The Federal Reserve releases details about trillions of dollars lent during the financial crisis. President Obama blocks expanded East Coast oil drilling. And the White House deficit commission votes on proposals to address the nation’s fiscal woes. A panel of journalists joins Diane for analysis of the week’s top national news stories.
- Naftali Bendavid National correspondent, The Wall Street Journal.
- Sheryl Gay Stolberg White House correspondent, The New York Times.
- John Dickerson Chief political correspondent for Slate.com and CBS political analyst and contributor. Author of "On Her Trail: My Mother, Nancy Dickerson, TV News' First Woman Star."
Friday News Roundup Video
Diane and the panelists discuss the week’s Senate Armed Services Committee hearing on repealing the military’s “Don’t Ask, Don’t Tell” policy:
The panelists explore some of the new information that emerged this week about loans the Federal Reserve made to different corporations and banks during the start of the global financial crisis in 2008:
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The nation's unemployment rate rose to 9.8 percent for the month of November. Private sector hiring fell off considerably. The Obama administration and Republicans are meeting to discuss extending Bush-era tax cuts. Plans for more government spending to boost the economy are also being considered. Joining me for this week's Friday News Roundup, Naftali Bendavid, he's national correspondent for The Wall Street Journal, Sheryl Gay Stolberg is White House correspondent for The New York Times, John Dickerson, chief political correspondent for Slate.com, CBS political analyst and contributor.
MS. DIANE REHMAnd, of course, you know we'll welcome your calls, comments. Join us a little later in the program, 800-433-8850. Send us your e-mail to firstname.lastname@example.org. Join us on Facebook. Drop us a tweet. Good morning to all of you.
MS. SHERYL GAY STOLBERGGood morning.
MR. NAFTALI BENDAVIDGood morning.
MR. JOHN DICKERSONGood morning, Diane.
REHMJohn Dickerson, the nation's unemployment rate at 9.8 percent -- sobering news -- and yet we're still talking about tax cuts.
DICKERSONWe are. Sobering news because everybody kind of expected the number to be a lot higher than...
DICKERSON...39,000 jobs, so this is another sock in the gut. And the tax cut debate is happening, you know, in the context -- I mean, this is a part of the tax cut debate to the extent that the debate is about what can you do that gets the most bang for the buck? And the administration says, well, if you really want a lot of bang for the buck -- in other words, federal spending or tax cuts that help encourage economic activity, and that will lead to hiring and jobs -- then you should extend unemployment insurance because that is -- that money goes right to people who spend it.
DICKERSONYou should not continue to have the tax cuts for those who make over $250,000 because while that does hit a small portion of small business, it ultimately ends up going to people who are saving that money right now. So in terms of the immediate economic impact, there are other things you can do. The White House also, in a part of this tax cut debate, is arguing for a series of tax cuts that go to lower and middle income families. They like to call them the Obama tax cuts, the Making Work Pay tax cut, and those, they say, are also the kinds of tax breaks that do give you a lot of bang for the buck.
REHMSo what's the other side of this argument, Naftali?
BENDAVIDWell, the other side of the argument that the Republicans are making is simply that you don't raise taxes or let tax cuts expire during a difficult economic time, that what you want to do is give people more money to spend -- and that includes people at the upper end of the income scale. And also they say that these tax cuts go to small businesses. That's the key part of their arguments. It's actually striking to me how much the Democrats have lost the message battle on this. Because what they call the Obama or Democratic tax hikes, were put in place by Republicans 10 years ago. They passed this tax cut that would expire in 10 years, and they did that for budgetary reasons.
BENDAVIDNow, that bill is coming due, and they're describing that as Obama tax hikes because Obama -- the Democrats don't necessarily want to let all of them -- don't want to continue all of these. So, I think, it's -- in messaging terms, I think it's been much better for the Republicans than the Democrats.
STOLBERGI think Naftali is right. I think the White House is, in effect, in retreat on this issue. We're seeing negotiations going on right now with the budget director, Jack Lew, and Treasury Secretary Tim Geithner, trying to guide Republicans and Democrats to some sort of resolution on this issue. And what most people expect is that the tax cuts will be extended across the board temporarily for two to three years in exchange, perhaps, for the addition of these unemployment benefits that John spoke of. But any way you look at it, this is a cave, really, by the White House. President Obama has said repeatedly he does not want these tax cuts extended for the wealthiest Americans. And if this deal goes through, that's exactly what's going to happen.
REHMSo it's a choice between extending the tax cuts and providing for the unemployed?
DICKERSONWell, in the end, the grand deal may be that you get everything, that the tax cuts get extended for a temporary period, either one year or three year across all rates, which is -- as Sheryl was talking about -- the cave. The White House position used to be make them permanent for the middle class and below and don't extend them at all for the upper income. Now, they've shifted. So the deal, in the end, here may be to get those -- that unemployment in with the tax deal. But Republicans are saying while there don't need to be offsets for extending the tax breaks for those who make over $250,000, there need to be spending offsets -- which is to say spending cuts -- in order to pay the $50 billion you need to extend these unemployment benefits.
