MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The lame duck Congress has been tackling a series of high-stakes legislative issues. The president postponed his Hawaiian vacation, and Senate Majority Leader Harry Reid says he might reconvene the chamber after Christmas. But not everyone is happy with this last minute productivity. Joining me in the studio, Matt Bai of The New York Times and David Keene of The American Conservative Union and The Hill newspaper. Joining us from the Argo Studios in New York City, Katrina vanden Heuvel of The Nation. I know many of you will want to chime in with your own thoughts and ideas. Call us on 800-433-8850. Send us an e-mail to drshow@wamu.org. Feel free to join us on Facebook or send us a tweet. Good morning to you, Katrina.

MS. KATRINA VANDEN HEUVELThank you. Good morning, Diane.

REHMDavid Keene, good to have you here.

MR. DAVID KEENEAlways a pleasure.

REHMNice to see you, Matt Bai.

MR. MATT BAINice to be here, Diane.

REHMHow in the world did the Congress manage to do all this over the weekend? Tell us what they accomplished.

BAIWell, it's a -- you know, a pretty remarkable lame duck session highlighted by this tax deal worked out by the president and the Republicans in the House and voted through both houses. He signed that bill. No sooner they did that, they turned around and repealed the Don't Ask, Don't Tell policy for the military, which, you know, Diane, is a pretty -- it really is a remarkable thing. If you step back for a moment -- that back in 1993, right, 1994 -- this paralyzed the country for weeks. This was a major political issue. Here we are in the middle of a lame duck session of Congress, where it hasn't even been the biggest thing to come up. It basically was for -- it was a one-day headline. They went and repealed this policy.

BAII mean, there was some talk about it beforehand, but it really shows you where -- how the country has moved on this issue, that it's not nearly as polarizing or controversial as it was, at one time passed by a pretty good margin. And now, they're moving on. Of course, they're talking about the START treaty. And over the weekend, Sen. McConnell, the minority leader in the Senate, said he would oppose that treaty. But it's still not clear, and, in fact, most people think there may be a way to pass that treaty before they adjourn later this week. They'll probably get out of town by Wednesday. So it's been, you know, by any measure, a pretty remarkable burst of activity.

REHMWhat about the First Responders Bill?

BAIThat failed earlier. Republicans blocked it. There seem to be the votes now. I would expect that is going to come up some time this week, but I don't have the specifics on that. I don't know what the actual schedule is on it.

REHMAnd didn't the Senate unanimously agree on Sunday to pass a version of a food safety bill?

BAIYes. There is a food safety bill that has already gone through the House. That's also on the Senate agenda. That's also a pretty transformative piece of legislation. Add it, again, to a session that, you know, comes after the American people have rendered a verdict on this Congress, but an incredibly productive session nonetheless.

REHMAnd, by the way, that food safety bill would give the FDA more power to inspect food processing plants and impose mandatory recalls. And this bill now goes back to the House for a final vote. Katrina, tell me how you believe this lame duck session is reflecting on President Obama.

HEUVELIf I could just step back for one minute, Diane...

REHMCertainly.

HEUVEL...I think it's worth reflecting on this entire session of Congress. One may disagree with certain elements, but it's a landmark session. We've seen major landmark pieces of legislation, health care reform, financial reform legislation. We've seen smaller pieces, yet still important ones, Lilly Ledbetter Pay equity bill, the student loan reforms, making it easier for young people to go to college. And as Matt said, the repeal of Don't Ask, Don't Tell is a measure, not only of the generational transition in this country, but also, in some ways, that for a moment, there wasn't a sense of left-right politics. It seemed to me it was more about a politics of decency and dignity.

HEUVELAnd you could see the Republicans, and particularly Sen. McCain, disgracing his record in so many ways, being on the wrong side of history. Sen. Lieberman -- no big fan -- he played an important strong role. I just hope that 17 years of organizing by liberal senators and others around this country played a role. But I think it's, you know -- politics is the art of the possible, Diane. And certainly where I sit, I work with many people who feel President Obama could've laid out a broader vision, fought harder earlier on, as could've members of the Congress to oppose the tax bill, that at the end of the day is not a great one for middle class, working class people and has a lot of goodies for the very rich in this country and may lead -- open the door to spending cuts, maybe a back door to cutting Social Security.

HEUVELBut there was a great burst of productivity, especially around Don't Ask, Don't Tell. I think the START treaty is still up in the air. I think the Republicans are showing that they're less interested in national security, more interested, again, in undermining President Obama's agenda. There's a pettiness in how they're whining that too much has been done in this lame duck session. But, I think, we pay attention again to the landmark pieces of legislation, this will go down in history as a reform congressional session. But as you pointed out, Diane, things like the food safety bill, these are civilizing advances in our country and will help -- will improve the condition of people's lives, which at the end of the day is what I define as reform politics.

