The U. S. economy created 146,000 jobs last month. That pushed the unemployment rate down to 7.7 percent, a four-year low. With just a few weeks before the fiscal cliff deadline, President Barack Obama is sticking with his demand that tax rates rise for the wealthiest Americans. ea party favorite, Jim DeMint of South Carolina, said he’s resigning the Senate to head up a conservative think tank. Former President George W. Bush calls for a “benevolent spirit” in the debate over immigration. And the legacy of jazz pianist Dave Brubeck. Shawna Thomas of NBC, Naftali Bendavid of The Wall Street Journal and Lori Montgomery of The Washington Post join Diane to talk about the week’s top national stories, what happened and why.

Guests

  • Naftali Bendavid national correspondent for The Wall Street Journal.
  • Shawna Thomas White House producer for NBC News.
  • Lori Montgomery financial reporter, "The Washington Post"

Friday News Roundup Video

Sen. Jim DeMint, a Republican from South Carolina, announced his resignation from the Senate on Thursday. The panel discussed the implications of his resignation on the ongoing fiscal cliff negotiations and how it affects the tea party movement. Naftali Bendavid, national correspondent for The Wall Street Journal, said DeMint no longer fits comfortably in Congress because the climate there is moving more toward compromise. Shawna Thomas, White House producer at NBC News, said the tea party lost influence as a result of the 2012 national elections.

Transcript

  • 10:06:56

    MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Fiscal cliff talks resume between Republicans in the White House after nearly a week away from the negotiating table. The unemployment rate falls to 7.7 percent, a four-year low. And former President George W. Bush calls for immigration reform.

  • 10:07:19

    MS. DIANE REHMHere with me for the domestic hour of the Friday News Roundup: Naftali Bendavid, national correspondent for The Wall Street Journal, Shawna Thomas, White House producer for NBC News and Lori Montgomery, financial reporter for The Washington Post. Do join us, 800-433-8850. Send us your email to drshow@wamu.org. Follow us on Facebook or send us a tweet. Good morning, everybody.

  • 10:07:53

    MS. SHAWNA THOMASGood morning.

  • 10:07:53

    MS. LORI MONTGOMERYGood morning.

  • 10:07:54

    MR. NAFTALI BENDAVIDGood morning, Diane.

  • 10:07:55

    REHMNaftali, tell us about these latest job numbers. What have we learned?

  • 10:08:00

    BENDAVIDWell, the economy made 146,000 jobs, and the unemployment rate dipped a little bit to 7.7 percent from 7.9 percent. So things are better than the expected jobs report. You know, for months, we've been looking at the jobs report, engaging how they would affect the presidential race, and now that's not really any more a factor, of course.

  • 10:08:21

    BENDAVIDSo now, people are sort of looking at how it might affect the fiscal cliff talks, not just that it's going to have a huge impact, but maybe the big take-away is that it's a little bit of a better jobs report than was expected but still not what the economy needs to really flourish and grow.

  • 10:08:32

    REHMLori, was it a surprise?

  • 10:08:35

    MONTGOMERYI think it was a surprise because people were expecting it to be a lot worse than it was. But there are still big concerns about the economy, particularly as we head into this fiscal cliff situation. Business investment has dropped off dramatically in the last couple of quarters, and economists think that it may be because people are so uncertain about what's going to happen with taxes in the New Year.

  • 10:08:56

    REHMShawna, how important are these jobs reports to President Obama now?

  • 10:09:04

    THOMASWell, I think one of my CNBC colleagues joked yesterday that will anyone makes some sort of a fuss about these anymore now that the election is over. I think they are important to him. It is trending downward. It continues to trend downward, the jobs rate. The White House wants to tout that, and that's great. But, you know, I was looking at the numbers.

  • 10:09:22

    THOMASLast month's numbers actually were re-revised down. They created 10,000 less jobs than they thought they did. Two months ago, they created 30,000 less jobs than they thought they did. The rates stay the same, but the job creation is going down. And so it will be interesting to see when next months job report comes out what actually happened this month.

  • 10:09:43

    BENDAVIDBut the other thing that this highlights, I think, is that the economy is, you know, while it's improving, it's not improving at an incredibly dramatic rate. And some of that could be due to the fiscal cliff talks that we've all been kind of focused on.

  • 10:09:55

    BENDAVIDIf, let's just say, to take the best case scenario, Congress and the White House agree on something that's a solid deal, that, you know, both sides are relatively happy with and it provides some real stability so that businesses feel more certain about their tax situation, their investment situation, who knows? But we could see a little bit of a leaping in the economy right after that.

  • 10:10:14

    REHMSo Shawna, where are we on this fiscal cliff negotiations?

  • 10:10:21

    THOMASIt seems that we are basically where we started. We had an offer from the president that was basically like the budget that came out in February. So his fiscal year 2013 budget, a couple of differences, but for the most part, he wants to raise revenues by raising rates on the top 2 percent. You have a counter offer from the speaker and House Republicans saying, here's $800 billion in revenue without raising rates on the top 2 percent.

  • 10:10:50

    THOMASOur problem right now, which has been our problem the entire time, is the president wants to raise tax rates. Speaker Boehner does not. Where do we come into the middle? And the thing that creates the fiscal cliff is, at the end of the year, the rates are going up if they do nothing.

  • 10:11:03

    REHMSo Lori, have we come down to negotiations between Speaker Boehner and the president?

