Inflation is high. The GDP has shrunk. But the job market has never been better. The Washington Post's Damian Paletta helps make sense of the U.S. economy today.
A panel of journalists joins Diane to talk about the week’s top stories: President Obama called for “concrete plans” to raise the federal debt ceiling and avert a government default. Standard and Poor’s says it could move to downgrade U.S. debt later this month. Fed chair Ben Bernanke warned of a “huge calamity” if the stalemate continues. Minnesota’s governor and lawmakers reached a deal to end a two-week state government shutdown. The president raised a record $86 million for Democrats and his re-election campaign. Some GOP presidential candidates refuse to sign an Iowa marriage pledge. And former first lady Betty Ford is laid to rest.
- Eleanor Clift Contributing editor for Newsweek/The Daily Beast.
- Michael Scherer White House correspondent, Time magazine.
- Jim Angle Chief Washington correspondent, FOX News Channel.
Friday News Roundup Video
The panelists talk about the likelihood that Congress will reach a deal that would raise the U.S.’s debt ceiling before the August deadline:
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The president and the Congress made little progress in reaching a bipartisan debt deal this week. In Minnesota, the governor and lawmakers agreed to end the government showdown. And first lady Betty Ford was laid to rest. Joining me for the week's top domestic stories on the Friday News Roundup: Eleanor Clift of Newsweek and The Daily Beast, Michael Scherer of Time magazine, Jim Angle of Fox News.
MS. DIANE REHMWe do invite you to join us, 800-433-8850. Send us your email to firstname.lastname@example.org. Join us on Facebook or send us a tweet. Well, that was the week that was, was it not, Jim Angle? (laugh) We have no agreement. Republicans were scheduled to have a press conference at 9:00 but cancelled?
MR. JIM ANGLEYeah. They're working on plans for a vote on some sort of a balanced budget amendment, which would happen next week, which would -- which might assuage the concerns of some conservatives in the House, which would at least prepare the ground for some sort of future progress. But look, the problem is you've got to have -- no one really knows what is being proposed. And this is where things have broken down.
MR. JIM ANGLEAt one point in the negotiations, the Republicans asked the budget director, how much in spending would be reduced next year under the proposal that you're discussing here? And he said $2 billion. Now we borrow $4 billion a day. The way they got to more than a trillion was to say OK, we'll cut $2 billion next year then we're gonna put a cap on spending every year. But it's not enforceable, so there is no penalty if you exceed the cap. There's no automatic spending cut or anything like that.
MR. JIM ANGLEAnd then they computed the presumed savings in interest cost. So as John Boehner put it, it was like dealing with Jell-O, in some cases, like dealing with Jell-O that have been left out all night. And at the same time, Democrats wanted tax increases, which would be more certain than the spending cuts. And that is where we are at the moment.
MS. ELEANOR CLIFTWell, I think everybody views this through a different prism. And from my perspective, they went from what I think was a truly historic deal, where each party would have taken some pain, a lot of sacred cows would have been slain...
REHMYou're talking about the grand package?
CLIFTThe big -- the $4 trillion package...
CLIFT...I think, which would have satisfied the Chinese and our creditors, and people really wondering if this country get can on a sane fiscal path. And they went from that to now, I think, probably crafting a minimalist package that will avert the default and will provide as much political cover as possible, the balanced budget amendment that Jim was just talking about, which is --will not get through Congress, it's more posturing. And I think they'll go on to, you know, fight about it for the next year.
CLIFTAnd I think, you know, it's a pox on both houses, but I do think the president emerges with a little bit of the upper hand here. The Republicans are really feuding among themselves.
MR. MICHAEL SCHERERI would agree that there is -- at least for the last week, the president has had upper hand that there is a huge window if he can get a deal going into the 2012 election. So I think he's still very interested in crafting something. Both Boehner and Obama are still looking at the possibility of a big deal. It doesn't mean it's a likely outcome, but it still could happen. They've discussed an agreement on somewhere between $1.4 and $1.7 trillion. That's not enough to get them all the way through next year.
MR. MICHAEL SCHERERBut another possible compromise is that they cut a deal that will raise the debt ceiling through the middle of next year sometime. Then they will have another vote. The Senate Democrats have been talking about possibly setting up a commission. Because if you can't solve something in Washington, you set up a commission to try and solve it for you. They would come back or report back before...
REHMBut we've already had the Simpson-Bowles commission.
SCHERERThat's right. This commission, in theory, would be a little more binding. The problem with the Simpson-Bowles commission is that it was a nice commission. But if they didn't come to an agreement or if they did come to an agreement, Congress really didn't have to take into mind what they done. So this one would have some sort of a binding component to it.
