The Islamic State launches a counterattack in the Iraqi city of Kirkuk, as the battle to retake Mosul intensifies. Ecuador cuts off Internet access to WikiLeaks founder Julian Assange. And the president of the Philippines says his country is pivoting away from the U.S. A panel of journalists joins guest host Derek McGinty for analysis of the week's top international news stories.
A panel of journalists joins Diane to talk about the week’s top stories: President Obama signed a compromise debt ceiling deal; a partial shutdown of the FAA furloughed thousands of airport workers; and several top advisers departed from more than one Republican presidential campaign.
- Chris Cillizza author of The Fix, a Washington Post politics blog, and managing editor of PostPolitics.com.
- Julie Hirschfeld Davis congressional correspondent, Bloomberg News.
- Ron Elving Washington editor for NPR.
A panel of journalists discusses what the debt ceiling debate really accomplished, and who they think will be on President Obama’s deficit super committee.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The unemployment rate improved slightly in July. Yesterday, the Dow plummeted more than 500 points, the steepest decline since 2008. And Congress finally reached a deal to end the FAA shutdown. With me, here in the studio, for the domestic hour of the Friday News Roundup, Ron Elving of NPR, Julie Hirschfeld Davis of Bloomberg News and Chris Cillizza of The Washington Post.
MS. DIANE REHMAs always, I look forward to hearing your questions, comments. For the moment, our 800 number is not working. So join us by email to email@example.com. Join us on Facebook, or send us a tweet. Good morning to all of you.
MR. CHRIS CILLIZZAGood morning, Diane.
MS. JULIE HIRSCHFELD DAVISGood morning.
MR. RON ELVINGGood morning, Diane.
REHMRon Elving, the stock market, combined with the July unemployment numbers, what do you make of it?
ELVINGThis has not been a quiet week in Lake Wobegon, our hometown.
ELVINGWashington, D.C., has been...
ELVING...as bad as I've seen it in my time here. And that's a little more than a quarter of a century.
REHMMe too. Me too.
ELVINGIt is not surprising that, in combination with the debt problems in Europe, the high energy prices, the slowing of the economy in China and a number of other factors, the unease on Wall Street has now turned into a great deal of uncertainty that leads towards a kind of panic. Yesterday, we saw some real panic selling. Today, the markets are more mixed. They actually thought this was a good jobs report.
ELVINGIt was better than it was last month, and the last month's terrible report was actually upgraded a little bit and adjusted today. Those are on the plus side. There are many considerations here, obviously, for people in the stock market and in the other markets, among other things, the consideration of what's going on in the commodities markets and the enormous boom in gold. Some people say it's a bubble.
ELVINGSome people say it's going to stick around. That's what makes a market. So there are a lot of reasons for these phenomena, but, clearly, one of them is the unsettling spectacle of the American government, the United States government, the last repository of confidence in the world economic system -- our debt -- looking shaky for the first time, really, ever. We've never threatened to default on our obligations before, not in this fashion.
ELVINGWe've had many arguments about the budget. We've had many arguments about fiscal behavior in this country and monetary policy and all the rest of it. But we've never gone to this particular brink, and I think that gave everybody a case of the willies.
REHMJulie, Adam has already sent an email. He wants to know how much of the current stock market downturn can be linked to Congress' poor handling of the debt limit.
DAVISWell, I think you cannot underestimate the degree to which the struggle that Congress went through and President Obama and Congress had to go through to get this debt deal done. And also, the substance of the deal itself made -- zapped people's confidence. It took weeks and weeks and weeks of negotiation.
DAVISIn the end, the deal that they passed, that cleared and Obama signed earlier this week, really punted the big questions until later this year, probably another big searching debate next year, and, potentially, a lot of big cuts starting in 2013 if they can't get their act together and do something about deficit reduction.
DAVISSo, I think, what you're seeing is people really questioning, A, whether the government can get a handle on the debt problem, but, B, whether policymakers really have the political will to do what's necessary to restore some of the economic growth that needs to happen in order for things to get better in the markets.
REHMLittle bit better job numbers than expected this morning, Chris?
CILLIZZAAbsolutely, 117,000 jobs created. I talked to some folks yesterday who are much smarter than the Republican and Democratic economist types who said, look, given the last two months, anything over 100,000 would be good. Now, I think you can make numbers say almost anything, Diane. We know this. I certainly know this in writing about politics every day. So this is something, I think, you have to keep in mind, too.
CILLIZZAYes. This is a better than expected report. But to get unemployment down to 8.5 percent -- okay, it's at 9.1 now, down a percentage point. To get it down to 8.5 percent by Election Day 2012, we have to grow 200,000 jobs every single month between now and then. To get it under eight, we have to grow 250,000 jobs.
CILLIZZASo, yes, certainly, Barack Obama and his administration are much happier with 117,000 than the 18,000 from last month and the 25,000 from the month before. That said, the broader context here suggests, as Ron pointed out, we are in the midst of a very slow recovery, to the extent we're in a recovery at all.
