sunday night. I will say it was a surprising book to me, unexpected and...
REHMUnexpected in what way, Susan?
PAGEWell, I'll tell you. I think that I went into the book, thinking the account of his election would be the most interesting thing about the book. But it turns out the account of his childhood is the most interesting thing about the book. We've seen some leaks about that in other publications. It was a reminder, though, of the kind of enormous impact his election had a year ago. I mean, he cost the Democrats their 60th vote in the Senate. He forced the Democrats in the White House to change the tactics they were using to pass the health care law. And he encouraged several Republicans to get in races for the midterms they otherwise would not have made. He had an enormous impact on where we are politically in this town.
DICKERSONAnd, also, he showed that the Tea Party could move out of some of the places people expected it only to live. So, for example, Democrats would say, well, the Tea Party is just a sort of western and southern thing. And when they watched his money come in, when this looked like it was a race that was going to punch the president in the nose because, you know, a lot of people argued that this race was all about health care, the money just started pouring in to this race.
DICKERSONAnd so it suggested that the Tea Party could really affect races. Massachusetts is not -- you know, if you were just making crude generalizations, it's not a hotbed of conservative movement. And so this changed that kind of dynamic. And, also, it's very interesting to watch him as he figures out his votes because he's run into a little bit of issues with the Tea Party who think he's been, you know, not (word?) the line exactly and always.
REHMThis whole area of sexual abuse that he recounts in the book, why do this now, Jerry?
SEIBWell, I don't know the answer to that question, and, I think, you've raised a question a lot of people will be asking. You know, I assume he's done it because he thinks he has a valuable story to tell that will actually benefit people beyond his own circle and beyond Massachusetts. And there's probably something to that. But I suspect there'll be more sinister kind of interpretations to that, that there's some political gain to be had by telling such a compelling, personal story now. You know, my inclination is to take somebody who does something that personal at his word, that they think they can help other people by telling their story.
PAGEI think that's right. I think it can't be easy to tell a story like this and to have everyone know about it and talk about it and debate it on the radio.
REHMSusan Page, Washington bureau chief for USA Today. We'll take just a very short break. When we come back, time to open the phones. I look forward to hearing from you.
REHMWe'll go right to the phones to Paul in Dallas, Texas. Good morning to you.
PAULGood morning. I have a statement and a question.
PAULMy statement is I think that Wisconsin is a sign of what's going to come across to the country with those who work in the public sector, who really don't want to make the sacrifices that need to make to help this country move forward. And, as far as raising taxes on the big businesses, is it not true that if those taxes are raised on the big businesses, they will pass those costs on to the consumer? So, in the long run, the consumer will end up paying higher prices for their products, in turn paying for those tax increases?
SEIBWell, in terms of passing on tax increase, probably in the long run, but not necessarily in every case. I mean, one of the things you're seeing right now is that companies are having a hard time passing along costs because consumer demand is down. So, you know, as a general proposition, companies absorb some costs and pass on other -- along other costs. I think that what companies are really looking for here, if we're going to have a tax debate, is a lower corporate tax rate and some predictability -- less complication, fewer loopholes, just tell us what the rate is, make it lower than it is now and we'll pay our taxes. And that's actually becoming the bipartisan view.
REHMTo Norman, Okla. Good morning, Pat. Pat?
REHMGo right ahead.
REHMPat, go right ahead, please.
PATOh, okay. Thank you. I'm sorry. I'm inside interviewing. I'm listening here now. But my comment was about the state of Wisconsin. I don't think that it's in a better shape as the government wants to make out. I listen to "Rachel Maddow Show" a lot, and she says that the governor gave away a lot of tax cuts to businesses and then, you know, about the same amount of money that he gave away for this tax cut. Now, he's claiming that his state is in debt to that amount and...
REHMAll right. Let's talk about when those tax cuts went into effect, when they were voted on and the impact they've had on the rest of the state's budget.