REHMKatrina vanden Heuvel, she is editor and publisher of The Nation. She writes a weekly column for The Washington Post. David Keene, on Wednesday, The Washington Times' editorial board criticized this last minute action, calling it lame duck on steroids. What's your opinion?

KEENEWell, as in most things, what you see depends on where you stand. And I can understand that liberals are very happy with this. On the other hand, you can look at it as I do as a Congress whose direction had been repudiated by the voters coming back before they lose power and before the new Congress comes in and saying, we don't really care what you voters thought in November. We're going to do everything we can to advance our agenda between now and the time we have to give up our power. That's not unusual for legislators or for politicians.

KEENEBut it does -- out in the country, particularly with the people that were very upset about the direction and are upset about the direction the country is going, it causes them even more sort of frustration and pain because they say the whole impetus of the last couple of years has been that they don't listen. And now in Washington, we have more evidence to them that they don't listen. In many ways, as you know, a lame duck of this length or lame duck at all is sort of an anachronism. Originally, presidents and Congress didn't come in until March...

REHMMarch.

KEENE...because it took that long to get here.

REHMRight.

KEENEThen they moved it back to January, and the Congress comes in now. And they moved it back precisely because you didn't need to let the people who had lost the trust of the people make the laws after the election as long as they could get them here. Now, you could move much quicker. I think there needs to be some reform in the terms of whether there should be a lengthy lame duck session. Many of the things that they had to do -- and everybody got some wins here. You can argue the tax bill -- and I have, both with conservatives and liberals. There were reasons to oppose it. There were reasons to support it. It came through. I think it was, perhaps, President Obama's best moment.

KEENEBut the real winner in the Senate was Mitch McConnell, who negotiated this, who got his people through, who then killed the omnibus bill. There was such outrage at it. He got his members, many of whom love earmarks, including Mitch -- himself on occasion -- to say we're not going to do it. So, I think, going into the new Congress, you're going to have -- one, you're going to have a Republican leader who is much stronger than he might have been, even though the Democrats got some things out of this lame duck.

REHMDavid Keene, he is chairman of the American Conservative Union. He is a columnist...

HEUVELDiane, could I just jump in for...

REHM...for The Hill newspaper. And the phones are open, if you'd like to join us, 800-433-8850. Send us your e-mail to drshow@wamu.org. Katrina, I know you want to say something.

HEUVELYeah, I just was going to jump in with a modest proposal.

REHMSure. Okay.

HEUVELYou know, it seems to me this idea that, you know, come back in March or cut back on the lame duck, small modest reform, maybe the people in Congress should spend less time raising money, more time passing legislation, reading legislation, listening to constituents...

REHMAnd not leaving everything until the last minute.

HEUVELThat's -- yeah, but so much time -- and all the people in Congress will tell you now, and I think that it leaves to possibility of some reform. So much time -- three, four, five, six hours a day spent -- either meeting with lobbyists raising money. And that's so counterproductive to the possibilities of democracy.

REHMI think Matt Bai wants to jump in.

BAIWell, you know, Diane, I take Katrina's point about the money. I don't think there's too many people who disagree with that, but that's not why we were left with a lot of the stuff on the agenda. We were left with the huge issue of the tax bill and what to do about these expiring tax cuts because Democrats did not want that vote earlier in the year. They felt it was politically disadvantageous. I think the White House, you know, would've liked to get that done earlier. Democrats in Congress were very clear that they didn't want that done. I mean -- look, I hate to, you know, get the forces arrayed against mushy centrism -- I'll energize them. But I'm going to come down a little bit on the middle between David and Katrina on this.

BAII do -- I think David's got a point. We, perhaps, should have some misgivings about the fact that, you know, a Congress that has already faced a verdict from the American people comes in and sort of, you know, after the fact, when clearly this was meant to be prevented by a previous constitutional amendment -- as The Washington Post very wisely pointed out -- comes back and attempts to go through the series of legislation. On the other hand, I disagree that this has been sort of a push of a liberal agenda before they go home. There's a lot of bipartisan legislation here. I think this is much the way you would want Congress to behave normally.

REHMMatt Bai, he is national political columnist for The New York Times. We'll take a short break. Your comments, your questions are welcome.

REHMAnd welcome back. Here in the studio, David Keene of the American Conservative Union. He's also a columnist for The Hill newspaper. Matt Bai is a national political columnist for The New York Times, and on the line with us from New York City, Katrina vanden Heuvel, editor and publisher of The Nation. She writes a weekly column for The Washington Post. And we'll open the phones shortly. First, though, Matt Bai, in a recent column, you asked about the president. Has he become the kind of compromiser he once disdained? Tell me your thoughts on that.