REHMLot of people are wondering, Julie, whether we're in danger of a double-dip recession.
DAVISAbsolutely. And I think this is part of what you're seeing, both in the U.S. markets and abroad, is this question in people's minds about what more can be done to stop us from sliding further down. The Fed has already taken a lot of action to try to do whatever it can to stoke a recovery. There are questions. The Fed is meeting again next week.
DAVISAnd they'll be talking about what more can they do, whether it's keeping interest rates low or slowing the rate at which they sell off the bonds that they have bought or maybe do another round of that buying. But people are wondering what more can they actually do. They've already done quiet a bit.
DAVISAnd there doesn't seem to be, as I said, the political will in Congress or the ability by the -- by President Obama to really do much more on the fiscal side given the divisions that we've seen.
REHMBut let me ask you this, Ron. Isn't the fact that the European governments thought, we'll put some more money into Italy, Greece, Spain, isn't that part of what triggered the sell-off yesterday?
ELVINGYes, yes. There's no question, but that a major cloud over this market all year long has been its concern about what they call the PIGS countries. That's Portugal, Ireland, Spain and Greece. And Italy has now entered this group as a second I country, if you will, and it is larger than any of those other economies by a good bit. It's one of the largest in Europe.
ELVINGSo to bring a country the size of Italy into this mix really begins to give people the sense that something is shaking the foundations of the entire European Union. It's a question mark for the euro going forward. And this is unsettling to world markets. Now, under normal conditions, a lot of that might not be entirely bad for the United States. People would be coming to the United States as a final repository of confidence and value.
ELVINGAnd they still are. That's why the bond markets have not really gotten too spooked about all this madness in Washington that they've seen in recent weeks and months. They thought, well, it's got to be okay. They're really not going to default. And that's still the best place to put your money. It's still the benchmark for the world economy.
ELVINGThat's why any kind of messing around with the idea of defaulting on U.S. currency just gave all these jittery people one more reason to get uneasy. And when you get enough people uneasy at once, you get a mini panic. How long it's going to go on, like it went on in 2008, and then we recovered. We'll have to see.
CILLIZZAYou know, I just wanted to flush out a point Julie made, Diane, about the political will. We know the Fed in interest rates are as probably about as low as they can make them. The political will argument, Ron mentioned the gridlock that we've seen.
CILLIZZAMany people, Larry Summers, former Treasury secretary in the Clinton administration, senior economic adviser in the Obama administration, wrote an op-ed earlier this week in which he said there was a one in three chance of a double-dip unless new spending, new stimulus spending was put into the economy. The problem you have is the politics of that.
CILLIZZAAfter we've just gone through the debt ceiling debate, we are now roughly a year -- I'm probably rounding up a little bit 'cause I like elections. But we're not all that far from the next election. The Republican Party believes the stimulus, first stimulus did very little, that it was a waste, that it speaks to Barack Obama's misunderstanding of the economy that you just have the government grow and spend more and more money.
CILLIZZASo whether or not that could happen, it simply won't happen because of the politics. And so it just -- again, to Julie's point, now, you are taking a big piece of something the government could do to try to jumpstart economy. Whether you think that's a good thing or a bad thing, that's totally off the table. There is not even a Democrat, even a liberal Democrat who believes that we're going to see any more large stimulus spending out of Congress.
REHMSo what did the debate over the debt ceiling really accomplish, Julie?
DAVISWell, I mean, I think, as I said, I think that they punted a lot of the big questions until later this year. I think one of the things that it accomplished -- and it's a negative as Ron said -- was it made people question whether it was actually going to be possible to -- for the -- you know, for the country to default given the gridlock in Washington, whether that was going to actually bring the country to the brink and possibly the world economy to the brink of collapse.
DAVISNow, that obviously didn't happen. I think people understand the issue of our debt and the burden that our debt puts on the country a lot better now, for better or for worse. But the Congress wasn't able to actually get a handle on that in the final solution. So I don't know that it accomplished a whole lot.
REHMIs this deficit-reduction panel -- do we know who's likely to be on that panel, Ron?
ELVINGWell, I hope this is not true. But, sadly, the guess, I think, around town is that the people who are going to on the panel are going to be not the kind of people who might make a deal. Let's say the Gang of Six. What if the Senate were to just appoint the Gang of Six? Here we've got six guys who've already agreed on a grand bargain that has revenues as well as program cuts.
ELVINGAnd then the House is going to put up some people, probably going to be a little bit more partisan, but you could get a majority of 12. You could get a 7-5 or even, imagine this, an 8-4 out of that committee of 12, this new super committee, if you started with the Gang of Six who have already decided they want to compromise with each other: Senate, Republicans and Democrats.
ELVINGUnfortunately, I mean, you look at all these releases coming out from every interest group in town -- not we ask, not we propose. We demand that the leaders of the House and Senate appoint people who will hold the line, who will fight back, who will insist that there be either no tax increases of any kind, no revenue increases, or that there be no changes in programs.
