The House of Representatives rejected the Senate’s extension of the payroll tax cut on Tuesday and the stalemate continued with days to go before the end of the year; the U.S. economy grew at just 1.8% in the third quarter, down from the original 2.5% estimate; and the latest Iowa polls show Congressman Ron Paul with a slight lead over Newt Gingrich in the race for the 2012 Republican nomination. Sheryl Gay Stolberg of The New York Times, Major Garrett of National Journal and Karen Tumulty of The Washington Post join Diane for analysis of the week’s top national news stories.

Guests

  • Major Garrett congressional correspondent, National Journal.
  • Sheryl Gay Stolberg Washington correspondent, The New York Times.
  • Karen Tumulty national political reporter, The Washington Post.

Transcript

  • 20:06:55

    MS. DIANE REHMThanks for joining us. I'm Diane Rehm. House Republicans bowed to political pressure last night. They agreed to the two-month extension of the payroll tax cut. The U.S. economy grew at just 1.8 percent in the third quarter, lower than originally estimated. And the latest Iowa polls have Congressman Ron Paul with a slight lead over Newt Gingrich in the race for the 2012 Republican presidential nomination.

  • 20:07:37

    MS. DIANE REHMJoining me in the studio for the domestic hour of the Friday News Roundup, the final one of 2011: Sheryl Gay Stolberg of The New York Times, Major Garrett of National Journal, Karen Tumulty of The Washington Post. I hope you'll join us, 800-433-8850. Send us your email to drshow@wamu.org. Join us on Facebook or Twitter. Good morning and welcome to you all.

  • 20:08:20

    MS. SHERYL GAY STOLBERGGood morning.

  • 20:08:20

    MR. MAJOR GARRETTGood morning, Diane.

  • 20:08:20

    MS. KAREN TUMULTYGood morning.

  • 20:08:22

    REHMSheryl Gay, what happened to Speaker John Boehner to make him change course?

  • 20:08:30

    STOLBERGYou know, I think he realized, upon hearing from his members, that they were going to get hammered if they went home over the Christmas holidays without extending this payroll tax cut. President Obama was not backing down. This was starting to evoke echoes of the 1995 and 1996 government shutdowns. We even saw former Speaker Newt Gingrich say, you know, hey, basically don't make the same mistake that I made. And I think Speaker Boehner just realized that he had to have no -- he had no choice.

  • 20:09:02

    STOLBERGAnd what we saw was very interesting. You know, he came into office saying he was going to open the process. He was going to let members voice their concerns. It was going to be very collaborative. This time around, on a conference call with his caucus, he basically said, this is what we're going to do. We're going to approve this two-month extension like the Senate wants us to. And he didn't let anybody talk or serve up a dissenting voice.

  • 20:09:27

    REHMAnd, Major Garrett, what concessions did the White House make?

  • 20:09:31

    GARRETTVirtually none. The Senate Democrats agreed to technical corrections to the legislation that will streamline and make more easy to comply with this two-month payroll tax extension. There's an element of the payroll tax extension that seeks to avoid giving that 2 percent payroll tax cut to the wealthiest income earners, and implementing on a two-month basis creates some difficulty for payroll officers of businesses large and small.

  • 20:09:57

    GARRETTSo there's technical language in there that allows that to proceed, and if there are any mistakes made, to be recompensated, basically take out any potential hassles the government could add with the implementation of this two-month payroll tax extension. But that's it. There had been some very small tepid effort by House Republicans to tighten up the language on the Keystone XL pipeline, not making it a decision point in 60 days but an approval in 60 days. That was tried but very quickly abandoned.

  • 20:10:22

    GARRETTThey extracted one small, small concession. But on the main focus of this disagreement, whether it's a two-month extension or a one-year extension, Democrats in the White House won completely. Heavy is the head that bears the crown. And we do not have a regal or royal system in this country, but Speaker Boehner was alone on Saturday. His conference rose up against him. He could not lead them in a direction he thought was best for them, both short term and long term. That rebellion had to play itself out.

  • 20:10:50

    GARRETTAnd then after playing itself out, the members said, oh, Mr. Speaker, we're in a terrible fix. Help us. Help us. Help us. It's all awful. So the speaker had to go up by himself yesterday, no one of his leadership team standing behind him, which I think is enormously significant optics. His conference led them into this trap, and he had to walk them out of it all by himself.

  • 20:11:11

    REHMAnd you might be interested knowing the House has just passed the payroll tax extension. The Senate approved it earlier this morning. The bill now goes to the president for his signature.

  • 20:11:29

    GARRETTOne quick note on that, Diane. Yesterday there were some members of the Republican conference who were tweeting that they would drive down to Washington to be on the floor to object because all of this -- all you need to do is one objection to block this by unanimous consent.

  • 20:11:38

    REHMRight. Right.

  • 20:11:39

    GARRETTSomeone in Boehner's office said to me, well, we're going to find out the difference tomorrow between actual courage and Twitter courage.

  • 20:11:47

    REHMInteresting. Karen Tumulty, how is this two-month extension going to be paid for?

  • 20:11:53

    TUMULTYIt is not basically. And this is -- you know, it's another one of these episodes it seems like this year has produced. Almost every month we have yet another episode to reinforce the contempt that most Americans are feeling right now for Washington in general and Congress in particular. What is going to happen is, eventually, they will have to reimburse the trust -- the Medicare and Social Security trust funds for that.

  • 20:12:22

    TUMULTYBut this has been one of the things that the Republicans have said that they were objecting to about this, was that they really didn't have much confidence that there was any -- you know, any mechanism in place.

