Today marks the 14th day of a partial government shutdown. The top Democratic and Republican Senate leaders spoke over the weekend, but no resolution was reached that could fully re-open the federal government and raise the debt ceiling. Now we’re just days away from Oct. 17, the date the Treasury Department said it would begin to run out of money to pay the nation’s bills. World Bank and IMF leaders, in Washington for meetings, warned of potential calamity in global financial markets if American lawmakers cannot come to an agreement soon. The latest on prospects for ending the budget impasse.

Guests

  • Michael Scherer Washington bureau chief, TIME.
  • Lori Montgomery financial reporter, The Washington Post.
  • Janet Hook congressional correspondent, The Wall Street Journal.

Transcript

  • 10:06:53

    MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The standoff between Republicans and Democrats is entering its third week. The Senate made little progress in high level talks over the weekend to end the government shutdown and avoid a U.S. debt default. A majority of Americans places most of the blame on Republicans for the impasse between Congress and the White House.

  • 10:07:21

    MS. DIANE REHMJoining me to talk about the deadlock in Washington and potential consequences: Janet Hook of The Wall Street Journal, Michael Scherer of Time magazine, Lori Montgomery of The Washington Post. I know you'll want to weigh in. Give us a call, 800-433-8850. Send us your email to drshow@wamu.org. Follow us on Facebook or Twitter. Well, welcome to all of you.

  • 10:07:51

    MR. MICHAEL SCHERERGood morning, Diane.

  • 10:07:51

    MS. JANET HOOKGood morning, Diane.

  • 10:07:52

    MS. LORI MONTGOMERYGood morning.

  • 10:07:52

    REHMGood to see you. Janet Hook, what's happened in the last few days? Bring us up to date.

  • 10:08:00

    HOOKWell, we really are on the brink right now. And over the weekend, there was a lot of attention that had been turned to the Senate because, at the beginning of the weekend, the House Republicans met, and John Boehner informed his Republican conference that talks with President Obama -- between him and President Obama had basically collapsed.

  • 10:08:22

    HOOKSo then everybody started thinking about, well, maybe the answer is in the Senate. Harry Reid, the Senate Majority Leader, and Mitch McConnell, the Republican leader, met for the first time since the government shutdown, so there was a lot of hope that these two guys, veteran dealmakers, might actually be able to bridge the gap and come up with a way to break the impasse. As of last night, that had not happened.

  • 10:08:48

    REHMSo how did those talks go? Do we know?

  • 10:08:54

    HOOKWell, yeah. I mean, I think the basic dynamic is that Harry Reid doesn't think that Democrats owe the Republicans a single concession. And I think, basically, as of last night, he had offered to the Republicans a short term spending bill to reopen the government until, say, mid-December and a longer term extension of the debt limit, no concessions on Obamacare, with the idea that they'd then open budget negotiations for a longer term deal between now and mid-December.

  • 10:09:24

    REHMMichael Scherer, I thought Obamacare was sort of off the table.

  • 10:09:32

    SCHERERWell, it still might come back onto the table in a final deal, but it's definitely clear that what Republicans went into this thinking that they could gain, they will not be able to gain. The Republican consultants and the Democratic consultants and the pollsters who said that, as a strategy, this plan of shutting down the government to really disrupt or dismantle Obamacare was a bad idea.

  • 10:09:54

    SCHERERI think the polls have proved that that was accurate. You know, there's some polls have shown in the last week that approval for Obamacare has actually gone up despite the enormous problems they've had rolling this out. And the Republicans just never had the leverage here. Again, one of the reasons Harry Reid doesn't feel like he has to give anything, or President Obama, at this point, is that the polls have dramatically shown that Republicans are suffering the most for this.

  • 10:10:21

    SCHERERThat doesn't mean that, you know, the Republican House is yet at risk next year, but it does mean that the Republican brand nationwide is in enormous trouble and that even -- I mean, one of the most telling numbers, I thought, from last Friday was the NBC/Wall Street Journal poll showed even a majority of non-Tea Party Republicans think the Republican Party is putting politics above the country. So if you're asking Republican voters who don't identify with the Tea Party -- and that's, you know, depending on the poll, 40 or 50 or 30 percent -- Republicans are disapproving of this strategy.

  • 10:10:58

    REHMAnd you did a cover story on Capitol Hill a couple of weeks ago for Time magazine.

  • 10:11:04

    SCHERERThat's right.

  • 10:11:05

    REHMWhat was the response?

  • 10:11:08

    SCHERERWell, you know, we're in a massively polarized country. That's no news to anybody. But, you know, you got -- I think it's one of those stories, whenever you try and write about what's happening in Congress right now, all sides are quickly disapproving of what you've done. And there was a lot of pushback on both sides. I mean, from the left, we got a lot of pushback saying, how dare you say that Republicans and Democrats aren't disagreeing? That's a false equivalence charge. In reality, this is all the Republicans' doing. You should blame it wholly on them.

  • 10:11:37

    SCHERERI think our story was a little harsher on them than Democrats. And then, also from the left, there was this sense that -- and you hear this from the right as well -- that Republicans and the Tea Party folk are acting outside the bounds of what should be acceptable discourse. And from the right, you know, it's very similar, that the partisan politics has fragmented the media in such a way that when people get a narrative that's outside of their normal channels, they tend to react.

