MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The White House is considering business tax cuts that could be worth hundreds of billions of dollars. Federal regulators say the company responsibility for the latest oil rig explosion in the Gulf has been involved in at least a dozen offshore accidents. And Fed Chair Ben Bernanke says he failed to recognize flaws in the financial system that led to an economic disaster.

MS. DIANE REHMJoining me for the domestic hour of the Friday news roundup, Susan Page of USA Today, John Dickerson of Slate.com, and Jerry Seib of The Wall Street Journal. I look forward to hearing your questions, comments. Join us on 800-433-8850. Send us your e-mail to drshow@wamu.org. Join us on Facebook, as John Dickerson did, or send us a tweet. Good morning to all of you.

MS. SUSAN PAGEGood morning.

MR. JERRY SEIBGood morning.

MR. JOHN DICKERSONGood morning, Diane.

REHMGood to see you. Now, Jerry Seib, the president is due to make a speech in about 20 minutes. He's facing the second to last jobs report out before midterms. We got a 1/10 of 1 percent increase. So what is the president likely to say about all of this?

SEIBWell, I think he's likely to say there's a little bit of good news amid the gloom. But he won't say very much good news because that looks a little unrealistic and out of touch. But it's a mixed report, and I think he's gonna say not good enough. We need to do some things. We need to, maybe, do some small business tax cuts and incentives. I've been asking for that. We need to get some more help out to the states, which he has been asking for and Congress and has been reluctantly to do. Because one of the problems in this report is that state and city payrolls, that's where some of the job losses came from. It's -- overall, it's a mixed report.

SEIBThere was a drop down in payrolls by 54,000. As you said, a slight take up or -- in the unemployment rate, which is the politically sensitive number. But on the other hand -- and the good news that the White House will point to is that private sector payrolls rose by about 67,000. That's a small number, but it's the eight straight month of small increases there. And that's a good -- though, a faint good sign. And that if other things start to turn around, particularly if the states get certain - or an uneven keel, there's a reason to think that things can get a little bit better, but slowly over the coming months.

PAGESuch disappointing numbers, though, for the White House. Eight and a half weeks before the midterm elections where Democrats seemed to be about to head off a cliff, you get a number that shows you an employment rating a little bit worse, not better, not going in the right direction. And in a week where the president has really focused on other issues -- you know, we had this speech on the Iraq withdrawal, the end of formal combat operations in Iraq, then we had two days of Middle East peace talks. Those are really important issues, but those are not the issues that are at the top of the minds of Americans, especially as they look to who they're gonna vote for in November.

REHMJohn Dickerson.

DICKERSONAnd you see Republicans taking any effort of the White House -- we got two problems with any of these late moves by the White House. One, economically, all the things they're considering aren't gonna change the picture between now and Election Day. It shows the administration may be doing things. And in the president's statement today, he will have all of his economic advisors arrayed behind him, obviously not taking the advice of House Republican Leader John Boehner, who suggests he fire them all. (laugh) Newt Gingrich turned in, and they call for that as well.

DICKERSONIt won't help economically before the election. And the Republicans are now saying, too little, too late. These are desperate measures, the President is considering. He's running all over the place trying to come up with something which allows them to sell to their voters, you know, the sense of a president kind of -- doesn't really know what's going on, and he's kind of casting about now in the final moments.

REHMJerry.

SEIBA little -- you know, a little context here. This was bound to be bad. I mean, the -- well, this is a serious recession the country is trying to pull out of. This is now the 16th straight month of unemployment, at or above 9 percent. But -- and that's terrible. But if you think back, last time there was a recession like this, 1981 through 1983. There was 9 1/2 unemployment for 19 straight months. And from the time that recession started in July of 1981 until the recovery -- it got to the point where unemployment was back to where it started -- there were 35 months that passed. It took three years to get unemployment back to where it started at the beginning of that recession. So the realistic -- the analysis here says, this is still a long, dark tunnel. And maybe there's a light at the end of it, but it's gonna take a while.

REHMJerry, you mentioned reduction of taxes for small business. What about the idea of a second stimulus? Does that have any traction?

SEIBWhatever happens, it will not be called a second stimulus strike. It's...

REHMRight. It would be called something else.

SEIBPolitically toxic in both parties. Now, it will be called something else or nothing. It will just be tax credits for small business or it will be help for the states or it will be extended unemployment benefits again. I think the most realistic thing that will happen is some attempt to do things that either realistically or inspirationally are seen as a help to small businesses because those are good, quick, short term job creators. The real debate, though, is gonna now come over what to do with the Bush tax cuts, whether to let any of them expire this year or whether to do what Democrats want, which is to let them expire for those who make above $250,000 a year.

REHMSo where is the White House on that? Where is the Congress on that, Susan?