  • 20:12:34

    REHMBut isn't there some fee increase on Fannie and Freddie?

  • 20:12:38

    GARRETTYes. There are fee assessments to the government-backed and now currently government-bailed-out mortgage giants Fannie Mae and Freddie Mac. That fee will be assessed over a 10-year period, raising $33 billion. The cost of the payroll tax, the jobless benefits and the Medicare doc fix come to about $31.5 billion. The problem with that, Diane, is -- and this goes to Karen's broader point -- those costs are two-month costs right now. These fees are assessed and this revenue is raised over 10 years, OK?

  • 20:13:06

    REHMTen years.

  • 20:13:07

    GARRETTSo you're basically putting money out rapidly in two months and collecting it over the long horizon of 10 years.

  • 20:13:13

    REHMSo what are the chances of negotiating a longer, more permanent deal after the holidays?

  • 20:13:21

    STOLBERGYou know, I think -- I don't know. And I think this goes to Karen's point, which is that we're seeing in Washington this sort of never-ending cycle of kind of kick the can down the road, do something short term because we can't fix it for the long term. So they've made this agreement for a two-month tax cut, which, in essence, kicks the can down the road. And, yet again, just like they did with the debt ceiling, you know, deciding to form a commission to resolve that -- we saw what happened with that commission. I think that this will only breed further dissatisfaction on the part of...

  • 20:13:56

    REHMSo you're saying that they're not going to do anything?

  • 20:14:00

    STOLBERGI think they will have to do something, but I think that we're going to see the same kind of turning. I'll ask my colleagues if they agree. In two months, I think what we'll see is this very same battle playing out yet again over how they...

  • 20:14:13

    REHMBut considering what Republicans have already heard from constituents, aren't they likely to move forward to get out from under this doomsday cloud?

  • 20:14:27

    GARRETTThere are two key questions that have to be asked and answered internally at the White House and among House Republicans in the next two months: Does the House -- do the House Republicans want to fight on a one-year basis to pay for everything with spending cuts from the existing federal government? The pay -- the price tag for extending all of these things is about $185- or $190 billion.

  • 20:14:48

    GARRETTDo you want to find all the offsetting things that you need to find out of the government to do that? And if you do, do you want to walk into what Democrats will say as you won't raise taxes on millionaires, you want to take fundamental services away from the American people in order to provide a payroll tax cut that you should be financing by taxing the wealthy? Do Republicans want to walk down that road again?

  • 20:15:09

    GARRETTAnd does the president want to say, after having abandoned for a period of time the millionaire's surtax, bring that back in? One of the reasons House Republicans rebelled is they did not want to have the political argument yet again only two months from now. They knew there will be horrible politics. Well, welcome to it.

  • 20:15:23

    TUMULTYNow, they're going to have it two months from now.

  • 20:15:23

    REHMThey're going to have it.

  • 20:15:24

    GARRETTWelcome to it.

  • 20:15:24

    REHMAnd what about the Keystone pipeline, hasn't President Obama said he wanted to postpone that decision till after the election?

  • 20:15:34

    TUMULTYAnd this legislation does have a provision that requires him to make that decision in two months as well, which would be before that. But there is also language in there that would suggest that he could once again say my decision is to postpone the decision.

  • 20:15:50

    GARRETTThe route has been changed, and the State Department can legitimately say, under the powers assigned to it to review this, that there needs to be some assessment made of whatever impacts the changing of this pipeline route in -- will have, and that will probably push it off. So in 60 days, there will probably not be a definitive decision on this question.

  • 20:16:07

    REHMBut in the meantime, hasn't Canada come out and said, if you guys don't move forward with this Keystone pipeline, we're going to sell to China?

  • 20:16:20

    GARRETTWell, yes, they'll move -- the pipeline direction will suddenly shift from north to south, which it's currently now, and U.S. jobs -- we made a longer route north to south, and we'll go due west toward Vancouver and the port cities there. And all of the crude oil will be dealt with there and sold to -- it's going to be sold to overseas buyers anyway. Remember, there was attempt by Democrats, in the debate on this particular provision, to require all the crude oil come down, be sold in America and refined here.

  • 20:16:49

    GARRETTWell, no one would accept that because, as a business proposition, you can't tell TransCanada who it can sell and who it can't sell to. But be that as it may, the Canadian governor said, it's either -- goes north to south or due west. And you have jobs north to south. You have no jobs due west.

  • 20:17:05

    REHMSheryl?

  • 20:17:05

    STOLBERGSo this is exactly why we saw President Obama push this decision away. This is the last thing that he wants to do in a difficult election year when he has made promises to environmentalists already on the greenhouse gas emissions and global warming that he really hasn't been able to keep. So now, he's got a situation where, on the right, people are saying this pipeline could create jobs. And there is pressure to approve it. And on the left, to approve it would be a betrayal of his base.

  • 20:17:31

    STOLBERGAnd so I would vote with Major, who says -- and Karen, I think, who also said probably what will happen is, you know, in 60 days, I'll look this, and I'll say, well, where's -- he'll come up with some way to say we're still studying this.

  • 20:17:42

    REHMRight. And, you know, that whole question about just how many jobs this Keystone pipeline would create, I've heard anything from 65-, 100,000 jobs down to 2,000.