REHMAnd we'll take a short break here. I'm told we do have our phones working, 800-433-8850.
REHMAnd the talk is going on here about this deficit reduction panel among Ron Elving of NPR, Julie Hirschfeld Davis of Bloomberg News and Chris Cillizza of The Washington Post. Here's a follow-up question on that from Jill in Winston-Salem. "Does the new formed super committee have to pass their recommendations with a majority? Or does it have to be unanimous or a super majority?"
ELVINGThey have to have a majority. Seventy-five...
REHMOkay. All right.
ELVING...would be sufficient to push it on to the House and Senate. But then the House and Senate have to agree.
REHMOkay. And if what they do doesn't reach any kind of an agreement, then you have this, what, kick in, Julie?
DAVISThey call it sequestration. Basically, it's very punishing, across the government cuts in programs, including Medicare and defense. And there is one thing that could prevent that, and that's if the House and Senate both passed and sent to the states for ratification a balanced budget constitutional amendment. But given the makeup of the Congress, there's virtually no chance that that's going to happen.
DAVISSo what that will allow, if they should reach that point, will be for the Republicans to sort of mount a debate in Congress to say, wouldn't Democrats join us to add a balanced budget amendment to the Constitution in order to prevent these cuts? Isn't that -- doesn't that seem to make sense to people? And it'll be a very political argument, but, in the end, very unlikely, like I said, to happen.
REHMChris, I heard yesterday that Congress' popularity is at 14 percent.
CILLIZZAThat's right. That was a CNN poll, 14 percent, the lowest they had ever tested, Diane. They've been doing -- asking that question, do you approve or disapprove of how Congress is handling its job since 1972 or '73? A very long time. It's...
REHMSo you're the one who follows elections.
REHMWhat could that mean?
CILLIZZAYou know, here's what's interesting. I think there are two schools of thought. One is that, well, people never liked Congress. It's like used car dealers. People don't like them. But they still go and buy used cars. It's just -- it exists. But I talked to a lot of smart people yesterday, Diane, 'cause I was kind of intrigued by that number being so incredibly low.
CILLIZZAAnd a couple of people, including former Congressman Tom Davis, former Congressman Martin Frost -- one a Republican, one a Democrat, both very well-versed in campaign politics -- and they said that they believe we are in a new era. Tom Davis said to me, you know, you have to throw out the old playbook. What we've never seen before is anger at Washington visited on both parties somewhat equally.
CILLIZZAUsually, what happens in elections is what we've seen in recent elections. 2010, people blamed Democrats, voted them out of the House. 2006, people blamed Republican, voted them out of the House. The question is, is could we see a literal throw-the-bums-out election in 2012 that actually impacts both sides equally? You know, the question is, how much has the political landscape changed?
CILLIZZAHow much has the economic anxiety, rise of the Tea Party movement, the changing demographics in the country -- does that mean that everything we've looked at in the past is no longer as applicable?
ELVINGDiane, when I saw that 14 percent figure yesterday, I thought the only explanation for that 14 percent is that they simply didn't understand the question. Surely, there can't be anyone out there who really approves of Congress at this particular moment. I can't imagine what they were thinking. Extremists are all unhappy that their extreme is not prevailing totally.
ELVINGAnd anyone who doesn't believe in extremism has got to be distressed by this Congress.
REHMAnd here's something on the FAA, the Federal Aviation Administration. We're told a deal was reached yesterday, that workers will go back on Monday. And Terry has this comment, who says, "This fiasco is almost too hard to believe, especially when coupled with the debt debate. Our legislators' posture about their concern for what the American people want, and yet cannot manage to do two things at once.
REHM"Let's vote to take the millions lost in revenues, as a result of the FAA mishandling, out of the pockets of legislators who didn't do their jobs in a timely manner." What do you think, Julie?
DAVISWell, actually, those millions in revenues are in the pockets of the airlines at the moment. And...
REHMExcept for Delta.
REHMDelta said it's going to return those tax revenues.
DAVISRight. And, I think, over the coming days and weeks, we'll hear the other airlines say more about what they plan to do with the money. But, I mean, I think that there is such a level of frustration with folks who were watching Congress over the last two months. The debt debate was so all-consuming.
DAVISThere were a lot of big issues that came across their radar screens during that time that had to be completely ignored because the politics of the debt debate just sucked up all the oxygen. And so when this -- when they finished it, the FAA bill is sitting there on the table. And they said, well, you know, we don't have a deal, so we're just gaveling out.
REHMHow did they get the deal?
ELVINGThey got the deal because Ray LaHood rode to the rescue. And Ray LaHood is a former congressman who is a Republican and a leader among Republicans, and now he's in the cabinet of Barack Obama. And so he was able to talk to some people and broker a deal between the very hard position of the Senate Democrats, very hard position of the House Republicans.