  • 10:11:12

    MONTGOMERYI'm not sure we're quite at that stage yet. But the word from the speaker's office yesterday was that the lines of communication are open again since the president called Speaker Boehner on -- what day are we at -- Wednesday, Wednesday evening. And this is something that they had been waiting for because Republicans -- there are three pieces that have to come together in this deal: taxes, entitlement cuts and the debt ceiling.

  • 10:11:39

    MONTGOMERYAnd Republicans have been reluctant to talk about taxes until President Obama talks about entitlement cuts. So each side had been waiting for the phone to ring. Republicans are offering their tax plan, Obama offering an entitlement cut plan. And on Wednesday, the phone rang. It was President Obama. Speaker Boehner picked it up. We don't know what was said. But since then, they have been indicating that at least things are starting to roll again.

  • 10:12:05

    REHMBut do I understand correctly that, at Boehner's request, Senate leaders and Nancy Pelosi have been excluded from these conversations?

  • 10:12:18

    BENDAVIDWell, in the sense that they're not directly involved in the conversation. They're certainly being consulted and being kept in the loop. But it's true that these -- I mean, if you even talk to people on the Senate, they'll say that the negotiations ultimately come down to the president and the speaker. I mean, I think one way to look at this is we're kind of entering a little bit of thaw in maybe the third and final phase of the talks.

  • 10:12:39

    BENDAVIDYou know, initially, everybody came out and was talking about compromise and conciliation and was saying nice things. Then we have this two-week period where everybody were screaming at each other and talking about how disappointed they were that the other side was putting partisanship over country.

  • 10:12:50

    BENDAVIDAnd now, just in the past 24 hours maybe, I think were starting to hear a little bit more about how there's room for talking. And, you know, it's right on schedule. We're two and a half weeks before Christmas, and I think people are ready to settle down and start talking. So without making any overly optimistic predictions, you do get this sense that there's a little bit of movement where there hadn't been.

  • 10:13:09

    REHMAnd the president continues to hold sort of campaign-style events, Shawna.

  • 10:13:17

    THOMASYesterday, he went out to Northern Virginia and met with a family, a typical middle-class family who would lose $2,000 if these tax cuts were to -- if the tax rates were to go up on everybody. So he's continuing that. He's going to go to Michigan on Monday and hold another event at a company and take a tour of a company that's doing well. And this business could be affected badly by tax rates going up. And he'll give a speech, kind of what we saw in Pennsylvania last week. And he's going to continue to do these things because he thinks it gives him the upper hand.

  • 10:13:47

    THOMASAnd today, the vice president is having lunch with middle-class families. We got an email this morning saying it's going to be a group lunch of some of the people who rode into the White House with the My2k hashtag on Twitter. And they still won't tell me where that lunch is. I'm hoping to find that out soon. But they're going to continue to do these events. And the president, unlike the speaker, can go out and do these things and get play 'cause he has a contingent of press that follows him around everywhere.

  • 10:14:15

    REHMAnd, Treasury Secretary Geithner told CNBC that the president is willing to go over the fiscal cliff.

  • 10:14:24

    MONTGOMERYWell, that's got to be there position, and this is certainly the position that Senate Democratic leaders have taken. You have to remember, two years ago, the president caved at this point. Two years ago when we were extending the Bush tax cuts, the economy was in the dumps, and he agreed to do it even after campaigning on ending tax cuts for the rich.

  • 10:14:44

    MONTGOMERYThis time, he's fresh off an election victory. Democrats in Congress are determined that they're not going to get rolled again on this issue. So they've got to take that position even if they don't -- I mean, I can't imagine that the White House generally wants to risk another recession by going over the cliff.

  • 10:15:02

    REHMAnd what about the debt ceiling issue?

  • 10:15:06

    MONTGOMERYWell, the debt ceiling issue, you know, it's another whole can of worms because -- all right. So the debt ceiling is legally set at $16.4 trillion. We are now above $16.3 trillion. By the end of the year, we're probably going to hit that cap. Now, Treasury can do some stuff to, you know, manage the money so that we can pay the bills without more borrowing. But sometime in February or March, we're going to need to borrow more money.

  • 10:15:31

    MONTGOMERYSo we got two options. Either we leave the cap now as part of this big deal where everybody swallows something bad but gets something good or we don't get a deal now, we're all mad at each other in January, and we're facing another big fight over this ugly, you know, economy-rattling thing. And everybody, no matter what they say, I believe, genuinely would like to get this all done before that.

  • 10:15:57

    REHMAnd what about the president saying he wants to be able to lift this debt ceiling without congressional approval, Naftali?

  • 10:16:06

    BENDAVIDYeah, he's asked to have this be a permanent method that the debt ceiling would be raised. Essentially, he could do it unilaterally. I mean, Congress would get to vote on it, but they couldn't really do much to block it. And I think that that's in part because he sees the fight over the debt limit increase that happened in August 2011 as one of the low points of his presidency. It really did not turn well.

  • 10:16:24

    BENDAVIDActually, on neither side, things had turned out well for them, but certainly, the White House feels like they were up against the wall, there wasn't much they could do, they were not happy with the deal that they ended up with. And they want to make sure that never again do the Republicans have that kind of leverage to force spending cuts that the White House doesn't want. That's why they've put in this request.

  • 10:16:41

    BENDAVIDI don't think they'll get a permanent one. My guess is that's not going to be part of a deal. But certainly, I'd be surprised if, you know, a debt ceiling increase for a little bit of time wasn't baked into this deal so it doesn't come up again. They don't want another cliff essentially two months after getting past this one.

