It’s August 2nd, and lawmakers and the president have until midnight to raise the debt ceiling, or risk default. They’re on track to do so. The House passed the debt limit deal last night. The Senate votes this afternoon. The legislation will enact spending cuts immediately. And a bipartisan commission will consider tax reform and revenue adjustments over the long term. But just because the deal is on track doesn’t mean it’s popular. It faces opposition from both the left and the right, for different reasons. We hear reaction to the emerging debt deal and take a close-up look at its details.
- Susan Page Washington bureau chief for USA Today.
- David Winston Republican strategist and president of the Winston Group, and CBS News consultant. Served as a strategic adviser to House and Senate Republican Leadership for the past 12 years.
- Matt Kibbe President and CEO of FreedomWorks and co-author with former House Majority Leader Dick Armey of the book, "Give Us Liberty: A Tea Party Manifesto."
- Katrina vanden Heuvel Editor and publisher of The Nation, writes a weekly column for The Washington Post.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. It's down to the final act in the debate over raising the debt ceiling limit. Last night, the House passed the debt ceiling bargain. This afternoon, the Senate votes. But it sure hasn't been easy. The administration and congressional leaders had to work hard to sell the deal to their parties. And people from both left and right have opposed it.
MS. DIANE REHMJoining me for reaction to the deal and its details: Matt Kibbe of FreedomWorks, Susan Page of USA Today, Republican strategist David Winston and, joining us by phone, Katrina vanden Heuvel of The Nation. I look forward to hearing your comments throughout the hour. Join us by phone. Join us by email, on Facebook, or send us a tweet. Good morning to all of you.
MR. MATT KIBBEGood morning.
MS. SUSAN PAGEGood morning.
MR. DAVID WINSTONGood morning.
REHMI wonder, Susan Page, how close are we to finalizing this deal and raising the debt limit?
PAGEWell, I think we're just a few hours from doing that. Of course, we don't have more than a few hours to wait since the debt ceiling deadline is midnight tonight. But the Senate is expected to take up the bill that the House passed rather easily yesterday. We expect the Senate to take that up about noon today. We think passage in the Senate should be relatively easy. It'll go up to the president, and we think the president will sign it.
REHMGive us a quick outline of the deal.
PAGEWell, it raises the debt ceiling by $2.4 trillion, which gets us through this debate, through the next election, through the 2012 election, which was something that Democrats really wanted to have as part of this deal. It pretty quickly cuts just over $900 billion in federal spending over 10 years. And it sets up a really powerful, I think, in some ways, unique joint committee that will be tasked with coming up with another $1.5 trillion in spending cuts.
PAGEThey have to report back by Thanksgiving. And Congress needs to accept or reject what they propose by Christmas.
REHMDo we know who will be on this committee?
PAGEWe don't. We can only imagine the kind of lobbying that's going on now in Congress to get on that committee 'cause Congress has ceded enormous powers to the 12 people, the six Democrats and six Republicans, who'll be on this commission.
REHMDavid Winston, I gather you're pretty happy with this deal.
WINSTONYeah, this turned out quite well for Republicans, certainly, specifically for Speaker Boehner. One of the things that he was able to do in this particular debate was strategically change the direction of this debate away from revenue increases and to spending cuts. That's a big shift. Tactically, there may have been some things that didn't work out well. But at a strategic level, this is a big change.
WINSTONAnd going to Susan's point, she's absolutely right. I mean, who ends up being put on this commission is so central and so critical in terms of their particular beliefs for both sides.
REHMWhat has Boehner said about who goes on this committee?
WINSTONWell, he's got one element that has been true in terms of the entire Republican conference's view. And that is he wants people on that, who are not going to raise tax rates, and that's going to be a central element for him.
REHMKatrina vanden Heuvel, you're not happy with the deal. What did Democrats get out of this?
MS. KATRINA VANDEN HEUVELYou know, I think what we're seeing, Diane, just to broaden your question slightly, is a country looking at this melodrama that has consumed Washington this hot summer and seen a Washington out of touch with the real economy. And there are Democrats inside the beltway. I'm thinking of the Progressive Caucus.
MS. KATRINA VANDEN HEUVELI'm thinking of Sen. Bernie Sanders, who understand that what this was was not shared sacrifice -- no revenue at all, no revenue -- and a misunderstanding that the deficit we face has come mostly from decreased revenue, not increased spending. So we witnessed a Tea Party able to extort a deal by threatening to blow up the economy and a failure to understand that, out there in this country, there is enormous pain.