PAGEWell, the president has made it clear. He thinks the tax cuts for couples who make $250,000 a year and more ought to expire. He says these are people who have made out well in the last few years. And money for the programs that he wants to do -- and to hold down these alarming deficit numbers has to come from somewhere. But he's losing a lot of support among Democrats on the Hill who have -- are very mindful of the Republican attacks on this. They're nervous about the idea of raising taxes on anybody. That sounds kind of alarming. And they're also aware of the economic effects. I mean, as Jerry says, it's hard to get anything through Congress. It's gonna cause some money. The stimulus is not popular with voters. They don't see it as having the effect that was promised. So I think that this is gonna be a tough fight for the president. We think Congress is gonna take it up. But I think it's likely Congress won't actually deal with this until after this election is over in the lame duck session.

REHMWhite House economist Christina Romer is on the way out. She defended the idea of the second stimulus. John.

DICKERSONShe did, and this caused -- there was up -- and there are still mixed signals coming out of the White House here, because there are a lot of constituents, the president's supporters, labor leaders, in particular, who want a second stimulus. A big old fashioned, on the demand side stimulus. And the White House is saying that's not gonna happen. There are these smaller measures. Tax cuts was also something Christina Romer talked about. She wasn't specific about what she wanted, but she also mentioned tax cuts. And the White House is likely to say, look we have this small business bill here, and then we've got these other measures that are -- there are some reports being talked about about tax cuts for -- a payroll tax holiday.

REHMYeah.

DICKERSONAnd then also some tax breaks for research and development that might be put together in some kind of package. This is all -- it shows that the White House is at work here and trying to do something.

REHMYou know, it’s interesting. Yesterday, we had a caller who identified herself as a Tea Party member. We asked her about her views. She said that the unions have way too much power. Now, what I wanna know is how does the Tea Party and how do Republicans -- if you can divide those two -- what are the differences in their outlook on taxes, on spending and what we're about to see the Obama administration trying to do, Jerry?

SEIBWell, I do think you can separate them to some extent. I think the Tea Party is, at its core, about spending in the deficit. And that's why -- it’s a big reason why anything called the stimulus package has got a big problem, because it will add to the deficit in the short term whatever the federal government does, either on the tax side or the spending side. And that is an aftermath to the Tea Party movement. I think there is, or should be, within the Republican Party a fairly decent constituency to do some things on the tax side that President Obama and the White House are talking about. Extending the R&D tax credit, small business tax break, a tax -- a payroll holiday for payroll taxes is an idea -- that was a bipartisan idea earlier this year on the Hill.

SEIBIf the political system is functioning normally, there should be a bipartisan consensus for those things. But we're at Labor Day weekend before midterm election, and I'm not sure what that does to it.

REHMNow, is there anything called bipartisan left?

SEIBNo. And -- but you could see a situation in which -- and some Democratic strategists I've talked to have said -- and you've seen this from the White House on the small business bill, which is basically saying, look, we're trying to help small business, and these Republicans keep blocking and blocking. If they put up some new tax measure, then included in these measures -- which, again, John McCain had a payroll tax holiday. It's a part of his economic plan when he ran for president. Mitch McConnell, the Republican leader in the Senate, had such a plan. Obama would at least be able to say, I'm trying to give them what they want, and they won't take yes for an answer.

REHMSusan, when the president spoke from the Oval Office the other night about our ending of combat mission in Iraq, a lot of people said, the next day, he should have been speaking out more and more on issues like these, on issues of jobs, on issues of taxes, on things, in addition to Iraq that really matter to the American people. What message is the president getting about how forceful to be, how much to speak to the American people and why?

PAGEYou know, I think the White House has been criticized for being not -- for not showing the political deftness that was so impressive during the 2008 campaign for people who are tone deaf.

REHMIs he getting bad advice?

PAGEWell, you know, he's surrounded by many of the same people who worked for him with the campaign. Of course it's hard to be president, there's no question about that. I think John wrote a column this week that talked about how Obama must be feeling just a little bit of sympathy for George W. Bush now that he's in that office. But I think -- and actually, when I was at the coffee shop on my way here, I ran into a ranking Democratic official who must live around here, who was expressing enormous frustration with what the White House is doing and with the speech Tuesday night for not hammering home, I'm worried about jobs. I'm worried about the concerns that you're worried about.

REHMSo why...

PAGE...and he tried to do it in the speech. He did talk in the speech about the economy but I think not in the way that his supporters would like to see him do.

REHMSusan Page of USA Today. And just to let you know, at 12:00 noon, portions of this program will be webcast at wamu.org.