  • 20:17:58

    TUMULTYWell, and, you know, the estimates do range, but the fact is this is an issue that has -- on the one hand, the president's dealing with environmentalists, on the other hand, his dealing with the unions. I mean, they are in favor of seeing those jobs created. So this is an issue, I think, that is actually fracturing the Democratic base, and it's one of the reasons, politically, at least, putting the substance aside, why this is so difficult for the president to make.

  • 20:18:22

    REHMAnd you're also dealing with states' rights and aquifers and all the rest of it. Karen Tumulty of The Washington Post. Do join us. I look forward to hearing your comments and questions after a short break.

  • 20:20:04

    REHMWelcome back. Our first emailer in this last Domestic News Roundup of 2011 is Inggay (sp?) in Reston, Va. She says, "The Washington Post headline, 'House GOP surrenders on payroll tax cut' was inflammatory and divisive. Wouldn't it have been more reasonable to substitute agrees to surrender? I'm not a Republican, but I bristle to that war-like language. We are all Americans -- need to pull together, not demean or insult one another."

  • 20:20:48

    TUMULTYI don't know. I think surrender is pretty -- I mean, it also has the virtue of being accurate. This was a big fight this week. And they lost, and they completely reversed themselves. So I honestly don't see much difference between saying surrender and saying agrees to surrender.

  • 20:21:05

    GARRETTI wrote on our website last night that not only did John Boehner surrender, but he didn't even call Harry Reid to tell him. There wasn't even that moment were the two leaders, the two battlers -- this is all handled by -- at the staff level, which showed -- I wrote in the piece that John Boehner didn't even want to show up to surrender because it was, if not humiliating, a deep and embedded disappointment. I don't think -- look, surrender is an accurate word. That's what happened. And if you asked them internally, they would agree.

  • 20:21:34

    REHMAll right. Here's an email from Michael, who says, "Putting aside the warm, fuzzy feeling of who's team won, Democrats or Republicans, what has this tax cut done to the Social Security Trust Funds' viability?"

  • 20:21:55

    GARRETTWell, in the first year, remember, this payroll tax cut was proposed as a sweetener on the Democratic side during the lame duck Congress after the 2012 -- 2010 midterm elections. Republicans said, OK, if you want that, that's not really a high priority for us, but we'll take it. It was financed then by a debt allocation. Essentially, the federal government said, we will compensate the Social Security Trust Fund with general revenue either that we have or with debt obligations to come.

  • 20:22:24

    GARRETTWell, Republicans -- and overtime, Democrats came with a theory, well, that's probably not a really good idea. If we can offset it, let's try to offset it. And that was really the big element of the House Republican position in the last week. They had a bill that offset all the costs, according to Congressional Budget Office, and they liked that. It was a great pride of authorship that they had a one-year deal that was paid for -- not with higher taxes on anyone, but by restructuring and reforming and cutting federal spending.

  • 20:22:51

    GARRETTThey liked that. They wanted to hold on that and stick with that. That was a very complicated, long-term communications message that could not push through, and they had to walk back. That's going to come back, though, as we look at how to pay for the next 10 months. And there are some Republicans I talked to who were trying to find some glimmer of hope in all this and say, look, if we shift this debate back to size of government, shrinking it, paying for things we want to do, maybe we can back on the advantage. But that's a big maybe.

  • 20:23:17

    REHMAll right. Let's talk about the economy. We've just gotten word that -- from the AP suggesting that consumers spent a lackluster rate November as their incomes barely grew, suggesting that Americans may struggle to keep spending more into 2012. You've got some signs that suggests good news, some signs, lackluster. What do you make of it, Karen?

  • 20:23:51

    TUMULTYI keep harkening back to that famous quote from Franklin D. Roosevelt, where he got so tired of the economist telling him on the one hand, on the other hand, that he asked him to start sending him one-armed economists. The fact is there are some signs that the economy may be struggling out of this recession. The most hopeful one is the weekly unemployment figures that there are, in fact, fewer people filing new jobless claims.

  • 20:24:20

    TUMULTYBut, you know, there's also a number of signs. The third quarter GDP number was adjusted downward because it turned it's the same issue that was at work. Consumer spending was lower than had been previously estimated. So I think the economy right now is just in a very, very fragile position, which is one reason that this whole payroll tax debate took on, I think, the kind of gale force that it did.

  • 20:24:48

    REHMSheryl.

  • 20:24:49

    STOLBERGWhen Karen mentioned FDR, I was the thinking -- the other FDR quote leaped to mind, "The only thing to fear is fear itself." And thinking about it from an economic standpoint, I think we're in a place psychologically where we've had a year of kind of up and -- ups and downs, a little blip here, a little good news here. The unemployment rate goes down, and it goes up again. Housings stats are up, and they're down again.

  • 20:25:07

    STOLBERGAnd I think Americans are weary, but also nervous, and that's maybe why we're seeing a little pullback in consumer spending. And so I think the overarching issue is that, one, you know, it's taken too long to pull out of this recession, and people don't see an end in sight.

  • 20:25:27

    REHMBank of America has agreed to pay $335 million in a mortgage discrimination suit. What's it about, Major, and is it going to resolve these problems?

  • 20:25:43

    GARRETTWell, if it's approved by the court, it will. This is negotiated by the Justice Department with Bank of America. This is about Countrywide, which Bank of America purchased, some might say, at the barrel of a federal government's bailout gun back during the entire financial meltdown. As a part of TARP, there was a very brief and intense negotiation that Bank of America would have to purchase or would assume the obligations of Countrywide.