STOLBERGRight. And it's important to remember, Diane, that we're having this debate concurrently with the debate over the fiscal commission and the larger debate over how to reduce the federal deficit. So here we have policy proposals coming forth that don't address the deficit issue, that, you know, do the reverse, that would drive up spending. And it's hard to see how these lawmakers can square those two goals.
REHMYou know, I am confused. Because, in my mind, having done this program for more than 30 years, those tax cuts were intended to be temporary. They were not intended to be permanent. Or were they? Was there a bomb planted by Republicans when they placed these tax cuts into the system?
BENDAVIDI mean, I think to some degree, there was. I mean, in other words, I think what the Republicans really wanted was probably to make them permanent. They believe that the tax burden should be lower, but that was something that was difficult to do at that time, in part for budgetary reasons. So they set up a situation where they'd expire in 10 years. And I don't think anyone had any illusion that it would be easy to let those things just expire for everybody in 10 years, so, I think, to some degree, this was calculated. And now it's all coming due, but it's coming due in a way that is playing to the Republicans' advantage.
BENDAVIDI mean, you would think the Democrats would have a pretty good argument here. You know, we're in a time of high unemployment. They want to extend unemployment benefits to 2 million people. The Republicans want to extend tax cuts to everyone, including very wealthy people as well as people at the lower end of the spectrum. But, somehow, the overall narrative that the Republicans have put forth seems to be controlling. I mean, this idea that the problem we're having is spending -- that's what Democrats are doing. We need less taxes, less spending. And the Democrats just want more of it. I marvel at it sometimes, at the difference in the messages and how successful each party is at putting them forth.
DICKERSONOne of the reasons, just to put some numbers to this, is there's a -- CBS came out with a poll, asking people, what do you feel about these tax cuts? And the Republican position which is, extend them for everyone, has support of 26 percent of the country. The rest of the country believes either they should be extended just for those who make $100-, $250,000, or they should be eliminated, not allowed to continue at all -- the Bush tax cuts. Now why did Republicans -- with those kind of numbers, the White House should be running, you know...
DICKERSON...and having a huge success. The problem for the White House is twofold. One, if nothing is done about this, at the end of the year all of the tax cuts expire, which means everybody gets hit with the tax cut. And their view is...
REHMHit a tax hike.
DICKERSON...excuse me, I'm so sorry.
DICKERSONYes, a tax hike. So their view of the White House is if everybody gets hit with a tax hike, we're going to get blamed.
DICKERSONThe president's going to get blamed. The second problem is, in the Senate in particular, there are Democrats who want to extend these tax cuts for all income brackets. So it's not just Republicans who are opposing the president, but there are a handful of Democrats who are also opposing him. So that he can't make this just a Republicans are for the rich because you've got some small number of Democrats who are also in this case against the president and his position.
STOLBERGI also think this is a fundamental tenet of American politics, which is once you give Americans something, it's very hard to take it away, right? And we see this in the debate over Medicare and over Social Security and various other government programs. And if you kind of look at the tax cuts in that way, it's something that Americans have, right? More money in their pockets. And it's just politically hard to undo that.
BENDAVIDI also think underlying almost everything that's happening in Washington these days is competing narratives on what the election -- that we just had -- met. And the Republicans are interpreting it as a meaning of complete rejection for everything the Democrats want and stand for and advocate. And they're putting that forth. And that's really, I think, what they believe, and that means being against the unemployment extension. It means being against letting the tax cuts expire. And the Democrats are having a very difficult time coming back at that, in part 'cause their own party is in disarray about what message to take from the election.
REHMNow, with this addition of some 39,000 jobs -- which was way below what was expected -- are Republicans going to have a harder time arguing against extending the unemployment insurance?
STOLBERGYou know, the arguments that we're seeing out of Republicans today really focus on the tax issue. After the unemployment numbers came out, Mike Pence, senior Republican in the House put out a statement saying, you know, the Democrats have to stop with their job-killing tax hikes. That is their -- that is the message that they are sticking to. I believe the Speaker-Designate John Boehner put out a similar statement. They are sticking to their mantra that they used during the election season, which is, where are the jobs? So, you know, that's their focus. That is how they're trying to frame the debate. It's only -- these job numbers are only what, a couple hours old, if that? So we'll see how it plays out over the day.
REHMWell, and you'll also, perhaps, see differences between November and December, considering Black Friday, Black Monday -- everything that happened over that weekend -- the hiring that retailers are now doing.
DICKERSONThat's right, and, although, those numbers won't come in until January...
DICKERSON...so we've got -- so there are -- yeah, we've seen this for months and months, haven't we? Which is, that you see some positive signs, you know. Black Friday was -- there was all of this...
DICKERSON...purchasing going on.
DICKERSONPeople are buying like mad, taking advantage of a lot of these deals. And so there is some good news out there, and then just when everybody -- and the market was doing well. And just everybody gets -- you know, is able to get up out of the chair and take a walk around, and then they get hit in the gut again by these kinds of numbers. And so this is -- you know, we've kind of had this story for the last many months.
