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.
The haggling goes on. The White House says Congress needs to raise the debt ceiling by Friday to avoid a potential U.S. default, but there were few signs of progress over the weekend. The only plan that seems to be gaining some traction is a bi-partisan proposal that allows the president to raise the debt ceiling … without the support of congressional Republicans. The plan assures wrangling for months, if not years, to come. This week both the House and Senate plan largely symbolic votes on measures aimed at soothing ruffled constituents but little else: Join us for a conversations on the debt and deficit battles down to the wire.
- E.J. Dionne Jr. Senior fellow, The Brookings Institution, columnist, Washington Post and author of "Souled Out: Reclaiming Faith and Politics After the Religious Right" and of "Stand Up Fight Back."
- Janet Hook Congressional correspondent, The Wall Street Journal.
- David Winston Republican pollster and President of the Winston Group. He also writes for Roll Call and is a CBS News consultant.
MS. DIANE REHMThanks for joining me. I'm Diane Rehm. The White House and congressional Republicans remain in a state of paralysis over terms raising the national debt ceiling. House Republican insistence on no compromise could mean just that as we head into the final days of avoiding potential U.S. default. Joining me to talk about what movement, if any, we're likely to see this week and why, E.J. Dionne of The Brookings Institution.
MS. DIANE REHMHe's also a columnist for The Washington Post. Janet Hook, she is congressional correspondent for The Wall Street Journal, and David Winston, Republican pollster and president of The Winston Group. Throughout the hour, I'll look forward to hearing your questions and comments, 800-433-8850. Send us your email to email@example.com. Send us a tweet, or join us on Facebook. Good morning to all of you.
MR. E.J. DIONNEGood morning.
MR. DAVID WINSTONGood morning.
MS. JANET HOOKGood morning, Diane.
REHMJanet Hook, if I could start with you, few signs of movement over the weekend. But where are we now?
HOOKWell, I have to say, rarely has Washington seemed more leaderless and rudderless and kind of at sixes and sevens over what's going to happen next. And there's a lot of anxiety and suspense about raising the debt limit by Aug. 2. And, I think, we're still in the stage where what's most obvious and before our eyes, angry partisan debates and bills not being passed and bills being passed, that's still a lot of political theater.
HOOKAnd I think there is progress being made. Or there's motion towards a compromise that is less obvious, that there's -- this week, right this week, the first half of the week will be taken up a lot with more partisanship because both the House and the Senate are going to be approving bills that are straight Republican conservative party line documents.
HOOKBalance budget amendment to the Constitution, and a bill that they call cut, cap and balance, which is the conservative program for balancing the budget over the long term and their condition for raising the debt ceiling -- cut spending, balance the budget, and cap spending over the long term. It's very drastic, and no Democrats are expected to vote for it. So it's kind of the Republican Party's way of saying, this is what we stand for, before they move ahead to any kind of compromise.
HOOKAnd there are efforts under way, in the Senate in particular, to reach some kind of compromise that would involve allowing the debt ceiling to be raised most -- by the president and attaching with it some much smaller amount of spending cuts and a committee that would be tasked with coming up with some further longer term deficit reductions. But that would be off in the future.
REHMJanet Hook, she is congressional correspondent for The Wall Street Journal. E.J., this whole thing seems so unbelievable. You say it's an entirely artificial, politician-created crisis.
DIONNERight. I think when this is over, we're going to look back and really challenge why conservative members of Congress -- Republicans in this case -- thought they could use the debt ceiling fight to have a showdown on the budget. The debt ceiling -- the Post has this in its pages this morning. Debt ceiling was raised 17 times under Ronald Reagan. It was raised seven times under George W. Bush.
DIONNEMany of the Republican leaders who are saying we won't raise the debt ceiling until we have all these cuts voted for those debt ceiling increases, many of them under President Bush. And the issue...
REHMSo why now?
DIONNEAnd the -- well, because they, I think, vastly over-read the "mandate" that they got out of the 2010 election. Secondly, they are very responsive to a very conservative element in their primary electorate, the Tea Party and their -- and the Tea Party's allies. So they want to make a big show of cutting spending. The country is really concerned with jobs and the economy. And I see this whole fight as a big distraction from where we should be.
DIONNEAnd this balanced budget amendment, which I hope we talk about later, I just think it's one of the most dishonest pieces of legislation we've seen before Congress, and I know that's saying a lot. Because what it is is a way to vote to slash Medicare, Medicaid, Social Security, lock in tax increases.
DIONNEYou know, I mean, tax -- low tax rates for the wealthy because they have super majorities to require -- they require super majorities for any tax increasing, but your fingerprints aren't on it. Fortunately, it won't pass. But it's really remarkable. It's replacing symbols with governing.
REHME.J. Dionne, he is senior fellow at The Brookings Institution, columnist for The Washington Post.