  • 20:26:11

    GARRETTUnder Countrywide's financing at the time, they systematically provided subprime mortgages to Latinos and African-American home purchasers in this country, often the first time they'd ever purchased a home, unfamiliar with all of the paperwork. And anyone -- and all of us here, I think, have probably been to one mortgage settlement or another. It's an enormous raft of paperwork.

  • 20:26:35

    REHMYou bet.

  • 20:26:36

    GARRETTAnd they intentionally put subprime mortgages together that charged higher fees, higher interest rates and put these first-time mortgagers in a more perilous economic position as their mortgage raised. 'Cause you get a teaser rate upfront, which is very low. You pay a low mortgage upfront. But as the mortgage adjusts, over time your payments increase.

  • 20:26:57

    REHMOf course.

  • 20:26:57

    GARRETTPeople don't understand this. It's a complicated thing. And so Countrywide did this a matter of course. And there's really no disputing that Bank of America doesn't dispute it. They're trying to move on. They've agreed to the settlement. And if the courts approve it, it's -- is going to stand.

  • 20:27:12

    STOLBERGYou know, when I heard about this settlement, three words came to my mind: Occupy Wall Street. I think that these kinds of actions, directing the poorest of us, the 99 percent, into loans that they can't afford, placing blacks and Latinos into precarious financial situations, this is what is fueling the anger against Wall Street, against banks, against the haves in our country.

  • 20:27:39

    REHMKaren.

  • 20:27:40

    TUMULTYIn this case, they had the data to prove it, too, that there were over 200,000 African-Americans and Latinos who were charged higher fees and higher interest rates than similarly situated whites. This was one instance where the data just completely made, I think, an open and shut case.

  • 20:27:59

    STOLBERGAnd in one case, a black customer, for instance, in Los Angeles paying $1,200 more in fees on a loan in a similarly qualified white borrower, it's -- you know, it's horrifying, frankly.

  • 20:28:11

    REHMIt truly is. And before we open the phones, one question I'm going ask our guests this morning at the end of the program is what they consider to be the most significant domestic issue of the year. You yourself might want to comment on that in your emails, your phone calls. You know, we did a program this week with Debbie Hersman of the National Transportation Safety Board on a ban on cellphone use. Secretary LaHood has now come out against that ban. Were you surprised at that, Sheryl?

  • 20:29:00

    STOLBERGNo. Not really, honestly. I think that -- I think it would be very difficult to take away people's cellphones. It would -- for the administration to do that, they would tick off the entire telecommunications industry, the car makers. You know, it could be viewed as an infringement upon states' rights because states have been legislating. There are all kinds of problems with doing this. One thing that really has struck me about this cellphone debate was we published a story that said there's kind of a new construct in thinking about cellphone use in cars. People used to say that it was like drunk-driving.

  • 20:29:34

    REHMYeah.

  • 20:29:34

    STOLBERGNow, they're saying it's like smoking. Experts are saying that the use of a cellphone in the car is like smoking, that there is something addictive about it. And I found out a very fascinating analogy, and I think, frankly, it's kind of true for a lot of people. People get in the car, and their first instinct is...

  • 20:29:50

    REHMFirst instinct: Reach for the phone.

  • 20:29:51

    STOLBERG...OK, I got -- who can I call?

  • 20:29:53

    REHMYeah.

  • 20:29:54

    STOLBERGAnd so if you think about it in that way, it's also why it would be hard for Ray LaHood to take away people's cellphones, right, sort of like the nanny state taking away your cigarettes, in a way.

  • 20:30:04

    REHMWell, and, as you said, here you've got the automobile industry establishing these Bluetooth phones in cars hands-free so you're not impeded.

  • 20:30:18

    TUMULTYBut the key finding of the NTSB was not about whether hands-free versus using regular cellphones. It was that the act of talking on the phone…

  • 20:30:27

    REHMRight.

  • 20:30:27

    TUMULTY...itself was the distraction. And, you know, I think that's true because if what -- if you're in a 5,000-pound machine, and -- it does seem like it should require your full concentration.

  • 20:30:41

    STOLBERGYeah.

  • 20:30:41

    TUMULTYSo I am going to make a resolution to leave my phone in my purse in the backseat.

  • 20:30:43

    STOLBERGI was going to say, is that -- yeah, yeah. Is there any driver who really can honestly disagree with that? It is a distraction, just the act of talking.

  • 20:30:51

    REHMWhat do you think?

  • 20:30:52

    GARRETTThree quick observations. I think the science is ready, but the public is not. The NTSB's data is pretty concrete on this point. Also, not every phone call is the same. As those on your program said, you can have a very stressful call about work, about family, about your child, and that can be a severe higher level of distraction than anything else that we would normally consider a minimum distraction of being on the phone.

  • 20:31:16

    GARRETTMy daughter, oldest daughter, and I were listening to the program, and she reminded me that there are times when I will text or email while -- not while I'm driving, but at a stoplight.

  • 20:31:26

    REHMSure.

  • 20:31:27

    GARRETTLast night, we were driving home, and I pulled off to the side of the road to answer an email.

  • 20:31:31

    REHMGood for you.

  • 20:31:31

    GARRETTAnd she sidled, and she quietly clapped her hands and said, thanks, dad.

  • 20:31:34

    STOLBERGAnd those of us who have teenagers and who are teaching them to drive really are trying to model good behavior as we are in our home.

  • 20:31:37

    REHMExactly. That's the other...

  • 20:31:38

    GARRETTExactly. That's exactly what I tried -- that's exactly what I -- why I pulled over and -- you know.