BAIWell, the word that circulates, as you know, Diane, in liberal circles is triangulation. It harkens back to Bill Clinton's period. It's, you know, has he become someone who sells out his base and actually picks fights with his base in order to look centrist with the American people and find bipartisan compromise? I think on that very narrow point, no. He certainly hasn't picked fights with his base. In fact, I think he's gone out of his way to avoid them, even in policies where they disagree. He's not looking to gain points at the expense of his base. Is he a compromiser in a way that a lot of his base doesn't like? Yes. He certainly moved in that direction with the tax plan, at least with the new tax bill, and he's done it at other junctures in his administration.

BAIAnd, you know, my point is, if you call every compromise that isn't exactly what you would like to see, triangulation. Then you are coming awfully close to an indictment of governing, generally, because this is what presidents often need to do. And, I think, in the case of the tax bill where Katrina has said, you know, speaking very much for a large segment of the Democratic Party, that it is not great for the working class -- I think she even said it would endanger Social Security -- I think that's a mischaracterization of this bill.

BAII think you have to remember that it keeps rates low for the middle class that would have gone up had this expired, and you would have had a real fight about it. It introduces a payroll holiday that will impact those families. It introduces -- it solidifies 99 weeks of unemployment insurance at a time when unemployment continues to be unreasonably high and very problematic for a lot of families who rely on net income. So, you know, I think you have to give the president his due here. It may not have been the best deal anyone could imagine, but it may very well have been the best that he could get.

REHMKatrina, did the president get most of what he wanted with that deal, even though the left has been very critical?

HEUVELYou know, real leadership requires compromise. I think it's been touted about, bruited about, that progressives, the base -- first of all, it's not a monolith. There are those, even on the progressive side who -- economists who are supportive of the tax deal in certain respects. What, I think, President Obama -- on a number of levels, the problem, Diane, is President Obama has engaged in so much transactional politics that he's lost sight of the importance of transformational politics, which was at the root of his campaign. He came in, and he demobilized his base. And as a pragmatist, you want a base behind you.

HEUVELYou want that wind at your back as a countervailing force to the power of corporate money, establishment power, inside the beltway. Of course, he needs to govern inside the beltway, but the balance was off. And, finally, I think the tax deal does open the doormat. I mean, many people think it will open the door to spending cuts in the next couple of years. Who's going to be hit hard by spending cuts? Not Wall Street. And you have in our political system, in this session of Congress, Diane, so exposed the structural obstacles to change -- the power of money, the lobbyists, the arcane abuse of the filibuster -- but President Obama never laid out a clear set of ideas.

HEUVELDuring the campaign, I remember, he was attacked by Hillary Clinton and others because, at one point in some session in New Hampshire with an editorial board, he spoke of -- admiringly, of President Reagan. But he wasn't talking about the substance of Reagan's ideas. He was talking about the ability to change the narrative. And in the absence of a leader who's willing to fight for a counter narrative, we have myths like, we need to cut the deficit. That is the first priority. That is not the first priority in a time of recession. So President Obama wavers. He does talk about investments in a new economy. But this tax deal is, in my view, putting aside the details, which are important. But he exceeds -- he cedes the terrain to a right wing narrative...

REHMAll right.

HEUVEL...which I think will hurt him going forward.

REHMI want to ask David Keene. Was the compromise on tax cuts a good move for the president and for Republicans?

KEENEI think it was a good move for the country. You could come down on either side of it if you were a conservative or a liberal, and conservatives and liberals did come down on either side of it. But the fact of the matter is that we were headed for a train wreck on Jan. 1, on the one hand. And, secondly, there's all this capital that's tied up, and there's all the uncertainty. And I think that the biggest sin of this Congress was to punt it from October to January because that left the uncertainty there and probably delayed some of the recovery.

KEENESo, I think, on balance, the tax bill was good for both sides and, more importantly, good for the country. And I think it was good that the president and the congressional leaders came together on it. Katrina is so upset at the thought that we might cut spending. We just had an election. And if there was a message from that election, it was that you are spendthrifts there in Washington. And we have to do something about the spending, so I know it's going to upset her. But this tax bill or not, when the new Congress convenes, number one on the agenda is going to be what do we do about spending?

REHMAll right. Now, I want to turn to passing a repeal of Don't Ask, Don't Tell. Do you see that, Matt Bai, as a major victory for the president? How was it passed?

BAIWell, I don't think it's a -- I mean, I'm sure the president is thrilled about it. I think it's a major victory for the society, and I think it was passed -- we can talk about the mechanics of how that was passed, and I don't know all the mechanics of how that was passed. But I think it's irrelevant because, I think, what really happened here is that generations of Americans between 1992 and 2010...

REHMChanged.