REHMAnd here's our first e-mail for our national correspondents Susan Page of USA Today, John Dickerson of slate.com and a contributor to CBS, Jerry Seib of The Wall Street Journal. This is from Alex, who's in Carrboro, N.C. "Please address the fact that Republicans are the ones who designed the Bush tax cuts to expire. Now Republicans are acting like the Democrats would be to blame if taxes went up. Why should any of them be extended when we have such a large budget deficit?” Jerry.

SEIBWell, it's true. I mean, the Bush people built the tax cuts with a 10-year life span. They did that because they knew that if they -- they could not get the votes to make them permanent because when you get to the end of 10 years, the deficit numbers, even back then in a better economic climate, started to look very bad. And the way the Bush administration, the Republican Congress, kept those long-term deficit numbers under control was by sunsetting the tax cuts. Everybody knew that at the time. Everybody went into this with their eyes open. And everybody knew that this moment would come.

SEIBAnd the question was whether it would come in the second year of a Republican administration or the second year of a Democratic administration. So -- but I think to be fair to the Republicans, if you would ask them at the time, would you like to end this after 10 years, or would you like to make them permanent, they would have all said, we'd just as soon make them permanent because that's what they believe. And I think there's truth to that today, so I don't think there's a hypocrisy involved here. I think there was a political imperative for the Bush White House to do something that made the long-term deficit numbers look not quite as bad.

REHMAll right. Go ahead, John.

DICKERSONWell, I was just gonna say, at the time, there were a lot of Republicans who said, you know what, even though there's this provision that says they'll sunset after 10 years, it's an awfully difficult thing to get rid of a tax...

REHMYeah.

DICKERSON...cut. And the political pressure at the time will be to reinstate them, and that's what we're living through now.

REHMNow I wanna come back to Chairman Bernanke and what he had to say to a panel investigating the financial crisis, Jerry.

SEIBWell, what -- this is the panel that's trying, by December, to put out a report that says, here's what we think the root causes of the financial crisis were and what the country ought to do to prevent another one. Ben Bernanke talked in particular about what happened at the very beginning of the spiral downward in 2008, and in particular why the government allowed Lehman Brothers to fail. That was the event that, in a way -- in many ways -- set off the panic that led to what happened in the fall of 2008, which was a complete meltdown.

SEIBAnd what Chairman Bernanke said was, I knew it was gonna be a catastrophic event, but I couldn't do anything about it. I didn't have, at that point, the legal powers or the political support to do anything, so I let it go. He admitted, along the way, a couple of mistakes. He said, I should have made it clear at the time that I didn't -- I couldn't do anything about it, rather than pretend it was something we chose to let happen because we didn't think it would be too bad. I knew it will be bad. I should have been more open about that at the time. And then more broadly, he said the Fed's great mistake was not regulating the mortgage markets more aggressively in the time leading up to that. Maybe we wouldn't have come to quite that moment where Lehman Brothers failed if we had kept a better eye on the housing market and the mortgage market.

REHMSo what happens under this new Federal Reserve Board legislation?

SEIBWell, you know, this is kind of a weird thing because the horse is out of the barn already, running down the road because Congress passed and the president signed a bill already earlier this year, reregulating the financial industry. Now we're going to find out months later what the Angelides, this commission that's looking into the result -- to the causes, thinks what the causes were. And I don't know what exactly is supposed to happen at that point since we've already fixed the problem they're going to analyze. So it's kind of a strange Washington-only kind of sequence of events. I think what will happen is there will be a look at this report and maybe some attempt -- not right away but over the next couple of years -- to fine-tune the Financial Regulatory Bill.

REHMAnd the AP is reporting before the president's speech that he's going to promise better days ahead. Despite continuing high unemployment, he's going to call anew for Congress to pass legislation providing tax relief for small business, pretty much as you've said. Susan, I would think that Democrats, considering these twin polls that were taken this week about their chances in the House and the Senate, plus their standing among voters, not a very happy time.

PAGEYou know, we have a new USA Today Gallup poll out this morning that shows the same dismal political landscape for Democrats that everybody else has seen. It's a little worse than the landscape in 1994 and in 2006. Those are both years when control of Congress shifted from one party to the other. But we found one big difference, which is people now are much less -- they're much more voting against the party in power, against the Democrats, than for the party in the opposition.

PAGERepublicans have not improved their reputation with Americans. Both parties are held in quite low regard. They are more likely now to say they're voting against the Democrat, not for the Republican. Only about 32 percent say they have a favorable opinion of congressional Republicans. Overall, we asked people, would it be better or worse if most members of Congress were just replaced this year, if we had mostly freshmen next year in Congress? Seventy-five percent of Americans said, we'd be better off with a whole new team. That shows you the level of unhappiness with the direction of the country and the state of things.