  • 20:31:43

    REHMAll right. Let's talk about the Iowa caucuses and New Hampshire primary. They're just weeks away. Sheryl, you and Karen both wrote long profiles of Newt Gingrich this week. What were you concentrating on, Karen?

  • 20:32:01

    TUMULTYWell, I did a piece. I was struck by the fact that, on the campaign trail, he makes this sort of jolting pronouncement. He says, I am the longest serving teacher of the senior military teaching one- and two-star generals, as he puts it, the art of war, which I thought was a pretty startling claim. And, presumably, if you're a one- or two-star general, you know a thing or two about the art of war.

  • 20:32:24

    TUMULTYBut I actually found, as I did research, that, in fact, Newt Gingrich has become a very important voice at the Pentagon over the last decades or so, even after he left the speakership, and that he -- it's a setting in which the more appealing aspects of his character, his ability to look at things from a big distance and in a big way has actually been very, very much appreciated.

  • 20:32:51

    TUMULTYAnd I was struck by, too, the fact that he's been largely doing this behind the scenes, but going back to the mid-1980s. He goes out to this, in fact, a training program for one- and two-star generals and admirals at Maxwell Air Force Base and does give these four-hour...

  • 20:33:09

    REHMTwo- to four-hour lectures.

  • 20:33:11

    TUMULTYYes. And, apparently, it was described to me by one retired four-star general who took it as a tour de force.

  • 20:33:17

    REHMInteresting. And you're listening to "The Diane Rehm Show." Yours was a different take.

  • 20:33:25

    STOLBERGMy piece explored what I called the paradox of Newt Gingrich, which is that this is a man who led the conservative revolution of 1994, yet conservatives turned against him. By the end of his four-year speakership, he was denouncing House conservatives as the perfectionist caucus, and they were pushing him out the door. And conservatives today are very suspicious of him.

  • 20:33:45

    STOLBERGAnd my story traced his roots, his entry into politics as a Rockefeller Republican, someone who campaigned against Richard Nixon and then, later on, sought Nixon's counsel...

  • 20:33:57

    REHMYes.

  • 20:33:57

    STOLBERG...on how to create the Republican revival that he, Gingrich, hoped to lead.

  • 20:34:01

    REHMHe told him to get a group.

  • 20:34:03

    STOLBERGHe told him -- he went to see -- it was 1982. Republicans had lost 26 seats in the House. Gingrich went to New York to see Nixon in exile, and Nixon said to him, if you want to be a majority, you've got to be noisy, you've got to attract attention for yourselves, and you've got to form a group. And Gingrich goes out, and he forms a group called the Conservative Opportunity Society, which he then used, over the next decade, to carry Republicans to power.

  • 20:34:29

    STOLBERGBut along the way, if you examine Gingrich's policy positions, his thinking, his behavior, you can see that he is really, frankly, far more moderate than a lot of people might think...

  • 20:34:42

    REHMWell, he's...

  • 20:34:43

    STOLBERG...on some things.

  • 20:34:44

    REHMOn some things.

  • 20:34:44

    STOLBERGOn some things. He's anti-tax. He's very hawkish on defense, but he is an environmentalist. He is someone who believes in an activist government, as he will say. He's often citing the transcontinental railroad and the land-grant college systems as ways that the American government, in the past, has used the bureaucracy to advance economic growth. And he's not opposed to that kind of aggressive use of government.

  • 20:35:09

    REHMAnd, Major Garrett, you now have Newt Gingrich and Ron Paul running pretty darn close out there in Iowa. Ron Paul has clearly risen in the ranks.

  • 20:35:24

    GARRETTAnd don't forget Mitt Romney. Mitt Romney, according to all the polls I've read in the last week, still remains a competitive and viable force in Iowa. So you have those three and then somebody else. The Ron Paul phenomenon is not a surprise to me, is not to anyone who was out there four years ago. I was covering the Democrats, but I saw the Ron Paul folks get on -- clamor on to their buses and go canvassing at 6 a.m. in the frigid morning of Des Moines, Iowa. They're there. They're going to be a force. But now Ron Paul is going to take some heat and has begun to take some heat in the last couple of weeks.

  • 20:35:56

    REHMTell me about that interview yesterday with Gloria Borger on CNN, not so much about the fact that he walked off the set. But what was it she was pointing to?

  • 20:36:12

    TUMULTYThere were a number of newsletters that used to go out under his name during, I believe, in the 1980s that other people writing in these newsletters would write some pretty far-out and racist things in the newsletters. And so Gloria on -- Gloria Borger on CNN attempted to question him about some of these writings, and he claimed that he not -- that he basically never read his own newsletters. Well, I think that is a kind of claim that can -- you know, gets you, that doesn't sort of pass the test of the presidential...

  • 20:36:46

    REHMHe is said to have called the Rev. Martin Luther King a world-class philanderer, criticized the U.S. holiday bearing King's name as Hate Whitey Day, said that AIDS sufferers enjoy the attention and pity that comes with being sick. Can these quotes actually be attributed to him?

  • 20:37:14

    GARRETTNot to him directly, but if you go to reasonmagazine.com, they have an excellent piece that sort of really details the lengthy history -- I read it this morning -- about what Ron Paul has said previously about these newsletters. And there's a great C-SPAN clip of an interview done with him where he talks about these newsletters and doesn't say anything about the fact that he doesn't know what's in them or he doesn't have any authorship of them. You listen to him, and it sounds like, not only knows what's in them, but he's happy about it.

  • 20:37:40

    REHMMajor Garrett of National Journal. When we come back, your calls. Stay with us.