REHMAll right. Let me ask you a question, Michael. How much of this whole fight has been political? And how much of it has been really about dollars?
SCHERERIt's -- that's like saying, you know, is an orange, orange, or is it a juicy fruit? It's all one of the same -- one and the same thing. The politics here has crept in deep into it that I think the way to answer your question would be to say that when John Boehner and Barack Obama were meeting secretly over the last several weeks or several meetings at the White House or a number of phone calls, that was a situation not even members of the Republican caucus knew that meeting was happening.
SCHERERVery few people in the White House knew those meetings were happening. And therefore, because there's no public exposure, it wasn't political. They were really talking about the substance of things. And they were really looking for something giant, hoping that if they go big, if they find something grand, then the sacrifices would be made up for on both sides by the huge win, by really finally putting this issue to rest, getting the nation on the right track.
SCHEREROnce those talks broke down and everything became public, it becomes sort of the classic deal where it has to get darker and darker and darker right before the...
REHMBut did the talks break down or did Eric Cantor step in and say, we're not doing this?
CLIFTWell, first of all, members of Congress and the big players here, each have individually voted to raise the debt ceiling numerous times. It was raised during the Bush years with, you know, a little bit of a kerfuffle but nothing serious. And so, yes, this is political. But I think leaders on both sides and -- the president and particularly Speaker Boehner -- saw this as an opportunity to really get a grasp on the nation's fiscal difficulties.
CLIFTAnd, in fact, the Republicans demanded. They linked -- the president wanted what's called a clean debt ceiling bill and the Republicans said, we're not giving it to you unless we get all these spending cuts. And then, when the Republicans got the president, basically, to agree to major cuts and to put some Democratic sacred cows on the table, entitlement, they were like the dog that caught the cat.
CLIFTThey didn't know quite what to do with it, and they didn't know how to say yes. I mean, this had the makings of an historic deal, and maybe they can still pull it off although, right now, it doesn't look like it. And Eric Cantor looks like the villain, but he represents the Tea Party. And the 87 freshmen Tea Party people all ran on no taxes of any kind, and so Eric Cantor represents them.
ANGLEWe are now at a point, in a broader sense, where it's not just about the debt ceiling. It is about the issue of cutting spending over the long term. And you had warnings this week from Moody's and S&P, and contained in those warnings was something far worse than just, if you don't raise the debt ceiling. It was, even if you raise the debt ceiling, if you do not cut long-term spending, the U.S. credit rating may still be downgraded because we are so far in the hole.
ANGLEThis is why President Obama, who is unlikely to look at entitlements, was forced to do so because you now have tens of trillions of dollars in promises, especially in Medicare, that we cannot pay for, tens of trillions. And if there's no change in those programs, it will not only destroy the program, it will also destroy the federal budget.
REHMSo, Michael Scherer, how likely is President Obama to cave on this as the Minnesota governor has done to try to get beyond this impasse?
SCHERERI think whatever happens it won't be cast as a cave. I think both sides will compromise somewhat. I would just say that the credit rating agencies aren't just saying there's a spending problem. They're saying the books are not balanced. They're prescribing whether it has to be a tax issue or a spending issue, so it's very possible also you could have increases in taxes.
SCHERERIf you look at recent, you know, right now, we're taking in revenues of about 14 percent of GDP, which is a historic low, even far below even what Reagan was -- part of that has to do with the recession. But, you know, taxes aren't off the table when it comes to ratings agencies. I think there's still an enormous amount of wiggle room here, and there's lots accounting gimmicks you could use. There's lots of ways in which you could boost these numbers.
SCHERERThere are ways in which you could have revenue increases that would be offset by things that aren't on the table right now, like the alternative minimum tax which could bring you over the line if the various lawmakers agree to this. So, you know, I'm not quite as cynical as a lot of people are, that you won't have a deal that gets you through the 2012 election.
CLIFTWell, when you say the Minnesota governor caved, I think he didn't get from the Republicans the increases in income taxes on the wealthy, but he did get money for infrastructure spending. So a classic compromise maybe. And I think if the way the minimalist deal is being explained, it would be -- the president would be allowed to raise the debt ceiling, which is not a great gift to allow him to do it politically on his own, and that Congress would go a long with that with spending cuts.
CLIFTSo, to me, that looks like a win for the Republicans. But the politics -- the way this is played out, the Republicans really have been cornered as intransigent. That there was this opportunity to reach this deal and they blocked it, and they care more about protecting taxes and tax breaks for the wealthy than they care about reducing the deficit.