  • 10:12:10

    REHMLori Montgomery, you've had Ted Cruz continuing to speak about Obamacare. You know, and it's sort of beyond reason to think that he would continue to come back to this when the country seems to be moving in another direction.

  • 10:12:33

    MONTGOMERYYeah, it seems completely beyond reason, and it is to the consternation of his Republican colleagues, who, at this point, you know, even his fellow senator from Texas, John Cornyn, who is the number two Republican in the Senate, is saying, come on, guys. This is not going to work. The danger now, though, seems to me, is that Democrats have so much leverage.

  • 10:12:54

    MONTGOMERYI mean, we're not only no longer talking about Obamacare. We are now talking about whether or not Harry Reid can squeeze out of the Republicans the thing that he most wants, which is a rollback of the sequester cuts. And the danger now, it seems to me a little bit, is that the Democrats will overplay their hand, that they'll shoot for the moon and that we will see a failed vote in the House if it can squeeze something through the Senate.

  • 10:13:19

    REHMJanet, do you agree?

  • 10:13:21

    HOOKYeah. I think the biggest obstacle right now is the clock. I mean, it could be that Harry Reid could try to ask for more and they could go back to the House and they could reject it and send it back to the Senate, but we just have three days left.

  • 10:13:34

    SCHERERWell, and the other thing here is that, from the beginning, the president's talking point has been, I don't want to use either the debt limit or government funding as something to hold up -- as something to demand ransom for. We shouldn't be doing that. And Harry Reid is coming dangerously close right now to basically holding up a deal for his own ransom which is next year's funding has to be higher than the sequester levels of this year. And so it's really undermining, in a way, the Democratic talking point.

  • 10:14:01

    REHMMichael Scherer of Time magazine, Lori Montgomery of The Washington Post, Janet Hook of The Wall Street Journal. Do join us, 800-433-8850. Janet, there seemed to be a lot of enthusiasm late last week for Susan Collins and what she was putting forth. Explain what it was and what happened to it.

  • 10:14:34

    HOOKWell, Susan Collins is one of the most moderate Republicans in the Senate, which is an interesting point. The Republican Party has gotten kind of into trouble because of Ted Cruz and Susan Collins. It was trying to bail them out. The most important thing that she did was, in the House, they had been talking about only raising the debt limit for a short period of time, and she came up with a proposal that would both raise the debt limit and extend government funding.

  • 10:15:00

    REHMRaise the debt limit until...

  • 10:15:03

    HOOKUntil, I think it was March -- it was about six months, so it was a longer look at the debt limit. No.

  • 10:15:10

    MONTGOMERYJan. 31.

  • 10:15:11

    HOOKNo, Jan. 31. There were so many proposals. Pardon me for getting confused.

  • 10:15:14

    REHMJan. 31.

  • 10:15:15

    HOOKJan. 31, and it was the...

  • 10:15:17

    REHMOf 2014.

  • 10:15:19

    MONTGOMERYCorrect.

  • 10:15:19

    HOOKRight. So it would give it a little bit more room than the six-week extension that the House was looking at. But she was also looking to attach to the spending extension and the debt limit extension some Republican asks that were in the zone of Obamacare, but really small. One was delaying or repealing -- it changed by the version -- the tax on medical devices and paying for it with some change in pension rules, very complicated stuff.

  • 10:15:44

    HOOKBut the idea was that was a small change in Obamacare and also tightening up eligibility rules or the enforcement of eligibility rules for subsidies under Obamacare. So anyway, it was a package that did a lot of stuff that both sides wanted. But this is where Harry Reid's concern about the spending levels was concerned, is it was a six-month extension of current spending levels which would, he thought, lock in the lower levels mandated by the sequester.

  • 10:16:10

    HOOKSo for him, it was unacceptable because it involved a big concession from what the Democrats were seeking in terms of spending. So he scotched in -- and he also thinks that they owe no concessions on Obamacare, so even those two small changes in the medical device tax and eligibility enforcement were more than he wanted to give.

  • 10:16:28

    REHMWhat about the plan that the Obama administration put forward to extend the debt limit until after the 2014 elections, Michael?

  • 10:16:41

    SCHERERSo one of the things that is really the subject of discussion now and will be going forward is just how many of these crisis points we're going to have over the next several months. And one of the big Democratic asks is to have less of these crisis points. They don't want to have to come back in January to face the possibility of another government shutdown.

  • 10:17:00

    SCHERERThey don't want to have to come back every three or four months for the next year to deal with another debt limit. And so the big Democratic ask -- and I think it'll be part of the bargaining over the next couple days -- is just how far you can push the question of the debt limit and how far you can set in stone some agreeable number for what you fund the government at.

  • 10:17:21

    SCHERERAnd so, yes, the White House ask has been, let's just take the debt limit off the table. The debt limit is not about actually choosing to spend more money. It's just about spending the bills we've already agreed -- or paying for the bills we've already agreed to spend. And so they would like to push it off as far as possible.