DIONNEBy the way, I want to correct that sentence. It's replacing governing for symbols.
REHMReplacing governing for symbols.
DIONNEGoverning for symbols.
REHMDavid Winston, how do you see it?
WINSTONWell, not surprising, I only have a slightly different take than E.J. here. But, first off, why the debt ceiling at this point in time? And why do you see conservatives and Republicans engaging? And I think there are a couple of elements into play. First off, we've never seen debts above, you know, federal deficits above a trillion dollars a year. So that sort of creates an impetus, too.
WINSTONWe've now had an anemic economy that clearly doesn't seem to be helping, at least in terms of generating the revenues that it needs to. And, third, we've had historically high unemployment, what, 28, 29 months of 8 percent or higher. So it's an unusual situation.
WINSTONSo given that and also given the fact that these Republicans believe that every opportunity you take to sort of reduce the amount of spending that Washington is doing, they're going to take that opportunity they've created this particular situation, saying -- going back to the continuing resolution and now this as well. In terms of the debt ceiling, you'll see it occur through the appropriations. This is the time.
WINSTONHaving said that also, it's not necessarily the first time. If I remember correctly, back in 2006, all the Democrats in the Senate also voted not to extend the debt ceiling. And so it's been a political football for a while. In this particular case, however, you're dealing with majority who then you're dealing with a situation, I think, you would see all four leaders agree in terms of the House and Senate that ultimately we do want to increase the debt ceiling. The question is, how do we get there?
DIONNEJust to one quick point on the history. In the past, it was tacitly agreed that the debt ceiling would go up. When Republicans are empowered, Democrats tended to vote against it, but the votes were there. And when it was the other way around, the parties switched. But no one used -- tried to used the debt ceiling in this particular way. That is genuinely new.
WINSTONAnd I would agree with that, and, again -- but I also would suggest that -- 'cause the situation is so unique as well.
REHMAnd what about Orrin Hatch's introduction of the balanced-budget amendment this week in particular?
WINSTONWell, clearly, what Republicans are looking for is some sort of fiscal device -- mechanism, by which they can bring out sort of fiscal discipline that we would like to see put into place. There are those advocates of the balanced budget. There are those who are advocating economic growth policy. I think, as Janet was describing, there are a lot of elements that are sort of moving at this point in terms of how do you coalesce that into what will eventually emerge?
WINSTONHaving said that, Republicans (word?) in the House, tomorrow, we're going to vote on something that establishes at least where their position is as a starting point. And what you're also going to see from Republicans is a challenge to the president to say, okay, now give us your plan so we can -- as we go through these last two weeks -- begin to figure out how we get to a point that works.
REHMDavid Winston, Republican pollster, president of The Winston Group. Janet Hook, this balanced-budget amendment somehow seems to get things off-track when, as E.J. said, we're looking for new jobs. We're looking to get over this debt ceiling crisis. Why the introduction of the balanced-budget amendment now?
HOOKWell, actually, I'd like to say one thing that's really interesting is the particular brand of balanced-budget amendment that's been introduced by the Republicans is kind of designed to not pass. In the mid-'90s, Congress came very close to passing a balanced-budget amendment to the Constitution, which was kind of what I call the plain vanilla balanced-budget amendment. It just requires Congress to pass a balanced budget.
HOOKThis balanced-budget amendment that the Republicans are pushing is much, much more stringent. It sets all kinds of conditions on how the budget is balanced and how the budget is written. There -- it requires -- it specifies not just that it be balanced, but that if there's any kind of tax increase involved, it has to be approved by three-fifths -- or is it two-thirds? -- a super majority, more than a simple majority.
HOOKIt specifies that federal spending can't exceed 18 percent of the gross domestic product, which is much...
REHMWhere right now?
HOOKRight now, it's, like, 24, 25 percent. So it's a bit -- much smaller share (word?). So what it is is it's not just a balanced-budget amendment. It specifies that it's a low-tax, small government budget. Now, I actually think that if it this was a plain vanilla balanced-budget amendment, it would be really hard for Democrats to vote against it in these circumstances. As you say, it's a little bit of a...
REHMIt's off track.
HOOK...a sideshow from the central focus on what do we do right now about...
HOOK...the debt limit or what do we do right now about jobs. I do think it speaks to a genuine frustration that Republicans and Democrats feel that every year we keep coming up against these problems, you know, what's the long-term solution. And there's this sense of Congress can't do it on its own. It needs some kind of external constraint. And that's what people think this constitutional amendment would do.
HOOKI don't know whether, in fact, it would work out that way, but that is why, I think, people look to it at a time like this.
REHMBut you're saying it's designed to fail.