BAI...grew up with openly gay friends, lived next to gay neighbors, met children of gay parents and decided that there were more important things for the country to be focusing on. In a sense, you could argue that -- you know, people compared it to the desegregation of the armed forces. I think you could make an argument that Harry Truman got out in front of public opinion when he desegregated the armed forces. And I think you could argue that our leaders failed to get out in front of the public on this issue and actually waited till the public led them to what was effectively an inevitable social conclusion based on the evolution of the society.

REHMNow, Katrina, looking at this very issue, does that victory help the White House with progressives and among his base?

HEUVELNo question. But I do agree with Matt that one steps back for a moment because I think it's a victory for the civilizing advances in this country. It's a victory for tolerance, decency and dignity. But looking toward 2012, I think that this does show that the Republicans -- I mean, there were some statements out of the Republican Party and their allies and this family council coalition, et cetera, about deviants and perverts. I mean, it's just another century. And I think it shows a party out of touch with a country that is ahead of its political leader -- so often the case -- but certainly the Republican Party. I would just make one note to David Keene. I'm not that agitated, David. Thank you for your concern this cold Monday morning.

HEUVELBut I would say that there is a disconnect between the beltway and people in a way you're not nodding to, which is polls consistently show a majority of Americans put job creation over deficit reduction as their main priority as they seek work, as they seek a way to take care of their families. And I think one thing in the tax deal, which was important, and at the end of the day, if you look at the polls, people still -- a majority don't support extension of the tax cuts for the richest, but they do understand that they need it to get unemployment benefit extension, some support for the payroll tax, of course. So I think that disconnect, David, is something worth reflecting on.

REHMAll right. I want to go back to Don't Ask, Don't Tell, David. Republican reaction.

KEENEWell, I think -- on the one hand, I would suggest that Katrina's earlier point that McCain had disgraced himself and that all civilized people agree with this, the debate was on the question of whether this was a good policy for the military. And I can't answer that question. Many countries allow gays in the military in different roles. And, obviously, it is true that there's been a generational change, and we see that's true on the right, the left and the center in terms of their attitudes toward these things. But I do think that it is unfair to characterize the debate that took place in the United States Senate over this issue as a debate between those who are hidebound, old bigots or whatever, and the civilized nature of the people that Katrina admires.

KEENEIn fact, there were legitimate substantive arguments that were being made by both sides. I think the outcome was a result of the generational change that's taken place in this country.

REHMAll right. And let's talk about the START Treaty, which is being debated even as we speak. David, what are the objections to it by some Republican senators?

KEENEWell, there are number of objections. And on this one, Joe Biden, on television, said many of these objections are subsequent of and need to be worked out. One of the great concerns that it would -- it could inhibit missile defense development at a time when rogue nations are getting the capability to actually strike at us and at our allies. And I'm not an expert on all of these things. The Lord knows probably half the people that are going to vote on it aren't experts, but there are very, very legitimate concerns. And the fact that it was brought up in the way it was, at the end of a session where there were a lot of things that had to be considered, has troubled a lot of senators. And they want a fuller debate, and they may put it off in until the new Congress.

REHMBut, Matt Bai, hasn't this START Treaty been debated and debated and debated?

BAIIt has. I mean, David says, you know, half the people voting on it aren't experts. He's being very generous. I think it's far more than that who aren't experts, and neither am I on the policy. But this is one of those instances where, I think, not being a policy expert is probably not a detriment 'cause I don't think this is really about policy. I think this is largely about politics. There are some policy differences. What I'm told is the White House and, you know, the folks on the Hill have worked very hard. They've worked very hard to acknowledge these differences.

BAIThey've worked very hard to find common ground on it. It probably ought to -- they ought to be able to get it done. The question here -- I think the operative question here without -- you know, without indicting the motives of people who are opposing this on principle is, do they want to give this president another victory before they all go home? There is a question. I mean, the tax deal was a question of mutual self-interest. The cost of not doing anything on that bill was going to be greater than the cost of either side angering some people in the party. And that is how legislation gets -- that's how compromise gets done.

HEUVELSo, Matt...

BAIThe question is, have they given him enough for one session? And can they stand to give him a clear victory on this treaty before they go home? And does it put it them in a disadvantage politically?

REHMKatrina.

HEUVELSo, well -- yeah, so Matt uses the term mutual self-interest. The term in nuclear lingo, mutual assured destruction, is one I might bring up here. I mean, the START Treaty -- let's be honest. I mean, it's an important step, particularly in terms of verification which is -- benefits the United States, but it's a modest step in terms of cuts. And the president has given so much, thrown money at missile defense which -- I think it's important to remember that scores of tests by scientists have proved that missile defense just isn't working. Sen. Kerry, head of the Senate Foreign Relations Committee, said the other day that 900 questions had been submitted and dealt with.