  • 10:17:37

    SCHERERIt's clear that at least the House Republicans and some other Republicans still see both the debt limit and government funding as a real points of leverage over the White House and over Senate Democrats, and they don't want to give up the fight we might be having in three months or four months.

  • 10:17:54

    MONTGOMERYIronically, though, Democrats are seeking a shorter extension of the government funding bill. So while they want to push the debt limit off as long as possible, they only want to fund the government, say, through December because they want to -- they're willing to lock in the sequester cuts for the short term.

  • 10:18:11

    MONTGOMERYBut they think that Republicans are now so terrified by the idea of shutting down the government again, that if we do just a -- you open the government, let's say, till December, let's have another conversation about this, that they will be able to win the higher spending levels that they want out of this weakened Republican Party.

  • 10:18:28

    HOOKRight. And it was also Harry Reid who wanted the full year extension of the debt limit until after the election. And that's the break point, is, do we have to do this all over again before the midterms?

  • 10:18:40

    REHMJanet Hook of The Wall Street Journal. Short break. We'll be right back.

  • 10:20:01

    REHMAnd welcome back as we talk about entering the third week of the U.S. government partial shutdown and as we approach the deadline for lifting the debt ceiling. Here in the studio: Michael Scherer, White House correspondent for Time magazine, Lori Montgomery, financial reporter for the Washington Post, Janet Hook, congressional correspondent for the Wall Street Journal.

  • 10:20:33

    REHMDo join us, 800-433--8850. We're going to open the phones shortly and hear your thoughts, your ideas. You know, Janet, you talked earlier about Senators Reid and McConnell having to come together to talk. These two guys haven't gotten along very well in the past. What's ahead for them?

  • 10:21:00

    HOOKWell, actually the thing is that Reid and McConnell have had a long history together. And it's only been in the last couple years that the bad blood has really boiled. I do think that fundamentally they are both very pragmatic people, that personality may delay an agreement, but I don't think that their personal animosities are going to derail it entirely. But, as I was saying before, time is of the essence, and they better come to some kind of agreement right now.

  • 10:21:27

    HOOKI think the most important thing isn't so much Harry Reid and Mitch McConnell's relationship as Harry Reid is in a mindset that he really wants this to be a decisive win for the Democrats and not so much in whether he actually right now rolls back the spending cuts. But he wants to send a message, as the White House does, that these crisis points aren't always going to be every time inevitably a hostage-taking kind of situation. That's the thing that Harry Reid really wants to accomplish here.

  • 10:21:56

    SCHERERAnd I think you can say the same for President Obama, who has made clear from the beginning that the big ask he has out of this whole process is to stop the debt limit being this ransom moment.

  • 10:22:08

    REHMHere's our first email from a tour guide here in Washington, D.C. who says, "I'm appalled at the filth and unsanitary conditions around the U.S. Mall. My guests from around the world could not believe how trash cans are beginning to overflow, how, because the shutdown closed the restrooms on the Mall, people are urinating outside the restrooms.

  • 10:22:41

    REHM"It's disgusting, unsanitary, embarrassing. Perhaps our members of Congress should know how the shutdown is affecting tourists' view of the nation's capital, perhaps not an important issue in the overall scheme of things, but I had to mention this." Lori.

  • 10:23:02

    MONTGOMERYYeah, so I guess that was sort of the motivating factor behind the protests we saw yesterday down on the Mall where several hundred people came and removed the barriers under the watchful eye of Sarah Palin from the World War II Memorial and other memorials and piled them up outside the White House. You know, it's affecting the city. It's affecting the way people live their lives, let alone tourists. I mean, we've got big chunks of Rock Creek Park closed. We've got, you know...

  • 10:23:32

    REHMBut it's not just Washington. It's national parks around the country, Michael.

  • 10:23:37

    SCHERERThat's right. And I think the other thing that'll come clear, assuming they don't solve the shutdown part of this brinksmanship this week, is that there are second-level shutdown effects that will be happening in the coming weeks. A lot of departments have had temporary monies that they've been using to cover up for the fact the federal government is no longer paying them. The federal courts have been basically operating near full capacity the last few weeks. But by the end of this month, that will no longer be true.

  • 10:24:05

    SCHERERThe State Department had money in reserve that it has been using to keep employees at work. That will no longer be true. The District of Columbia, the mayor's warning that a big check he has to cut to charter schools later this month, if the federal government isn't open he may not be able to cut, which would close schools for a significant percentage of students here. So there are a lot of -- the shutdown, we haven't seen the worst of it yet. There's a shutdown in the first two weeks, and there's a shutdown after the first two or three weeks. And if we keep going, it will get worse.

  • 10:24:34

    HOOKI have an idea. How about they stop collecting the trash inside the Capitol, and then...

  • 10:24:38

    REHMGood idea.

  • 10:24:39

    HOOK...the senators and congressmen might feel more incentive to solve this?

  • 10:24:42

    REHMHere's another email. "If history can repeat itself, perhaps there's something positive coming from this crisis. In the last '50s and early '60s the ultra-right wing John Birch Society was controlling the Republican Party. A young William F. Buckley took them on successfully, returned the party to the mainstream," Janet.