  • 20:40:04

    REHMAnd it's time to open the phones, your questions, comments, 800-433-8850. First to Dartmouth, Mass. Good morning, John. You're on the air.

  • 20:40:19

    JOHNGood morning, Diane. Thanks for taking my question.

  • 20:40:21

    REHMSure.

  • 20:40:22

    JOHNIt's very quick. It's just -- if Ron Paul wins the Iowa caucus convincingly and begins to gain momentum that, let's say, can be sustained, not like the temporary momentum that a lot of the other Republican candidates have enjoyed the past year, do you and your guests think the Republican Party might support him? Or do you think they'd refuse to?

  • 20:40:45

    REHMKaren.

  • 20:40:46

    TUMULTYI am very skeptical. But ultimately, the Republican Party can come around to supporting Ron Paul, and it's primarily because of his positions on foreign policy. It's just hard -- difficult to imagine that the, you know, majority of the party is going to come around to support a candidate who says, for instance, that it's not a big deal if Iran gets a nuclear weapon and also who has as much of a sort of -- even though, also, Jon Huntsman wants to get out of Afghanistan right away. But the sort of degree to which -- the degree to which he has also been an anti-war candidate.

  • 20:41:23

    STOLBERGI agree with Karen. I think Ron Paul represents a particular wing of the Republican Party, the libertarian wing that really -- we have never seen, I don't think, a presidential nominee who is coming from that wing of the party. I just think that the party is going to have to embrace a more centrist candidate for the Republicans.

  • 20:41:41

    REHMOK. But what would happen if Ron Paul not only won Iowa but went on to win New Hampshire?

  • 20:41:51

    STOLBERGWell, you know, honestly, here's my prediction. If Ron Paul went on to win Iowa, what we would see is what we've seen with all these other candidates. So just an intense level of scrutiny, the kind of scrutiny that Newt Gingrich is now getting, the kind of scrutiny that, frankly, Ron Paul himself is beginning to get over these memos that you earlier referenced. And we would -- and I think that, you know, some of these kinds of things might be viewed as disqualifiers, this -- the racially tinged memos that he sent out. I'm not sure the Republicans would want to run a candidate with that in his past.

  • 20:42:24

    GARRETTAnd I agree entirely with what Karen said about Ron Paul and policy, but even on domestic policy. Look, there are not five Republicans who are currently in the Congress who would be willing to vote -- actually vote for $1 trillion in spending cuts in the first year of a Ron Paul presidency. I mean, it's just not going to happen. That's politically untenable. He can talk about it all he wants, but there aren't any votes for that all in a Republican conference.

  • 20:42:42

    REHMAll right.

  • 20:42:43

    GARRETTAnd the other thing is this is a long campaign. The Romney campaign has built itself entirely for something that goes to April and June. They intend to get delegates every step of the way and write out with organization money whomever rises and falls. And so far, you have to say they've been pretty good at that.

  • 20:42:59

    REHMAll right. To Steve in Highland, Mich. Good morning you. Steve, are you there? He's not. Let's go to Wright, Mass. and to D.B. Hi there.

  • 20:43:16

    D.B.Hi, everybody. I love the show. I love the civil exploration that you always do.

  • 20:43:21

    REHMThank you.

  • 20:43:23

    D.B.My question is about payroll tax cuts and the Social Security...

  • 20:43:28

    REHMOh, dear. Telephone dropped. We've been having some problems with these phones in the last few days. Let's go to Fairport, N.Y. Good morning to you, Joyce.

  • 20:43:43

    JOYCEGood morning. I want to comment on the business that's going on in Washington and particularly you might discuss with what we're...

  • 20:43:52

    REHMLet's see if we can get this back again. Joyce, are you still there?

  • 20:43:58

    JOYCEYes, I am. Can you hear me now?

  • 20:43:58

    REHMOK. Yes.

  • 20:44:01

    JOYCEOK, fine. I wanted to comment on the opposition we're seeing that's going on with the Republican Party, which just finally came to this dramatic conclusion and how they have opposed and vowed to oppose everything that's being done by the president or the other party and say that he just can't lead, how they take -- have excessive self-interest to pursue, mainly, their own selfish goals, disregard the feelings of others, et cetera.

  • 20:44:26

    JOYCEAll of these things fit the personality disorder description of narcissistic personality disorder. And what does it take for our country to wake up and see that we have a political party that is acting in a way that can be described as what is a ratchet knife mental emotional disorder...

  • 20:44:43

    REHMWell, I fear that what we have here this morning -- I don't really fear it -- are journalists and not psychotherapists, so trying to analyze politicians and the mental capacities or capabilities leading them to make the decisions they do is not easy.

  • 20:45:05

    STOLBERGBut I would also argue that the Republican Party is less of a unified force than we have ever seen it in my lifetime certainly. It is torn between its establishment wings and its Tea Party wing. It is -- it's basically a mess right now. And that's one of the reasons that we have seen so much disarray in a presidential primary process which is just normally kind of a model of organization.

  • 20:45:31

    GARRETTWell, one thing I would say -- operationally, the Obama White House would probably say when they have to go up against Republicans in the Senate, they're pretty organized, pretty unified and pretty much in opposition on a rather unified basis, except on this payroll tax issue. I mean, one of the problems that John Boehner faced is what Mitch McConnell faced. He had stray cats all over the field from the beginning of this payroll tax debate.

  • 20:45:51

    GARRETTWhen Republican alternatives came to the floor, half the Republicans voted against them. McConnell could never hold his team together, even if he wanted to. And I'm not so sure he did. So the Senate Republicans were running an...