  • 10:16:54

    REHMAnd what about so-called entitlements? I had thought the president want to put those off and deal with those separately. Are they going to be baked into this cake?

  • 10:17:08

    MONTGOMERYWell, that's one of the big questions. I mean, there are a couple of big questions. One is what should the Republicans demand in return for the debt ceiling increase? But another is what are Democrats willing to do on things like Social Security and Medicare? And you hear different things. I mean, Sen. Dick Durbin has said, this is also complicated. It affects so many millions of people. Let's agree to save a certain amount of money, but let's do the policy next year when we have more time and we're not under the gun.

  • 10:17:35

    MONTGOMERYI don't think that that is necessarily going to satisfy Republicans. They're going to want some structural reform to one of these programs such as adjusting the inflation rate for Social Security benefits, raising the eligibility age for Medicare. They're going to want one of those things in exchange for raising tax rates.

  • 10:17:54

    REHMAnd are they going to get it, Shawna?

  • 10:17:56

    THOMASI think it's a saving-face maneuver for the Republicans. They need entitlement reform to say they didn't cave on something like the debt ceiling and either one of those things. The president had talked about before these things are a possibility last year in the grand bargain that never came to be, and they sort got taken off the table with the FY 2013 budget. But they're -- they are not crazy things. They are not things that have not been discussed before. But the White House has said very clearly that they don't want Social Security to be part of this deal.

  • 10:18:30

    REHMShawna Thomas, White House producer for NBC News. When we come back, we'll talk about the announcement of Jim DeMint's resignation from the Senate, his move to a conservative think tank and how that weaves in to this whole narrative. Stay with us.

  • 10:20:05

    REHMAnd welcome back to the domestic hour of our Friday News Roundup this week with Lori Montgomery, financial reporter for The Washington Post, Shawna Thomas, White House producer for NBC News and Naftali Bendavid, national correspondent for The Wall Street Journal. Here's an interesting email from Evan, "Is it possible for Speaker Boehner to compromise without endangering his leadership position with the Republicans in the House?" Lori.

  • 10:20:45

    MONTGOMERYWell, that's a great question, and I think that's something that they're extremely worried about. That's why they feel like they've got to craft some kind of a deal that can get at least half of their caucus. I was talking with some conservative tax experts yesterday, who said -- and my question was would it be easier for them to just capitulate completely, go back up to 39.6, pass the bill that Democrats have already passed in the Senate or to compromise on something lower than 30 -- 39.6 as the top rate, like 37 percent?

  • 10:21:18

    MONTGOMERYAnd his theory was they would much rather have something that they can get their people to vote for an affirmative plan that they can represent as a Republican victory than to, as he put it, give Nancy Pelosi control of the House floor.

  • 10:21:33

    REHMNaftali.

  • 10:21:34

    BENDAVIDI mean, I do think that's a very difficult question that John Boehner has had to negotiate in some sense since he became speaker. There's always been this issue that on these compromises, he loses 40, 60, whatever it is of his own Republicans, and he's got to get there for a certain number of Democratic votes. But the key issue is can he maintain enough of a majority of his folks that he doesn't look like -- like it was a vote of no confidence in him?

  • 10:21:58

    BENDAVIDAnd so I think that's right now the difficulty that he is navigating. He knows he's going to need Democrats. He knows he's going to have Republican defections. But he's got to have that critical mass so it doesn't look like a rejection of him in terms of the number of Republican votes that he gets for whatever deal is ultimately reached.

  • 10:22:12

    MONTGOMERYBut he's got -- I mean, one thing he's got going for him this time that he hasn't necessarily had in the past is the entire leadership team, including Eric Cantor, the majority leader who has, at times, seem to be at odds with Boehner, signed that letter the other day making the offer to President Obama. He's got Paul Ryan onboard. I mean, all of these guys who, in the past, might have splintered the caucus seem to be behind him.

  • 10:22:36

    REHMAll right. Let's talk for a moment about the resignation of South Carolina Republican Sen. Jim DeMint. What implications might that have for these fiscal cliff negotiations? Naftali.

  • 10:22:53

    BENDAVIDWhile Jim DeMint was kind of early in this approach that the Tea Party has now popularized by going after your own party establishment if you feel that it's not being sufficiently conservative enough. And he really ended up being kind of a major figure. And during his tenure, the very conservative part of the Senate caucus, you know, increased. Not to say that it's totally due to him, but he kind of exemplified it and, to some degree, led it.

  • 10:23:15

    BENDAVIDAnd I think what's happening is that the whole temperament and climate in Congress is more toward compromise right now. And it's not a place that he fits comfortably in. So you have that caucus, you know, Ted Cruz, for example, the senator from Texas who's coming in, Mike Lee from Utah, Rand Paul from Kentucky, people like that, that caucus has gotten bigger.

  • 10:23:32

    BENDAVIDBut the larger political climate is, I think, more of an accommodation. And his role in that situation was kind of uncertain. And so in a sense, while it's rare for somebody to quite the Senate in the middle of their term and take over a think tank, it's not a completely inexplicable move on his part.

  • 10:23:49

    REHMHe had four more years left on his term. He had pledged to retire in 2016. In the Senate, he made $174,000. In 2010, his predecessor at the Heritage Foundation where he's going to head up made $1.1 million. I listened to DeMint yesterday as he talked with Rush Limbaugh, who asked him whether he would have the kind of power at Heritage that he's had in the Senate.