BENDAVIDBut I actually don't think that those kinds of developments -- whether the unemployment rate goes up or down -- is going to affect the basic political dynamic. I mean, the Republicans are sticking to a very specific, you know, point that they want to make. I mean, and in fairness to them, they say that they do want to extend the unemployment insurance benefits as long as they're paid for, right? But that's something that's difficult to do, and it's not similar -- they don't say a similar thing about their tax cuts. But, anyway, you know, I've been actually struck by the extent to which they have no more political fear of standing in the way of extending unemployment benefits.
REHMNaftali Bendavid of the The Wall Street Journal. Sheryl Gay Stolberg, The New York Times. John Dickerson, Slate.com. Short break and right back.
REHMAnd here's our first e-mail from Heather in Belmont, N.C., who says, "Your guests keep saying the choices between having tax cuts for everyone or only those making under $250,000. Please be clear -- those who make over 250 get the same tax cuts that everyone else gets up to $250,000. It's an important point most Americans don't understand."
DICKERSONTrue, and that's quite true. But that's -- the nature of the debate is not -- you know, the debate is basically -- in the political context, is between the breaks for the 250 and those for under. So that's a good policy point, but it's not the way the debate is happening.
REHMAnd here's something from David, who said, "Senate Democrats should refuse to go along with the extension of tax cuts to higher income earners. Under any circumstances, they should show more backbone than the administration. It's better to have the cuts expire for everyone. Why is the president willing to cave on this?" Naftali.
BENDAVIDWell, because he doesn't agree with the assessment, that it would be better if the tax cuts expired for everyone. Both politically and substantively, that would be a bad thing. And, I think, that is why the Republicans hold the upper hand in the negotiations. There are some Senate Democrats -- it should be said -- who agree with what the e-mailer is saying. Tom Harkin says we should stick to what we want to do and let the Republicans pay the price for insisting on tax breaks to the upper income. But, politically, that's not how most Democrats feel it should play out.
REHMAnd, on the other hand, this from Gary in New Marshfield, Ohio, "Why does your commentator call the president's compromise with regards to unemployment insurance and the Bush cuts a cave by the White House? Aren't we desperately in need of some ability for our two parties to engage in compromise? Isn't this what the president is doing? Why label it caving in?"
DICKERSONWell, I think the cave language is being used by a couple of people. One -- liberals are running ads. There are two liberal groups that are telling the president, don't cave, don't give in. And to the extent it's a cave, it's a cave from this, which is, before the election, the president argued that middle class tax cuts should be continued permanently, that it was -- and that tax cuts, extending them for those who make over 250, should not happen at all. He then modified -- it was suggested in the middle of that debate that perhaps there should be an extension for all rates of, say, two years. The White House said, no, we don't want that. That, now, is what the White House is lining up behind. So to the extent that they've come down from a previous position, that's often labeled a cave.
REHMAll right. But considering that last e-mail, I mean the Republicans -- 44 of them -- wrote a letter to the White House -- 42 of them...
REHM...wrote a letter to the White House to Harry Reid, saying that they are vowing to prevent a vote on any legislative item until the Senate has acted to fund the government, and we have prevented the tax increase that is currently awaiting all American taxpayers. So where's the compromise, gang?
STOLBERGWell, this is actually one of the most striking developments of the week, I think. President Obama had Republican lawmakers in earlier in the week for their long-awaited meeting, and they all came out saying very nice things about each other. They call -- they said they were encouraged, the Republicans did. The president called it a frank discussion. Sometimes that's a euphemism in Washington for, we just don't get along. But, in this case, everyone seemed to be ratcheting down the rhetoric a little bit.
STOLBERGAnd then the very next day, these 42 Republicans came forth with this letter, saying, we're going to hold up Senate business until these issues are dealt with. And it felt, to many people, like politics as usual. And where did the goodwill go? So I suppose, in a way, your e-mailer is correct, that if they do resolve this, perhaps it will be viewed as a compromise and as a way that everybody walked away with a little bit of something. That would be a nice spin on it.
BENDAVIDBut it was an extraordinary move. I mean, the 42 Republican senators -- that's all the Republican senators. I mean, there's two -- a man and woman --they said they weren't going to do anything until, essentially, they got their way on tax cuts. And, I think, one thing that it does is it sends a signal about the way that the next two years are probably likely to unfold. There's been some thought that, with divided government, maybe it will lead to compromise. But, I think, history suggests -- and I think this act suggests -- that we're probably in for more of what we've seen over the last two years, that both parties will be sort of calculating and couching themselves with an eye toward 2012.
BENDAVIDThe other thing it is -- to me, is that it's an attempt by the Republicans to, in a way, move up the results of the election by a month. I mean, we all know that in January, they're going to come in with a much greater presence in Washington. And this is, I think, one attempt on their part to say, well, we've been emboldened by this election. We think we've gotten a mandate from the American people, and now we're going to start blocking everything the Democrats do.