CLIFTSo I think the politics favors the president, although substantively, I think the Republicans would do pretty good if the deal goes through with nothing but the raising of the debt ceiling and some spending cuts.
ANGLEOne of the asking things on the tax front is that -- one of the Republican arguments was we should have comprehensive tax reform, but it is dangerous to just go in and pluck things. And I'll give you an example. There was an accounting change called LIFO. It's not worth going into the details, but it determines how you compute profits and so forth. And this was one of the proposals and it would save like seven billion over 10 years. The problem is the small business administration of the Obama administration said it would force many small businesses to close their doors and would end jobs, destroy jobs.
REHMJim Angle of FOX News, Eleanor Clift of Newsweek and The Daily Beast, Michael Scherer, White House correspondent for Time magazine. Short break. Right back.
REHMWelcome back to the domestic hour of our Friday News Roundup this week with Jim Angle of Fox News, Michael Scherer of Time magazine, Eleanor Clift of Newsweek and The Daily Beast. Yesterday, we had Grover Norquist on the program. He said, Eleanor, that the White House had not put a single spending cut on the table. What spending cuts has the White House offered?
CLIFTYou know, this is a whole, you know, definitional. I believe Vice President Biden was meeting at Blair House, and they came up with $1.5 trillion in spending cuts. Everybody's been tossing that number around. The president has been saying it includes programs he don't…
REHMHave they been put in writing?
CLIFTI don't think anybody's put it in writing publicly either side. But if you had three congressional staffers sitting here, they are the ones who are working through this. I mean, I don't know that it's that particularly sexy. It's (laugh) not like they're cutting out, you know, whole departments or they're shaving programs here and there. And as Michael said, there are probably a lot of accounting gimmicks.
CLIFTAnd this is the how these budgets are worked through, and it's done on the staff level. And I don't think the way this White House is doing it is particularly different from the way these arrangements have been done in the past.
ANGLEThe reason they're trying to get whatever they're going to do done by the end of next week is so it can -- for one thing, you can write it in a legislation and it can go to the Congressional Budget Office, and they can tell you how much it's going to save. And the argument has been that a lot of these things were just vague proposals that weren't really going to save what people hoped they would save.
ANGLEAnd that is why you need some sort of independent arbiter like the Congressional Budget Office, which has some limits on it, but at least will say, look, if you do this, it will save this much money. And, no, we haven't gone through that process.
ANGLEIt's sort of vague, general proposals. Well, what if we did this? What if we did that? You need some sort of specific analysis.
REHMYet, yesterday, President Obama -- or perhaps it was day before -- said we may not be able to send out Social Security checks on Aug. 2. How realistic a threat is that, Michael?
SCHERERThere are two big threats. One is if you do not raise the debt ceiling, then about 40 cents on the dollar of what the U.S. government is used to spending goes away. And the president would be forced with a decision of figuring out how -- where to cut that 40 cents.
REHMWhich bills to pay.
SCHERERBut if you look at the numbers, it's incredibly difficult. It's not like a government shutdown where you keep essential services. This is a situation where if you just paid out your social safety net -- your Medicare checks, your Social Security, things like that -- and you paid military contractors, you paid unemployment insurance, you'd basically be out of money right there. I mean, there's -- it's not -- 40 percent is not something you can easily adjust.
SCHERERIf you wanna pay off all the social checks that people expect, you wanna pay your military personnel so they keep fighting overseas, you can't easily do that. There's a second real risk. It's not just the payments. The second risk is that the markets will react in a way that will make borrowing in the U.S. -- in the immediate future and maybe in the long-range future -- much more expensive, which could have a number of very, very dangerous effects and could very well lead to another recession.
SCHERERInterest rates on everything could go up. You could, in theory, have runs on things like money market funds. You could precipitate sort of another version of the financial collapse we had before. If our lenders decide -- even if we're not stopping to pay our debts, if they decide that we're just not responsible enough or we're getting too close that they don't trust us, then every -- the whole rules change.
REHMSo considering all that, how likely do you think it is that we are going to get a deal before Aug. 2?
SCHERERNothing is a certainty in Washington, but I think this is almost definitely a certainty, if that's a fair answer. I mean, all the leaders have agreed that this is not an option. The only people who are saying it is an option are people running for president or House conservatives who are not in the room. And there are enough ways that you could have short-term deals, you know...
REHMWhich the president said he does not want.
SCHERERRight. But if he's faced with a choice between a short-term deal and the economy going into a recession, he'll take the short-term deal.
REHMIs he gonna go for a short-term deal, Eleanor?