HEUVELThe idea that this hasn't been given adequate time -- and, finally, the military support and decades of bipartisan agreement -- so, I think, it is about mutual -- you know, on the part of the Republicans, they want to -- you know, they want to undermine President Obama. I would simply add, I think, by the time this treaty moves forward because so much -- and President Obama sent a letter to the Republicans the other day saying that he would put back into Poland and Romania interceptors and radars that had been taken out and agreed to be taken out by East European countries. This could well nix this treaty in Moscow. I think that could be a deal breaker because so much now has been poured into the missile defense run, and if you read the preamble to the treaty, it's -- it could be a deal breaker. So a lot of argument about it may be nothing.

REHMKatrina vanden Heuvel, and you're listening to the "The Diane Rehm Show." Now, one bill that really had not gotten much attention, until Jon Stewart devoted an entire show to it last week, is the First Responders Bill. Katrina, talk about the evolution of that legislation.

HEUVELYou know, Diane, I don't know as much as I should about the evolution. What I do know is that in the days after 9/11, there was a celebration of firefighters, of those first responders, who helped the city I'm sitting in respond and restore some measure of life and security. And you had Republicans, you know, playing the national security card in different ways, but then, now, we see they're not willing to support those very people who were affected and afflicted by 9/11. So on some level, you know, it exposes the kind of compassion and the willingness to sort of not give back to those who served the common good.

REHMAll right.

HEUVELBut they're willing to give handouts to others.

REHMAnd, David Keene, we're talking about a $7.4 billion bill in health care benefits compensation of first responders who became ill after being exposed to pollutants in the wreckage of the World Trade Center. What are Republicans' objections to this?

KEENEI think it -- I wasn't familiar with the battle that took place in there. Part of it, of course, is where do you get the money? Is it paid for and all that which are -- these are legitimate questions. I will point out that right after 9/11, the first group that really had a problem, as you recall and your listeners recall, when the World Trade Center fell and collapsed, within half an hour there were cranes and construction equipment there because there were four construction companies that were in the neighborhood. And they were asked to come immediately. They didn't have a contract. They didn't have insurance. And when they went to get some because of the uncertainties that have now created the problems for the firefighters and others, they couldn't get any insurance.

KEENEAnd they were faced with the prospect of bankruptcy down the road. The government -- this was during the Bush administration -- created the fund so that they could be helped. The national responders are self-insured by the federal government. And so, now, we're dealing with the state and local police and fire people who were there who also have to be taken care of, presumably had insurance but from probably a bankrupt state. So I think that, given what they did, obviously, everybody wants to help them. The question is how. And I think that was really the dispute that was going on. I would bet that this will, in fact, pass.

REHMMatt Bai.

BAIYou know, part of what you're looking at -- and we stand back here, Diane -- it's kind of shocking if you think about it. This is how much the recession and the economic climate in the country has eclipsed the legacy of Sept. 11, 2001, which was seen at the time, reasonably, as the defining event of the period. You know, that we are -- that this bill went down, that nobody particularly cared, as you point out, you know, except for Jon Stewart or -- you know, and some others who wrote about it, but it wasn't a huge issue -- that all the talk was about the tax bill and the economy.

BAIWho would have thought it possible in 2002 that Republicans would feel it politically palatable to vote down a bill for first responders in New York City? As it is, I think it is bad politics. I think it's one of these things where you look and you scratch your head, but there's deal-making going on. There's a point made by the opposition, and, ultimately, I think they're going to get this done. But I do think it points to see change.

KEENELet me quickly compare that to...

REHMQuick.

KEENE...early on when Mitch Daniels called and said, you're not going to believe this news at OMB. But, sometimes, the government does the right thing. They reacted quickly, and that goes to the difference in the time.

REHMDavid Keene of the American Conservative Union. When we come back, we'll open the phones for your calls and comments.

REHMWelcome back. Time to open the phones. First to Columbia, Mo. Good morning, John. You're on the air.

JOHNAll right. Good morning. Thank you for taking my call.

REHMSurely.

JOHNI'd like to address Mr. Keene's comment earlier in the show about the newly empowered Republicans in Congress and how the lame duck Congress had basically turned their backs on the will of the people that was shown by the election. And it occurs to me that part of the Republican justification for their large win in the election was that the will of the people said we wanted to stop the outrageous spending and cut deficits in Washington. And yet no one asked -- when the Republicans wrote a letter saying that they would not view the business of the people until the tax bill was written so that billionaires were given the same tax break as people that are scraping by, there's no business what continue in Congress.

JOHNI don't remember anybody asking how we were going to pay the $160 to $600 billion that it was going to cost to leave millionaires at the 35 percent tax rate instead of 39 percent tax rate, which goes to the question of how uncertain everybody was. Oh, everybody was very uncertain about that.