REHMAre they overplaying their hand, John Dickerson?
DICKERSONWell, they are in danger of it. And they say they know they're in danger of it, but yet they came out of this meeting having -- I thought there was -- in this meeting, President Obama said, you know, I should have, over the last two -- almost two years, reached out a little bit more to Republicans. So in these -- after these little moments of reconciliation, one side says, I should have done this. Usually, the other side says, oh, yeah, well, I should have been nicer, too. So the president offered his little, you know, walk-down, said, I should have been -- reached out more. And the Republicans said nothing.
STOLBERGYeah, you should have.
DICKERSONYeah, they said -- and so what was interesting is a -- just as a kind of theatrical thing, that showed the Republicans, basically, aren't budging. And what interested me in this is that one of the key claims against the president was that, after the 2008 election, he sat down with Republicans in a meeting about the stimulus package and at one point said, I won, which they took great umbrage. And they said, you know, you don't want to negotiate with us. You're just saying you won. In advance of the meeting with the president, Republican leaders wrote an op-ed in The Washington Post in which they used a number of words, but essentially the message was, we won, and you lost.
DICKERSONAnd the American people repudiated Democratic positions. And so they have taken the same posture that they were so irritated the president took after the 2008 election, and this letter is symptomatic of that. And also, we should note, that having sent this letter, the vote that the Senate is scheduled on Saturday on tax cuts, there was going to be a more expansive vote with Republican options. That was forestalled because a Republican senator, so far unnamed, blocked that from happening. So, on the one hand, there's a letter saying, you can't go forward unless you deal with tax cuts. But when the moment of truth came to deal with the tax cuts, it was blocked by a single Republican senator.
REHMI'm, you know, speechless. It's just awful.
BENDAVIDWell, this is a pattern that we've seen. I mean, what happens is one party wins a pretty impressive election, and they see it as a mandate, which -- maybe it is, maybe it isn't. But that's how they interpret it. And they push ahead very strongly, and then there's a backlash, and they're chastened, and things kind of swing the other way. And it seems to me like we're, perhaps, seeing some of that same dynamic playing out right now. It was only two years ago that we saw the same thing go in the other direction.
REHMNow, we were expecting a vote from this National Commission on Fiscal Responsibility and Reform at 9:30 this morning to let us know what that commission proposes. They had to have 14 votes to get a majority. Surely, they weren't going to get that, but they were going to issue a report in any case, Naftali.
BENDAVIDYeah, and, I think, actually, what's the most interesting news isn't that they're not going to get the 14 out of 18 supermajority, but they're probably going to get a majority. And that's something that -- just a few days ago, maybe -- people thought they wouldn't get at all. In fact, we should remember how much this commission was ridiculed at first. President Obama wanted this to be passed as part of legislation, and it was blocked in Congress. So he just appointed it himself, and it was just ridiculed by Republicans all along as a fig leaf for a tax increase. It was criticized by Democrats as being sort of a way to cut Social Security benefits.
BENDAVIDAnd here this thing has come out. It's going to get a majority of the commission behind it. It's going to get Dick Durbin, a very liberal Democrat, and Tom Coburn, one of the most conservative Republicans in Congress, both supporting it. And I think they've really succeeded in changing the conversation. Now, that's different from getting their proposals enacted into law, and that's still a big challenge. But they certainly have seized attention and being -- they're being taken much more seriously than anyone thought.
REHMAnd the conversation includes raising the age of retirement, includes dropping Medicare benefits or lowering them, includes a lot of things.
DICKERSONIt includes getting rid of what they call tax expenditures, some things we are all familiar with. Those of us who do our taxes, you get a benefit. If you pay more, you get to deduct your mortgage interest, you get to deduct your state and local taxes. They would exchange those breaks on your tax cuts for lowering the rate. And there are a whole host of things. Back to the point Naftali made, though -- which is so interesting -- is we've just been talking about the recalcitrance and that everybody is locked in their corners.
DICKERSONTom Coburn is the poster child for that kind of behavior, usually, in terms of, you know, he takes a position, is willing to hold up the whole Senate when he -- and in his discussions about this commission, he and others -- Democrats as well -- have said, you know, there's a lot in this I don't like. But we have to deal with this. And so I'm going to accept a worldview in which the final decision about how to deal with the deficit means we're all going to have to take and swallow some things we don't like.
DICKERSONAnd for Tom Coburn to say that is kind of extraordinary, and it represents at a sort of a level of adult behavior -- whether you agree with anything in the proposal or not, it just represents a kind of adult behavior we don't see among the actual -- you know, the politicians playing their games on tax cuts. That is at least somewhat refreshing in this otherwise pretty parched time.