ELVINGThere's a reason why Delta may want to give back that money and get some good PR out of this because, underlying this whole business, while they are arguing about small airports -- and that is a good issue, the money that's spent subsidizing small issues, good issue -- but the underlying issue that has held up the re-authorization of the FAA...
ELVING...for a very long time is one union case about unionizing people at Delta, which is the one last big airline that isn't unionized. And so because of their position in wanting to overturn a decision made by a mediation board in the federal government, because of that, we don't have a permanent FAA re-authorization. That's why all this happened.
ELVINGAnd the Democrats got caught flat-footed, looking bad on this issue. That's why Delta doesn't want to look bad collecting those tax revenues.
REHMAnd, Julie, you mentioned sucking all the air out of the room. We have an email from Joe, who says he fears that a balanced budget constitutional amendment is going to take up everything all the time, all -- everything.
CILLIZZAWell, you know, Diane, you asked earlier, what did we get or learn about the debt ceiling debate? The answer is not all that much, which, I think, is basically what Julie said. I think one thing -- the lesson that, I think, many Republicans, however, took from this is that if you take a position -- and their position was no revenue or tax increases -- and you absolutely refuse to budge off of that position, you can win because you can debate winners and losers.
CILLIZZAAnd I know people don't like the kind of horse race mentality with this. But the reality is John Boehner -- I saw a quote where he said, I got 98 percent of what I wanted. He's not saying that publicly unless he thinks he got a lot of what he wanted. And I think that this -- the super committee, the debate over sort of how it proceeds, what cuts they make, that's going to be a huge issue. Are taxes on the table there?
CILLIZZAAnd then the balanced budget amendment, you know, this is -- remember, Cut, Cap and Balances program that Republicans in the House tried it out, that's the program that they want.
CILLIZZAI think they -- I think the belief that if you stand your ground, no matter where that ground is, if you stand it and you refuse to budge off of it, you can bring the legislative process to you is a lesson that was learned, but also a potentially dangerous lesson for both sides going forward, given the recipe for gridlock that we saw over this debt ceiling debate took months and months and months.
CILLIZZAAnd, of course, like we always do with Congress, they did it in the 11th and a half hour.
DAVISAnd I think the lesson is not necessarily that they're going to get everything that they want, but the debate is now taking place on their turf. And that's, I think, what we're going to see with the balanced budget amendment. Again, I don't expect to see a balanced budget amendment sent to the states. But I do expect to see a whole debate on Capitol Hill and with the White House about shouldn't we be adding a constitutional amendment to balance the budget?
DAVISAnd why would you be against that? And why would you not be in favor of cutting spending and, you know, and making sure that we get it?
REHMWell, what about the American people? Are they likely to cry out and say, you are wasting our time? You are wasting our money. You're not taking care of the issues that we do care about. Where are the jobs?
ELVINGThat's all true. That's all true. Fourteen million people are unemployed, and that is not getting the attention that $14 trillion in debt is getting right now. But when you start talking about a balanced budget amendment, that has a tremendous amount of appeal, and the polls show that something like two-thirds, maybe even 70 percent of the people in the country will say, yeah, let's have a balanced budget amendment. Why not?
ELVINGWell, why not is, let's find out a little bit about what that would mean. When you talk about cutting spending, everybody is for it. When you talk about cutting programs -- if you're going to get to a balanced budget, the only way you're getting there is by talking about the big programs. That means defense, which is already on the block for a lot. Then it means Medicare. Then it means Social Security.
ELVINGThere is no way -- even though it's not fair to talk about Social Security, there's no way you're going to get to absolute balance without gutting those programs, I mean, seriously gutting those programs or serious tax increases. And if you put the tax increases off the table, which this form of balanced-budget amendment would attempt to do, two-thirds for passage, you are going to see something, the likes of which this country has never seen.
ELVINGAnd when people understand that, that two-thirds number is going to come down.
REHMOf course, Leon Panetta came out very publicly yesterday, concerned -- expressing his concern about cuts to defense.
CILLIZZAYou know, Diane, it's a fascinating thing that's happened. The Republican Party, for a very long time -- and largely the Democratic Party as well -- but the Republican Party made it a core principle that we could not cut defense spending, that it would be letting our guard down in some meaningful way, that it would be not fully investing in our troops abroad and here at home.
CILLIZZAIf you watch what's happening on the 2012 campaign trail -- and I always say that that's the leading edge of kind of where people are headed because those candidates out in the campaign trail are the ones spending the most time with people, trying to win their votes up. Remember, Congress has spent a lot of time in Washington. Candidates have spent a lot of time on the campaign trail.
CILLIZZAHaley Barbour, who is not exactly a renegade within the Republican Party -- this is someone who's a Republican National Committee chairman, the governor of Mississippi -- was thinking about running for president. And when he was thinking about it, he floated the idea that maybe we need -- to get our budget in line, we need to start looking at defense cuts. I mean, this is a fascinating thing. It was, clearly, intentionally done.