  • 20:45:59

    REHMSow what does all this say about John Boehner's leadership?

  • 20:46:04

    GARRETTWell, that it -- that -- two things. One, John Boehner looked at the deal that Mitch McConnell struck, knew it was not perfect, but thought, for that moment, it would be better than waging this ultimately futile war on the last week before Christmas. He also tried to tell his Republican members, look, if we do this on a two-month basis, let's have a two-month argument with the White House about job creation and deficit reduction. Let's just do it every two months.

  • 20:46:29

    GARRETTIf that's the road they want to go down, let's try to work it out on our terms or at least somewhat on our terms. They did not listen to him. They would not follow him. And I've written this at National Journal. The essential difference between Newt Gingrich as speaker and John Boehner as speaker is, when Newt Gingrich was speaker, at least 150 House Republicans said to themselves, I'm here in Washington, and we have a majority because of him. He led us to this promised land. Freshman House Republicans look at John Boehner and say, you're in power because of me.

  • 20:46:55

    REHMYeah.

  • 20:46:56

    GARRETTI'm the fulcrum, you're not. And that's the enormous permanent difference.

  • 20:47:00

    REHMSheryl.

  • 20:47:00

    STOLBERGI think that's right. And I have to wonder if John Boehner isn't reassessing his own approach to the speakership. And if this wasn't a turning point, as I mentioned earlier, here he -- we saw him say, basically, this is what we're doing, and I'm making a decision. And that is -- that has not been his style in the past. And because that has not been his style in the past, because he has allowed for dissenting voices, there's been this kind of churning within the -- within his caucus that has basically positioned him as kind of a weak leader, frankly.

  • 20:47:28

    REHMAll right. Two points. First, we have a tweet that, domestically, the disastrous weather situations that we've had all over the nation is the most important story of 2011. And now to John Boehner and to Andrew. Good morning. You're on the air from Cleveland, Ohio.

  • 20:47:55

    ANDREWGood morning, Diane. You asked earlier in the program what happens to John Boehner, and if I might quote a Christmas classic, I think all through the capital you'll hear Democrats say that John Boehner's heart grew three sizes that day.

  • 20:48:11

    GARRETTThat was something that I believe a member of Congress put out. Yeah. I think it was Ed Markey of Massachusetts. He put out the -- one of the last stanzas of Dr. Seuss' "The Grinch Who Stole Christmas" along those lines.

  • 20:48:19

    REHMYeah.

  • 20:48:22

    GARRETTAnd since we're going down this road, at the National Journal website right now is something I wrote yesterday, which is a stanza by stanza "'Twas the Night Before Christmas" on this entire payroll tax thing. I'm not saying it's great, but I did it.

  • 20:48:35

    TUMULTYMajor, we had no idea you were a poet.

  • 20:48:36

    GARRETTI invite you to take a look at it. And one other thing, Diane, you had a couple of emails. I was wrong on something I said earlier in the show, and I want to correct it...

  • 20:48:42

    REHMOh, good.

  • 20:48:43

    GARRETT...because they brought it to my attention. Bank of America acquired Countrywide not in the clutches of the TARP bailout situation, completely on its own, willingly, eagerly in June of 2008. It acquired Merrill Lynch in September 2008. That was much more closely realigned to that acquisition that was done under duress. So your listeners were correct. I was incorrect, and I apologize.

  • 20:49:05

    REHMI'm glad you did. Let's go to Jason in Indianapolis. Good morning to you.

  • 20:49:12

    JASONHi. Thank you for taking my call.

  • 20:49:14

    REHMSurely.

  • 20:49:15

    JASONHey, I just had one comment and then a quick question for your colleagues there. I just wanted to ask or point out that it seems glaring to someone like me that...

  • 20:49:32

    REHMLost another call. This is maddening. Call us back, please. Let's go to Miami, Fla. Good morning, Bob.

  • 20:49:43

    BOBYes. How are you doing, Ms. Rehm?

  • 20:49:44

    REHMGood.

  • 20:49:44

    BOBAnd I just wanted to say, you know, when we look at the situation that's happening, you know, we got -- we always got to look in the mirror and blame ourselves. We -- the debt independence that moderate Republicans voted these people in and what's been going on, it's been (word?). I -- and to this point about this payroll tax, I'm trying to figure out, how is it that Kyl can go on the news, Fox News, and say that $678 billion in tax cuts for the wealthy can be unpaid for while we have a big argument over the payroll tax. Please explain it to me. Bye.

  • 20:50:22

    REHMCan anybody do that?

  • 20:50:25

    GARRETTThat's a very difficult place for Republicans to be, and that's how this issue has been turned around in a couple of basis. Republicans did not think it was necessary to pay for tax cuts under the Bush -- in the Bush era, either the income tax bracket cuts or the capital gains or investment tax cuts because they argue those will, over time, create revenue because the economy will expand. Well, then the president came along and said, what about a payroll tax?

  • 20:50:48

    GARRETTWell, no, we got to pay for that. Well, wait a minute, doesn't -- don't panic. Don't tax cuts pay for themselves? That's one part of the ideological argument, and the other one is they were trapped in this payroll tax for the middle class versus taxing the very wealthy. And it put them, for the first time in my career in Washington since the first tax meltdown I saw for Republicans -- when I first got to town in 1990, George Herbert Walker Bush broke his tax pledge, raised taxes, not -- and has not been since then that I've seen Republicans in such difficulty on taxes.