STOLBERGRight. And I also think that what the commission succeeded in doing was not only putting this on the agenda in Washington, but having the American public sit up and take notice. And the way they did it was to basically tackle some sacred cows. For one, the mortgage interest deduction. They proposed eliminating it. When Americans hear that they might lose their mortgage interest deduction, people out way beyond the Beltway, sit up and take notice. Also, repealing the employee health benefit exclusion, which is another issue of great, you know, concern, allowing employers to deduct the cost of giving their employees health benefits.
STOLBERGSo, I think, if they have succeeded in doing anything, they have succeeded in making everybody wake up to the danger of this deficit and really putting it high on the table. Now, I think it's going to be important to see what the president does.
STOLBERGWill he show the kind of leadership that is needed? Will he embrace these recommendations? How much will he get out in the country and fight for them or talk about taking this on?
BENDAVIDBut even having said all that, I still think there's a big question about how many of these recommendations will ultimately be enacted. Because the strength of this proposal -- maybe its weakness -- but certainly its strength is that it's one big package so that people have something to like and dislike, no matter what side of the political spectrum you're on. So if they're not voted on as a package, if President Obama incorporates some of them into his budget, and congressional Republicans, let's say, incorporate some of them into their legislation, they'll be much easier to oppose.
BENDAVIDAnd you're already seeing interest groups on both sides -- and I don't say that pejoratively -- but you're seeing groups like the AARP and the Home Builders opposing some of these things and coming out very strongly against them. So the distance between putting this on the table in a serious way and having them actually take effect has yet to be traversed.
REHMBut, realistically, let's talk about, for example, raising the retirement age to 69. That wouldn't happen for what, 75 years?
DICKERSONRight. And one of the interesting things...
DICKERSONSorry. One of the interesting things is that Dick Durbin, again, jumped on this right away. He's very much in the liberal Democratic camp. And he said, look, people are going to yell at me for this. But it's not radical to say that over 75 years, we should raise the retirement age by two years. And so you're definitely seeing some interesting positions being taken by people across the spectrum.
REHMDoes anybody have any idea how long that interest rates on mortgage deduction has been in place -- when that was put in place, how long it's been there? All right. We'll find that out. And you're listening to "The Diane Rehm Show." We are videotaping this segment of the news hour of the Friday News Roundup so that you will be able to see it at our website after 12, noon. Do join us, 800-433-8850. Let's move away from money to Don't Ask, Don't Tell. And what about the Pentagon's findings on that, Naftali?
BENDAVIDWell, the Pentagon came out fairly strongly. They -- what they did is they put forth a survey that's been in the works for sometime, that showed that about 70 percent of service people have no problem serving with openly gay or lesbian comrades. It is true that among the Marines and among some of the big combat units, that number was much higher. However, the leaders of the military, Defense Secretary Gates and Admiral Mullen, the chairman of the Joint Chiefs of Staff, are very strongly saying, look, we need to move ahead with this. This survey shows it can be done. It's something that we need to move forward with. They are meeting some real resistance though.
REHMI should say. Sheryl.
STOLBERGYeah, I think, frankly, one of the most striking things about this debate was the sight of Sen. John McCain, the Vietnam War hero, going head-to-head with Secretary Gates and Admiral Mullen over this. Sen. McCain strongly opposing repealing Don't Ask, Don't Tell, saying, in effect, I served in Vietnam, and, you know, I know from -- you know, I know that service members will be uncomfortable with this. And he cited those statistics that Naftali cited, that 58 percent of Marines and combats units and 48 percent of Army combat troops thought repeal would have either a negative or a very negative impact, to which the top rest of the Pentagon points out that 70 percent of service members asked overall said that this would be no problem.
STOLBERGAnd you saw Admiral Mullen basically saying to Sen. McCain, I've been serving with gays and lesbians my whole military career. I went to war with them in Vietnam aboard a destroyer. And I knew they were there, and we never had any problems meeting our mission. And to see these two go at it this way, to me, really crystallized the fight and was just a very striking tableau.
REHMSo, what's likely to happen on this in the Congress, which is where the president wants it to happen?
DICKERSONWell, the first thing is we've got -- Sen. McCain is going to get some help in his case. The theatrics of yesterday will be matched by theatrics today with the -- the service chiefs will come before the Armed Services Committee, and they will talk about what -- these numbers we've just been talking about and help McCain make his case, that in actual war fighting, this causes a problem. Now what happens legislatively? Well, this is blocked behind, although it depends. There's a parliamentary move that allows, actually, the Senate to, perhaps, actually take a vote on this. It's a part of the Defense Authorization.
DICKERSONThe problem is, in the Senate, they won't get 60 votes for it, and so it will die. But there are two questions always with any legislation, whether it even can come up for a vote and be filibustered, or whether it gets killed before that. And this will at least be able to be brought up for -- or could be brought up for a vote. It would die in a filibuster because of what the Republicans have said about -- that we want to deal with the tax cuts first. This is blocked behind that. And, you know, the clock could very much run out for this term of Congress in being able to deal with this.