MS. KATRINA VANDEN HEUVELAnd poll after poll shows people understand we have a jobs crisis and would prefer to protect vital programs, like Medicare. And to see spending -- to see cuts and revenue increases come from increased taxes on those making more than $250,000 in hedge fund operators, Diane -- so my main point is there is great unhappiness because this doesn't do what is needed at this critical moment to boost demand, to boost growth and to rebuild an economy that is in desperate need of reconstruction.
REHMAnd turning to you, Matt Kibbe, the Republican House leadership likes this deal. How come you don't?
KIBBEWell, it's kind of a bittersweet moment, I think, for the Tea Party movement because I feel like we finally forced Washington to have an adult conversation about priorities, to come to terms with the fact that the debt versus GDP ratio is very close. If you look out over the next 30 years, we're not so far from Greece, and we have to do something about that.
KIBBEThe Tea Party movement, in that sense, have been the only adults in the room, forcing Washington to do something it didn't want to do, which is set some priorities. That said, when you actually look at the details of the deal, particularly in the first year, the cuts that Susan was talking about represent one-half of 1 percent of the budget. So anybody that says this is draconian, anybody that says this is a huge cut out of federal spending, is misinformed.
KIBBEWhat it is, at least, is an acknowledgment of a problem. Now, we actually have to get to a path to a balanced budget, which is going to be a process of going back again and again and again and having this debate right into the election.
REHMInto a debate over a balanced budget amendment?
KIBBENot just an amendment. I think the goal is to balance the budget. The goal is to cut the debt and cut spending and make the same difficult priority decisions that the American families had to make. If you have too much debt and too much spending and not enough income in your family budget, you make priorities.
REHMSo the Tea Party pushed this, but you, as a representative of people within the Tea Party, don't like it. You don't think it goes far enough.
KIBBEWe didn't get enough. We -- in fact, we didn't get that much at all. But our view is that Washington won't do the right thing until you take everything else off the table. We're systematically trying to take bad ideas off the table so that Washington can, in fact, get to the right conversation.
REHMMatt Kibbe, he's president and CEO of FreedomWorks, co-author with former House Majority Leader Dick Armey of the book, "Give Us Liberty: A Tea Party Manifesto." Susan Page, how right is Matt Kibbe that the Tea Party did not get as much as it wanted?
PAGEI think the Tea Party is the big victors in this agreement. I think the Tea Party succeeded in taking rather small numbers in the House of Representatives. I mean, they're only a piece of the Republicans in the House. And they stuck together.
PAGEThey use that as leverage to basically redefine the parameters of what was acceptable in this deal, and that's why there is no -- as Katrina said, that's why there are no taxes in this deal, even though that was a fundamental demand by President Obama from the start. They're not included. I think that one thing is the Tea Party has succeeded in changing the direction of American fiscal policy and the theory of how we're going to get out of this very slow recovery, this fragile recovery.
PAGERepublicans are now arguing that, by putting out this deficit reduction plan, they're setting -- they're providing more stability for the economy over the long term, more certainty for businesses to use some of the money they've been hoarding to hire and invest. That's different from the policy that we've pursued in the past at times when the economy has been so weak when we would ordinarily spend some money to try to get things going again.
KIBBEWell, I think the real problem, of course, is the debt. It's not the question of whether or not we had the political will to raise the debt ceiling. And I would predict that the rating agencies that were threatening to downgrade U.S. credit ratings, it -- this is going to happen anyway because this deal did not get to where they said we needed to be. We needed to achieve at least $4 trillion in savings.
KIBBEAnd my prediction is, as the details of this plan come out, there's going to be a lot of heartburn about what people thought might be in the plan that's not actually in the plan. And I would suggest that both Democrats and Republicans and Americans in general should be disgusted by the fact that this was a politically generated crisis that failed to put ideas on the table in a transparent way so that the American people could actually see what was proposing -- what was being proposed. We did not do that.
WINSTONWell, a couple of things. First off, in terms of the economy, ultimately, what's going to balance the budget is economic growth. I mean, that's what balanced it in the late '90s with significant economic growth. You need to restrain spending. And we've seen those first steps taken that are critical. And, again, from Speaker Boehner's point of view, what he was trying to do was create a situation where that economic growth could occur and begin that process of a restrain in spending.
WINSTONHaving said that, I do want to go through a couple of votes in terms of the Tea Party members. According to reports, 33 voted for it, 27 voted against. Republican freshmen, 58 voted for, 29 voted against. So what you're seeing is -- sure, was there some tactical dissatisfaction? Yes. But you have members like Allen West and Kristi Noem, clear Tea Party members. Allen West said, you know, we don't want to have the perfect be the enemy of the good here.