HOOKI think -- like I said, I think that if they put up a simpler version, it would get more Democratic support. And there are little tiny signs that maybe they'd fiddle with it to get more support. But I don't -- I think this is more intended to make a statement and to present a Republican conservative vision of government that goes beyond simply balanced budgets.
REHMIt's also a time waster, E.J.
DIONNEWell, it's a time waster, but I think it's worse than a time waster because it's an attempt to use the Constitution of the United States to lock in a very particular set of highly ideological policies. The Ryan budget wouldn't qualify under this constitutional amendment. It makes the Ryan budget look like a social Democratic document, you know, given the cuts that would be a required.
DIONNEI'd like to call attention to a column this morning by Ross Douthat, a conservative columnist. He's been a guest on this show before, and he made, I think, a very important point to his own conservatives, which is you can't enter a fight like this without having an endgame. And they weren't willing to compromise in the least.
DIONNEAnd I think, from a conservative point of view, they could've gotten a deal that they rather like, but they weren't prepared to compromise.
REHME.J. Dionne of the Brookings Institution and The Washington Post. Short break. We'll be right back.
REHMI want to give you some early comments from listeners. Here's a tweet from Willis. "This whole situation is unbelievable. I'm 20 years old. I believe the system is broken. I know many in my age group feel exactly the same."
REHMAnother from Carrie in Cincinnati: "The only thing this farce is related to is not, under any circumstances, cooperating with this president. He's been continually demonized in every way possible by Republicans, and they are happy to take the country down to new lows to do it. Politicians are hypocrites by nature, but this sets a new standard by far." How low can it go, David Winston?
WINSTONWell, not surprising, I'm going to disagree with that conclusion. And I don't find politicians -- some politicians are certainly hypocritical. But I would say, generally, they're trying to get to an outcome that is positive for the country. Having said that, you're in the middle of a debate here where you're seeing two viewpoints. The two sides truly believe butting up against each other.
WINSTONAnd that is, fundamentally, Republicans believe -- and this is where Boehner -- John Boehner is the speaker. And this is where, I think, the White House talks began to break down a bit. Boehner fundamentally believes that increasing taxes will contract the economy.
REHMBut why then did he seem to come to an agreement with the president and then have to back away after Eric Cantor stepped in?
WINSTONHe didn't come to -- what he was willing to do was discuss how do you increase revenues through effective tax reform? And he was willing to have that conversation. What had simply occurred was the president decided his concept of tax reform was increasing taxes, to which Speaker Boehner and the Republican caucus, that was just something that wasn't going to work. And as a result of that, that's what you saw the talks break down over.
HOOKYou know, what went on between President Obama and Speaker Boehner is a little bit of a mystery. I mean, it kind of -- this is -- this was the quintessential back room deal in the making.
HOOKAnd when things fell apart, we had to kind of put up with conflicting accounts of what happened and who was at fault and -- but to speak to the caller's or the listener's comment about hypocrisy among politicians, I actually do find -- I don't know whether this is hypocrisy or just astonishing degrees of scripted political debate, leading up to a very practical problem.
HOOKI mean, I find -- at a certain point, people have to kind of step back from their ideological arguments and start looking for a solution. And it's getting a little scary now that we're getting so close that people are not able to speak openly about possible compromises. And, you know, I guess we have to hold our breath while they go through another round of yelling at each other.
WINSTONAnd putting my polling in here for a second, I will tell you, one of the problems the public has is when they hear both sides sort of discuss the sky is falling. Right now, what they're hearing is political hyperbole, just as that individual is saying. They're not sure what to believe. And so it's hard to have a political discourse when people are listening to politicians, assuming they're hearing hyperbole.
DIONNEBut this is not an equally balanced situation. The deal that Obama was talking about with Boehner -- and Janet's right. We don't know all of the details of the deal. But the deal seemed to involve something like three times as much in spending cuts as tax increases. That is an awful lot of give from a Democratic president. He wanted that ratio.
DIONNEHe wanted just a little bit of tax increase -- mostly on the very wealthy who are doing just fine, even in this economy -- in order to give the Republicans real cuts in a lot of things. And I think if this deal had gone through, President Obama would have faced enormous opposition from within his own party. On the other side, you have Republicans who have made very clear that they don't really care about the deficit.
DIONNEWhat they care about is keeping taxes on the wealthy low because they just weren't willing to give anything on that. And it's really odd to hear that Republicans, when the economy was good, said we needed to cut taxes on the wealthy because we shouldn't have too big a surplus. Now, they're saying, well, the economy is bad, and we can't do anything about taxes. If pulling money out of the economy is bad, then cutting the budget is bad, too. It's not a consistent argument.
REHMWhat about the argument that you cannot raise taxes on the rich because they are the ones who create the jobs? Janet.