CILLIZZAOther Republicans have, running for president at least, have largely stayed away from it, although Jon Huntsman, the former governor of Utah, has broached that topic. You know, I think that things are changing. I think as the debt becomes this all-encompassing issue, particularly for Republican voters who are so animated by this -- remember, at the root of the Tea Party movement, really, is the idea that government is growing too big.
CILLIZZAWe're putting this debt on our children and grandchildren.
REHMPut it all in a bathtub and drown it.
ELVINGThat's Grover Norquist.
CILLIZZAAnd that's the -- you know, I do think that that suggests that the tectonic plates of the Republican Party on this issue are moving. Now, are they moving fast enough that we'll see not a big fight if the trigger happens and defense spending is put on the table by this super committee? I'm not sure we're there yet.
REHMChris Cillizza, he is author of The Fix, a Washington Post politics blog. He's also managing editor of postpolitics.com. You're listening to "The Diane Rehm Show." You mentioned the Republican's Jon Huntsman. Has there been some drama within his campaign that's likely to affect his presidential prospects, Ron?
ELVINGYes. His presidential prospects are a bit cloudy at the moment. But John Weaver, the campaign consultant who is associated with John McCain, put together a kind of a without-a-candidate package campaign for Jon Huntsman when Huntsman was still the ambassador of China so that there'd be something ready to stand up when Huntsman came back to the U.S. So there it is. John Weaver is enormously important to this entire enterprise.
ELVINGSometimes, brilliant campaign advisors can be somewhat controversial, even within their own campaign, sometimes hard to work with. Sometimes, they have disagreements with the candidate himself. And so we have that kind of turmoil in the Huntsman campaign. But that's probably not the essential problem of the Huntsman campaign at this point.
ELVINGAt this point, he's not getting any visibility. He's not getting any traction. He doesn't seem to be speaking to the mood that Chris was just describing where Republican voters are today.
DAVISAnd particularly for Huntsman, this was a damaging thing to have happened this week because he has -- sort of has built himself or has, you know, presented himself as the no-drama...
DAVIS...you know, candidate in the mold of -- in the Republican side of Barack Obama. And this is anything but that. So it's a big challenge for him to, as Ron said, overcome the lack of fundraising, the lack of being able to catch fire in the polls. But this has just been as distractive for him. He had to talk about it in New Hampshire yesterday. It's just -- it's something that he doesn't need right now.
REHMHe isn't the only one on the Republican side having few little questions raised. A $1 million donation to Romney's super PAC, tell us about that, Chris.
CILLIZZAYeah, Diane, one of the things that we've seen develop post-campaign finance reform in the early 2000s, as well as post-the Citizens United Supreme Court ruling, is what's called super PACs. Now, what they are -- it's a political action committee, registered through the Federal Election Commission, but not bound by federal donation limits, $2,500 for each election. These are -- they can take unlimited amounts of money.
CILLIZZAThey have to report their donations. So they're a little bit different than things that we saw crop up earlier in the last decade, 527 (c) s, where the money was harder to follow. But what we saw with Mitt Romney, a small group of people who are Mitt Romney supporters have formed a super PAC for him. Basically, you spend money to ensure that he is the Republican nominee and maybe beyond that as well. The donations were reported.
CILLIZZAThere were a handful of people giving the money. They raised about $12 million. And one of the donations came through a corporation or that had been formed for the expressed -- it appears the expressed purpose of giving that money -- and then it was disbanded, which essentially means that the person giving the money didn't want his or her name to be revealed, put it in a way that they know reporters, like myself and my colleagues here at the table, would look for and find it very hard, just kind of a random company name and address -- very hard to track.
CILLIZZASo not a great moment for Mitt Romney. The one thing I would...
REHMDid he -- go ahead.
CILLIZZAThe one thing I would say is we -- and I put myself in this category -- spent a lot of time with campaign finance and looking at where money comes from. I very rarely, in the time I've spent with voters in early primary states, ever had them bring up to me issues like this, particularly when you have the economy -- in a Republican primary, the health care bill, which still remains a very much -- they tend not to follow it with the closeness that we do.
CILLIZZANot to say it's a good story for Mitt Romney. He'd clearly not like to have it out there. But I don't know that it's a story that moves votes, I should say, Diane.
REHMHe also announced a legal advisory team. What's that all about, Ron?
ELVINGEverybody has to have a certain amount of advice when they're running for president.
REHMBut this is 63 lawyers.
ELVINGWell, it's not just an advisory team, really. They're going to be doing a great deal of work for him. He called it an advisory team, but there are going to be lots of things to be vetted. There are going to be lots of accounting decisions that have to made, and this is not unique to the Romney campaign. You need a gang. You need a posse if you're going to run for president and raise a lot of money. Romney's larger problem is he's not raising enough.
REHMAnd, finally, Pawlenty's top advisor is leaving him, Julie.