WINSTONLet's make some progress and move on. And I think that reflects a lot of where the conference went. Here is this opportunity to move forward. We've changed the debate. Republicans have changed the debate. Let's claim victory and move on.
REHMKatrina, do you want to comment?
HEUVELI do. I mean, let me just begin with -- what we have seen over these last months is a failure to reset the terms of the debate. We are seeing a debate now playing out on Republican terms, playing out on their field.
HEUVELWe are seeing what Julian Zelizer has called the fiscalization of our politics, meaning this -- just consumed with debt and deficit, and lost in this discussion, is what this country needs, which is a clear strategy to rebuild the economy to boost growth, revive the middle class and make investments vital to our future.
HEUVELI think one of the most dangerous images, metaphors is this idea of our economy like a family economy. We need an operating budget and an investment budget.
REHMAll right, and we'll take a short break.
REHMAnd we're talking about details of the agreement voted on yesterday by the House of Representatives in terms of both budgetary compromises and lifting the debt ceiling. Today, this measure goes to the Senate, where it's expected to be voted on and then immediately put on the president's desk since today is August the second, the deadline date for raising the debt limit. Here in -- pardon me.
REHMHere in the studio, Susan Page, Washington bureau chief for USA Today, David Winston, Republican strategist, president of the Winston Group -- he's also a CBS News consultant -- and Matt Kibbe, president and CEO of FreedomWorks. On the line with us from Long Island, Katrina vanden Heuvel, editor and publisher of The Nation. She writes a weekly column for The Washington Post.
REHMWe'll open the phones shortly, 800-433-8850. Send your email to email@example.com. Join us on Facebook or Twitter. Susan Page, what kinds of federal spending cuts are we likely to see right away?
PAGEWell, of the $917 billion in cuts over the next 10 years, just $21 billion of it. I mean, I guess, only in Washington we say, just $21 billion of it.
PAGEBut only $21 billion of that is what we see as cuts in this first year, in fiscal year 2012. And this whole set of cuts, including the ones in the first year, are cuts that are spread through the government. No particular program takes -- will take a huge hit this first year. They're cuts that were basically agreed to by that group led by Vice President Biden in which -- when they were trying to figure out if you could have a kind of grand bargain with a much larger amount of deficit reduction, entitlement reform.
PAGEBut these cuts, I don't think, will be particularly controversial. The deal does cap spending, discretionary spending, so they're -- so it does constrain what Congress and the federal government will be able to do next year. But that first set of cuts are pretty modest. And one reason is concern about the impact it might have on this fragile recovery.
REHMOkay. But you've got Pell grants. You've got the wars in Afghanistan and Iraq exempted, correct?
PAGEThat's right. Pell grants, in fact, will go up. That was one of the things that the White House claims as a victory in this deal.
REHMAnd the deal hinges, in part, on whether or not to freeze next year's defense budget. Is that correct, David Winston?
WINSTONYes. But, again, all this -- you've got this commission.
WINSTONAnd that was what Susan just went through. It's the least what's laid out. But this commission could decide to do some different things. And that's why the appointment of these individuals is so critical.
REHMAnd the Congress is bound by the action of that commission.
WINSTONAs we understand at this point.
REHMAs we understand it. How do you feel about that, Matt Kibbe?
KIBBEI find the commission frustrating. And, by the way, I think the concept of creating this commission comes from my own chairman, Dick Armey, who did this as a way to get the political process, to make some sort of rational sense of base closing for the military. But when you apply it to the actual budget process, to me, it suggests an abdication of congressional responsibility.
KIBBEIt's their job to set priorities. It's their job to go through regular order and pass a budget resolution and pass appropriations bills.
REHMSo why did they decide to do it this way?
KIBBESo that they can blame somebody else.
REHMKatrina, how do you feel about this commission?
HEUVELWell, I tend to agree -- you might be surprised -- with Matt Kibbe. I think there is an anti-democratic element in this. In fact, you know, we're fixed on this economic short-term deficit when, in fact, I think, we have a democracy deficit in this country.
HEUVELAnd just to step back for a moment, I think one thing that's going on, and the day after the longer term takeaway for millions of Americans, is they looked at this process -- and as you could see from this recent Pew survey -- and said, this is ridiculous.
HEUVELBut what they're saying, and so often this idea of the problems with the culture of Washington and President Obama campaigned on coming to D.C. to change the culture of Washington -- but so often that means people are fed up with a Washington that seems stacked against working people, that's just working for the important and powerful that is warped by corporate money and lobbyists.
HEUVELSo, I think, you add this in, this commission that seems removed from real electoral democracy, as dysfunctional as that may be at times, and there is an anti-democratic element that, I think, is very troubling.