  • 10:25:10

    HOOKSuggesting that maybe this crisis might undermine the Tea Party wing of the Republican Party, well, there is this really big structural political situation though that's going to be very hard to change, no matter how discredited the establishment may feel that the Tea Party wing has been. The House is very, very gerrymandered so that there're all of these Tea Party Republicans who are getting nothing but positive feedback for this message. So it's hard to see how this really jolts the system within the Republican Party in the short run.

  • 10:25:42

    REHMLori, over the weekend you had leaders from the World Bank and IMF speaking out about their concerns. What did they have to say?

  • 10:25:53

    MONTGOMERYWell, Christine Lagarde, the managing director of the IMF, said that if we, you know, go past Thursday, if we begin to miss payments, if we begin to cause global investors to doubt the value of investments in the U.S. Treasury, that it'll cause massive disruptions across the globe and potentially cause the world -- the First World to dip back into recession.

  • 10:26:20

    MONTGOMERYAnd, you know, people came to Washington thinking that they were going to talk about how the recovery was taking hold. And when they got here and realized what a disaster they had on Capitol Hill, it completely took over the IMF's discussion.

  • 10:26:33

    REHMSo, Janet, if some kind of resolution were not to take place, what would you see happening, not only here in this country financially but around the world?

  • 10:26:47

    HOOKWell, the big -- the first question is how dramatic the impact is of hitting the Oct. 17 deadline. There's sort of a rolling series of deadlines that will have different kinds of effects. As of Oct. 17, the Treasury has said that they will no longer be able to borrow so that the only money that they could spend in paying bills will be money that comes in day by day as revenues.

  • 10:27:13

    HOOKBut they will still have $30 billion on hand so that you can't say that, right on the 17th, everything's going to go kerflooey on the ledger. But then there's the question of all of the confidence or lack of confidence, dwindling confidence by investors, both in the United States and around the world. And it's by the end of the month then they really do run out of money.

  • 10:27:34

    REHMMichael.

  • 10:27:35

    SCHERERYeah, I think the answer is that no one is able to predict because the issue here is that the U.S. Treasury bill -- our lending is the reserve currency for the world. So it not only is something that people invest in thinking there's no way there will be a default on it, but it's also something that underpins other complex securities. So banks are able to evaluate how much they have in certain properties based on their belief that the T-bill is sacred and will not be defaulted upon.

  • 10:28:05

    SCHERERNow, the question is, even before -- if we pass the 17th, we pass this week and there is this new question about whether the government will pay its bills, it may not take the government actually not paying its Treasury bill for significant financial harm to come because these banks -- you could have a sort of panic environment around the world, not so dissimilar from what happened in 2008 with the Lehman collapse, where suddenly financial institutions around the world didn't know what they owned because their counterparties were no longer clearly solvent.

  • 10:28:37

    REHMDo you believe the Republican Party is willing to risk that kind of threat?

  • 10:28:45

    SCHERERI believe that the leadership of the Republican Party in Congress is not willing. I think it's also fair to say that the leadership of the Republican Party in Congress has not always been fully in control of what happens.

  • 10:28:57

    REHMAre they more in control now than they were a week ago?

  • 10:29:01

    SCHERERWell, I mean, I think it's clear that Speaker Boehner could at any point this week or Thursday bring to the floor a clean debt limit bill that would get enough Democratic votes and Republican votes to pass the House. So he always has that option. I think markets which are down slightly today are probably counting on that as a backdrop. Boehner's made very clear this is not something he expects or wants to do. And I expect the Senate would have a similar ability at the last moment to do something like that. Now, whether that actually happens is a slightly different question.

  • 10:29:31

    REHMWhat would happen to Boehner's leadership if he did that?

  • 10:29:36

    SCHERERI don't -- I think his leadership would probably take a hit. I don't know if it would be the end of the speakership because there would be lots more deadlines in the future to fight over. And there's not a clear heir to his throne right now.

  • 10:29:49

    HOOKNobody wants the job.

  • 10:29:51

    SCHERERSo it's not as if there's a bunch of people who want to take over. But it's not an option he wants to embrace clearly. I mean, he's been trying for several weeks now to avoid having to do that.

  • 10:30:01

    REHMLori.

  • 10:30:01

    MONTGOMERYI hate to bring this up because I know it's nothing that any of us wants, but I do fear a little bit that the 17th is not necessarily the deadline. Because it is so difficult for Boehner to pull that lever on the nuclear option and put something on the floor that might...

  • 10:30:17

    REHMWhy? Why is it so difficult?

  • 10:30:19

    MONTGOMERYBecause -- you know, they probably could have done it weeks ago, but after all of this, you know, Obamacare madness, his troops have sort of lined up behind it. So it becomes very difficult for them to now back away from this claim that they've made that this is the moment to (word?) Obamacare. So you even see, you know, last night there were some rumors that they were preparing a debt limit bill that would still repeal the medical device tax if it came down to it.

  • 10:30:54

    MONTGOMERYYou know, so their last-minute play would again be demanding a concession from Reid in the White House that they may not be able to give. And this is why I take some solace from the fact that financial analysts universally agree that the Treasury Department will pay interest on the bonds before all other obligations. Our next interest payment is not due until Halloween. It's only $6 billion. It is universally agreed that we will have the cash to make that payment.