REHMAll right. Let's talk about the prospect, if not the possibility, of Republicans taking control of both Houses. And let's say there are a lot of Tea Party members among those. What happens next, John?

DICKERSONIt's very, very exciting. Let's first talk about the prospects. For a few months, prognosticators and political scientists have said the House is looking more and more likely it's gonna go. The magic number is net 39 pickup for Republicans. And they've pretty much said, because of economic conditions and the president's low standing and the way people think about the direction of the country and the enthusiasm among Republicans, it looks like the House is likely to go. They've said the Senate, though, is a tougher deal. Ten-seat net pickup, the Republicans need. That's really not gonna happen.

DICKERSONWell, in recent weeks, and including this week, Charlie Cook, a famous prognosticator about this kind of things, and Larry Sabato, a professor at the University of Virginia, both inched up their Senate numbers to between the seven- and nine-seat pickup. It's just one away from the 10. And they both now say it is plausible. Maybe not, you know. Still not. Maybe likely. But now plausible that this might happen.

PAGEWell, you know, the reality is no one will have control (laugh) of the Senate...

DICKERSONRight.

PAGE...next year because with the Senate, even with 60 votes, Democrats had a lot of trouble getting stuff through because of the filibuster rule. So if you think you'll either have a diminished Democratic majority, a very narrow Republican one, that's gonna be a place of real pain. And, you know, who's -- the person in for the most pain will be Mitch McConnell, the Republican leader who will be having to deal with moderate Republican senators like the two from Maine and some of these Tea Party senators who would have been elected, who have an extremely strong agenda and will come in feeling that they have a mandate to really shake things up.

REHMAll right. Now, what's the relationship between Congress and White House going to be with that kind of a mix up?

SEIBWell, you know, it will be awkward, to say the least. But I also think, in some ways, it's probably beneficial for President Obama in the long run. You -- the incentive to get some things done shifts solely from the White House to -- to Congress and the White House. Republicans take on a need to show that they are accomplishing something and a certain amount of responsibility if nothing happens. And the problem of keeping the Senate under control, as Susan suggests, becomes the Republicans' problem, not the Obama administration's problem.

SEIBRight now, and we saw this all through the health care debate, when Senate couldn't be forced to move on anything, people would look at the president and say, why can't you make -- you know, fill in the blank of the name of the senator you like -- get on board and do something? Well, that's not gonna be the question anymore. The question will be somebody else's. So, you know, there will be a need for Republicans to do something, to accept responsibility and less of a burden on President Obama. That doesn't mean a lot is going to happen, but on some selected issues -- and I'm thinking maybe energy, maybe even immigration -- there will be, perhaps, an opening.

PAGEWell, you know, the experience -- when the Democrats lost control of Congress in 1994, it was like that. It wasn't all bad for President Clinton. He was able to get some things on the welfare reform and the budget. But it also means that you've handed the powers of investigation to the other side, as President Clinton could tell you. And we know Darrell Issa, the California Congressman who chairs the government oversight committee in the House, has announced that if he's chairman, there are a whole series of things he'd like to investigate.

REHMSuch as?

PAGESuch as the offering of jobs to Democrats who are considering challenging, in primaries, favored candidates of the White House. It's just -- there are some good aspects of it, I agree with Jerry. But there are some aspects that are really troubling for the White House, too.

DICKERSONBut that's quite tricky, as it was, for Nancy Pelosi when she was waiting in the wings to come on and was asked about investigating the Bush wars, because if you come in and you are controlling your Republicans and then become defined by these investigations -- and you're not talking about what people actually care about -- you start to squander whatever political capital you have. So the notion of it going right into investigations is -- there a lot of Republicans who think that's not a great idea. One other thing I would just add to the complexity of the Senate picture is there might be a case where Mitch McConnell not only has to deal with those two moderate main Republican senators. But if Castle wins in Delaware -- he's a Republican senator but a moderate one, and then if Charlie Crist wins down in Florida he is an independent, where is he gonna go? And then you got Lieberman. He is an independent. I mean, Mitch McConnell could wake up with massive headaches every morning if he gets control.

REHMI'm wondering about your reaction to Lisa Murkowski's loss in Alaska.

PAGEMy reaction was who is Joe Miller? (laugh) You know, I think a lot of us didn't see this coming. A Tea Party-backed candidate against a sitting Senator and just very narrowly beating her in the Alaska primary.

REHMAnd Sarah Palin's role?

PAGESarah Palin I think played a significant role. She backed Joe Miller. She encouraged some Tea Party forces to spend significant money on his behalf on TV ads. And now John mentioned Mike Castle -- who the moderate Republican running in their primary on September 14th -- well, he's got a Tea Party opponent too that we haven't paid much attention to. In the day after the Alaska primary, people started paying more attention to that Delaware primary, thinking maybe Mike Castle could get knocked off too. And now we have both sides investing money we didn't expect to see there.