BENDAVIDWell, you know, whenever there's a proposed social change, there's a few ways it can come about. It can come about through the courts, like in, you know, let's say, Brown versus Board of Education or Roe v. Wade. It can come out through an executive action, like President Truman integrating the military, or it can come out through Congress. Activists always want it to come out through Congress, if possible, because that's the elected representatives of the people. Now, there is a whole court fight over Don't Ask, Don't Tell, and that may ultimately resolve the thing. But I think for people who want to repeal it, they hope that Congress can find a way to do it.
REHMAnd, of course, that's exactly how the president wants it to happen, through the Congress, Cheryl.
STOLBERGThat's right because it's the most permanent way of making the change. You know, court decisions can be overturned -- although I suppose because it's the Supreme Court, it wouldn't. But I think the feeling is that this is -- these are the people's representatives. This would be a broad-based sentiment in favor of repealing this, and that is how he wants it done.
REHMAnd, just a note here, prior to the Tax Reform Act of 1986, the interest on all personal loans, including credit card debt, was deductible. That was eliminated but created the narrower home mortgage deduction.
REHMWelcome back to the domestic hour of our Friday News Roundup with Sheryl Gay Stolberg of The New York Times, John Dickerson of Slate.com and CBS News, Naftali Bendavid of The Wall Street Journal, 800-433-8850. First, to Attila in Plantation, Fla. Good morning. You're on the air.
ATTILAGood morning, Diane. How are you?
REHMHi there. Fine, thanks, sir.
ATTILAFirst of all, let me tell you, I love your show. Thank you very much for this opportunity. You know, I think about what a difference 10 years makes. And the Bush tax cuts, when they came in -- as I recall, the debate on the Republican side was we have a surplus, this money belongs to the American people, should go back to the American people. Ten years later, we're still fighting two wars now -- which we were not fighting back then, of course -- we have an economy that is shaky, is having a hard time getting its legs -- you know, standing on its legs.
ATTILAThere's so many problems that we're facing that we did not face back then, and yet it's just another political, you know, issue that's being used to get somebody into office in 2012, I suppose. Where are the Republicans now on -- that money is no longer here. We're -- keep borrowing for the wars. It's amazing how history is forgotten.
BENDAVIDWell, I mean, Democrats do make a point of saying, look, when there's a surplus, Republicans say, we need a tax cut 'cause there's a surplus. And when it's a bad economy and a deficit, they say, we need a tax cut 'cause there's a bad economy and a deficit. On the other side, though, to be fair, I mean, the Democrats, when there's a surplus, they're willing to spend. And then when there's a bad economy, they say, well, we need to spend. So I mean, I think, both people -- both sides really believe, philosophically, in their positions, and they use the circumstances to justify whatever that is.
REHMAnd, of course, one of the critical elements in this whole economic meltdown over the last few years has been the Federal Reserve's involvement under orders from Congress. The Fed released details of the emergency loans it made in response to that 2008 financial crisis. What did we learn, John Dickerson?
DICKERSONWell, we learned there were 21,000 loan records released. And we learned that the loans went out to a whole lot more people than you might have otherwise guessed, including foreign banks, corporations. And one of the things that was striking about this incredible emergency behavior is that, in some cases, to keep the financial system afloat -- which was their goal -- they relied on collateral from Citigroup, for example, that was quite risky. I mean, it was -- you know, letting these loans -- letting Citigroup borrow the money and the assets that carried the greatest risks of default were what were backing up those loans, which is the kind of risks people were taking that lead to the disaster in the first place.
DICKERSONNow, the Fed said we had to this. We were the lender of last resort. We had to rush in pell-mell and try to save the banking system. But I think, as a political matter -- save not just the banking system, the entire economic system -- as a political matter, when you see these extraordinary measures taken to rush in and save these corporations, people wonder -- they say, where do -- what building do I go visit in Washington where people are rushing around diving in front of disasters in order to protect the middle class? And they don't see such a building.
STOLBERGRight. And at the same time, this comes as the Fed is fighting another battle over its decision to pump $600 billion into the economy. We saw during the president's recent trip to Asia how controversial that decision is, and it's sparked a lot of debate in Congress about how much oversight Congress should have. I'm struck by, in a way, the politicization of the Fed. It used to be that when the Fed spoke, it was like -- you know, it was like the Supreme Court before Bush v. Gore, right? These were institutions in our society that were revered and that were somehow free of politics. And, now, like the court, which since Bush v. Gore has been caught up in the political debate, we're seeing the Fed really caught up in a political debate over its own future.
BENDAVIDYeah, it's kind of interesting that some of it -- that the two people, perhaps, that are most behind pushing reform at the Fed are Bernie Sanders, who's a self-avowed socialist senator from Vermont, and Ron Paul, who is a very much Libertarian Republican from Texas. And I think that speaks to a strain of suspicion of the Fed that's very prevalent in the left and the right and something that's caught on a little more broadly as the economic system has struggled. And, I think, what we're seeing with these revelations -- you know, in addition to what they actually show -- is the manifestation of this broad suspicion of the Fed that's only grown in the past couple of years.
REHMMmm. And a trillion dollars we're talking about.