  • 10:31:25

    MONTGOMERYAnd then our first likely moment of actual default comes the next day on Friday, Nov. 1, when the Treasury owes $60 billion to Social Security recipients, active duty military, civil service pensioners, so, you know, you could see -- I totally agree with you guys that the markets could go nuts if we blow the Thursday deadline. But you could also see that, you know, they might go into the weekend again.

  • 10:31:50

    REHMJanet.

  • 10:31:50

    HOOKI think though that for Boehner and McConnell, the calculation isn't on the balance sheet. It's not on the stock market. They are -- their party is being pummeled for what's going on. So, no matter what, I mean, there is so much political pressure on them to put this behind them...

  • 10:32:07

    MONTGOMERYI hope you're right.

  • 10:32:08

    REHMJanet Hook of the Wall Street Journal, Lori 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, let's see, first to Chip in Waco, Texas. Hi, you're on the air.

  • 10:32:36

    CHIPGood morning. Thank you so much for your program. It's always awesome to hear it.

  • 10:32:39

    REHMThank you.

  • 10:32:41

    CHIPMy question -- or my comment is, there has to be something somewhere that will break through that insulation they have built around themselves (unintelligible)...

  • 10:32:51

    REHMWho is they? Who is they?

  • 10:32:54

    CHIPThe legislators, the Republicans and the Democratics (sic), both...

  • 10:32:57

    REHMOK.

  • 10:32:57

    CHIP...seem to have constructed a bubble around themselves that -- their paychecks aren't affected. They're still able to work. They're still making their mortgages. They're still paying all their bills. And they don't seem to be in touch with what's going on in the real world.

  • 10:33:14

    REHMAll right. Michael, do you see it that way?

  • 10:33:16

    SCHERERI think it's certainly true that there are significant portions of especially the Republican Party that are not acknowledging the reality of this situation. I mean, you had Ted Cruz on Friday at the Value Voter Summit saying, Democrats are backed up against the wall on Obamacare. We're winning this fight. You heard similar things on Sunday. It's just not true. And it can be true for his audience.

  • 10:33:39

    SCHERERAnd that's the trick here in politics, that, increasingly, politicians are not talking to the whole country. They're talking to a very small segment of the country. And that segment of the country can believe this to be true. But, you know, if you call a brick a bunny rabbit, when it hits you in the head, it's still going to be a brick. And you're seeing that right now in the polls for Republicans.

  • 10:33:58

    SCHERERAnd I think -- you know, this is something, as a trend in politics, we've seen now over several cycles the -- you know, you've had several senate races in which Tea Party Republicans have argued that the way to get elected to the senate in Delaware and Nevada and Alaska is to nominate in a primary a far right Tea Party person. And there's a good chance that Republicans would actually now be in control of the Senate had that not happened. I mean, the theory was wrong. Reality stepped in and corrected them.

  • 10:34:29

    REHMAll right. So, going back to this discussion between Boehner -- sorry, between Harry Reid and Mitch McConnell, suppose something does move first in the Senate, then what happens, Janet?

  • 10:34:45

    HOOKWell, that's the big question. I mean, you can kind of imagine some really short term deal, just debt limit and a spending bill to reopen the government, making it through the Senate. Then it goes to the House, and it...

  • 10:34:58

    REHMDoesn't that put more pressure?

  • 10:34:59

    HOOKYes. And probably the closer we are till the Oct. 17 deadline, the more pressure there is on the House to act quickly. But, like Lori was saying, I still see that the Republicans in the House have it in them to take that clean measure, amend it and send it back to the Senate and try to jam them. It's kind of like musical chairs. You know, who doesn't have a chair when it's time to sit down at the end?

  • 10:35:19

    REHMHere's an email from Jack in Gainesville, Fla. who says, "I feel very confused. When the current debacle started, it was a Tea Party attempt to defund Obamacare regardless of consequences. Now this fight has lost any focus at all. Talking points are shifting daily. International community is weighing in on domestic politics. What's happening?"

  • 10:35:51

    MONTGOMERYWell, the Obamacare push was a giant mistake. The Republican Party -- senior members of the party openly admit that there was no strategy...

  • 10:36:04

    REHMBut then why did they let it happen?

  • 10:36:07

    MONTGOMERYWell, that's sort of John Boehner's fault. He told his members in August, look, we're not going to stage a shutdown fight. We'll talk about this Obamacare business on the debt limit. That's our moment to have leverage. And even that was a concession that other leaders like Paul Ryan did not want to make. They've always wanted to turn this conversation back to the fundamental question of whether we're going to overhaul our tax code, whether we're going to rein in spending on Social Security and Medicare.

  • 10:36:38

    MONTGOMERYSo the leaders didn't want to have this fight, but the pressures being brought to bear from the outside groups like Heritage Action for America, the Club for Growth -- you know, Sen. -- former Sen. DeMint, Sen. Cruz, Sen. Lee, they just got yanked into this what has become a bit of a nightmare for them. As John McCain said yesterday on one of the Sunday shows, I think our support is down to blood relatives and paid staffers. So they're desperate to get out of this, but we've returned to spending because that's what Democrats now want to talk about.