HOOKThe argument is that there are a lot of small businesses that pay their taxes through the individual tax cuts. So if you raise taxes on the upper income brackets, it also affects small businesses. Now, it is true that small businesses are a significant, and probably the major, generator of jobs. I don't -- I think that Republicans tend to overestimate how many of those small businesses pay their taxes this way.
HOOKSo it's a little bit of a fact-based debate that I can't quite mediate right now. I do think that what E.J. is talking about, though, is -- I actually think that there are Republicans who were ready or seemed ready to make some concessions, small concessions, kind of like face-saving concessions on closing tax loopholes. You know, there was this big debate about when is a tax increase not a tax increase, but a loophole closer.
HOOKAnd even Eric Cantor, who seems to be the hardest line Republican on -- against raising taxes, was showing a little bit of willingness to say, yeah, fine, let's close some loopholes as long as we then take those revenues and cut taxes elsewhere.
HOOKSo I personally thought I saw a deal coming up where they kind of get rid of ethanol subsidies, close some tax loopholes on corporate jets and some of these things that the Democrats had focused a lot on, and then take that money and extend the payroll tax break that we're now about to see expire. And I don't know. In this end game, that obvious kind of compromise seems to be fading. I don't know. Maybe it'll show up before it's all over.
DIONNEIt's striking that Republicans are showing so little interest in the payroll tax cut until -- up to this point. Somehow, maybe it's 'cause it only goes to -- goes primarily to the middle class. But the answer to your question, Diane, do -- does raising tax on the wealthy hurt the economy? Two-word answer. Bill Clinton. We raised taxes on the wealthy, as a country, in that budget deal, which hurt the Democrats so much in the '94 election.
DIONNEAnd guess what? We had the strongest economy we have had in years -- I forgot -- over 20 million jobs created after the taxes went up. So this is simply -- this is an argument that's been disproven by history, and yet it comes around over and over again.
WINSTONA variety of things. First off, I'd like to point that in terms of a lot of job growth occurred after the Republicans sort of did the '97 tax cut, there was a huge significant increase in terms of expansion.
DIONNEBut didn't -- we've seen the Clinton tax rates on the wealthy.
WINSTONWell, they had a lot of tax cuts. It was almost $1 trillion. As a matter of fact, that's the first thing. Second, Tax Policy Center identified the amount of small businesses that taxes would go up on if, in fact, we got rid of those taxes for the wealthy. They said 894,000 small businesses. That's...
DIONNEA lot of them are doctors, lawyers who incorporate small businesses.
WINSTONNo, they're not. No, they're -- E.J., you're only going to have to disagree with me because I happen to be a Chapter S. I happen -- we happen to have people in our local community who have small businesses, gas stations who are Chapter S's. Right? It is not just a hedge fund...
REHMOkay. But let's hear from somebody in Greensboro, N.C., who says, "Every time I hear Republicans shout out how we can't raise taxes on the rich because they're the ones who create the jobs we need, they've had over 10 years to do that. And the only jobs they created are outside the country while they've laid off our own workers." David.
WINSTONTwo elements. After the 2003 tax cuts that George Bush put into place, revenues in this country went up 44 percent, $800 billion by 2007. It's the largest expansion of revenues in the history of the country, and that was because of economic activity. And so when you're looking at what do you do, how do Republicans view taxes, they view the way to generate revenues -- and this is where Boehner was going into these debates -- through economic activity you set tax rates to maximize economic activity.
WINSTONThat occurred in terms of '64 when you had the Kennedy tax cuts, in '81 when you had the Reagan tax cuts, in '97 when you had the Clinton-Gingrich tax cuts and in 2003 with the Bush tax cuts.
DIONNEDavid happens to be one of my favorite Republican pollsters. I don't mean to ruin his business by saying that, but -- so I understand he's got to make these arguments. There were two big tax cuts for the wealthy under President Bush. And the net results was a loss in jobs between the beginning and the end of that period. So the notion that tax cuts are a magical elixir for the economy, it's just not true.
DIONNEWe can have these debates over and over again, but it seems to me that the history of the last 20 years suggests that this is all a red herring. We should have tax revenues. We need to support the amount of government that we seem to want as a country. And we just can't get there because there is this theology that tax cuts are always better than anything else.
REHMJanet Hook of The Wall Street Journal, I know you've been following this very closely. How much control does Speaker Boehner have at this point?
HOOKVery good question. And, I guess, we'll find out when something comes for a vote. I mean, what we have right now is a situation where -- I mean, you'll remember back in the spring when a somewhat easier vote came up before the House on a spending cut package that Boehner had negotiated, and Speaker Boehner lost the votes of 59 Republicans.
HOOKAnd the going in assumption is that at least that many will vote against the debt ceiling increase, no matter what's attached to it. I mean, I suppose if cut, cap and balance was attached to it, they'd vote for it. So does he have control over those 60? I would say no. One thing that I found very interesting about the way all of the Republican leaders, including Sen. McConnell and Eric Cantor, have been talking about this whole debate, is they refer to proposals.