DICKERSONWell, it was $117 million in tax breaks that the governor and legislature put in place. And what is interesting about this is that this is an argument we saw, again, in Washington, which is when John Boehner was asked about the people who would lose their jobs when these cuts were made -- the actual jobs that would be lost from the cuts. He said, so be it. Now that's going to be used against him forever. But the argument that they make and that the governor is making in this case is, yes, there will be -- there are tradeoffs here. And so the argument for the tax breaks that he makes is that that has a bigger bang for the buck.
DICKERSONAnd so -- and John Boehner would say, yes, there's pain in government spending. But if you get government out of the way, you allow the economy to grow, businesses to grow, you change the relationship in competition for private, for money and investment and that you get a big economic benefit from doing these kinds of things. So they would argue the numbers can't be compared. That's -- that would be their argument.
SEIBWell, there's an additional argument, which is that over and above the immediate problem, I think Gov. Walker in Wisconsin -- but not only him, other governors -- would say we have a problem right now. But we have an increasing problem over the years because, like the entitlement programs in Washington, some of these costs just sort of start to multiply over time. And so whatever problem we have now, it will be a worse problem in five years if we don't deal with it today. So there's a here and now, and then there's a long-term time -- ticking time bomb argument. And that's really what all these states are worried about.
REHMTo Grand Rapids, Mich. And, William, thanks for joining us.
WILLIAMYeah, Diane, I'd love to get government out of the way, except that a couple of years back we had a governor by the name of Engler who took retirement money out of the teachers' retirement fund and put it in the general budget. By the time the issue had worked its way through the courts and the Supreme Court of Michigan ruled that Engler was wrong and had performed an illegal act, it was unfortunate 'cause the money was already gone and there was no way to give it back to the teachers whose, you know, retirement and health care is in jeopardy right now. I think it's really important that we learn from our past. I also hear people complain about educator's health insurance.
WILLIAMMy wife recently retired from about four decades in the school. We paid several thousand dollars a year in premiums to supplement what we got for our health insurance -- and that was in Ann Arbor, a very well-to-do town. We retired over to the west side of the state because of family and because it was, frankly, less expensive.
REHMWhat do you think, Jerry?
SEIBWell, I think that the comment makes -- it explains why it's so hard to generalize here 'cause, as Susan said, I think, at the very beginning of our conversation, different states have different standards and different experiences here. Some states have teachers' unions and public employee unions making contributions to pensions and making significant contributions to health care, others have very little or none. And so this is very much a state by state issue.
REHMWhat about the history on Gov. Engler?
SEIBNow, I don't remember that history precisely, but I do -- I remember the incident. And I think that the point I would make about that is that that sort of illustrates how this issue has turned around in the last 15 years or so, that there was a time in which state budgets and state pension funds were actually fairly fat. And that's kind of all gone away. And, you know, that's the long-term problem I was referring to -- is that the trend lines are just going in the wrong direction.
REHMAll right. To Frank in Charlotte, N.C. Good morning.
FRANKHi. Okay. I was reading at the Bureau of Labor Statistics, and it's -- right before President Bush came in office, that was the height of our employment. Okay. During his administration, we lost over 6 million jobs. Okay. After health care passed, okay, our employment stabilized and then it started to go down -- the health care bill. So I think that the Republicans needed to change the name of the health care killing jobs -- whatever they call it -- and use it in a proper name.
REHMAll right, Jerry.
REHMThe height of the employment -- just take that first.
SEIBThat's easy. I mean, you know, when the -- in the year 2000, unemployment was about 4 percent. And it's the lowest it's been in long time and far lower than it's been at any time since then. It has gotten progressively worse since then. It just ballooned when -- in 2008, when the financial crisis hit, but it wasn't doing that great before. I mean, this has not been a great job-producing economy for a while. That was before this recession and certainly during this recession. So I don't think you can point to any one thing and -- clearly, things were on the skids before the health care bill was passed. So we're dealing with a very big problem here, and it's -- it defies simplistic explanation.
REHMHere's an -- go ahead, John.
DICKERSONWell, I was just going to say -- going back to that Fed report and this is a view among some other economists -- is that we are at a new norm, that we are not going back...