  • 10:24:32

    REHMHe said, oh, much more in shaping conservative thought, getting out the conservative message. Limbaugh said, what? You were of one of 100 people in the Senate. Has the Tea Party, in the form of Jim DeMint, somehow lost its power? Shawna.

  • 10:24:57

    THOMASI would say I think they've lost a little bit of this -- of their power due to the latest election and that we saw some of these candidates who had -- primary Republicans who had been in Senate and been in the House before lose to Democrats in races like Indiana, that a year ago -- two years ago, when 2010 happened, you would have never thought would've happened. So they have lost a little of that.

  • 10:25:21

    THOMASI think Naftali was right when he's talking about they are moving towards compromise because the fiscal cliff has created a situation where they have to find compromise. Or basically, we're going to go into a recession, as what most economists think. And in a way, DeMint will have more power at the Heritage Foundation. He'll make more money. He will have a much larger PR budget. He can be on as many talk shows as he wants without having to show up for a Senate vote. And that -- I think that that message can get out there in a larger way. And people know who is already.

  • 10:25:53

    MONTGOMERYAnd Democrats feel like the Tea Party -- you remember, the Tea Party was a creature of the economic meltdown of 2008. It was a reaction to feeling like government was bailing out everybody but me. And Democrats feel like they have -- the tide has turned a little bit with, you know, the Occupy Wall Street movement and now this sense that it's not so much government bailouts, it's general economic inequality.

  • 10:26:19

    MONTGOMERYAnd that has sort of -- they feel that they're sapping the power or the Tea Party because they've identified this other broader societal concern that is really at the bottom of people's minds. Why are the rich making out better than I am?

  • 10:26:32

    BENDAVIDThere's also this dynamic that's taken place in the political landscape on both sides, but particularly on the right, where, you know, the Senate has been somewhat dysfunctional. It's been really hard to get anything done. But the power of outside groups, has to some degree, increased whether it's super PACs, Tea Party groups, Occupy Wall Street, you know, there's a whole range of them.

  • 10:26:50

    BENDAVIDAnd I think -- so in a way, this is emblematic of something larger that's happening, which is somebody's leaving the Senate and the U.S. government and going to an outside group where there's more money, where there's a bigger platform, where there's more freedom. And so I think it symbolizes something bigger that's been going on.

  • 10:27:04

    REHMAnd let's talk about George W. Bush's remarks on immigration, Shawna. What did he say this week, and what all does it mean?

  • 10:27:17

    THOMASHe basically said that we need to come together for immigration reform, that it will be better for the economy if you bring Latinos more into the community and that this is something that needs to be done. And it's something that he has been preaching for years. I mean, he ran compassionate conservativism in 2000. He got, I think, almost 40 percent of the Latino vote when he ran.

  • 10:27:42

    THOMASMitt Romney, I think, got about 27 percent of the Latino vote. The Republicans know they messed up. They know they messed up. And one of the few times when we've actually see actually seen George W. Bush come into public and say something politically, which he has definitely avoided, has been about this issue that he's been talking about as has his brother, Jeb Bush, who we all have 2016, you know, mumblings and leanings about. This is a big deal to him because he thinks this could destroy the Republican Party.

  • 10:28:09

    REHMNaftali.

  • 10:28:11

    BENDAVIDYeah. I mean, I think you heard Republicans the day after the election saying that they had to change their views on immigration or at least the way that they approached it. And there's a lot of talk about running Latino candidates and talking, you know, in a rhetorically more pleasant way. But there, I think, also is and probably has to be a closer look at the policies. And so you've seen, really, conservative leaders like Sean Hannity.

  • 10:28:32

    BENDAVIDBut you've also certainly seen member of Congress, you know, talking about that they have to tackle this issue. The numbers are just very stark. Latinos are a rapidly growing group. You know, Bush got almost half of the Latino vote. Romney got about a quarter of it. There's just really no way to avoid it. And so to have President Bush, a guy who has some real credibility on this issue because he was out front talking about it, it does tell you a lot about where the Republicans are going.

  • 10:28:54

    REHMYou know, it's interesting because there was also a meeting this week in Washington of law enforcement and clergy on the immigration issue hosted by the National Immigration Forum, and they're talking about how to move forward on this. Lori.

  • 10:29:18

    MONTGOMERYYeah. I mean, I think it'll be a real test for President Obama, who has said that this is one of the primary things he wants to do in his second term. And if conservative groups, law enforcement groups, Republicans start to rally around actually accomplishing what I think would be the first comprehensive immigration reform since 1986. I mean, let's see whether the president actually wants this to be one of his major accomplishments.

  • 10:29:45

    REHMYou know, it's interesting that with the good economic news that came out this morning, Citigroup had 11,000 or has announced they're going to lay off 11,000 workers worldwide. What's behind that decision, Naftali?

  • 10:30:05

    BENDAVIDWell, I think Citibank is one of the banks that was hard hit during the financial meltdown, as all the large ones were. They've had bailouts. They've had a lot of criticism. They recently changed their CEO. I think a lot of these banks are trying to stabilize, essentially, and this is an example of that. And so, you know, the new CEO has decided that this would be a way to create efficiencies.

  • 10:30:25

    BENDAVIDWe should probably say a lot of these jobs will not be in the United States, for what that's worth. There's a sort of consumer service jobs that are in Pakistan and places like that. But that's how I'd see it, as sort of a part of what's going on throughout this banking sector as it tries to recover itself not just in terms of business, but in terms of, you know, public perception.