DICKERSONWe -- yeah, I mean, it's a trillion dollars, and also it -- you know, the institutions, again, are just these names that are -- you know, that represent colossal interests and, just as a political matter, again when people look at this, they see huge numbers, big corporations. And the argument that these corporations have to exist because the whole economic system needs to be protected, you can make that argument to somebody, but it requires -- you've got to sit down and have a bit of a conversation. And, as a political matter, what they see is a lot of effort being done by people they never elected with their money -- well, not in this case with their money -- but you know, that they have no control over, that there's just nobody watching the shop here.
REHMSo we're talking about firms like GE, Harley Davidson, Central Banks in Britain, Japan. We're talking about Mexico, South Korea, Norway, Sweden and Switzerland, that the Fed put money out to. I don't get it.
BENDAVIDYeah, that's always a subject of great -- you know, people get very concerned about that. I mean, I think the argument that the Fed would make, and that its supporters do make, is that we essentially need to help prop up the world's economic system because we're at the crux of it and the core of it. We suffer when it suffers, and when we struggle, it struggles. And that -- but that doesn't mean that it's something that people tend to accept.
BENDAVIDYou know, one of the arguments that Bernie Sanders makes is also, look, what did we as a country get from this gift, this aid that we -- it's -- you know, if you want to give people a lot of money, fine. But make them help small businesses. Make them help, you know, homeowners. Instead, they get all this help. Now, they're doing great. They're bouncing along, they're making profits, they're doing fine while ordinary Americans are struggling. So this thing has a very strong Populist element to it.
DICKERSONJust to -- one (unintelligible) is that they get -- the money was paid back, the Fed would say. We got a return on the money. But Bernie Sander's point is that isn't enough, that there's got to be some economic activity here that actually helps people.
REHMAll right. To Marblehead, Mass. Good morning, Bruce.
BRUCEGood morning, Diane. Always an insightful program, although I must admit I am frustrated. I'm 71 years old. I live on Social Security, Medicare. I live in public housing. Perhaps I'm not an average American, perhaps I'm not even middle class, but I manage. I am constantly struck by the -- well, I call it reckless use of the phrase middle-class Americans, average Americans, what the American people want, what the American people must give up. This comes out of -- the budget commission comes out of pundits in economics. What are those people going to give up? Do they have any real sense of giving up? Are they listening to people? Or are they working with models? Are they working with computer readouts? Do they place too much emphasis on surveys, constant surveys?
REHMConstant surveys and political maneuvering is how I would put it. Sheryl.
STOLBERGYeah, and, I think, the caller expresses feelings that many Americans feel...
STOLBERG...which is what happens in Washington is completely disconnected from what Americans experience at a variety of income levels -- whether it be the small business person or like this gentleman, someone living on Social Security in public housing, or for that matter, you would hear this from wealthier Americans who stand to lose these tax cuts. It's simply a feeling that Congress, lawmakers, policymakers don't understand, which I think, frankly, gave rise...
REHMThey're out of touch...
STOLBERGRight -- which gave rise to the election that we just saw, and which a lot of them got thrown out.
REHMAnd here are two messages. "With great respect for Sen. McCain, with gratitude for his personal sacrifice," this caller says, "I'd like to point out his military experience was 40 years ago. Americans' opinion on gay people in general has evolved since then. The armed forces policy is one of the last bastions of arbitrary entrenched and intransigent anti-gay bias, and removing the military's barriers will help disarm some of the vestiges of civilian bias." And here is an e-mail from Hank in Reston, Va., who says, "When did the military become a democracy? When I was a Marine, we were told what to do, what to wear while doing it and often, what to think." Naftali.
BENDAVIDWell, that's a point that Admiral Mullen made in the hearing yesterday. I think he got frustrated at some point with this parsing of the survey. And what exactly do the service people want? And do people in this kind of unit want something different from this kind of unit? And he sort of tried to make the point, look, we don't make policy decisions about the military by referendum -- I think that's the word that he used. There's been a lot of talk about the survey. And this question about whether we need to wait and make sure it's sort of okay with everybody in the military before we make a policy decision, that's something that he pushed back against as well.
REHMTo Dayton, Ohio. Good morning, Kevin.
KEVINHi. I have a comment I'll try and keep brief and a question I'll take off the air. One, the comment is after these elections happened, the first things I wanted to hear talk about from either party was, you know, getting the country back on track and creating jobs. And yet the first thing I heard under Republican leadership was we need to find a way to get what we want, or we're going to find a way to get rid of the president. That's how I took what their rhetoric was.
KEVINAnd then, I guess, my question for it is, with all this stuff going on -- and, obviously, nothing is getting done -- with Republicans saying, we're not going to vote for anything whether it's, you know, extension of unemployment benefits or anything like that until we get our tax breaks -- which, again, is something else, you know, I -- it makes me disheartened to hear that we're going to let the country go once we get a vote on our tax breaks, how we want it. Do we -- do you guys think that maybe next election term, or very soon, we could see the rise of a third party candidate or candidates on the next elections? Thank you.