CLIFTWell, I think the package that Mitch McConnell has offered, while it is really laughably cynical because it passes all the blame to the president, is nonetheless the basis for a deal. And I think, you know, short-term, I think it would get the president beyond the 2012 election, is what they're looking at. So I think, you know, I believe there will be a deal, but I think they are flirting dangerously close to the deadline.
CLIFTAnd I think not only rating agencies, but I believe China has spoken out (laugh). They're, you know, they're our creditor. So there are serious financial risks here with taking this so close to the wire.
REHMAnd political risks mostly for which party, Jim Angle?
ANGLEWell, there are plenty of political risks to go around. This McConnell proposal has now been -- he's now working with Sen. Reid and a number of other Democrats. They're all trying to come up with sort of a fallback plan, so you don't know exactly what the outlines will be once they have all hammered it out.
REHMDo you believe something will happen?
ANGLEThere will be -- there will definitely be a fallback plan that comes out of the Senate that would give the president an opportunity. What McConnell wanted to do is say, look, the president can come to us. He'd do it in three tranches. First one would be 700 billion. Here are the spending cuts. Everybody could see them. They could be analyzed. And then Congress could vote up or down whether or not to go forward.
ANGLEThat would be -- obviously, the president would have to commit to certain cuts, but members of Congress would also have to commit in some way. The -- one of the thing I wanna say about the Social Security checks and other things, it's not just a question of overall money. It's also cash flow. If you look at the way the money comes in -- and you never quite know because people are paying taxes late and all sorts of things.
ANGLEBut it's a question of when the money comes in and how much money you have on a given day. Now, on Aug. 3, there's a $23 million -- $23 billion payment of Social Security checks. Do we have 23 billion in the coffers, as the president put it, on that day? That is the question. It's not whether you have enough money over the month. It's a question whether or not you have the money on the day that things are supposed to be done, and that is a much more difficult calculation.
REHMAll right. Let's move on to Minnesota, and that shutdown finally seems to be coming to an end. I must say those folks out there, they're such lovely people in Minnesota, and I just wonder how they got to this point. Michael.
SCHERERIf you talk to Democrats, they'll say the former governor of the state, Tim Pawlenty, had a big part of it. You know, the problem with a lot of state budgets, not just in Minnesota, is that you -- it has to be balanced every year. There are lots of political reasons why it can't be balanced. And so you fall back on things like -- called non-recurring balancing tools or you take loans against future revenues, or you delay payments that you know you have to pay.
SCHERERThese are all things that then just come back to bite you bigger later on down the road. And, you know, even this deal that they have announced is not really a great deal from a policy perspective, if you look at it. I mean, they're gonna be issuing more bonds. They're going to be borrowing against future tobacco settlement money. I mean, it's not -- they haven't solved the problem. They again pushed it down the road, which is -- it's not just in Minnesota they're doing it.
SCHERERIt's not just Tim Pawlenty who does this. Governors across the country, they have to balance their budgets every year, and given the political gridlock, they haven't been able to do.
REHMBut you mentioned Tim Pawlenty. How much of an impact is this gonna have on his presidential campaign?
SCHERERI -- in the long run, I don't think very much. He's got bigger problems right now, which is that -- is Michele Bachmann in Iowa taking off and him still not being able to craft for himself a real vision that he can sell to the people of Iowa, the people of New Hampshire, who he is, why he's different and why they should be attracted to him.
CLIFTWell, Gov. Pawlenty left a deficit in Minnesota, and so he can't really run on the Minnesota miracle. I think didn't the bridge collapse while he was there? And they've got infrastructure problems and they've -- he has problems that he shares with all the other governors in all the other states, but not every governor is running for president. But I agree that he has bigger problems. But he can use this.
CLIFTHe stood up to the Democrats is how he is portraying it because there was a brief shutdown when he was in office, and it may help him in the primaries, actually. But I was interviewing a Republican operative this week who's worked on previous presidential campaigns, and he gave me a very fair analysis of Governor Pawlenty. And then he said, but on background, this doesn't come from me. He couldn't sell cold beer to a boatload of sailors.
CLIFTAnd, you know, he's got a good record, and he's a Minnesota nice, but he's trying to be right-winger. It doesn't come across authentically, and he just doesn't leave much of an impression. Now, it's early in the game. I certainly wouldn't write him off just yet, but he's struggling in this field.
REHMOK. So Governor Dayton said Republicans have to agree on a few stipulations, 500 million in a bonding bill for new building projects. They also had to agree on killing some earlier proposals. My question for all of you, and this relates to the larger budget deal in the Congress, the smaller budget deal in Minneapolis, Minnesota, is the country -- or is Minnesota going to be any better off with these deals? Now, I'm talking about the people, Michael.