  • 20:51:15

    STOLBERGYeah, you know, when Republicans are on the losing side of an argument about cutting taxes, they are in a bad spot.

  • 20:51:24

    REHMKaren, do you think that this argument about raising taxes on the top income earners in this country is gaining traction in part because of the Occupy Wall Street?

  • 20:51:45

    TUMULTYYou know, I don't know if Occupy Wall Street is driving it or reflecting it. But I think that -- and I think it is difficult to have an argument over raising taxes in the middle of a recession, but that, I think, right now is being subsumed by the fact that people are beginning to recognize the fact that income inequality in this country is expanding. And it is -- you know, people also don't feel as though their children are going to have as good of a life as they had.

  • 20:52:18

    REHMAnd when you see the stats about how the top incomes in the country have increased percentage-wise versus those at the lower end of the income spectrum, it's breathtaking.

  • 20:52:34

    TUMULTYWell, it also -- it feeds this idea that somehow the game is rigged against me.

  • 20:52:39

    REHMExactly.

  • 20:52:40

    GARRETTAnd if you listen to those who are at the highest end, who are in the business world, they will say, not to a person, go ahead and raise my taxes because I need a middle class that can purchase things...

  • 20:52:52

    REHMOf course.

  • 20:52:52

    GARRETT...because if the middle class can't purchase things from me or my company, I don't make any money. And I like to make money, and I want to continue making money.

  • 20:52:59

    STOLBERGYeah. And I think this is one argument on taxes where President Obama is winning. Polls show that the majority of Americans do support raising taxes on millionaires.

  • 20:53:07

    REHMAnd his poll numbers are going up.

  • 20:53:12

    STOLBERGYes, they are and partly because, I think, Americans viewed him as the more reasonable actor in this payroll tax debate. And we're seeing Republicans kind of eating themselves alive, right? They're -- you know, they're at war with one another. And he held steady. He held firm. And, certainly, Democrats are feeling a lot better about him after this debate.

  • 20:53:32

    REHMAll right. Let's go back to the phones. You're listening to "The Diane Rehm Show." And keep our fingers crossed. Let's go to Scott, who's in Jacksonville, Fla. Good morning.

  • 20:53:48

    SCOTTGood morning, Diane. Thank you for having me on.

  • 20:53:50

    REHMSure.

  • 20:53:50

    SCOTTMy question to the reporters is, how did we get to the point where our fiscal stability of this country has become so fickle? Well, I know how (unintelligible) it is consumer driven. But how do we -- I mean, why aren't the bigger questions being answered? It's become so fickle that people's basic emotions, like fear and blah, blah, blah, which we all know fear (unintelligible) driving the Bush administration -- I mean, but how did it become so up and down and wishy-washy?

  • 20:54:17

    SCOTTHow come it's not more secure than it is, one, which I think is a bigger question. And two, how do you get people to quit buying cheap crap made at Wal-Mart? No offense to Wal-Mart, but...

  • 20:54:30

    REHMNo offense to Wal-Mart.

  • 20:54:31

    STOLBERGI think I would take the former and you would -- you know, I think most economist would sort of take the long view and look back at, you know, the government had a surplus. This is an argument certainly that President Obama is making. The government had a surplus when President Clinton left office. We've had two wars that were very, very expensive.

  • 20:54:49

    REHMAnd off the books.

  • 20:54:50

    STOLBERGWe had -- and off the books. We had some earmarks and government spending, the expansion of the Medicare prescription drug benefit, which Republicans voted in $400 billion over 10 years without paying for that. And then we had the housing bubble burst. Our economic growth was built on credit, and it burst. And here we are with no money to pay for it and for what we bought.

  • 20:55:15

    REHMAll right. Your most significant domestic story of the year, Karen.

  • 20:55:22

    TUMULTYWell, I don't think it can be anything but the economy and the degree to which the economy, as I said earlier, has really shaken people's faith in the future. And that seems to be driving every other issue.

  • 20:55:37

    REHMAnd faith in government.

  • 20:55:40

    TUMULTYAnd -- well, government has completely lost its ability to fix anything.

  • 20:55:45

    GARRETTDebt. Debt is the biggest story, in my opinion, in this country, and it's the biggest story globally -- debt at the individual level, debt at the government level. The only ones who are not in debt are the big banks or the large corporations. They have balance sheets. You can read them. But governments are in debt at the state level, at the federal level, and individuals are in debt. And it's that pressure of debt and relieving debt.

  • 20:56:07

    GARRETTIf you were going to relieve that pressure, you spend less. And if you spend less, the economy suffers. You may put your own balance sheet in better shape, but the economy suffers along with it. I think we are in a period of debt realignment and resetting of our own behavior in this country that's going to create economic slackness for quite some time.

  • 20:56:24

    STOLBERGI would say this is not the biggest story, but one of the most compelling stories for me is the fundamental philosophical divide that we are seeing in American society today between the Republican view of, you know, smaller government and President Obama's view of more activist, energetic government. This is a divide that we need to bridge and somehow reconcile, and it's going to percolate all through this coming election campaign.

  • 20:56:46

    REHMSheryl Gay Stolberg of The New York Times, Major Garrett of National Journal, Karen Tumulty of The Washington Post, Merry Christmas, Happy New Year, Happy Hanukkah to all. And just to restate, we are going to take next week off. We'll bring you some of our favorite programs while we celebrate with our families. I hope you do as well. See you on Jan. 2. Thanks for listening, all. I'm Diane Rehm.

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