  • 10:30:42

    BENDAVIDElizabeth Warren, by the way, the new senator-elect from Massachusetts, almost certainly going to be on the banking committee. I'm sure that's something that they're not looking forward to. And so they're trying to, you know, for all these reasons, get themselves in a stronger position.

  • 10:30:53

    REHMAnd indeed, more layoffs may be coming, Shawna.

  • 10:30:57

    THOMASIndeed. I mean, the CFO said that this was an initial foray into that. A lot of the banks did some restructuring last year, did a lot of layoffs. Bank of America did a lot of layoffs. Citi -- some people see this as Citigroup sort of catching up to that. But I think the bottom line is the most important thing in that the CEO has basically taken over and said, I need to make more money.

  • 10:31:20

    REHMAnd speaking of the bottom line, here is an email from Greta in Arlington, wanting to get to the heart of these negotiations between the White House and the Hill. "Can your panel speak to the point that taxing the very rich will do little or nothing to affect our national debt and that the debt ceiling is a polite fiction? The ceiling has never been upheld. How can we face our debts without cutting spending?" Lori.

  • 10:32:00

    MONTGOMERYWell, OK. So, yes, our debt is very large. However, the plans to tax the wealthy would generate around $1 trillion over the next 10 years. Now the debt is forecast to go up by something like six to $8 trillion over the next 10 years. So would it be great if it only went up by five to seven? No, but it would be better. And Obama has proposed a plan to get a little bit more money out of the wealthy, another $600 billion over the next 10 years.

  • 10:32:31

    MONTGOMERYThat said, nobody has a plan right now, including the Republicans, to halt the debt or even pay it down. I mean, our financial situation has been so damaged by policy decisions over the last 10 years -- going to war, for the first time in our history, without paying for it, tax cuts that we knew were going to drive us back into debt. I mean, we have a long road to recovery, and the debt limit is going to have to keep going up until we get that under control.

  • 10:33:02

    REHMLori Montgomery of The Washington Post, and you're listening to "The Diane Rehm Show." We're going to open the phones now, 800-433-8850. First to Fayetteville, N.Y. Good morning, Claire. You're on the air.

  • 10:33:22

    CLAIREGood morning. Thank you for taking my call.

  • 10:33:24

    REHMSurely.

  • 10:33:25

    CLAIREWhen entitlements are spoken of, are the entitlements which the members of Congress collect included, such as their health care for life and their pension for life even though they only serve one term? They are federal employees.

  • 10:33:46

    BENDAVIDWell, no, that's not usually what they mean by entitlements. Usually, they're talking about Social Security and Medicare, Medicaid and then a few other related programs. You know, this does come up periodically in the debate where members of Congress talk about cutting their own benefits, that, you know, every once in a while they freeze their own salaries and stuff like that. I think they are sensitive to that sort of thing.

  • 10:34:04

    BENDAVIDBut, you know, in terms of large dollar amounts, while there's a symbolic power to the benefits that members of Congress get, obviously real money is in Medicare, Social Security and Medicaid.

  • 10:34:16

    REHMAll right. To Concord, Mich. Good morning, Lean.

  • 10:34:21

    LEANGood morning. Everyone is talking about not taxing the wealthy. We at the bottom -- the retirees, the disabled and the working poor -- took a massive hit in the Bush tax cuts. The minimum went from 12 percent to 15 percent, which was a 25 percent tax increase on the people who could afford it the least. But no one is talking about dropping the rate from 15 percent down to 12.

  • 10:35:00

    REHMLori.

  • 10:35:01

    MONTGOMERYActually, sir, everybody got a tax cut in the Bush tax cuts. There was a new bracket created. It used to be you paid 15 percent on your first dollar of income. Now you pay 10 percent on your first dollar of income. So everybody benefited from the Bush tax cuts. The controversy has been that the benefits were disproportionately larger for people at the top of the income spectrum.

  • 10:35:24

    MONTGOMERYAnd, you know, one thing, I think, that society, people don't really recognize, everybody's tax rate, no matter who you are, has been falling pretty rapidly for the past 30 years. So we think we're overtaxed. I can understand why people feel that way, but the fact is we are taxed at a much lower rate, all of us, than we were when Ronald Reagan was in office.

  • 10:35:45

    REHMAnd let's just be clear as to what the president wants to do. He wants to tax everything above 250,000. So those who make one to $250,000 would pay at a lower rate than those above 250.

  • 10:36:10

    BENDAVIDYeah. And even people who make $1 million would, you know, they would still get lower taxes on that first...

  • 10:36:15

    REHMOn that 250.

  • 10:36:16

    BENDAVIDExactly. But, you know, the whole issue of tax rates, I think there's another reason why it's such a sticking point because it goes to the fundamental beliefs of both sides about government. And for Democrats, for them it's an issue of fairness, and that is something they care deeply about. And for conservatives and Republicans, you know, it's an issue of small government and government overreach, and that's what they care deeply about. So, partly, this is an argument about numbers and percentages, and partly it's an argument about broad philosophical issues.

  • 10:36:42

    MONTGOMERYBut it's also about the economy. I mean, one of the reasons that Republicans right now are so reluctant to raise the top tax rates is they're -- they feel like they are protecting the small business owners who are the job engines of the national economy and who, in great numbers now, pay their taxes, their business -- on their business profits on their personal return. So, you know, yes, it's a philosophical thing for them. They don't want to fund a bigger government, but they also believe, fundamentally, that it would hurt the economy to raise taxes on small businesses.