DICKERSONOne interesting thing about the Miller victory in Alaska is before the returns came in, a Democratic strategist called me and said, you know, really watch that Alaska race. Because what you're gonna see is that the Tea Party can rally a lot of people and they can be angry. But they can't really mobilize voters. Whoops. And so this is interesting of course because -- back to your previous question about how it's gonna work in the Senate -- you know, if the Tea Party is able to match enthusiasm with actually getting the vote out and getting people to the polls, then a lot of these Tea Party candidates do get elected. They come to Washington with a kind of zero sum view of things. Don't work with Democrats. Don't, you know, hold the line on these issues which means, again -- back to Mitch McConnell's morning headache -- he has to try and find a majority of votes. But he's got a new kind of hard nut in his caucus that just isn't gonna move. And he's gonna have to balance those two forces.

SEIBThe flipside of the analysis is that between now and November, maybe the Democrats will discover that the silver lining in all their clouds is the Tea Party slate of candidates in senate races. That if you have a Tea Party candidate --in Kentucky as we do and in Colorado and in Nevada and into some extent in Florida and states like that -- the Democratic hope is that those candidates very popular in the Republican primaries prove to be too far off to the ideological fringe in a general election. And that the Republicans have shot themselves in the foot and saved the Senate for the Democrats by allowing people who are out of the mainstream to be nominated. It may be that this is a year in which all those people are the mainstream. Nobody knows that yet. I think that's the question of the next two months.

REHMAnd you're listening to "The Diane Rehm Show." The AP is reporting again. President Barack Obama says a new jobs report showing private sector growth in August is positive, but more needs to be done for the economy. Your quote, Jerry. He renewed his call Friday for the Senate to pass a bill that would increase lending, reduce taxes for small business. Obama said GOP opposition was needlessly delaying the aid, but he said there was no silver bullet to solve the country's economic woes.

DICKERSONOne just quick little amplification of Jerry's point is that 67,000 private sector jobs economists usually say -- I think it's around -- you'll need about 150,000 to make up what you've lost. So that just gives you some sense of how anemic things are. Positive, yes, 67,000 but not close to the 150 you need to make up for all that's been lost over the last few months.

SEIBOne little bitties of relying in these numbers, one of the reasons the unemployment rate ticked up a little bit was that some more people came back into the workplace hunt, which is to say the number of people looking for jobs went up and when they couldn't find them, that pushed the unemployment rate a little -- up a little bit. That's actually good news because it means some people who had given up hope have actually come back into the search for a job and that will pay off in the long run.

REHMDoesn't it also say that some firms are beginning to hire?

PAGEWell we are in a recovery although it doesn’t feel like one. I mean...

SEIBYeah.

PAGE...there is a little bit of economic expansion. Although when we ask Americans are we in a recession, 80 percent of them said yes. So it's not like people agree with the economic analysis of this. But it is true. The economy is getting better. It's just getting better so slowly.

DICKERSONYeah.

REHMYeah. I wanna ask you all about Tim Pawlenty, the governor of Minnesota. He is thinking about or has issued an executive order, limiting Minnesota's take from federal health care. Can you explain to me what this is all about?

PAGEWell this is all about Tim Pawlenty's hope to be president of the United States after the 2012 elections. It's...

REHMBut tell me what it means for the citizens.

PAGEIt means not very much. It's an executive order that says for the remainder of his term as governor -- which just goes till the end of the year -- they won’t apply for demonstration projects and grants that are part of the health care bill. So for instance, there was a proposal for a teen pregnancy prevention grant that would create a program in Minnesota, and he decided not to go ahead with that, he's not going ahead with an application that the state could file. They need to file it by the middle of next week for a million dollars to help set up those insurance exchanges that are part of the health care bill. So I don't think the substantive impact on the citizens of Minnesota is in fact very great, but I do think it's a big political statement that he doesn't like the health care bill. And it's a reminder that governors have a lot to say about how this health care proposal gets put into law. When it came to the big thing that states are gonna do -- the big expansion of Medicaid that's part of the healthcare bill -- Minnesota is going along with that.

SEIBWell -- we're in Iowa. You can see the speech now. When, you know, I issued an executive order and said halt.

REHMSo you're telling me that he is one of the people who is going to be running for president.

DICKERSONHe wants to run. You know, he's not in office much longer. There are only so many things he can do to build up that resume. And this is, you know, this is a shot at Obama Care as they call it. And also other people -- other Republican strategists -- see it as a bank shot against Mitt Romney, his likely opponent. Mitt Romney passed a health care plan in Massachusetts that a lot of people say is very similar to the federal program and therefore perhaps Pawlenty can make some head of that.