SCHERERI think you have to look at this in the context of the last three elections. We've had 2006, 2008, 2010, three elections in which the American people as a whole are upset at the direction of the country, and they have responded by saying, I need to elect -- replace my congressman, replace my senator, replace the president with someone who is going to fight harder for their particular position.
SCHERERAnd that has led to a new crop of people who believe that compromise is a bad word, who believe in signing pledges that have no room like a no-new-tax pledge. And so you have situations in which the -- doing the actual work to do the things that kind of everybody not involved in politics agrees has to be done to get the states in going in the right direction, get the federal government going in the right direction become much more difficult.
SCHERERAnd I think what's gonna happen is if these things go the way they are, if the McConnell deal happens, which is basically pushing off the problem to another election, if stuff like what's happening in Minnesota continues to happen around the country, where the problems are pushed off to another election, the people will at some point I think, begin to understand that just, you know, electing a harder partisan who's less willing to deal is not necessarily the proper solution.
ANGLEPushing off is -- has been the big problem, and this is the -- you see this in all of the states. The state pension funds are, most experts say, are underfunded by $3 trillion, and this affects Democrats and Republicans. Governor Cuomo in New York said yesterday, look, we've settled our, you know, budget for this year, but the one thing that I did not get done was working on the pension funds, and we have to tackle that next time. If you have $3 trillion in unfunded liabilities and state pensions, you have got to deal with them.
ANGLEAnd the bigger problem here is not, you know, we worry about all the groups who say, oh, you can't take that away from me. You can't take that away from me. The problem is all of these things we're spending more money than we have and who's gonna pay? Your children are going to pay.
REHMAnd it seems to me that the bottom line becomes the American people's faith in government. And you're listening to "The Diane Rehm Show." Let's talk about this Iowa marriage pledge. What's the pledge, Jim Angle?
ANGLEI can't give you the exact pledge, but you've had different people saying -- and, obviously, it deals with, you know, whether or not marriage is between a man and a woman or a broader definition of it.
REHMAnd reject same-sex marriage, pornography and Islamic Sharia laws.
ANGLEMm-hmm. And some people have said, I will sign the pledge. Some people say, I agree with the pledge but I won't sign it, because I don't sign pledges that may be defined by someone else. And so you have people all over the map. But it basically comes down to whether or not you believe in marriage outside of man and a woman, the traditional marriage, and that's where the line is based upon.
CLIFTWell, first of all, I don't think Sharia laws are a big threat in this country. And so, (laugh) that's a kind of a political message. Secondly, the original language in the pledge, and they may have adjusted it, said that African-American children in this country, because of the breakdown in family and marriage, have a worse life than they did when they lived under slavery.
REHMThat they were better off under slavery.
CLIFTBetter off under slavery, exactly. That's pretty inflammatory language as well. I think that Michele Bachmann and Rick Santorum...
CLIFT...have signed it. Mitt Romney and Tim Pawlenty and Jon Huntsman have not. And that's -- it's really...
REHMNor has Gingrich or Gary Johnson.
CLIFTRight. But I would say the dividing line -- but -- and I think Gingrich probably didn't sign it for, I mean, personal reasons. It would look a little hypocritical (laugh) since he's a kind of a serial marrier. But it's kind of the division between the more fringe candidates and what we would consider the more traditional candidates.
SCHERERI think the trick with this marriage pledge is that it was called a same-sex marriage or a marriage pledge against same-sex marriage, but it really was much bigger. I mean, the -- you could have a one-line pledge. This is a two-page document with a long preamble. It asks the candidates, for instance, to pledge their own personal fidelity to their spouses. I mean, it goes sort of the full distance: Sharia law, pornography, prostitution. It says that we need robust childbearing in this country.
SCHERERI mean, it really was one that was meant to test the outer limits of the social conservative reputations, and I think it's sort of falling on its face. It's gotten to the point where Bachmann is not necessarily better off that she signed this pledge, and she signed it even before they took out the part about the slaver...
REHMExactly. And she backed away from abortion.
SCHERER...and then had to back away from it.
SCHERERSo it's just -- it's one of these pledges that just didn't play out the way, I think, anybody wanted it to.
REHMAll right. And quickly, let me ask you all about Elizabeth Warren's testimony, again, yesterday. It's the third time she's been called back to the Hill, Eleanor.
CLIFTThere really seems to be an element of harassment here of Elizabeth Warren. And she is basically saying the same things over and over, that she is setting up this agency. She didn't step outside of her role when she advised some people that they say was in the banking world, that the members of the committee think exceeded her authority. The president doesn't seem inclined to name her to head this new agency.