  • 10:37:14

    REHMAll right. We'll take a short break. When we come back, more of your calls, comments, your emails. Join us on Facebook or send us a tweet.

  • 10:40:07

    REHMAnd welcome back. Here's an email from Eric, who says, "I'm interested to hear what your panelists have to say about the right to work legislation and protest in Michigan this week. Is it another Wisconsin?" Naftali.

  • 10:40:26

    BENDAVIDWell, Wisconsin was so dramatic, it was probably unique, and a lot of that revolved around in an attempt to recall the governor. But it is true that in a place like Michigan that was such a birthplace of the union movement, of the United Auto Workers and such a symbol of labor's power to have a vote like this, even though similar votes have been taken in other states, I think, really does have a certain power.

  • 10:40:44

    BENDAVIDAnd, you know, the Republicans swept into power at the state level there in 2010, and now there's also, you know, these union protests and people who are on the other end of the spectrum. And so it's been one of these clashes. But there's something about it happening in Michigan and in sort of the heart of where the labor movement arose that I think is powerful.

  • 10:41:04

    REHMTo Baltimore, Md. Good morning, Robert.

  • 10:41:09

    ROBERTHello. Thanks for taking my call.

  • 10:41:10

    REHMSure.

  • 10:41:12

    ROBERTJust want to comment about Jim DeMint. I think the Republicans are failing to see the error of their ways. I grew up in South Carolina, recently transplanted to Baltimore. But as conservative as he is, it just seems like things that come out of his mouth, like his women should be barefoot and pregnant comment, it's just going to take them down the wrong roads. They're not -- it's not a tone of conciliation or, I guess, working together.

  • 10:41:43

    REHMShawna.

  • 10:41:44

    THOMASWell, I think this is one off the things that Naftali that was talking about that why Jim DeMint feels he isn't welcome really in the Senate anymore. There's a sense of compromise that needs to happen, and Jim DeMint can sort of find a bigger voice for whatever he wants to talk bout at the Heritage Foundation. And whether, you know, any of his comments -- and I took a look at a lot of old comments of Jim DeMint in the last day because I thought I was going to do a piece yesterday.

  • 10:42:12

    THOMASAnd the guy has been crazy consistent in all of these things the entire time. And if he feels his message, that consistent message, is going to be more well-served outside of the Senate, then that's what's he's going to do.

  • 10:42:24

    REHMWas Robert correct in saying that -- in quoting Jim DeMint as far as women?

  • 10:42:33

    THOMASI don't personally remember that quote.

  • 10:42:35

    REHMWe did run across that particular quote.

  • 10:42:37

    THOMASI did not run across that particular quote.

  • 10:42:39

    REHMOK. OK.

  • 10:42:40

    THOMASBut I did run across -- I mean, everyone remembers from the 2010 CPAC speech when he talked about he'd rather have 30 Marco Rubio's in the Senate than 60 Arlen Specters. He has, you know, said things about abortion consistently. We took a look at a Meet the Press from 2004. I wouldn't go so far as to say what Robert from Baltimore said, but I will say he's been consistent in his views.

  • 10:43:03

    REHMAll right. Thanks for calling Robert. To Jim in Greensborough, N.C. You're on the air.

  • 10:43:11

    JIMHi. One of your commenters touched on this briefly. But one thing I've not heard anyone in any of the media talk about is that -- about the whole fiscal cliff and tax issue is that we're at war for the first time in written history going back to 6,000 years to the Sumerian with not only tax -- not raising taxes but having tax cuts. At what point does, you know, not raising taxes become borderline treasonous? And why I think this will be a way for the Republicans to save face saying, oh, we need to raise taxes and for a patriotic reasons.

  • 10:43:44

    REHMHuh. Lori.

  • 10:43:46

    MONTGOMERYYeah. OK. So I'm not sure it's treasonous but it is certainly true that this is the first time we have ever not just, you know, gone to war without -- I mean, usually, we raise taxes. Usually, we tax ourselves to pay for what we're doing, and this is the first time that we have cut taxes at the same time that we were going to war. I mean, it is a little bit, you know, I can't say that it's treasonous. We are winding down the wars. The wars as a percentage of our economy are really very small at this point. We're actually reaping savings as we wind them down. But...

  • 10:44:22

    REHMBut they've caused the American taxpayers lots of money.

  • 10:44:27

    MONTGOMERYYeah. It's about 1.5 trillion, I think, is about it. And you have to remember when, you know, obviously, the reasons we went to a war were extraordinary. And the reasons the Bush administration pursue these tax cuts were also extraordinary. We actually were in the black. We had a surplus, and they thought they -- we're going to give it back to the taxpayers. So, you know, it seems like a good idea at the time.

  • 10:44:49

    REHMAny comment, Naftali?

  • 10:44:51

    BENDAVIDWell, I mean, it's an interesting idea that Republicans could, say, save by saving their raise in taxes to help fund the wars. I just think the time for that has passed. I think, right now, the wars are being wound down, and there's another question that's come up actually which is how you count the savings from winding down the wars. That's really what people are talking about.

  • 10:45:07

    BENDAVIDI mean, you know, but also the Republican philosophy has been become very, very anti-tax recently, more so than it used to be, and I think they would say well, that's 'cause government's gotten bigger than it ever was. But for whatever the reason, they are just opposed to raising taxes for any reason at any time.

  • 10:45:23

    THOMASThe war savings issue will be revisiting us again. We used to call it...

  • 10:45:26

    REHMI'm sure.