REHMIt's interesting that the Minnesota Chamber of Commerce is urging Pawlenty to soften his stance.

PAGEBut you think the election hasn't started yet for 2012. Sarah Palin is speaking in Iowa this month. Mitt Romney is speaking in New Hampshire at the big dinner, a big Republican dinner. And now we have this Pawlenty thing, which I think is symbolic and political, not substantive.

SEIBRick Santorum has been to both Iowa and New Hampshire twice this summer so.

PAGEYeah.

REHMSo...

DICKERSONAnd we saw Haley Barbour doing a little pretty spadework on his -- trying to position himself.

REHMIt gets longer and longer and longer. And you've heard the voices of John Dickerson, Jerry Seib, Susan Page. We'll take a short break. And when we come back, time to open the phones.

REHM"And here we are again on the subject of the electorate," writes Robert in Lakewood, Ohio. "What do your guests have to say about the Eugene Robinson column in this morning's Washington Post where he called the voters spoiled brats? It seems like we get the politicians we deserve because we elect the candidates who tell us what we want to hear or they lie outright. John Dickerson.

DICKERSONWell, funny to see a politician say that, because they may think it privately, but they can't say it out loud. One thing that's interesting about that is -- specifically, I don't know what specifics he's talking about, but certainly, in terms of these taxes and budget spending question we have, you look at the polls again and again, and there's an inconsistency. People say they're worried about the deficit. They're worried about the debt. And then you run down the line the things that -- you ask them, okay, well, where would you cut? And they defend in number, sometimes in the high 70s, almost every program.

DICKERSONSo the hard choices that need to be made aren't being made by the voters, and the politicians, certainly when they're running for office, are not gonna offer those hard choices when they run. And we've seen this with the Republicans who've made a lot of hay about the spending in the Obama administration but are being quite quiet about what their actual specifics are for cutting spending, because to get specific is to open yourself to abuse from the voters.

PAGEAnd the problem is if politicians don't make these arguments while they're running for office, then they've got no standing to try to make that case after they've been elected to office. So if you don't talk about the need to reign in Social Security spending or do something about Medicare while you're running, you get elected on the stand, you're gonna protect everything. Then when you actually get in and have to try to make hard decisions, it's politically harder for you to do that.

REHMAll right to St. Louis, Miss, good morning, David.

DAVIDOh, hi, thank you. Thanks for taking my call.

REHMSure.

DAVIDI just have a couple of, like, quick statements and then a question. You know, I'm just going off of -- in my learning period. You know, we have a free market capitalist system. And according to Republicans in Wall Street, only a private industry should create jobs. And they're pretty explicit that they're not gonna do it this year, maybe not next year. And you know, five to 10 year is just, you know, a complete joke to me, you know, of a recovery, because that's just too late for anybody, and especially Obama.

DAVIDSo I'm questioning why does he take the blame for the job situation when this is clearly something that private industry should be doing? And I guess my second question is if he's a true socialist, you know, why would he give him, you know, the, I mean, the private industry an ultimatum, either you hire them or I will?

REHMJerry.

SEIBWell, on the second point, you know, the -- this is the best retort to those who say Barack Obama is a socialist. The socialist would have had a big government jobs program, a WPA kind of program, and just hire people directly. And that hasn't happened. It hasn't even been seriously discussed, so I think that's true. On the first point, I think the response that a business person would give to that argument is twofold. A, it's -- there is no consumer demand right now. Why would I hire more people to produce products that nobody is buying? That's not logical. And that's got nothing to do with President Obama and has nothing to do with an agenda on the part of the business community. It's just kind of economic reality.

SEIBThe second thing they would say, and this is debated a lot, but it's a common refrain, is that the other reason I don't hire is there's a lot of uncertainty now. I don't know what my tax bill is going to be next year. I don't know what the effect of the health care bill is going to be. I don't know what the regulatory system is going to look like after the financial regulatory bill is fully in effect. So I'm pausing here because of the uncertainty. I don't wanna take a risk until I know that the odd is better than I do know. That's a logical argument. You may or may not disagree with it, but that's the business community's view of the situation right now.

REHMTo Kalamazoo, Mich. Good morning, Gary.

GARYHi. It's an honor to be on and to speak with you.

REHMThank you.

GARYHaving a week of revelations, it struck me this morning as you were talking about the revoking the tax cuts for earners over $250,000. But I'm baffled that there's even discussion of that. Ten years ago, at the peak of political capital, the Bush administration and the Republican Congress decided that the deficit could be so bad that these had to be revoked. And the deficit is worse, much worse. And every time I hear the phrase people earning more than $250,000, I realize, they're the people also earning 500 and 800 and 2.7 million, and I cannot conceive. I'm utterly -- I'm astonished at the notion that any serious person, any responsible government representative could possibly want that tax break to continue given reality.