REHMUntil maybe August?
CLIFTUnless he does it in a recess. And the Republicans are so adamant in opposing her, and they claim that they will keep the Congress running so that they -- technically, they won't be on recess. I've met with her, interviewed her. She's -- she earnestly believes in what she says, but she certainly is not a far-out person, a threatening person in any way.
CLIFTShe comes from Oklahoma, I believe, kind of -- she's one of the few people who didn't go to one of the Ivy League colleges, although she teaches now at Harvard. She has a feel for the middle class that a lot of the other people in this administration do not have, and I think she's very valuable to have around.
REHMEleanor Clift, contributing editor for Newsweek and The Daily Beast.
REHMAnd in our coverage of domestic topics on the Friday News Roundup, time to open the phones. Let's go first to Charlotte, N.C. Good morning, Frank.
FRANKOh, hi. OK, I'd like to say a couple of things real quick. One of them is when the president came was -- on Jan. 20 of -- when he became the president, OK? Our national debt at that time was $10.6 trillion. Our unemployment rate was 7.6 percent, OK? Not much difference from what it was now, but if you go to the U.S. Treasury and you look at the number before he was even elected president, we are gonna be in the debt that we are in right now no matter who became president or it actually could have been a lot worse, OK?
FRANKAnd the other thing that I wanted to say is basically, that I have read, you know, the Torah, the New Testament and the Quran. And none of them say specifically that two people of the same sex cannot be married. It doesn't say that in any of those bibles. So if somebody says that they're gonna find a pledge against that right there, those words, they're going against the Bible.
REHMAll right, sir. Thanks for calling. You've clearly become quite a scholar. Michael Scherer, what about his comments on the debt as it stood when President Obama was inaugurated?
SCHERERThis is gonna be a huge issue next year in the re-election, the -- President Obama's re-election campaign. It depends a lot on how you cut these numbers. You have -- the debt was around $10 trillion. It's now $14 trillion. That's a huge increase. But historically, whenever you have a financial collapse, you have collapse in revenues and you have a necessary increase in government spending to make up for it, economists say this is normal, then you just make up for it in the out years when the economy starts growing again.
SCHERERRepublicans have mostly rejected that logic in their campaign rhetoric so they're gonna run against that. In terms of unemployment, you do have a dramatic increase in the number of unemployed people since Obama came in, but it's also true that most of the losses in unemployment, the largest losses, were happening before Obama got in.
SCHERERAnd once Obama comes in the office, Jan. 20, with February, the monthly job loss numbers start decreasing. And we've had, even though very disappointing results in the last couple of months, increased employment since then. So it's really a way of how you cut the numbers. In the end, the numbers won't matter at all.
SCHERERIt really is gonna come down to whether the American people, probably in the early summer or spring of next year are feeling like there's hope, are feeling in their lives like the economy is getting better, like they're not trapped. That's what Obama has to worry about.
REHMWe've just had word that Republican lawmakers say that the House will vote next week on a $2.4-trillion debt ceiling increase and matching spending cuts. Interesting.
SCHERERThere may be actually a way out for. I mean, depending on how this plays, there may be a way out for the conservative Republicans. They can say that when they go back to their districts...
REHMThey voted against it.
SCHERERWe couldn't get it -- I -- then, I voted for the compromise, but this is what I wanted.
CLIFTYeah. I'd like to see those $2.4 trillion in cuts. Let's see them put them on the table, and then we'll see who start screaming the loudest. (laugh)
REHMAll right. To Fairfax, Va. Good morning, John. John, are you there?
JOHNYes, I am.
REHMGo right ahead.
JOHNI'm here. Yes. I just wanted to comment on a couple of things. One is I am partially retired, and I live on -- I get a Social Security check every month that pays for my rent. If that doesn't come in August, I could be in deep trouble. And the second thing is I have a neuro-muscular problem on my left side. The Medicare covers my -- most of my medication, which, if I have to pay for myself, I pay almost $700 a month, and that's a lot of money.
JOHNI think the -- what's going on in Capitol Hill is a sham, and I think that the Republicans really are making war on the middle class, and that's all I have to say.
REHMJohn, I'm so sorry for the situation in which you find yourself. I want to follow that with an email from Jeanne in Ohio, who says, "It disturbs me when comments such as the one about compromising causing some pain for each party. The parties will feel no pain. The American people will." And John's call certainly demonstrates that. How can these guys keep going on and on this way, Eleanor, when people like John are out there at their mercy?