  • 10:37:13

    REHMLori Montgomery of the Washington Post, Michael Scherer of Time magazine, Janet Hook of the Wall Street Journal. When we come back, more of your calls, your email. I look forward to speaking with you.

  • 10:40:01

    REHMAnd welcome back. Time to go right back to the phones to Fort Collins, Colo. Hi there, John, you're on the air.

  • 10:40:12

    JOHNGood morning. I had a question for the panel that I'm curious about.

  • 10:40:15

    REHMSure.

  • 10:40:17

    JOHNI read that President Obama had ruled out the notion that he might be able to use the 14th Amendment if these talks collapse and there's no resolution to the debt ceiling issue. And I was wondering -- I also have read that he is required by the Constitution to pay the debts and that, in order for him to pay the debts, he's going to have to decide to break either the law associated with the debt ceiling or he's going to have to disregard what the 14th Amendment requires him to do.

  • 10:40:49

    JOHNAnd I was wondering what people think his strategy is going to be. Is he going to actually use that in the end if things collapse and pushed into a corner?

  • 10:40:56

    REHMAll right. Thanks for calling. Too many legal complications.

  • 10:41:02

    SCHERERIt's definitely true that if we do default on our debt or are headed in that direction, there are all kinds of legal contradictions that happen. I mean, the U.S. legal structure is not built for us not to pay our bills. It's built assuming we always pay our bills, and so there are lots of complications that come up. Obama said he doesn't want to use the 14th Amendment, not only because -- and the White House has suggested they don't think it passes legal muster.

  • 10:41:27

    SCHERERBut beyond that, he argues that even if it is legally permissible and the Supreme Court eventually rules that he has the power to use the 14th Amendment, the fact is there would almost inevitably be a court case that happens after he uses it and that that would stretch weeks and weeks. And during that time, there'd be incredible uncertainty over what is happening at all.

  • 10:41:47

    SCHERERThe markets wouldn't know whether the president has this power or doesn't have this power. Nobody would really know how the Supreme Court's going to rule. And so, in the president's view, the 14th Amendment doesn't solve anything. It would just prolong and deepen a problem that has to be solved in his view by Congress. So that's his rationale for not going (unintelligible).

  • 10:42:05

    REHMJanet.

  • 10:42:06

    HOOKNot to mention that there would be intense and crazy political blowback from the Republicans if he did it, just because the legality of it is in question, and Obama said he hasn't -- doesn't have the power. I mean, it would just be politically devastating.

  • 10:42:19

    REHMAll right. Here's an email from Roger in Cambridge, Ohio. "The reason the debt ceiling and budget talks have evolved into this train wreck is because Republicans have been frozen out of the congressional political progress outside the House. The debt ceiling and budget are the only weapons they have left against what they see as an abomination of overspending that will bankrupt this country if it continues." Lori.

  • 10:42:56

    MONTGOMERYYou definitely hear that, certainly in the Senate. I was talking to Sen. Tom Coburn the other day who's, you know, caught in this weird place where, you know, he used to be the far right wing, and he finds himself now, like, arguing against what the far right wing wants to do. But nonetheless, he's like, you know, one of the reasons people are so frustrated is because we can't get our amendments onto bills.

  • 10:43:17

    MONTGOMERYHarry Reid has locked us out from having some of these debates. So, you know, it is certainly true that there is a lot of frustration, even among the more, you know, rational Republicans. That said, there is very little currency in the Republican Party right now for the strategy that is promoted by the Tea Party to try to use this moment to get something enormous.

  • 10:43:43

    REHMBut is the debt ceiling the tool, the only tool they may have left right now?

  • 10:43:51

    SCHERERThere's a long history of minority parties, parties that only control one House or don't control the White House, using both the debt ceiling and the continuing resolution, a government shutdown, as leverage to try and get what they want. The difference in 2011 and today is that sort of for the first time in modern history we have a situation in which it's not -- that point of leverage is not just being used, but the actual threat of default is a very real one.

  • 10:44:19

    SCHERERSo in the past, I mean, I think in the early '70s, Ted Kennedy tried to get a campaign finance reform bill past Nixon by connecting it with the debt ceiling. But Nixon rejected that. The campaign finance reform bill didn't pass, and the debt ceiling was approved. No one at any point really feared that the government was going to default on its debts. So I think the email writer's right that these are points of leverage, historically have been points of leverage, but they historically haven't been taken as far as leverage as the Republicans in Congress have been taking.

  • 10:44:50

    REHMAll right. To Greg in Chambersburg, Pa. Hi, you're on the air.

  • 10:44:56

    GREGGood morning, Diane.

  • 10:44:57

    REHMGood morning.

  • 10:44:58

    GREGI'd like your panels' opinion. President Kennedy had written a book called "Profiles and Courage" about ordinary Americans doing extraordinary things. Is there any chance that John Boehner will think my job is not worth this and bring it up to a vote in the House?

  • 10:45:16

    MONTGOMERYI think there's a good chance that might happen. I mean, he has said he doesn't want to default on the debt. He, you know, has enough of a sense of history that he doesn't want to preside over a default on the debt. You know, the question, we don't know. We really don't know.