DICKERSON...you know, that there is -- that we're not going back to those previous job levels, period. Like, something has changed.
DICKERSONYes. Something has actually changed in the economy...
DICKERSON...or until we go pass this through the digestive system more.
DICKERSONI mean, that this is a long-term problem.
SEIBThere was a four-year period in the 1960s when -- four straight years continuously where unemployment in this country was at 4 percent or below. Since then, it's been at that level once, and that was in the year 2000, the time that the caller refers to. So this is different...
SEIB...and, you know, even with this economic growth, the Fed is saying unemployment will probably be 9 percent at the end of this year if the economy grows at 3.9 percent.
REHMAll right, to Virginia Beach and to Rick. Good morning. You're on the air.
RICKGood morning, Diane. I am really struck by this Wisconsin deal and the attack on public unions, as a whole, and public workers in the last few years. You know, really, what's happening is this is the last stand of the ants against a grasshopper nation. We have gone for years and years and years, living at very minimal pay or pay raises on the promise that, in the future, we would get benefits. It's actually the politicians' problems that they did not set aside money over the decades. They just passed this problem from administration to administration to administration.
PAGEWell, you know, it's certainly true that these agreements the governors are attacking were reached by collective bargaining with state officials. You know, the unions didn't put these policies into place on their own. So, you know, it's not as though these governors come in and these state governments come in to this situation they had no hand in creating.
SEIBWell, and, you know -- and, I think, the -- I think you cannot understate the depth of the crisis states got thrown into two years ago. This was not -- this is not a normal thing that's happening to states. You could not have predicted it. So I certainly agree -- and I made the point earlier -- that there were some long-term time bombs planted in these agreements. But on the other hand, nobody, and, I mean, literally nobody, predicted what states would go through right now.
REHMJerry Seib, Susan Page, John Dickerson, and you're listening to "The Diane Rehm Show. And now to -- let's see -- Denver, Colo. Good morning, Lewis. You're on the air. Lewis, are you there?
LEWISI'm doing all right. I've got a question. We give bailouts to these banks and these big corporations. And they say they're going to either loan money and give jobs, and they don't. Why are we coddling these people?
REHMWhat do you think, John Dickerson?
DICKERSONWell, this is the big question, and this is a federal question. This is not -- having to necessarily do with Wisconsin. But because we -- you know, because we -- the president can't snap his fingers and make them do what he wants them to do, and he is trying a different approach, and it has a political benefit as well, but he is trying to kind of move them along. Remember, in the last two years, there was some Wall Street bashing, there was some pressure, trying to use the bully pulpit to get them to fall into line.
DICKERSONIt was over a series of issues. But now he's trying to say, look, I'm going to give you the certainty you want. I'm going to lower the corporate rate. I'm going to do these things you want. Now, you do your part and bring this money off the sidelines and start hiring people and investing and helping, you know, in your end to get the economy going. It's a sort of honey versus -- instead of vinegar.
REHMBut let's go back to the unions for a moment. Jackie in D.C. writes, "Unions were responsible for the existence and growth of the large middle class. If Wisconsin public workers have benefits that, today, are seen as too good, it's because, during the good times, Wisconsin state and local officials thought they could afford them. Public employees didn't take benefits. They bargained for them, two parties at the table. The answer, now, in bad times is, again, bargaining. The real problem in this country now is that too many people who can afford to pay taxes don't want to pay. The rich want the benefits of America without the cost."
DICKERSONWell, I think that's absolutely correct. And Susan made the point earlier. I would also note there's an analog for that in the private sector. You know, look at the auto companies. Benefits were negotiated with the United Auto Workers in good times that the auto companies discovered two years ago -- or longer ago than that -- that they couldn't possibly make good on. And so there was a very wrenching process of deciding, what do you do with contracts that the employer can't live up to anymore? And that's exactly what's happening in the public sector now.
PAGEAnd just to go back to a point John was making, I think nothing is more frustrating for the administration than the fact that businesses generally are recovering. The stock market's had a great recovery. Businesses are showing good profits -- not just bailed-out businesses, but businesses generally -- and yet you don't see them hiring workers. You find them relying on increased productivity for the workers they have. They're being very cautious about the legs that this recovery is going to have, and that's making it harder for things like unemployment to come down.