REHMJohn Dickerson.

DICKERSONWell, the argument they make -- and again it's -- and in fact, it's not just Republicans, there are Democrats who argue that you need -- with such a fragile recovery, that if you increase taxes on people above 250,000, who are doing a lot of saving but who still do some spending, and do a lot of spending, that you end up hurting the economy at this fragile moment. And it's not just polls who were saying this. There are also economists as well. Mark Zandi, who's often quoted in these debates because, in part, he advices Congress and he advised John McCain, believes that these should not -- these taxes should not go up on this group.

DICKERSONThere is another option being debated which is a kind of one or two year kind of continue the Bush tax cuts for a year or so after we -- so we can move a little bit more into this recovery, and then we'll have, you know, and then we'll reassess or then we'll them, you know, back to the previous levels for those making over 250.

SEIBThe other argument that is made, and this is, again, a plausible argument, is that when you raise taxes on households making over $250,000 a year, you've also raised taxes on thousands of small businesses who happen to pay their taxes at that personal rate. And that's the other argument for not, as John suggests, for not doing it right now. Because if there's any job creation seed out there, you don't wanna sort of choke it off.

REHMAll right. To Annapolis, Md. Good morning, Nelson.

NELSONHi, Diane.

REHMHi.

NELSONWell, my question seems belated now. But anyway, I was just thinking, you had one earlier this week, economist, most of whom thought we do need a stimulus and that money for the states would be good, and now, the president is recommending a stimulus. And I just wonder if the Republicans, having done everything they can to demonize and criticize the president, really care to do something that might help the economy now or would they rather just have a bigger platform of unemployment and deficits and so on to run on? And, you know, are their concerns totally political or do they care somewhat about the country, and following the advice, the sage advice of your economists?

PAGEWell, I think it's unfair to say Republicans don’t' care at all about the future of the country. I think, you know, you should give credit to people who serve in public office, that they have -- you know, they're elected because they do care about the country. However, eight weeks before midterm election, it's like not surprising that both sides are thinking a lot about the politics of what they're saying. And there is a point of view that the way to stimulate the economy is not to spend more money, but rather, to cut taxes to unleash the potential of the private market. That's a debate that goes on all the time.

REHMNow, do you think that Republicans and those Democrats who may have some opposition will go along with the president on these tax cuts for small business?

DICKERSONYou know, it's as we said before, it's a great question. I think it's the test of the next few weeks. I think, probably, the answer is yes because it does become awkward to explain why you're not in favor of your own proposal. And I think that would probably carry today.

REHMThey've had to do that before.

DICKERSONOh, it's an art in politics. It's done quite a lot, actually. So it's not beyond the pail. But I don't think that's what'll happen. I think something, you know, will happen. To me, the mystery in this equation all along has been why there hasn't been more of a constituency for sending aid out to the states. I mean, there are a lot of Republican governors out there, as well as Democratic governors, who have been wanting some help. The mystery of the summer to me was that the administration was not more easily able to sell the idea of at least sending some money out to the states so they don't have to lay off state workers.

PAGEI actually have a theory on why that's happened which is that there's so much concern among many Americans about the expansion of government. That goes back to the bank bailout and the auto company bailout said that there's just a real resistance for doing anything that seems to expand the powers and the cost of government, and that the idea of aid to certain local governments has been caught up in that debate.

REHMHere's an e-mail from Earl in Newfane, Vt. He says, "It's astounding to me" -- and apparently, there are several e-mails like this one. "It's astounding to me that with all Obama has accomplished, the bailout regulatory reform, health care, unemployment extensions, he's only being judged according to the dismal job numbers. In light at the catastrophic events and fallout from the prior administration, how can people be so forgetful and impatient?" Now, this is something that the Obama administration itself has tried to point out, but without a great deal of success.

SEIBWell, absolutely, and this gets back to the notion that the voters may be a little whiny or maybe not. I mean, maybe -- but you know, in some sense, it's fine. I mean, people are out of job, people are hurting. It's, you know, it's terrible. The question is where do you fix blame? And so, you know, whining isn't the same as fixing blame. The Obama administration certainly has tried to make this case. It's a funny kind of flip of things. In the primaries and during the campaign, Barack Obama was considered to be the guy who had the pretty words, but, you know, wasn't gonna be able to do anything. Now, he's done quite a lot. And people are saying, well, you know, his words haven't really matched up and been able to sell what he's accomplished.

REHMHere is an e-mail from Linda in Kerrville, Texas. She says, "Business is not making jobs because they don't trust the current administration on taxes, health and too many social programs that our country cannot pay for. Some states are not wanting the government giveaways because they know they cannot pay them back. They believe the government is trying to weaken the states' independence." Do you see that, Jerry?