  • 10:45:31

    REHMAll right. 50/50 chance, Janet Hook?

  • 10:45:33

    HOOKNo. I think there's a very real chance that he will as well. I mean, Boehner has in past episodes been willing to bring a bill to the floor. Part of the thinking is he kind of might be saving his party from itself, you know, that they really don't want to suffer the further political consequences of a long shutdown and debt limit. However, I have to say, at every stage, I've thought that he might do it, and he hasn't. So I wouldn't bet on my guesses.

  • 10:45:58

    MONTGOMERYAnd Republican senators actually wanted him to move first because they wanted to save him from himself. There was a big push Friday night to say, John, can you do something in the House so we don't have to jam you in the Senate? And he was unable to move forward.

  • 10:46:14

    REHMAll right. To Bill who's in Fairfax, Va. Hi there, Bill.

  • 10:46:20

    BILLGood morning, Diane. I have a comment and a question.

  • 10:46:23

    REHMSure.

  • 10:46:25

    BILLMy comment is that I'm in a leadership team of a large Virginia employer. We employ close to 2,000 people. We've been managing the federal shutdown so far. But, as of today, we're putting 500 people on unpaid leave. So I just wanted to let people know that this is not some abstract political game. People are being hurt in Virginia.

  • 10:46:49

    BILLAnd so my question now shifts to the Virginia governor's race. I came from a fundraiser for Terry McAuliffe today, and his polling numbers went up five points right after the shutdown occurred. And I'm wondering if the panel thinks, is the Tea Party candidate in Virginia going to become the poster child for the Tea Party's political future?

  • 10:47:15

    SCHERERI think it's definitely true that Republican posters I've talked to have pointed to the Virginia governor's race as an example of where there's real immediate harm. You got a state that has enormous employment that flows either directly through the federal government or indirectly through government contractors. And that race, up until now, has really been a miserable contest between two people who most Virginians dislike.

  • 10:47:40

    SCHERERAnd suddenly there is a clear dividing line, and Ken Cuccinelli has been taking the brunt of this. You see it in his public statements where he's trying to distance himself from his own party in Congress. So I think it is -- it will be an example. I don't think it will be decisive because, like I said earlier, we've had other examples where the Tea Party has undermined the National Republican Party at the ballot box, and then done it again.

  • 10:48:10

    REHMLori.

  • 10:48:11

    MONTGOMERYYeah. Cuccinelli, I believe, refused to even be photographed with Ted Cruz when he appeared in Richmond the other day. But the other thing that's working against Cuccinelli is, you know, you've got a Republican in office who's just been savaged in our newspaper for, you know, taking all this money from the taxpayers.

  • 10:48:31

    MONTGOMERYIf Virginia is the first victim, I think maybe one of the more important developments might come in places like Tennessee where you're starting to see incumbent senators, like Lamar Alexander, actively campaigning against the Tea Party stand. And if, you know, that sort of thing becomes more common, you know, hopefully the Republican Party will be able to right itself a little bit.

  • 10:48:55

    REHMSeveral of our emailers want to know where Vice President Biden is. One email says, "The VP should be appointed as a chief negotiator. He's a good negotiator. And if he succeeds, he will be the next President of the United States." What do you think of that, Janet?

  • 10:49:18

    HOOKWell, it is true that Joe Biden's been very involved in some past budget deals. He and Mitch McConnell cut a couple of them together. But earlier this year, I think, Harry Reid was determined to not have the legs cut out from under him. He wanted to take a tougher stand than he thought the White House often has in the past. And so he, in essence, requested that the White House keep Biden out of the talks. So he's not around by design.

  • 10:49:47

    SCHEREROn vacation at Camp David this weekend.

  • 10:49:50

    REHMHe's on vacation at Camp David.

  • 10:49:52

    SCHERERI think it's one of the first times I've ever heard of Biden going to Camp David, so it's quite a coincidence that he chose this weekend.

  • 10:49:58

    REHMMichael Scherer, White House correspondent for Time magazine, and you're listening to "The Diane Rehm Show." And to David in Jacksonville, Fla. You're on the air.

  • 10:50:14

    DAVIDThank you, Diane. I have a comment. A joyful day or reality is a strong delusion. An unhappy day or reality is living under another strong delusion. A good day is you support my delusion, I support yours, and it doesn't hurt another. But it takes a community to let us know when we're hurting another.

  • 10:50:45

    REHMAll right. Thanks for your call, David. How are Americans around the country? Are they paying attention to what's happening?

  • 10:50:56

    SCHERERI think increasingly they are. I think it's clear in the polls you've had dramatic shift in approval. As of Friday, the positive rating for the Republican Party was only 24 percent compared to 47 percent in The Wall Street Journal poll for President Obama. Fifty-three percent are blaming the Republican Party compared to 31 percent blaming Democrats. So, yeah, I think there's clear attention being paid to this.

  • 10:51:22

    SCHERERI think it's also fair to say that, for most people, they're not directly feeling the impact of this shutdown. Most people don't live in Washington, D.C. or don't work for the federal government. And as this continues to go on, I think more and more people, both from the shutdown and if, God forbid, we go over the debt ceiling, from the debt ceiling, we'll begin to feel this, and the attention will become much more intense.