HOOKAnd they say, that can't pass, as if, they, as leaders, are powerless over their rank and file. I mean, there's another approach to leadership, which is you take a bill that, you know, has stuff that your rank and file doesn't like, and you try to sell it to them. Twisting arms is kind of the old-fashioned way they talked about it. I think, actually, that when they say, that can't pass, it's just another way of saying, I don't want it to pass.
HOOKBut there is this sense of disconnect -- not disconnect -- of the leadership not having control over the new rank and file. And it's not surprising it's a completely different generation of Republicans who came to office actually promising not to follow their leaders.
REHMThat's -- I mean, when you think back to the era of, say, LBJ, when, you know, if something had to be worked out, something got worked out -- no longer, E.J.
DIONNEWell, but we were operating within something like a consensus about government. Remember, LBJ was the Democratic leader when Dwight Eisenhower was president. Dwight Eisenhower was a very different kind of Republican than the Republicans who've come into office, especially since the 2010 election.
DIONNEAnd if I can take off my polemical hat and just put on an analytical hat and ask David, I think one of the fascinating things about this whole situation is that Speaker Boehner wanted to make a deal which, I think, was a smart deal from the point of view of Republicans. He clearly did not read his caucus properly. Or something else happened, and he couldn't make that deal with President Obama.
DIONNENow, he's facing a situation where no budget can get through without probably 40, 30, some very significant number of Democratic votes, which oddly takes the weakest player in this foursome of Senate Republicans, Senate Democrats, House Republicans and House Democrats. It makes the House Democrats potentially quite powerful. So Boehner is stuck between a Tea Party rock and a Democratic hard place.
DIONNESo you can't get all these Tea Party votes. He needs Democrats to get something done. I'd like to know how David, as a brilliant consultant, solves this problem for him.
REHMAll right. And before you answer that, David, let me just remind our listeners. You're listening to "The Diane Rehm Show." David.
WINSTONWell, what E.J. defines is actually the classic problem any legislative leader has, and that is, how do you balance your base that gives you the leadership position? And then how do you manage those people who, in fact, elected you to the majority? And how do you make those two work? Nancy Pelosi showed you how not to do that, to a large degree, in terms of going hard base.
WINSTONAnd Boehner is in the process of working through with 50 percent of his caucus being brand new, figuring out where they're going to go. Having said that, I will tell you that he has managed to, since he became minority leader, keep this conference together and moving together in the same direction. The challenge is, can he grow that and bring in Democrats as well to build a larger coalition? And you're facing some remarkable situations.
WINSTONAnd it's not a simple leadership dynamic when you've got unemployment at this scale, the economy the way it is, deficit the way it is. I think what you're seeing is Boehner recognizing how best to get to a conclusion and letting people do their jobs, like he does with Eric Cantor and the rest.
REHMAll right. Let's open the phones, 800-433-8850. First to Lakeland, Fla. Good morning, Joe. You're on the air.
JOEHey, good morning, guys. Boy, you guys have been all over the place. But I want to -- my wife and I are both Republicans here in Florida, and we're done. We're very ashamed at the party for stymieing up the system. They seem to have a personal agenda against this president. That's the way we see it. She's a teacher. I'm a businessman. I see and talk to a lot of people daily..
JOEAnd everywhere -- from the street-view guys, the consensus is there's a -- there's something they have against this president. They don't want to let anything happen with this guy. They're trying to keep him a one-term president. We feel that the Republican Party is about not trying to allow the tax increases because they are the rich. They are the super majority. They are those people who will get those tax increases. The Republican Party does.
JOEWe joined because of the religious side of the party. But now, the party seems to have used that platform as their base, uses that base. And then -- but yet does -- I don't want to say sinful acts or sinful deeds, but uses our base to go out and do things pro-business, pro-money, (word?) but at the same time, not keeping that Christian, you know, to that standard. And it's just -- it's not what we want to be a part of anymore. Also, Social Security, real quick.
JOEIn 2001, 2003 -- Diane, maybe your staff could follow up on this and correct me on this. But I remember reading a byline where it said that the Bush administration was raiding the Social Security fund to fund the war. So they went and took that money out of that coffer to fund the war. I think it was for a year or for, maybe, six months. And then, I mean, that was millions of dollars that came out of Social Security fund.
JOEAnd that money was never put back into that coffer. And then they went on and came to Congress for more money and more -- so does anyone remember that also, that that happened?
REHMAll right. David Winston, do you remember that?
WINSTONWell, actually, Social Security money has been used by government or by Congress to fund a whole bunch of things. At this point -- and that didn't occur -- that's being going on for a long period of time.
REHMWhen you say a long period of time? What do you mean?