DAVISYeah, and this is another example of someone whose prospects are not as bright as he'd like them to be at this point. He is looking at the Ames Straw Poll here in a couple of weeks as a real test. And if he can't get his -- if he can't finish first or second, certainly, third, he's really going to have a hard time.
REHMJulie Hirschfeld Davis, congressional correspondent for Bloomberg News. Short break, then your calls.
REHMWelcome back to the domestic hour of our Friday News Roundup. Let's go now to the phones, to Oklahoma City. Good morning, Debra. You're on the air.
DEBRAThank you. I keep hearing the Republicans quote a number of 817,00-plus for the total small businesses or businesses that will have their taxes increased if the Bush tax cuts are allowed to disappear. Where does this number come from? And the Republicans call these businesses the job makers. So how many jobs in this country -- not outside, but in this country -- are made by these businesses?
DAVISWell, this is part of the Republican's -- Republican Party's argument against raising individual taxes, which is a debate that we've heard a lot about during the debt ceiling negotiations -- and we're going to continue to hear a lot about as the super committee does its work -- and then later on when it comes time for the Bush era tax cuts to expire at the end of 2012. The argument is a lot of small businesses file as individuals.
DAVISThey basically file under the regular tax code. They don't file as corporations. So if you are raising tax rates for the wealthiest, the argument is you're raising tax rates on these small businesses that create a lot of jobs. Now, Democrats will argue that, you know, basically, the wealthier and corporations have to contribute to deficit reduction if we're going to get a handle on the debt.
DAVISBut the argument that this caller is hearing has to do with how many of the smaller businesses actually file under different tax rules.
REHMBut Greg in Bostic, N.C., says, "If tax cuts produce jobs -- we've had them for about 10 years -- why haven't they produced jobs?" Ron.
ELVINGI suppose one way of answering that question would be to say that they were producing jobs prior to the big crash of 2008, and that we haven't gotten that engine back up and going. But my two questions about this argument, about creating jobs and taxing the job creators is -- well, first of all, if this, in fact, as the first caller was asking -- if this, in fact, is a great source of job creation, can we see a number of jobs that they have created?
ELVINGIs there a number we can get our hands on that's the actual number of jobs created that would be endangered by any kind of tax increase? And then the second thing is, if, in fact, that is true, if these people are, in fact, creating jobs with their tax cut, is there not some way for them to indicate that in their tax return and, therefore, escape the tax increase because they've created jobs? That does not seem, to me, to be an impossible thing to prove.
ELVINGIf a have a small business and I'm prospering enough to be setting aside all the money from my business and still making over $250,000 a year, so I'd be subject to this tax increase, why would it not be possible for me to prove -- with all the documentation you have to have when you hire someone legally in this country, why would it not be possible for me to prove that I was exempt from the tax increase because I was creating jobs with it?
CILLIZZAYou know, Diane, I didn't have my watch exactly calculated. But between Julie and Ron, they spent three or four minutes talking about jobs. That's about as much time as the federal government has been talking about jobs.
REHMExcept that the president...
CILLIZZAWith a notable exception, I would say, that when the president came out and signed the debt ceiling or announced that the debt ceiling increase had been made law, it was, first of all, not very celebratory.
REHMIt certainly wasn't, yeah.
CILLIZZAThere's no champagne popping, which tells you something about how he thinks the debate went and what he thinks kind of people think of how the debate went. In that speech, which was very brief, he used the word jobs seven times. We need to get back to focus on jobs. He rolled out several things that Congress could do.
CILLIZZAWhen we've seen him do those four things Congress could do to help -- he mentioned the FAA bill, which hadn't been passed at that point -- to help the job-creating atmosphere, I think most people look at the debt ceiling, and I -- fight. And I think this is why we see Congress so low again. And they just think, these people do not get it, that I am still struggling. The debt ceiling is, I think, a very fuzzy concept for most people. I think...
REHMAnd it's been increased...
CILLIZZAIt's -- right.
REHM...17, 19 times, whatever.
CILLIZZAAnd so, I think, it furthers the sense that these people are, A, not listening to me and, B, do not understand what people like me are going through. And...
REHMAnd do not care, perhaps.
CILLIZZAAnd that's the most damaging. Do not care is the most damaging, politically. And so I think what you'll see in August recess, you'll see Republicans and Democrats do everything they can to try to reconnect on the jobs issue. President Obama is doing a bus tour in the Midwest in mid-August, Aug. 15.
REHMBut, see, that's where the disconnect comes in, Chris. If President Obama is taking his bus tour to talk about jobs, and the Republican Congress comes back, wanting to talk about a constitutional amendment, you've got a total disconnect.
CILLIZZAAnd, well, and, you know, what you have a little bit, too, Diane, is that the two parties -- and this is hard, I think, for some people. John Boehner mentioned this. The two parties have a fundamental disagreement about the best way to create jobs and the best way to reduce our debt and the best way to get the economy moving again.