REHMAll right. David Keene.

KEENEWell, the question of whether the tax cuts -- and they're not really tax cuts. They were proposed tax increases. Nobody increased as a result of this deal or decreased the taxes that anyone paid. They kept them at the same level they have been for some years. There were several arguments. One, you don't raise taxes during a recession. Two, it's been proven time and time again that, particularly, at the higher end of the income scale, where most of the taxes are paid, also most of the investment takes place. And so this was seen as something that would in fact create certainty that will allow the private sector -- not the public sector -- to create jobs.

KEENEAnd, finally, there's the whole question of fairness. This country has never been a country in which class warfare has appealed to very many people, though it's been tried. And if you listen to Bernie Sanders and others on the Senate floor, this was really, in their minds, not something that had to do with economics but had something to do with punishing people who were successful. And I think Republicans rightly rejected that.

REHMMatt Bai.

HEUVELDiane -- I'm sorry.

REHMHold on, Katrina. All right, Mai Bai.

HEUVELThank you.

BAIYou know, here's what I -- Republicans really had the Democrats over a barrel here on this issue because I do think if you poll it, it's pretty clear that most Americans would oppose those -- continuing those breaks for the highest income levels. Well, the problem is, had they ran out, the argument would have been over who wanted to raise your taxes? Who let taxes go up on everybody in the middle of a recession? Democrats never win the tax argument. They know they never win the tax argument. It's not a good argument for them to be having. And so they were really over a barrel. You know, the other thing I would say is with this -- we're going to keep having these fights over the tax brackets.

REHMSure.

BAIAnd what it really points to, in some ways, is we need a new tax code.

REHMExactly...

BAIAll right. I mean, we're talking about these rates...

REHM...which is what the president raised.

BAIYeah, I mean, you talk about 40 percent of, you know, wealthy. Well, that doesn't seem, to a lot of Americans, that -- you're going to take almost half of somebody's income. Well, yeah, because their deductions, you know, by the time you get through manipulating the tax code, they're not paying nearly that much. It's confusing to people. It's frustrating to people. It's not 21st century. It's not building a competitive society. I think for this president, he's talking about it, and I think if he takes on tax reform, you know, I think that's a winning issue.

REHMKatrina.

HEUVELI believe -- you know, I agree with Matt. This country deserves a new tax code, a tax debate. We need a code that is fairer, simpler and rewards work. Matt and I may disagree on the substance of that tax code. On the issue of class warfare, listen, no one says it better than Warren Buffet, a billionaire in this country, who talks about if there's a class warfare in this country, it's a class warfare of the rich versus the middle class, the working class, which have been shafted for the last 30 years.

HEUVELI believe there's a role for enlightened capital, enlightened business. I think we've lost that in many respects because of the hyper-financialization, the masters of the universe of Wall Street. And if we lost a teachable moment, we lost it in these last two years when the recklessness and greed and the need for regulation, the need to ensure those masters are the people's servants, and not vice versa, was lost to a large extent.

REHMBut...

HEUVELAnd not simply 'cause of President Obama and that the legislation he passed was not sufficient to the scale of the problem both in terms of leadership, but also, Diane -- if I just could add -- the scale of the money that is poured into our system to dilute the form and delay the possibility of the legislation we need to deal with the scale of this problem, was clearly evident in this last year.

REHMAll right. To Indianapolis and to John. Good morning. You're on the air.

JOHNHi. I had a comment or a challenge for Katrina. And it has to do with her earlier comment about the fact that people inside the beltway are -- I think she said disconnected from what the people want. And I -- when you say that, it makes it sound as though they're elitists who are just speaking with their own inner circle, and they really have no channel of communication with what the public wants. And I just think that that's completely missing it. I think they have polls. They have people calling them constantly. There's -- in this in day and age, there's no way that they could be disconnected or unable to hear what the public wants. It's simply that they don't care, and they don't want to hear it.

HEUVELWell...

JOHNThey're working for someone else, and that is special interests.

HEUVELIf I could, I think there -- listen, I didn't mean to overgeneralize. I do think there are people inside the beltway who are more connected at the grassroots. And I think -- you know, listen, the Tea Party disagree, think the politics are right wing. But there is a connection there. On the other hand, you know, too often, the voices of ordinary people -- and I think you're nodding to this -- are drowned out, are drowned out by the power of money, by the power of lobbyists.

HEUVELAnd the representatives who are there to represent the people have only a limited amount of time, and they're not getting the full range of views in this country. I think we are a vast, diverse country. But, too often, very narrow views are framing a debate, and this country deserves a much broader debate. And I was referring specifically to this idea that spending and deficit reduction are at the top of people's priorities. I would argue that there -- it's about how to create jobs, how to build a new economy that will help people in this country.