WINSTONOh, geez, like, I don't even know when it started, '70s, '80s? I mean, it's been a long time in terms if dipping and using Social Security money. And they've got significant amount of IOUs, the same bonds in terms of when we're dealing with the deficit.
REHMI thought Joe's point about his religious interest in the Republican Party and its operation was fascinating. We, unfortunately, have to take a short break here. When we come back, we'll comment on Joe's comment and more of yours. Stay with us.
REHMAnd welcome back. Here in the studio, David Winston, Republican pollster, Janet Hook of The Wall Street Journal, E.J. Dionne of The Brookings Institution and The Washington Post. We're trying to deal with the elements of Joe's heartfelt call from Lakeland, Fla. He identifies himself and his wife as Republicans who, because of religious beliefs, came to the party and now feels somewhat turned away from it. E.J.
DIONNEThis is a fight, maybe even a time bomb, that always exists inside the conservative coalition. It tends not to come up when liberals or Democrats are in power because the whole coalition can unite against liberal Democrats. But what it's about is the use of the votes of social and religious conservatives, mostly middle-class people, to support an agenda for the very affluent and for business.
DIONNEAnd I think that heartfelt call really speaks to the sense that a great many social conservatives have. Now, some social conservatives are Republican down the line, and there are loyal conservatives on this business and low taxes issues. But I think there are a lot of them who do not get into politics simply to fight for low taxes for the wealthy. And I think this gentleman reflects that feeling that, I think, is out there within a very significant part of that constituency.
REHMNow, here's an email from Renee, and I'd like to know if there's any polling on this. Renee says, "We are all so ashamed of our government. They're busy doing silly, unnecessary things instead of making the deals we need. We have to raise revenue. Any adult knows this perfectly well. We've had our fun, indulged ourselves in wars of limited utility. Now, we have to pay." David Winston.
WINSTONWell, and this gets back to -- look, there's a fundamental difference of opinion between the president of the United States and Speaker Boehner in terms of the role of taxes and how do you increase revenues, right? The U.S. president believes -- and by the way, Christina Romer disagrees in them -- in the sense that when you increase taxes, you barely generate the revenues. She's saying that, in fact, we'll contract the economy.
WINSTONThat's what John Boehner believes. It's going to contract the economy and, therefore, you won't get the revenues that you need unless you set tax rates at the right level to maximize the economic (unintelligible)
WINSTONSo my point is, it's not for the wealthy. It's how do you get the country going. And, again, I'm going to go back to my point. When Bush cut taxes in 2003 over that next four-year period, you had an $800 billion increase in revenues, the largest increase in the history of the country. And someone has got to explain to me and to the speaker as to why that didn't occur because of those tax cuts.
HOOKI thought that the word that really stuck with me in the comment you just read was ashamed, that people are looking at the government and feeling ashamed, that the way the debate has been conducted is as disturbing as -- I have this ridiculous faith that it's all going to work out fine in the end, that they're not going to let the country go into default. But I don't think that the people are coming away from the public side of the debate thinking that, really, statements like things are going on here.
HOOKI do think that -- yeah, I don't know. There's all kinds of polling that shows that people's confidence in Congress is rock bottom levels. I don't -- we're too much into those polls just because often confidence in government reflects sort of the general state of the economy. But right now -- I mean, I hear it from friends and family, as well as reading it in polls, that people really don't think that this is an episode that says much about how well our government works.
DIONNEThe answer to David's question is, we had a little spurt of growth after the economic downturn, but the rate of growth was lower than the rate of growth was during the Clinton years. So those tax cuts did not do it. And, again, the long trajectory of the Bush administration suggests those didn't work. Second, nobody is talking about raising taxes until 2013.
DIONNEIt's actually President Obama who's talking about cutting taxes next year, well, with the payroll tax cuts. So nobody is talking about pulling this money out of the economy. And I'm, honestly, very worried on the other side that if we cut too deeply now, we will be pulling money out of the economy. This -- so this is all about the long term. And the last thing is, that caller is absolutely -- or that emailer is absolutely right.
DIONNEThe government needs more revenue. The debate we should be having between, you know, progressives and conservatives is, how do you raise that money? Bruce Bartlett, a former official of the Reagan administration, says, we shouldn't do it with taxes on the rich. We should do it with a value-added tax. I would say, no. We should do it primarily with higher taxes on the wealthy.
DIONNEBut that's a reasonable argument to be had between progressives and conservatives. But to have conservatives say, we can go on and on like this without ever raising revenue again is just irresponsible.
REHMAll right. To Cleveland, Ohio, to Neil. Good morning.
NEILI have a couple of points. One, just in response to that last comment by your guest about what Christina Romer believes, I'm looking at her recent article in The New York Times, and what she says there does not match what your guest said. She specifically says that increase taxes are not as harmful to the economy, as she's claiming. This is from July 2. My other point is I think the Republicans are being completely disingenuous.