CILLIZZAThat is a fact. That is why we have a two-party system. And so, unfortunately, while we can all agree that we want the unemployment rate to go down, that's about all that the two parties agree on. The way in which that happens is a point of significant contention. And, you know, that's the political process we have. It may not be the political process we want, but it is the political process we have.
REHMBut it's not working right now. Julie.
CILLIZZAI don't disagree.
DAVISBut the challenge also for President Obama is -- I mean, we talked about the economy and how the Fed has done pretty much what it can do in terms of -- or much of what it can do. I think that's also true for President Obama. And, politically as well, you know, I think his vision of how you would create jobs at this point, it would be more stimulus spending, would be more stimulative tax cuts, would...
REHMAre we talking about quantitative easing number three?
DAVISThere's certainly been talk of that. I mean, there -- that's not something that anyone would rule out at this point given what we're facing. But on the fiscal side, President Obama has kind of a fundamental decision, right now, to make about what he's going to talk about now in the next several months on jobs. He is pivoting to jobs. But how do you do that...
DAVIS...when there's no possible way that you're going to get -- now, we're talking about what spending cuts to make, not in any way, shape or form what programs to bolster in order to get jobs moving again.
ELVINGThat's right. I mean, in essence, the president can't really put any of the usual tools to work in the Keynesian sense. He could cut taxes, but that would completely ruin the deficit reduction emphasis that we've got right now, the focus on the deficit and go for more money.
REHMDoes he have a special pot of money with which he could, indeed, create a new road-building job, a new bridge-repairing job?
ELVINGAny money the president spends, it comes from some place. It either has to be taken from other programs. Or it has to be taken from the taxpayers, or it has to be borrowed. And we now know that there are extraordinarily high prices for all three of those options. Any money he spends, whether he takes it out of some magical account or whether he simply spends it on his own authority, has to come from somewhere.
REHMAll right. To Baltimore, Md. Good morning, Gus.
GUSGood morning. I just sort of wanted to talk -- I have a question in the sense of your political process. And I was just sort of wondering how much, you know, is poisoned by things like the Citizens United and groups like, you know, Americans for Prosperity, who, behind them are, like, the Koch brothers, who, I think, are kind of big winners in this whole debt debate.
GUSBecause, almost a year ago, we have, you know, The New Yorker recording an article called covert operations, basically, how they bankrolled the Tea Party, you know, getting their tax day protest in 2009, basically making this issue and continuing it from the shadows. I'm wondering how much our political process is basically poisoned by these manufactured processes and bad loans.
REHMThanks for calling, Gus. Chris.
CILLIZZAWell, Gus makes a good point. And I would say that many people who opposed campaign finance reform, that John McCain and Russ Feingold passed in the early 2000s, warned of a situation like this in which you would minimize the power of the party committees, where you can trace the money. And we sort of know where it's coming and where it's going.
CILLIZZAAnd you would bolster groups willing to take advantage of a -- or, you know, wanting to take advantage of loopholes in the law, which there are always loopholes, to allow lots more money to be spent and it more -- be more difficult to trace. Yes. He points out the Koch brothers and Americans for Prosperity. Obviously, we have American Crossroads, another conservative line group that has pledged to spend $120 million in the 2012 election.
CILLIZZAI would say, though, that that's only half the story. Look, organized labor spends a ton of money through organizations like these. We have a group called Priorities USA that's now formed. That is two former White House Obama administration officials spending money in 2012 elections. So neither side is blameless in the outside money pouring into elections.
REHMHere is the only bit of information I want to add onto that. Sixteen percent of the American electorate voted in the 2010 election. Therefore, you may, now, instead of having a majority rule government, you may see minority ruling the majority. As you said earlier, Chris, these guys stuck to their guns, and that was it.
CILLIZZAAnd, you know, Diane, one of the things I just want to mention, and one of the things I was most struck by during the debt ceiling debate, is, right towards the end, there was a poll done. And 55 percent of Republicans said, I'm not terribly worried about a default and what it would mean for the economy. They did not want a deal.
CILLIZZASo many people in the kind of commentary world said, how can they do this with the -- you know, how can they stand strong with the idea that America could default for the first time ever? A point I don't disagree with. But if you believe that this is a representative democracy, many of those people who voted no, both on the Boehner bill and then on the ultimate compromise, were representing a not insignificant portion of their constituents.
REHMAll right. To Columbia, Mo. Good morning, Bonnie.
BONNIEGood morning. I have a question from -- for your guests about stimulus money possibly going to small businesses as incentives to create jobs in alternative energy sources. 'Cause it seems like we're really not paying attention to our energy needs, which is draining resources from lots of individuals. Many people, you know, have to buy gas, or they cool their homes. Or they buy food, but they're struggling.
BONNIEAnd if we had money devoted to that purpose, it would help there. It would help, according to the rhetoric, create jobs within the small business sector, which is where most jobs are created in America, from what I hear.