REHMAll right. To Forth Worth, Texas. Good morning, Anne.

ANNEHi. Well, I would like to agree with something Katrina said earlier. She was talking about the lame duck Congress. And it's my opinion that they've been lame ducks for over a year. I think they really did pass quite a few pieces of legislation, but everything that they did pass, they put -- they blamed for -- put the blame on the president so that they didn't have to defend it. And I think their lack of inaction was a direct cause of the lack of action at the polls of moderates in their base.

ANNEAnd I'd also like to say that I am in favor of the tax hike or reinstatement of the Bush tax cuts -- whatever you want to call them. And I think I can say that -- don't chuckle, but I have a -- and I'm in the health field. My husband works for the railroad, both of which have chosen not to participate in the recession. But I would be willing to pay more taxes to bring down the deficit, and I just wish more Americans felt that way.

REHMThat's interesting. David Keene.

KEENEI just -- I've been resisting replying to Katrina. But I will say that the Congress is no more out of touch with the people of this country than the editors of some magazines in New York.

REHMAnd what about some magazines here in Washington?

HEUVELSo petty, and -- so petty, David. You can do better than that.

KEENEAnd some of those, too.

REHMAll right. Let's go to...

HEUVELThat is really -- oh, I'm just reeling from that blow. Wow.

KEENEI had to.

REHMLet's go to Mount Vernon, N.Y. Steve, you're on the air.

STEVEYeah, I disagree with one of your guest. He said earlier that he felt like that the Republican Party had a mandate from the people because of how they voted this last election. I disagree with that. I think that it's been more that they put so much emphasis on jobs and how jobs weren't created. And I believe that that's more the Republicans' fault than the Democrats'. Republicans support wealthy people. And who would sit on the boards of huge companies more than wealthy people?

STEVEAnd Republican politicians have locked arms and drug in their heels and just done everything to block anything going on with this government right now. And why shouldn't the wealthy Republicans who are sitting on these boards support them by saying we are not hiring? If anything, we're going to lay people off. We don't care if people can't pay for their homes, if they can't go to college. We're going to help our Republican allies in the Congress and in the House and the Senate, and we're just going to block -- put the people back to work, regardless of what it cost people.

REHMAll right. David, your chance.

KEENEThat is absurd. The fact of the matter is that Republicans who are coming to Congress have try -- believe very differently from Democrats, believe very differently from liberal Democrats, at least -- not from all Democrats. They believe that the private sector creates jobs. Historically, that's been the case. And then in order for those jobs to be created, you have to have access to capital. You have to have access to investment. The Obama administration has proceeded with the theory that jobs can be created by the federal government through the stimulus act and other things, which are now running out. And you're going to have states and localities firing the people that they hired as a result of the stimulus money flowing in.

KEENEIf the economy is to recover -- and it is slowly recovering -- it's going to be because of the creation of jobs in the private sector. Those jobs are created, not as a result of some conspiracy or don't -- people aren't laid off as the result of the conspiracy. They're laid off as the result of economic reality. And they're hired back, and new businesses are created because of economic need and consumer spending. So those kinds of things are very important, but the idea, the very idea that a bunch of Republican businessmen got together to fire everybody so that they could hurt Barack Obama strikes me as completely absurd.

REHMKatrina, do you want to weigh in?

HEUVELYeah, I'd like to. I mean, I think the Obama administration and many progressives believe in enlightened public-private partnerships. I wrote an op-ed for The Wall Street Journal a few days after the election, and I referred to an economist who writes for us that we're looking at corporations sitting on $1.9 trillion in their Fed accounts. Where is the investment? If they want to be economic patriots, invest in a country, help the recovery. And, you know, this idea that all government -- it's not all government. But you do need to boost demand. It's like common sense. You need to boost demand. We haven't even talked about what's going on at the state level, states where they can't go into deficit 'cause of the law, are going to look at the gutting of essential services for people. That's going to be brutal.

HEUVELSo, David, you know, listen, I'm -- you know, I never speak for all Americans. There's a vast range of views in this country, all power to it. But it seems to me that when more than 20 million Americans are out of work or underemployed, people are interested in real solutions. And they're not going to get it from those committed to slashing billions from key domestic programs as a way to economic recovery or making tax cuts for the rich permanent. I don't see that as a solution.

REHMAll right. To Mercersburg, Pa. Hi there, John. You're on the air.

JOHNHi. I'd like to make a comment about how the rest of the world is currently facing austerity measures. And we seem to be in the unique position of not having to worry about that because I believe of our unique position of our currency being kind of a reserved currency for the world. As soon as the world stops allowing us to be in that position, I think we're going to not have the control to be able to pick and choose whether or not we want to slash services or give tax breaks.