NEILWhen they were in power, they all applauded when Dick Cheney said deficits don't matter. They all voted -- those of them that were in power at the time -- to keep two wars of the books, vastly increasing our debt. They voted for a Medicare drug plan that was not going to be paid for. And I think they have somewhat deliberately tried to evade responsibility for the economy they created, which, unfortunately, Mr. Obama inherited. And I think it's an exercise in astonishing dishonesty.
WINSTONTo go to the Christina Romer point, this is an article in today's New York Times, and I'll just read it. It says, "Republicans also cite a paper published by Christina Romer, a former chairwoman of Obama's economic advisers, and her husband, David Romer, which studied tax heights in the United States since World War II. The couple, professors of Berkeley, reported that a 1 percent tax increase reduced economic activity on average by 3 percent over three years."
REHMI wonder if the caller is citing a later article written by Christina Romer.
NEILI'm citing an article from July 2 in which she says specifically that some in Washington and in the news media have seized on a study she conducted with her husband, and it shows that tax increases have a bigger short-term effect on the economy than spending cuts. They are mistaken. July 2, New York Times, this is by Christina Romer herself.
WINSTONWell, I'm just quoting what the New York Times said today in terms of what she said.
NEILWell, so they're not...
DIONNEBut this is her reply to that.
WINSTONWell, I mean she said -- she wrote what she wrote. I mean, you can try to explain it later.
REHMShe wrote what she wrote, but, apparently, some people interpreted it in a way that she did not intend is what she's saying.
WINSTONWell, I mean that's what The New York Times says that she said, so I'll just leave it at that. By the way, I want to go back to one point. Actually, E.J., during the period right after the '80s, the 2003 tax as economic growth was on par if not slightly larger than what Clinton had.
NEILIs Mr. Winston an economist because I don't really...
WINSTONYes. I did Econometrics, statistical policy analysis in econometrics at The Heritage Foundation.
NEILOh, well, that means nothing to me. I don't regard The Heritage Foundation as the equivalent of an academic institution.
REHMOkay. All right. Thanks for your call, Neil. And let's go now to Sycamore, Ill. Good morning, Hamish.
HAMISHYes, good morning. Unfortunately, we are no longer a government of the people for the people. We are a government of the politicians who are the lobbyists which, in turn, go to big business. The reason is one problem that we have in Washington D.C. that doesn't have an answer. It's just we have nobody there that wants to cooperate with anybody else. The government wasn't made for the Republicans or for the Democrats. It was made for us, the people.
DIONNEWell, you know, I think part of the problem is that what we're seeing right now shows that when one side of the debate, the -- you know, which is the right end of the Republican Party, just does not want to operate within what has broadly been a consensus in our history, a consensus that says we value individual initiative. And we also know the government needs a role -- a strong role in the economy to make things work.
DIONNEThis is a view that goes back to Henry Clay, Alexander Hamilton, Abraham Lincoln. We now have one piece of our debate -- one part of our debate that regards government in the words that Mr. Cain, the Republican candidate, as the caboose, as if you can just disempower government and everything will be fine.
DIONNEAnd when we get back to a time where we have a more reasonable debate about whether should government do this or not, should it do that or not and should we pay for it and how do we pay for it, we're going to have this chaos. And I'm afraid that this really is the creation of a very far-right view that really is outside the American mainstream.
REHMTo Roland, he's in San Antonio, Texas. Good morning.
ROLANDGood morning. Thank you. I like to remind everybody this Tea Party elected officials, they were voted by the people in their particular districts. Okay. You can talk all you want about that, you know, they're -- they want to bring the country down. They were still elected by the people, and they did not come into elected offices. They were duly elected. That's why they have alliances with the Republican Party.
REHMAll right. Janet Hook.
HOOKYeah, I actually think that Roland's comment is an answer to the previous caller in Illinois who thought that the -- that people don't matter anymore. I mean, the midterm election showed that elections do still matter, and it was a very strong political movement that changed Congress a lot. And...
REHMWhat about the gerrymandering that took place before those 2010 elections that placed individuals within certain areas depending on whether they were Liberal or whether they were Tea Party or whether they were conservative Republicans? Is that true?
HOOKWell, there's actually -- the gerrymandering or the redistricting of congressional district is going on right now based on the 2010 census. Every 10 years, there's -- they redraw the lines. And for the last couple of decades, when they've redrawn congressional lines, yes, there has been a real homogenization. They take districts and they draw them in a way that they're mostly Republican or mostly Democrat, and it tends to favor incumbents.
HOOKHowever, I don't think that explains the phenomenon that the Tea Party and what happened in the 2010 elections per se. I mean, this was the end of a period -- right now, they're re-drawing the lines. I do think that that has contributed over the last 20, 30 years to the real polarization of politics in the House that the Republicans who were there are really conservative and the Democrats are really liberal and the center is getting smaller and smaller.