CLIFTWell, the political rhetoric is terrifying to people who don't have resources to fall back on. And the Democrats have cast themselves as the protectors of Medicare and Medicaid, and those programs are growing at a rate that it's difficult to contain.
CLIFTI mean, it's my understanding that the adjustments that the White House was looking at in those programs was -- and this gets kind of technical in adjustment to the CPI, the cost price index, which is how you arrive at cost of living increases -- and that they would take into account that if the cost of one particular item that is measured as they try to determine the inflation in the country, if one item goes up, say orange juice gets much more expensive, people will then switch to grapefruit juice...
CLIFT...which is cheaper. And they would take that into account that would lower the cost of living increases that people on these programs would get.
CLIFTIt would not be a huge amount of money. It would be -- the number that was said to me was, like, $60 a year. And they're talking about, perhaps, means testing, that people at the higher income would have to pay more. So in theory at least, the cuts that the White House is talking about would not drastically affect people like this caller -- would not affect people like this caller.
REHMAnd Representative Boehner held a news conference at which he criticized Democrats, including President Obama, for producing no real plan with serious spending cuts.
SCHERERI think of the great untold stories -- and I don't even know if we'll ever fully know the story -- is how well behind the scenes, despite the rhetoric from President Obama and Speaker Boehner, these two men have been working together, and I still hold that hope. I mean, in the end, this deal -- if we get something more than the bare minimum and the, sort of, pushing the can deal that we've been talking about, will come down to that relationship.
SCHERERI think you do have two men who want to be historical leaders, who want to go down like Tip O'Neill and Ronald Reagan. The question is whether they can pull it off. So I kind of discount the John Boehner, you know...
SCHERER...saying bad things about Obama in public. I think that's just sort of for their own caucuses' consumption, their own people.
CLIFTThe problem is...
REHMAll right. I want to go to Denison, Iowa. Tim, you're on the air.
TIMThank you, Diane, and hello, panelists. I'm calling about the pledges that Mr. Norquist and Mr. Vander Plaats are putting forward, and would like just some reflection on -- can we, American people and voters, encourage our legislators to have a backbone and simply say to anyone who proposes a new pledge that I take an oath to the Constitution and that's enough for me.
TIMI want some reflection on that...
TIM...and I'll take the reflection off the air.
REHMThanks for calling, Tim. Jim Angle.
ANGLEWell, a lot of people sign pledges for various things, a lot of people propose pledges. The key here is for the lawmakers to take a look at what the U.S. is doing. We are spending money we do not have that we're going to force out children to pay for. We're talking about John's situation in Medicare, for instance. All of the proposals that I know of to reform Medicare would make the wealthy pay more and give them less and protect those at the bottom end of the income ladder.
REHMBut are you talking about raising taxes on millionaires?
ANGLEWell, no. I'm talking about changes in Medicare. You would force the wealthy to pay more and you would give them less in benefits. The same thing in Social Security, you force them to pay in more and you give them less in benefits in order to protect the people at the bottom.
REHMBut if he has nothing but Social Security to live on and the pay is rent with and Medicare is covering $700 a month in medical expenses, where is the money gonna come from for him to pay more, Jim?
ANGLENo, he's not wealthy. We're only talking about the wealthy paying more. He's not wealthy.
REHMWell, but the wealthy are not living on Social Security.
ANGLENo. But what I'm saying is the two programs -- all of the proposals are quite progressive in the sense that they require the wealthy to pay more into the program and receive less in benefits in order to keep the program alive for people like John who do not have enough income.
REHMBut even Republicans are saying you should not have the wealthy paying more on anything, Eleanor.
CLIFTRight. Well, that's their rhetorical position.
CLIFTThese are the job creators. And I think, you know, Speaker Boehner did say it's as though there are people from two different planets with such totally different views of government. And basically, the freshmen Tea Party Republicans are the ones who are really throwing a wrench in this deal, and they don't like government. And they wouldn't -- they don't mind dismantling it.
CLIFTAnd I think -- I -- my reporting this week, everybody says of Speaker Boehner, he's trying to do the right thing. He wants to do the right thing. He's a very weak speaker, because he does not command the loyalty of the troops. And it's Eric Cantor who the Tea Party freshmen look to, and Eric Cantor at this point does not seemed inclined to work to its compromise.
SCHERERI think there's important point to make about the tax pledge, the Norquist pledge in particular. If you talk to Grover Norquist, which I did in 2004, 2003, after the two big Bush tax cuts, what he was saying was these tax cuts are great because these rates are never gonna go back up. And because of that, we can basically force a re-evaluation of what the American government has been since the new deal -- a re-evaluation of what the social safety net is.