REHMAll right. Thanks for your call. And you're listening to "The Diane Rehm Show." Matt Bai, do you want to comment?

BAIYeah, you know, so I'm not an economist, and I've spoken to many, many economists about this. And I think there's general agreement that long-term, the deficit issue -- the debt issue here in the United States is critical and important and will probably have to be addressed. I think the CBO estimates something like debt as a percentage of GDP by 2020 could reach, what, 90 percent. It's 80 to 90 percent. It's a concern, and I think there's a reason it's a concern from policy level.

BAIOn a political level, you know -- Katrina has raised this a couple times, and it's a very good point about -- do people really care? They say they care about deficits. But then when you poll them and you drill down into the data, they don't really care. And they actually don't want to give anything up, and they actually care more about jobs. I think it's important from a political standpoint to remember -- I'll offer you a theory on this that I, you know, gained through talking to voters, watching some focus groups this cycle, which is -- I think the deficit is mostly a symbolic issue.

BAII do think it matters, and I think people get that it matters. But, politically, primarily in the short-term, it is a symbol of recklessness in Washington. It is the idea that people don't do what you do in your home, that they spend a lot of money without being accountable for it, that it's not having the intended effect and that they don't, at the end of the day, have to figure out how much they're putting out and how much they're taking in, and they don't have to be responsible for their actions.

BAIIt's a frustration that people have overall with the governing culture that is easily symbolized with the deficit. And I think, for that reason, as a political issue, neutralizing the deficit is probably easier than people think. Because, I think, for a president or for a Congress, simply the act of showing through concrete measures that you get it and that you can bring some responsibility and accountability to government would go a long way, maybe not as an economic matter. Though I think long-term, the economic picture is much more difficult to (unintelligible).

REHMBut how does the tax measure that has just been approved fit in to your thinking?

BAIWell, it's -- you know, there's an obvious contradiction here, right?

REHMYou bet. You bet.

BAIThere's a huge contradiction. People said, we're going to address deficit spending, we're going to come back. And then they came and said, hey, let's add another trillion dollars.

HEUVELYeah.

BAIBut I think you do have to distinguish, in some sense, between short-term and long-term debt and between what you do in a recession versus what you do after that recession. Now, it may -- this is, no doubt, going to make it harder to address some of these issues long-term. And maybe Katrina is right, that it opens the door to deeper spending cuts, but I think that door was already open. Frankly, I don't think this tax deal impacts it much. I think the calculation here is that in the short-term, the stimulative nature of this and not having the reverse effect on the economy is more important. And in the long-term, we will have to deal with some of the structural economic issues.

REHMAll right. We have less than a minute-and-a-half. Katrina, I'm going to give you half of that...

HEUVELOh, thank you.

REHM...and, David, you get half.

HEUVELI just want to pick up on what Matt said. It's interesting. You know, there's an image of our national deficit, sort of like a family sitting around the kitchen table, working out their budget. But there's a household budget or a government budget where there are investments that are valuable for a country, rebuilding a country, and then there are reckless investments. And I think in the -- we need to rethink how we invest in this country. And the greatness of this country came from wise investments in the infrastructure, in the people, in human security, and a lot of industrialized civilized countries have been operating in an investment budget. And it might be worth considering as we think about reframing our economic system, which is what I hope we do.

REHMAll right. David.

BAII agree with that, Diane.

KEENENo one disputes that. But the fact is that reckless spending has put us in a terrible position. Your earlier caller made the point about our long-term problem. The Chinese economic minister said, right now, as long as these other countries are in such deep trouble, the dollar is still something people want to hold, but that our fiscal position is actually worse than the countries that are now in crisis, and that when they get their act together, nobody is going to want to hold the dollar. And if they don't hold the dollar, then we're in trouble because those -- there is not money, as Katrina seems to think, out there, regardless of all of these other things. We can't spend ourselves into debt forever without paying the price. And that price is going to be harsher as time goes on.

REHMLast word from David Keene. He's chair of the American Conservative Union, columnist for The Hill newspaper. Katrina vanden Heuvel, editor and publisher of The Nation. She writes a weekly column for The Washington Post. Matt Bai, national political columnist for The New York Times. Great discussion. Thank you all so much.

BAIThank you.

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

ANNOUNCER"The Diane Rehm Show" is produced by Sandra Pinkard, Nancy Robertson, Susan Nabors, Denise Couture and Monique Nazareth. The engineer is Tobey Schreiner. Dorie Anisman answers the phones. Visit drshow.org for audio archives, transcripts, podcasts and CD sales. Call 202-885-1200 for more information. Our e-mail address is drshow@wamu.org. And we're on Facebook and Twitter. This program comes to you from American University in Washington. This is NPR.