HEUVELAnd that could be even more susceptible to the lobbyists who have worked so hard to dilute and gut even the small -- you know, the major reforms President Obama passed -- health care, financial reform -- but which were much diluted and watered down by the time they emerged because of corporate money and lobbyist power in the city.
REHMMatt Kibbe, do you expect Tea Party members to be appointed to this commission?
KIBBEWell, we're definitely going to fight for that. I don't know if that'll happen or not because, typically, commissions are designed to come to some kind of a consensus. And we've always been the skunk at the garden party, suggesting that maybe Congress needs to get its own House in order. So I don't know if we'll be allowed in that commission or not.
REHMWhat do you think, Susan?
PAGEI think there's no question there'll be a Tea Party member -- at least one -- on this commission. I mean, the Tea Party has emerged as too powerful a force, both in this current debate and in the 2012 Republican presidential field. I feel pretty certain -- not -- I mean, this isn't based on reporting. But common sense tells me that the Tea Party will be part of this commission.
REHMDavid Winston, are any tax increases on the table for the commission to deliberate?
PAGEBut they can. I mean, they're not -- the commission could choose to have some tax -- some revenue raises, maybe not tax rate increases.
WINSTONBut, Diane, I think, going to the point that you're trying to make -- is someone on the Republican side going to get appointed, who would be willing to raise tax rates? And the answer is no.
HEUVELBut, I mean, there could be compensatory increases in spending, aimed at creating jobs or even tax cuts aimed at creating jobs, or that any future spending cuts be contingent on the economy achieving specific lower unemployment rates.
HEUVELI think, heading into 2012, this White House -- it's going to be critical for this White House to have some kind of forward-looking real economy jobs program because this is maybe President Obama's clear attempt to rebrand himself as a deficit hawk because, I think, he failed to answer the ridiculous attacks of the right wing on his limited efforts to reflate the economy with the recovery stimulus and, as a result, allowed the right wing to confuse the bailout of banks with a recovery program that helped this country avert depression.
HEUVELBut President Obama now needs to pivot if he wants to move into this economy with a forward-looking economic program because Americans vote for the future. And just saying the recovery will come isn't going to cut it.
PAGEI'm not sure where -- I mean, a jobs program, a traditional jobs program like the stimulus bill that we saw last time around, I don't see where you find the money and the budget to do that now. It seems to me the hands of Democrats are pretty much tied in terms of any kind of new program aimed at stimulating.
WINSTONNow -- and if I may go -- now, I'm going to agree with Katrina, which I'm sure we stand by. But, ultimately, this was a subset -- this debate was a subset of a much larger debate. And that is, how do we get this economy moving, creating jobs?
WINSTON'Cause, ultimately, if we're going to balance the budget, that's where it has to happen. Now, there's some real differences, obviously, between Katrina and I in terms of -- I like supply side. I think stimulating through cutting taxes is the way to do it. But, ultimately, this election, 2012, the big number is going to be the unemployment number.
REHMOkay. But help me to understand, back to this committee or commission. What happens if they don't come up with the needed savings, Matt?
KIBBEWell, step two is a forced vote on a balanced budget amendment, and it's required that that be reported back to the states for ratification to get the next tranche of debt increase. And if that fails, then there's these across-the-board cuts, the sequestration.
PAGEWell, the -- and so if this commission can't -- either can't agree on a plan for $1.5 trillion in additional cuts or can't get it through Congress, either of which is possible, you would trigger $1.2 trillion in automatic cuts, half in defense, half in domestic programs, none of them in taxes. But there are things there that neither side likes, right? Democrats won't like it because there's no revenue side for it.
PAGEAnd a lot of Republicans are concerned about the depth of the Pentagon defense cuts that would be involved in these automatic cuts.
REHMAnd Democrats also concerned about Social Security Medicaid...
REHM...Medicare. That would be on the table, Katrina?
HEUVELYes. And I think, you know, there's a cruelty here because without revenue, it's so lopsided, I mean, that you're cutting more programs for the poor, exacting pain on the most vulnerable in our society. And I -- the idea that there is any kind of balance or reasonableness or shared sacrifice in this deal is laughable, though I think...
REHMActually, I think...
HEUVELAnd the problem, Diane, is you come out -- first of all, these are vital programs: dignity, security for millions of Americans, Social Security, which should never be in any deficit reduction because not a nickel or dime of Social Security is part of the deficit. But the real problem in our economy, in terms of rising cost, is rising medical costs.
HEUVELMedicare helps control far better than any private insurance plan, so you're basically cutting off your nose to spite this or that. The whole plan here, Diane, is going to weaken a fragile economy. When we all wake up after this spectacle and melodrama, the day after, already important people are speculating on how this deal will weaken an already fragile economy, let alone hurt the most vulnerable.