  • 10:45:27

    THOMAS...the global war on terror. Now, we call it overseas contingency operations. And by not spending that money, the president is proposing to save $800 billion in his deficit reduction plan.

  • 10:45:38

    REHMAll right. To Richmond, Va. Hi, Gary.

  • 10:45:43

    GARYHello, Ms. Rehm. I just wanted to put this to your folks there, the two big elephants in the room that nobody talks about, when us regular -- which I am now. I used to be at the 250 and above but now I'm the regular folk. When we sit down at the end of the year to do our taxes, we do it with 16 pages of really cheap news print as our guide.

  • 10:46:02

    GARYBut as a former 250, when I used to sit down at the end of the year, my accountant had (word?) thousand pages of excuses for reasons I didn't have to pay tax. So until we get rid of that, why are we even bothering to discuss raising taxes -- tax rates on the rich when they could just use deductions to get out of it? And why are we still not talking about a flat tax which is really the only true way the tax will be going this country?

  • 10:46:28

    REHMShawna.

  • 10:46:29

    THOMASWell, I think that's one of the reasons why what the Republicans really want in this deal is an overhaul on the tax code. They want comprehensive tax reform. And one of the things the president said this week was he is open to that. He does not want to deal with comprehensive tax reform in the next two weeks because he does not think you can get it done in the next two weeks. But he -- but his -- one of his advisers put a date on it this week, that they would like to do it by August of next year. They would like to attempt to tax for comprehensive...

  • 10:46:57

    REHMComprehensive.

  • 10:46:58

    THOMAS...tax reform by August of next year. And also, what the caller was speaking about was that through limiting deductions, through limiting loopholes, that's how the speaker has found $800 billion in savings. There's a little bit of that in the president's plan as well. He doesn't get to $1.6 trillion by just raising tax rates on the top 2 percent. And there is this idea that the Republicans have said, we don't mind, actually, taxing the rich a little bit more by closing loopholes and deductions. We realize there is some money there. They just don't want to raise the top rates.

  • 10:47:33

    REHMBut what about mortgage interest deductions as part of that? That's a pretty big deal across the board, Naftali.

  • 10:47:43

    BENDAVIDIt is and so is the charitable giving deduction. I mean one of the -- I mean, everybody agrees that deductions can and should be limited as well as other kinds of tax breaks. But the problem is that some of them might be relatively easy, a lot of them and there are ones where the big money is are much less so.

  • 10:47:57

    BENDAVIDAnd so, yeah, the mortgage interest deduction is something that very few people want to give up. But charitable giving is huge as well, and this is something, you know, on the one hand, it's a lot of wealthy that give money, on the other hand, it's a lot of not well-off people that get the money. So it's complicated. And while everybody is on board, in theory, with the idea of limiting deductions, very few people have come out with actually which ones they would limit by how much.

  • 10:48:19

    REHMBut if you were doing the mortgage deduction, for example, the mortgage interest rate deduction, wouldn't you have to limit it to those mortgages above a certain rate, Lori?

  • 10:48:34

    MONTGOMERYWell, yeah. I mean, I think that nobody is talking about eliminating the mortgage interest deduction altogether. But currently, I believe that the cap is $1 million. So you could bring that cap down to $500,000. Most people could still take it. Right now, you can write off second homes, houseboats. I mean, there are things you could do to make that thing, you know, not so expensive.

  • 10:48:58

    REHMAll right. Let's go to San Antonio, Texas. Hi, Carolyn.

  • 10:49:04

    CAROLYNHi, Diane. No one mentions the alternative minimum tax, which has been in effect for many years. And it has hit the middle-class people. And I just don't understand why they haven't said anything about what they're going to do about that.

  • 10:49:21

    REHMWhat are they going to do about that, Lori?

  • 10:49:24

    MONTGOMERYIf they don't fix that, we are in big trouble. This is one of the big reasons, one of the big incentives for both sides, another incentive to get a deal. The alternative minimum tax is expired for this tax year. If they don't fix it, 31 million people are going to be paying the alternative minimum tax in April. So right now, many of us owe this thing. It's an extra $3,700 on average on your tax bill. Most people have never paid it before because it's never been allowed to expand so dramatically, so they don't know it's coming.

  • 10:49:57

    MONTGOMERYIt's primarily a Democratic-state issue because it affects, you know, large families in high-cost areas, much like Washington, D.C. But, you know, neither side -- there are lot of red state people that will be get hit too. So neither side wants to end this year without patching the alternative minimum tax.

  • 10:50:14

    REHMOK. So is it going to be part of these budget negotiations, Naftali?

  • 10:50:21

    BENDAVIDOh, I think it will. I just think nobody wants to be in the business of allowing that, you know, that -- people to be wrapped into this alternative minimum tax, which was intended initially to hit the wealthy, but because it has not been adjusted for inflation, it wraps in a increasingly large number of middle-class people, so I think it will be taken care of.

  • 10:50:37

    BENDAVIDBut what the Congress usually does is every year, they -- this is why it's called a patch because every year, they adjusted for that year, and then it's a problem again. But I think both sides would desperately want to have a long-term permanent solution to this. I'd be surprised if that isn't, in one way, part of the deal.

  • 10:50:50

    REHMOK. Hope that answers it, Carolyn. And to Oklahoma City. Good morning, Ron.

  • 10:51:00

    RONGood morning, Ms. Rehm.

  • 10:51:01

    REHMHi. Go right ahead, sir.