DICKERSONI think there already is an effort underway to look for some kind of third way -- the no label effort. There's a piece in The Washington Post today by William Galston -- Bill Galston and David Frum, arguing for -- what's interesting about the (word?) case they make is they are arguing for just a space in which intelligent conversation can take place, which is -- kind of takes me back to the deficit commission, in which people can say, look, I don't like this. But I'm going to at least allow this proposal to go forward, so we can have an adult debate in which we don't question each other's motives. That's not exactly a political party, but it would be a step in the right direction.
REHMAnd the AP is now reporting that the Obama deficit commission plan has failed to win enough panel support to advance to Congress -- no real surprise there. But as you said, Sheryl, at least the conversation has begun in earnest.
STOLBERGI think no real surprise. I think Americans may actually be angry that they did not get the 14 votes necessary to put this before Congress. I think that the commission, in a way, is ahead of the politicians, that people really do want the deficit addressed. And the fact that they have not gotten 14 votes will be seen as another -- a bit of evidence about Washington's dysfunction.
REHMSheryl Gay Stolberg of The New York Times. You're listening to "The Diane Rehm Show." Naftali.
BENDAVIDWell, I also think there's a question about Congress. I mean, you know, just because they didn't get the 14 that would have obligated them to take it up, doesn't mean they can't. And so, I think, you know, there's one issue about why the commission members couldn't get 14 out of 18 to back this. I also think there's a question of whether Congress needs to stand up and just vote on this thing and what the public reaction will be to that. But I also do need to just say real quickly that I think that, yes, everybody is very angry about the deficit, but they also don't want tax increases.
BENDAVIDThey don't want their Social Security benefits cut.
BENDAVIDSo everybody is mad, but they also feel very strongly about the things that would have to be done.
REHMNaftali, let me ask you about Charlie Rangel, who, yesterday, stood in the well of the House and heard Speaker Nancy Pelosi read a censure.
BENDAVIDYou know, it's a very dramatic moment. Censures don't come up very often. There's an array of punishments that the House can mete out, from reprimands to expulsion, and censure is the next highest beyond expulsion. And, you know, it was like a public shaming. I mean, he stood in the well of the House, and Nancy Pelosi, who was an ally of his, you know, read out this -- you know, the will of the House that he be censured. And he had to stand there and listen to it. And then he spent -- I guess, he got a minute to then sort of reply and say, I understand what you guys did, but I think it was political. And he's a very powerful man. He has an amazing life history. And to see him there, in that position, was really pretty dramatic.
STOLBERGVery sad, I thought. Nancy Pelosi, to me, looked stricken as she read the censure resolution against him. She looked almost gray, and I thought what a terrible moment it must have been for her, and also for him. Let's not forget, Charlie Rangel is a decorated Korean War veteran. He's somebody who, I believe, put himself through law school. He's got decades of service, and frankly, he's 80 years old. This will be very prominent in his obituary. It is a public shaming and, I think, all around, a sad scene. He claimed it was political. It's hard, I think, for many Americans to accept that. After all, this is a Democratic House that judged him.
REHMAt the same time, he said, I brought it on myself.
DICKERSONWell, yes. It's the question is he brought in on himself, but he only wanted a much lower kind of slap on the wrist. And, I thought, one other thing that happened is a number of Democrats applauded him after he was done, which also makes people wonder about the institution. If all of the members of an institution believe that a majority vote is supposed to mean something, when a majority vote takes place, they censure him, then applauding -- even if you support Charlie Rangel in all of his long history -- it sends a quite a confused message about sort of the strict standards in the way the place is supposed to run on this, which was, you know, a bipartisan process that ultimately led to this conclusion.
REHMAnd let me just read for you the fact that the federal commission chairman -- co-chairman, Erskine Bowles, declared victory, nonetheless, despite the fact that they didn't get a majority. He said the panel's nonpartisan deliberations showed it's possible to have an adult conversation about cutting the deficit. The question becomes, what happens next? Does this all go away? Does it sit on somebody's shelf forever?
DICKERSONWell, the White House is saying or signaling that the president will say, this is -- will be incorporated in his budget, but, as Naftali said, you know, the question, how much of it will be incorporated? Will it all be incorporated? These things do have to be taken as a package. And then the question is, what will Republicans in the House do now? They're in control. Their budget chairman, Congressman Ryan from Wisconsin, has a very forward-leaning, aggressive, conservative vision about how to reduce the deficit. But, yesterday, he said he wasn't going to submit that because, basically, he can't get the support for it.
REHMJohn Dickerson, chief political correspondent for Slate.com. He's also an analyst for CBS. He's an author as well of "On Her Trail: My Mother, Nancy Dickerson, TV News' First Woman Star." Sheryl Gay Stolberg is White House correspondent of The New York Times. Naftali Bendavid is national correspondent of The Wall Street Journal. Have a great weekend, everybody. Thanks for listening. I'm Diane Rehm.