SCHERERThe agenda of that tax pledge is not just to keep -- 'cause living within our means or deal with the deficits we have now is to remake government from what we are used to it being.
REHMTo shrink it small enough so it...
CLIFTGo down the drain. Right. (laugh)
REHM...drowns in the bathtub, right?
SCHERERSo, you know, when -- and the way it's gonna play out is in moments like this where, you know, we have the full faith and credit of the United States on the line. And so, I -- it's just -- you get -- it gets lost in this current conversation. People think, oh, it's just about not just raising taxes now or something like that. Really, what this debate about never raising taxes again is about, is about over the long term whether we will have Social Security and Medicare and Medicaid like we have had it for the last 30 years.
REHMYou know, I tried to press him yesterday on those very issues. He doesn't answer straight forwardly.
SCHERERHe's a -- I've always found him to be a fantastic interview, very funny, very on message and entirely evasive when it meets his purposes.
REHMAnd your listening to "The Diane Rehm Show." Let's go to Freddy, in Durham, N.C. Good morning. You're on the air.
FREDDYGood morning, Diane.
FREDDYAnd thank you very much for allowing me to be on the show.
REHMSure. Go right ahead, please.
FREDDYMy question is this, that when we hear about adjusting the COLA and adjusting the CPI for Social Security and Medicare, why is it that we don't use the same method of indexing taxes that we're going to use on Medicare -- that are being -- is being proposed for Medicare and Medicaid, because that would also increase revenues because it would reduce income tax bracket creep. And if it's good for the gander, isn't it good for goose.
REHMWhat do you think, Jim Angle?
ANGLEI'm not sure I understand, but let me make a key distinction here between Social Security and Medicare. Social Security is a closed system. It can only pay out what it takes in. It has not added to the national debt. It has not added to the national debt. In fact, the Social Security trust fund, which was taking a surplus for a while, has been borrowed by Congress...
ANGLE...and spent over the years...
ANGLE...and now has to be paid back. Medicare, on the other hand, is entirely different, because Medicare -- most of the parts have an unlimited draw on general revenues. And last year, 51 percent of the cost of Medicare came out of tax revenues. That's why Medicare is different from Social Security, because it sucks in all the money that is needed to pay the bills, and taxes have to go up in order to pay for that or you run a deficit.
REHMAnd just one comment there, which apparently represents many emails we've gotten. I thought that Social Security payments came out of the Social Security lock box, and therefore the lack of operating funds should not influence the ability to write Social Security checks that won't bounce. That lock box was clearly invaded. Wanna ask you about Betty Ford, Eleanor. She died, and there was a lovely memorial service for her this week.
CLIFTYes, and she chose Rosalynn Carter, wife the Democratic president, wife of the man who defeated her husband for the presidency in 1976, to speak, Rosalynn Carter. And the Fords and the Carters have become very good friends. And she had also asked Cokie Roberts to speak, and Cokie's father was in the Congress working with Jerry Ford -- they were from opposite parties. And so, the whole message that she wanna deliver at her funeral was how the parties could work together, once worked together and were good friends.
CLIFTAnd Betty Ford was loved by women of all stripes because she lived out a lot of American family traumas in the White House from breast cancer to her children probably experimenting with marijuana, and she has spoke forthrightly about everything.
CLIFTYes, and she -- and, of course, she went on to found The Betty Ford Clinic. But its hard to remember, but you know there was a time when if a woman had breast cancer, you concealed it, you didn't wanna leave the house. And she went public with her mastectomy, and it was as though she, you know, liberated women everywhere about this disease.
REHMWe owe her a great deal.
CLIFTAbsolutely. And she's a very spirited woman who wanted to be a dancer and gave it up to be a wife and mother. And that was also a sort of a common American experience for women of her era.
REHMEleanor Clift, she is contributing editor for Newsweek and The Daily Beast. Michael Scherer, White House correspondent for Time magazine. And Jim Angle, chief Washington correspondent for Fox News Channel. Have a great weekend, everybody. Thanks for listening. I'm Diane Rehm.
ANNOUNCER"The Diane Rehm Show" is produced by Sandra Pinkard, Nancy Robertson, Susan Nabors, Denise Couture, Monique Nazareth, Sarah Ashworth Lisa Dunn and Nikki Jecks. The engineer is Tobey Schreiner. Katy June-Friesen answers the phones. Visit drshow.org for audio archives, transcripts, podcasts and CD sales. Call 202-885-1200 for more information. Our email address is email@example.com. And we're on Facebook and Twitter. This program comes to you from American University in Washington. This is NPR.
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