ELVINGThat's a very attractive idea. It's an attractive idea on lots of levels. It would be good for the businesses. It would be good for the people who got jobs. It would be good for our energy future. And it seems to be one of those few places where the two parties seem to be able to join. Everyone cares about small business. Everyone cares about creating jobs.
ELVINGAs I was saying earlier, it seems to me there must be some way to give credit to small businesses that create jobs, whether it's done through the tax code or whether it's done in some other direct way. That seems to be one place that we could all get together.
REHMLet's go to John here in Washington, D.C. You're on the air. John, are you there? All right.
JOHNYes, I am. Thank you. I -- one of -- pointed out earlier that there is a fundamental disconnect between the parties on how to create jobs. While the Republicans believe that deficit reduction will create jobs, and the Democrats believe that stimulus spending will create jobs, and I just wanted to -- because the media doesn't make this point very often, is that there is a fundamental consensus among most economists that deficit reduction will not create jobs in situations where interest rates are already as low as they are. And I can take comments off the air.
ELVINGWe should add that there are some economists who dissent from that and some economists who believe that the most important thing to do in the long run is to shrink the size of the federal government. But I think the caller is right. Most economists, most consensus in economics, is still basically Keynesian, that if you lower taxes, that's a stimulus. If you increase spending, that a stimulus.
ELVINGWhat we're about to see is, in all likelihood, some increase in revenues and great cutting of programs, which means great cutting of spending. And that will probably be distimulative, and that's the opposite of what we want.
REHMRon Elving of NPR. And you're listening to "The Diane Rehm Show." To Cincinnati, Ohio, good morning, Buckie. (sp?) You're on the air.
BUCKIEGood morning, Diane. I love your show.
BUCKIEEither H.L. Mencken or Bertrand Russell -- crazy, I can't remember who -- defined fanaticism as redoubling your effort when you've forgotten your goal. I think the recent debt ceiling debate, as well as the debacle over aviation rules, has made it clear that our Congress' conversation and policy is controlled by fanatics.
BUCKIEI would like to make this proposal. Every congressional candidate should take a pledge to take no pledges that would tie their hands or close their minds to any strategy or tool that might serve our national interest.
REHMWhat a great idea.
CILLIZZAIt's like Woody Allen. I'd never be a member of a club that would have me as a member.
DAVISYou've already taken too many pledges to be able to do that.
REHMI think you're right. All right. Let's take one last call from South Bend, Ind. Good morning, John.
JOHNGood morning, ma'am. I would like to point to the unsustainability of the Bush tax cuts. These people keep saying that we should cut taxes. But, obviously, if we were to keep cutting taxes and it worked, I'd have two or three people line up on my door trying to give me a job.
REHMWhat do you think, Chris?
CILLIZZAWell, that's the -- Julie mentioned this earlier. In 2012, the Bush tax cuts expire. Obviously, we saw at the end of last year, in the lame duck session of Congress and the incoming Republican majority, if you believe the liberal left, certainly, and many Democrats, President Obama caved on the extension of the Bush tax cuts.
CILLIZZASo now, we will have that fight in early 2013 when we will have either a second term Barack Obama presidency or a new Republican president of the United States. Obviously, that is going to be a massive fight given our deficits and given Republican's adherence to the, we can not let this -- that happen because it amounts to a tax increase. At some point, those two lines are going to cross.
CILLIZZAAnd it is going to be a political explosion, the likes of which we haven't seen. I mean, I think we -- it's hard to have -- it's hard to know what will happen, Diane, until we know. If you could tell me what party the president is going to be and what party is going to control the House and Senate, I think we could have a better idea. But until we know that, that debate seems, to me, to be too far off to get in the specifics on.
DAVISBut it's also worth noting that President Barack Obama's base was very frustrated with this debt deal because there were no revenues in it, no tax increases.
DAVISAnd he came out and said -- before he signed it -- that, you know, next time we're going to have to -- the rich are going to have to give up something, a little something. And privately, the White House was saying, we haven't taken tax increases off the table. The Bush tax cuts are still scheduled to expire. We're going to have that fight, and that's where you should focus your efforts.
DAVISNow, that was something they told the base to try to get them a little bit less disenchanted with the deal. But, in fact, it is going to be a big fight in the later year or so.
REHMAll right then. We're going to end with an email from Melissa in Orem, Utah. She says -- she found this quote that sums up her feelings. She says, "In my many years, I've come to a conclusion, that one useless man is a shame, two is a law firm, and three or more is a Congress." Do you know who said that, Ron Elving?
ELVINGI'm going to guess Will Rogers.
REHMAnd there we are. Thank you all for being here. Ron Elving of NPR, Julie Hirschfeld Davis of Bloomberg News, Chris Cillizza of The Washington Post. Have a great weekend.
DAVISHave a great weekend.
ELVINGThank you, Diane.
REHMThanks for listening, all. I'm Diane Rehm.
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