  • 10:51:47

    REHMTo David in -- sorry, to Perry in Brunswick, Md. You're on the air.

  • 10:51:54

    PERRYHi, Diane, thanks for -- thanks for taking my call.

  • 10:51:57

    REHMSure.

  • 10:51:57

    PERRYYou're a national treasure. And thanks to everybody on your panel for their work. I've been following politics since I was old enough to know about it in the '70s and mid-'60s. And it seems to me that there have been -- the Congress works -- the Congress works all year, and they've -- this Congress has taken more time off than any previous Congress in history, so they haven't really been doing their jobs while they've been here.

  • 10:52:22

    PERRYIn the past, they were able to work out different parts of the budget throughout the year. And then maybe we'd come down to a continuing resolution on one or two parts of the budget. And they'd work out a deal, and it would be resolved. And I've worked on a continuing resolution, so it's easy to do, except we have a Tea Party Congress that's much like, I don't know, some people from the Spanish Inquisition, Catholics from the Spanish Inquisition, or Democrats from the South who believed in slave holding.

  • 10:52:52

    PERRYAnd that's what the Tea Party Congress is holding everything up now. It's keeping John Boehner from being the leader. Everybody's just afraid instead of doing their jobs.

  • 10:53:00

    REHMLori.

  • 10:53:01

    MONTGOMERYWell, it's definitely true that the budget process has been completely blown up by the Republican ascension to control of the House. I mean, we haven't been able to adopt a budget since Republicans took over. And I think part of what, you know, folks like Paul Ryan want to see is a return to that kind of regular order. One of the big asks that Republicans have right now is for a budget conference.

  • 10:53:26

    MONTGOMERYThey've been avoiding a budget conference for most of this year, but now they're saying, let's get into that budget conference, let's start talking about these broader issues of taxes and entitlements. The problem is, I think, you know, Democrats are also saying, well, let's get back to regular order and get into a budget conference. But once they get in there, you know, things are so nasty at this point, there is no appetite for any kind of ambitious deficit reduction.

  • 10:53:49

    MONTGOMERYI think that that effort of the past couple of years is kind over. And if they do get past this crisis point, and if they do get into a budget conference to set the spending levels for next year, it's going to be limited to, how do we replace the sequester, how do we pay for that if we do it, and, you know, all of this business about entitlements and overhauling the tax cut I think kind of goes away and...

  • 10:54:11

    REHMJanet, if, as Michael says, God forbid, we do go over that spending deadline, is that going to weaken anybody's position?

  • 10:54:29

    HOOKWell, you know, that's a good question because if something really calamitous happens in the market...

  • 10:54:32

    REHMYeah.

  • 10:54:32

    HOOK...you'd like to think that both parties would say, OK, time to get together. I do think that, because the public has been blaming the Republicans a lot more than the Democrats, I think it continues to be the case that the Democrats have the upper hand. But I think, you know, a really calamitous reaction would reduce the differences in the refusal to adopt. I mean, really, all they need to do is -- I mean, they could do it for 30 days.

  • 10:54:54

    HOOKThey could extend the debt limit for a week, and it would pass, I mean, just something to kind of take the steam out of the sense of panic. And I think, because the solution is so simple and all of the extraneous Obamacare demands have dropped away, I still have this foolish confidence that we're not going to go over the cliff.

  • 10:55:14

    REHMWhat do you think, Michael?

  • 10:55:16

    SCHERERIf I knew the answer to that I would be working on Wall Street. I think there's a -- I agree that I think the likelihood is at this point that they should be able to come to a deal before Thursday before we go over. I think the negotiations have narrowed substantially. The topics we're talking about have narrowed substantially over the last two weeks. You can argue that there's been enormous progress over the last two weeks.

  • 10:55:39

    SCHERERThat said, if you would've asked me this three weeks ago, I would've said the government probably isn't going to shut down because the dynamics argued against it. So I can't say that I'm certain about anything. I mean, I could say that the environment suggests that this should be solved before more harm is done, but I don't know if that'll be the case.

  • 10:55:58

    REHMLori.

  • 10:55:59

    MONTGOMERYWell, my fear is that if we do, in fact, do what seems to be the likely outcome, which is a very short-term extension of both the government funding bill and the debt limit, we're just going to have this argument again. And instead of, you know, being -- sitting here in October, we're going to be Thanksgiving. And you can't underestimate the degree to which lawmakers do not want to have their holidays ruined yet again. So I guess I hold out hope that we'll get a longer term deal that at least throws this into January.

  • 10:56:27

    REHMLori Montgomery, financial reporter for The Washington Post, Michael Scherer, White House correspondent for TIME magazine, Janet Hook, congressional correspondent for The Wall Street Journal, let's hope they get together and get this over with soon. Thank you all.

  • 10:56:51

    SCHERERThank you, Diane.

  • 10:56:52

    HOOKThanks, Diane.

  • 10:56:52

    MONTGOMERYThanks, Diane.

  • 10:56:53

    REHMAnd thanks for listening, all. I'm Diane Rehm.

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