DIONNEThe gentleman makes a fair point, and Janet is absolutely right. Elections matter. I think two things have happened. One is progressives were asleep in 2010, and conservatives were very mobilized. And they had a real impact, particularly in House races but to a lesser degree in the Senate. But, secondly, I think what you're seeing is a lot of moderate Republicans have left the Republican Party and don't vote in primaries anymore so that Republicans are putting up a much, much more conservative group of candidates.
DIONNEAnd when you have an election like 2010, when the country was very unhappy, it's a big protest election. The people elected are extremely conservative. And sort of example number one was Christine O'Donnell defeating Mike Castle in Delaware. Mike Castle, being a very respected moderate Republican, someone whom I think most Republicans agreed was not fully prepared to be a U.S. Senate candidate, won because it was an ideological electorate.
REHMAnd you're listening to "The Diane Rehm Show." What about the candidates for presidential nomination on the Republican side? What are they saying about all this, David?
WINSTONWell, I think right now the challenge to them and one of the reasons why you may see a generic person leading the president, but you don't actually see an individual Republican candidate leading the president, is, to some degree, they're still talking about personality. And, ultimately, the challenge to the Republican candidates is, what is the big idea that's going to elect one -- get one of them elected?
WINSTONYou know, I go back in -- to sort of go back to the beginning where E.J. said this issue -- the issue facing the country's economy and jobs is absolutely correct. And, look, one of the challenges to this new majority is there are things they want to do, but there are also things that have to occur for the country.
WINSTONAnd so when we're looking at this whole discussion about what's happening with the debt ceiling, most Americans are looking at it from the point of view as, what is this going to do to the economy? What is this going to do to job creation? And, ultimately, that's how they're going to judge the success or failure of whatever anybody does here. And that's where the country is at.
REHMBut that's why they've got to do something.
WINSTONI -- and, again, going to -- I think Janet and, I think, E.J. would agree. I -- my sense is we are going to get to some sort of resolution. Everybody understands the seriousness of it. But you also have some pretty significant differences that people truly believe, and you're going to have to work through that. And that just takes some time.
DIONNEJust -- by the way, generic candidates always do better than real candidates because all of God's children, actual human beings, have flaws. And generic candidates are perfect because...
DIONNE...they don't exist. Just, secondly, I think we will get a solution. And what's fascinating here in the dynamic is that you really have Republicans in the U.S. Senate in a very different place than Republicans in the House of Representatives. I think part of that is that Mitch McConnell looks at the array of seats that are up in 2012, sees a real opportunity for Republicans to take the majority.
DIONNEHe really doesn't want to upset the apple cart. He wants the Republicans to take over the Senate. He would like to arrange some sort of compromise that keeps him with an issue but doesn't force him to either have the country default on its debt or do something radical. And I think what you're going to see is a dynamic where the Senate is going to pull the House along to a deal that a lot of conservatives in the House won't like. I'm curious if Janet sort of has that view or has a different perspective.
HOOKNo, I think that's right. I think Mitch McConnell kind of stepped forward last week with this proposal on the debt ceiling that everybody was left scratching their heads, saying, what, what? He's proposing to let the president raise the debt ceiling unilaterally and not tie it to spending cuts. It just sounded totally contrary to where the Republicans were going.
REHMBut what did that mean? You'd have the same argument year after year or decade after decade?
HOOKI think that part of the proposal itself, that's not setting it up for the continuing debate. The other part of the proposal that does do that is they're proposing to set up a special committee to make recommendations on how to reduce the deficit by the end of the year. Well, hello, I mean, entitlements taxes, it's the same thing...
REHM...and hadn't we already heard from the Simpson-Bowles?
HOOKRight. The one difference on this one is, I think, what McConnell and Sen. Reid are proposing would have a mandatory House and Senate vote on it. Part of the problem with Simpson-Bowles is there was no mandatory action requirement, and so Congress did what it often does...
HOOK...is that ignored it.
DIONNEAlso, to have actual politicians who might actually have to vote on something making these choices gives it, I think, a little better...
DIONNE...chance in an outside group...
DIONNE...with partly -- only partly politicians.
REHMOne word answer from each of you. Will we meet the deadline?
REHMLast words from David Winston, Republican pollster, Janet Hook, The Wall Street Journal, E.J. Dionne, The Brookings Institution and The Washington Post. Thank you all so much.
DIONNEThank you, Diane.
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, Monique Nazareth, Sarah Ashworth, Lisa Dunn and Nikki Jecks. The engineer is Tobey Schreiner. Katie June-Friesen answers the phones. Visit drshow.org for audio archives, transcripts, podcasts and CD sales.
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