REHMAll right. To Frank in Tampa, Fla. Good morning. You're on the air.
FRANKYes, good morning. I kind of find this curious that this issue started in Wisconsin and will like to hear the -- your panelists' comment on what's going to happen in California when a Democrat governor has to deal with the same issue, which is dealing with bargains that were made when times were flush. In a bankruptcy-like environment, as a guy who worked in government finance for years, we've never seen a state go bankrupt. But if there would be one, it might be California. And the corporate analogy that was brought up about the auto companies not being able to live up to their previously negotiated commitments seems to be the same analogous position that Jerry Brown is now finding himself in.
REHMAll right. John Dickerson, California.
DICKERSONWell, I think the question is pace. I mean, the -- and this whole debate is about, you know, whether in tight times, with a sense of crisis -- and they know all know the sense of crisis in California -- is whether the pain is spread evenly. What's happening in Wisconsin is people feel like -- or what it -- is that the pain is being disproportionately doled out to union workers. It's being that, under the guise of crisis, not only are benefits being shrunk -- so that's one kind of pain -- but that there is this special kind of long-term pain you're going to get from losing your ability to even have this conversation in the future.
DICKERSONAnd, I think, that's what Brown will try to avoid. The pain will be the same. The question is how you get people there. Do you force them to do it fast and add in kind of extra pain? Or do you manage it? And that's the challenge for Brown.
PAGEYou actually see some discussion now in policy circles and on the Capitol Hill about whether states can declare bankruptcy, whether a sovereign government can declare bankruptcy, go under bankruptcy protection and do some of the reorganization that you see companies do when they do that. A lot of people think that's a very bad idea, but it is something that is now part of the discussion.
SEIBI would just add two points. One is this actually didn't start in Wisconsin. This actually started in New Jersey where Chris Christie, the Republican governor there, started this process a year ago and set a lot of the arguments in motion. The second point I would make is that, you know, I do think that some governors are going to say, let's sit down and reason together. Can we come up -- and a Democratic governor, frankly, has a better chance of convincing public employee unions to negotiate back some things than a Republican governor does. And others are going to be confrontational, so we'll see it play out different ways.
REHMWhy did Gov. Christie get such a warm welcome at the conservative consensus meeting?
SEIBBecause he's seen as a truth-teller who's very effective and who took on, you know, big liberal causes in New Jersey and either one are tied, at least.
PAGEYou know, he's had this big figure, and he's very blunt. And he's kind of -- he can be kind of funny. He's very off-hand. He says things that -- think other political people sometimes think but don't say.
REHMOkay. So it started in New Jersey. California's facing it. You now have big deals going on in Wisconsin. Ohio is having a huge problem. Is this going to spread throughout the country?
DICKERSONAbsolutely because the states face -- they all face the same problem. Now, whether they choose to solve it through getting rid of collective bargaining with public employees is another question. But the pain is going to hit somewhere, and it will be acute. And the people it hits most acutely are the ones who are going to speak up. Now, of course, unions know how to organize, and so they can put 20,000 people there. And we have this -- again, as Jerry mentioned at the beginning -- the fascinating thing, which is you have the national organizations showing up, too. But, yes, it's going to happen from state to state.
REHMJohn Dickerson of slate.com and CBS, Susan Page of USA Today, Jerry Seib of The Wall Street Journal. Thank you all so much. Have a great weekend, everybody. I'm Diane Rehm.
ANNOUNCER"The Diane Rehm Show" is produced by Sandra Pinkard, Nancy Robertson, Susan Nabors, Denise Couture and Monique Nazareth. The engineer is Tobey Schreiner. Dorie Anisman answers the phones. Visit drshow.org for audio archives, transcripts, podcasts and CD sales. Call 202-885-1200 for more information. Our e-mail address is email@example.com. And we're on Facebook and Twitter. This program comes to you from American University in Washington. This is NPR.
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