SEIBI don't see they're arguing on the states, to be honest. I do think the -- you know, the earlier part of her explanation is what I was saying before, that is part of the business community's explanation. I do think, though, it's matched by this notion that until we see a recovery that guarantees us there is real and lasting upticks in consumer demand, I don't see they -- that they see the rationale for more hiring.

REHMAll right. To Edgecombe County, N.C. Good morning, Melanie.

MELANIEGood morning. In North Carolina, we have bad balanced budget. And because Congress delayed appropriating money to the states that they usually do, we had to have a secondary backup plan to lay off a bunch of state employees including teachers. And the Congress appropriated the money late in July. And we had a column in the paper a couple of weeks ago from Pat Buchanan railing against this appropriation because, in his words, the states had already decided they could do without these people, and we were gonna lay them off and fire them. And -- they were just excess. And now that Congress has increased the deficit by granting all this money to the state, the states were just gonna keep a bunch of lollygaggers on the payroll. That's the twist that the politicians have been putting on everything.

REHMMelanie, thanks for your call. You're listening to "The Diane Rehm Show." Susan, you wanna take that on.

PAGEWell, I don't know that I have anything very profound to say, maybe John does.

DICKERSONOh, well, I was just -- I mean -- well, it's funny, there used to be a Republican argument that you want deficits to get really big because then it forces the shrinking of government. And what you see -- potentially, Pat Buchanan didn't read his article, but he's moving the goal plus. So deficit shrink, you got to fire some people to deal with that. And then the people -- that's the new baseline. So that becomes the new normal, and any additional jobs -- you're supposed to forget that those firings were an emergency measure, and any additional jobs become the new ballooning of government. So this, in practice, a strategy that used to be part of the Republican platform.

REHMBut isn't private industry doing the same thing, downsizing then leaving all these people in a lurch, not hiring back?

DICKERSONSure. But if you play out this Republican theory, private industry is wonderful and smart and does what it does intelligently. Public employees, they're always way too many, and -- therefore, net new public employee is always about idea -- well, not always -- but largely about idea. So...

REHMBut that was Ronald Reagan's theory that government is the problem precisely because it's too big.

DICKERSONWell, and it's the Tea -- I mean, it's Reagan but also in present day. It's the Tea Party and conservative argument of, you know, the -- a forceful main argument of theirs.

REHMAll right. To Kate in Roanoke, Va. Good morning. You're on the air.

KATEGood morning. Thanks for taking my call.

REHMSurely.

KATEI -- with all that's been said in the last -- earlier in the hour, I think my concern is that what we have differently in this very complex and deep recession is the wholesale idea of pessimism that's going on. I don't think in the early '80s it was anywhere near as broad through, you know, 24/7 news cycles, pundits with major radio shows that are listened to, flipping up all kinds of hate and distress and -- you know, when president -- soon after President Obama was inaugurated, if I remember correctly, he was talking about how this was going to take a very long time to come out of this recession. And then he was spanked for being pessimistic because the psychology ethic populous is so important to any hopes of recovery. And this whole idea makes me very sad and very scared about a real recovery. Because if they're gonna be -- if we're all afraid, and we're -- don't just trust our government or anybody's decisions, what are we gonna do even if it's a whole new party in charge. I mean, you just can't erase that kind of attitude.

REHMJerry.

SEIBWell, I think Kate makes a very important point. You know, part economics is economics, part of economics is psychology.

REHMAbsolutely.

SEIBAnd the psychology right now is dreadful. You know, in our polling, we've asked people, do you think the economy is gonna get better over the next year? And even as the country is arguably coming out of the recession, the number of people who thinks it's gonna get better over the next year is going down, not up. And we've always asked people, do you think the life for your children will be better than it is for you? The number of people who think that is going down, not going up. And that has its effect.

PAGEYou know, the 24-hour news cycles had part of that. I think Kate makes a good point there. The reality is part of it too. This is a worse recession than we had in 1982, and it's gonna take some time to get out of it.

SEIBFor solace you might turn to the president who's latest theme has been things are bad but the spirit of the American people -- he talked about that even in terms of the Iraq speech -- and the notion that as dark as things are there is a resilience and a power in the American people. In part, that's what all he's left to say, but it will be his theme for the next 60, somewhat days of this election, trying to give people some sense of hope and -- much as he did in his last campaign.

REHMJohn Dickerson of Slate.com, Susan Page of USA Today, Jerry Seib of The Wall Street Journal. Please enjoy your weekend, but be careful, Earl is moving up the East Coast. And don't forget, you can see portions of this program starting at noon at wamu.org on our webcast. Have a great weekend, everybody. I'm Diane Rehm.