  • 10:51:04

    RONYeah. I'm a small business owner. And the conservatives talk about the small business people being the ones that will be hurt by this tax -- the possible taxes going up. I, last year, changed my corporation standing from an S corp to a C corp, which means that the money doesn't flow through to me, and I have to pay it on my personal income tax. So I don't understand why more people don't do that and that not actually be a problem.

  • 10:51:55

    REHMLori.

  • 10:51:55

    MONTGOMERYWell, that's something that's under discussion as a matter of fact. So over the years, since the 1986 tax reform, more and more companies have migrated away from being corporations, which have to pay the corporate tax which is currently 35 percent, into S corporations, which can be taxed on your personal income. It's called pass through. The profits pass through to the owner's personal income taxes. And because there are benefits to doing that. There are tax benefits to doing that.

  • 10:52:25

    MONTGOMERYAnd now there is some thought, particularly in the Democratic Party, that maybe we want to get those companies to migrate back into corporate status. So one of the ideas is to lower the corporate rate to, say, 28 percent, as President Obama has proposed, and leave the individual rate -- the top individual rate somewhere up around 35 percent, 39.6. So that these companies, we can shove them out of them the individual income tax code and back into the corporate tax code.

  • 10:52:53

    REHMBut to what extent our accountant's going to play with that again?

  • 10:52:58

    MONTGOMERYWell, you know, it depends on what the incentives are, right?

  • 10:53:02

    REHMYeah.

  • 10:53:02

    MONTGOMERYIf you weed out the corporate code of all of the deductions and lower the rate, maybe that'll be more attractive.

  • 10:53:07

    REHMAnd you're listening to "The Diane Rehm Show." Long-time Republican Congressman Jack Brooks died this week. What was his legacy, Shawna?

  • 10:53:19

    THOMASWell, I mean, I think Congresswoman Eddie Bernice Johnson sort of summed it up really well. He was a true grit Texan. He was a Democrat from a Southern state back when being a Democrat from Texas was something that really happened and was, you know, new -- Lyndon Baines Johnson was there in Dallas when JFK was shot, was on Air Force One when LBJ became president of the United States.

  • 10:53:43

    THOMASHe was a fixture in the House of Representatives and was well thought of -- voted for civil rights and, you know, and was part of a different time. But I was actually struck by something reading a little bit more about Jack Brooks yesterday. A lot of people said, he was a man of his convictions. He voted his convictions. That was very important to him.

  • 10:54:00

    THOMASAnd, you know, what, Sen. Reid said something very similar about Sen. Jim DeMint yesterday. These are people who had beliefs, and they went with those beliefs. And whether you agreed with him or not, this is what they did. And as a Texan myself, I kind of like that about him.

  • 10:54:14

    REHMLori.

  • 10:54:15

    MONTGOMERYYeah. Brooks has sort of a fascinating legacy. In addition to being a civil rights pioneer, he created the Government Accountability Office, the, you know, the Paperwork Reduction Act. He saved taxpayers millions of dollars. Well, the thing that fascinated me, as somebody who worked in Texas for many years, is this is a guy who represented Beaumont in deep East Texas.

  • 10:54:36

    MONTGOMERYAnd in the Piney Woods area, you can go down there today and interview Ku Klux Klan members. And he helped draft the Civil Rights Act. He helped draft the Voting Rights Act. I mean, Beaumont is recently -- I mean, you know, he was doing this in the '60s. Beaumont had race riots in the '40s.

  • 10:54:55

    REHMInteresting.

  • 10:54:56

    MONTGOMERYAnd, you know, you just have to admire a guy that can bring that kind of, you know, reaction to what he's seeing in his own home.

  • 10:55:06

    REHMIndeed. And the other person who died, Dave Brubeck. Talk about his legacy, Naftali.

  • 10:55:15

    BENDAVIDWell, you know, I'm not a jazz expert or aficionado, but he was one of the few real household names in jazz. I mean, he was somebody who -- people who weren't jazz lovers knew about because he popularized the music at a time when it was sort of fading in popularity in the late '50s and early '60s. And, you know, a lot of his tunes, if you heard them, you'd recognize them even if you couldn't identify them as Dave Brubeck pieces.

  • 10:55:34

    BENDAVIDAnd since we've been talking about racial issues, he also was a leader in that area. He had an integrated band. And there were places where they requested of him to play with an all-white band, and he turned them down. And that's something that in a time when he was sort of coming to prominence was still very much an issue, and he took an admirable stand on it.

  • 10:55:51

    REHMHis music was really quite radical for each its time when you think about jazz and you think about the kinds of combinations he put together. And listening to his music over the past few days has really been revelatory to me. Before we close our program today, I do want to say a fine farewell to Naftali Bendavid, who's going off to Brussels for two years. He's been such an important part of our Friday News Roundup. Naftali, what are you going to do there?

  • 10:56:35

    BENDAVIDWell, I'll be working in The Wall Street Journal's bureau there, covering European politics and economics. And I hope very much to stay in touch and be talking with you from there.

  • 10:56:44

    REHMAnd we'll be talking with Naftali, I'm sure, about the European Union and what's going on there. Thank you for being here with us for all this time. We'd loved having you.

  • 10:56:59

    BENDAVIDIt's been great. Thanks, Diane.

  • 10:57:00

    REHMNaftali Bendavid, national correspondent for The Wall Street Journal, Shawna Thomas, White House producer for NBC News, Lori Montgomery, financial reporter for The Washington Post. And we'll go out with a little of that Dave Brubeck music. Have a great weekend, everybody. Thanks for listening.

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