REHMAll right. I think I misspoke by mentioning Social Security Medicaid as part of the other half of the trigger because it's exempt from domestic spending. Susan.
PAGEThat's right. If you go to these automatic spending cuts -- Social Security Medicare, explicitly protected. But Medicare would be part of the cuts. Now, the agreement agrees that it'll only be on the provider side for doctors and hospitals and nursing homes. On the other hand, I think you could see that cuts on the provider side have a tendency to affect beneficiaries, too.
REHMOf course. Matt, what's your reaction to cuts to the Pentagon?
KIBBEI think defense cuts should be on the table. I think if -- you're not going to balance the budget without putting everything on the table. And I think that's where the Tea Party is coming from. We don't think there should be any sacred cows in this debate.
WINSTONNo. I -- clearly, everything -- defense needs to be on the table, but we need to be very, very cautious with it. You know, we've got a lot of serious threats facing us. And we need to make sure that we can stick to those commitments. Obviously, though, no department should be without scrutiny.
REHMWhat about the Bush tax cuts, Susan?
PAGEYou know, this agreement doesn't deal with the Bush tax cuts. The Bush tax cuts are scheduled to expire at the end of 2012, so they're not protected by this agreement. And I would expect us to have another fight over extension to Bush tax cuts when that comes up next year.
REHMWhat do you…
HEUVELI think Susan is right, and that's a critical fight. I guess what is of concern is that we've seen a president who has so badly misjudged his opponents time and time again. And the question is, will he draw a line in the sand, as we're in an election year, on the Bush tax cut? You could bring in $800 trillion, I believe, over a decade. And if you let all of the Bush tax cuts expire, you basically have about $4 trillion over a decade.
HEUVELBut we saw the compromise or the collapse or the capitulation at the end of last year. And if you want to do anatomy of the debacle, President Obama could have conditioned his agreement to extend the Bush tax cuts on a GOP agreement not to link the vote on the debt ceiling to budget deficit. And we wouldn't be in this position right now.
REHMKatrina vanden Heuvel. And you're listening to "The Diane Rehm Show." So does this deal weaken President Obama and the Democrats, Susan?
PAGEYou know, I would say that there's a sort of an upside and a downside for President Obama. The upside is that the debt ceiling is going to get raised, so we won't have this economic catastrophe that we were fearing happening at midnight and in the subsequent days. And the other is that he reached a compromise. He got a deal done that's appealing, especially to independent-minded voters who wanted a deal to be made.
PAGEOn the other hand, as you can hear from Katrina's point of view, how unhappy the liberal Democratic base is over this deal, how they feel that, once again, President Obama failed to stand up and fight for things that are real line-in-the-sand issues for them. And you -- if you're a president running for re-election, you need to have your base fired up, ready to volunteer, contribute to you, work for you, come out and vote for you. That's -- there's some cost for President Obama there.
KIBBEI do think it's a double-edged sword for the president. But I think one thing that's been exposed in this whole debate, that is a vulnerability for all Democrats running in 2012, is what appears to be an across-the-board opposition to actually balancing the budget. There seems to be a party position now that's far more radical than it was in the 1990s, actually opposed to a balanced budget amendment to the Constitution. The American people are not with them on that.
PAGEWell, the American people would like the budget to be balanced as it's been in the past. But I think even some conservatives have problems with the way a balanced budget amendment would work. And if you will end up with a vote on balanced budget amendment, I think there is no expectation it was going to -- it's going to pass Congress.
HEUVELSusan is absolutely right. I mean, the same members of a Republican Party, like David Brooks or even a Rich Lowry of the National Review, think a balanced budget amendment is just, you know, kind of fake symbolism that appeases members of the Tea Party.
HEUVELBut, you know, I think Americans, again, if you look at poll after poll -- and this is where I think the establishment is so out of touch with what's going on in this country -- people understand that if you want to protect programs that are vital to them, if you want to invest and you boost demand and create jobs, that there is a willingness now to "invest."
HEUVELAnd this mantra, this fetish about a balanced budget or spending cuts misreads a country which seeks a different path.
HEUVELIn terms of President Obama, you got a demoralized base, for sure. But, boy, is this president fortunate to have, you know, that some of the most right-wing Republicans we've seen in decades makes one yearn for Richard Nixon and Dwight Eisenhower.
REHMOh, my. All right.
WINSTONDiane, I have...
REHMHold on. I just want to say that President Obama is planning to make a statement at 12:15 in the Rose Garden today. Go ahead, David.
WINSTONWell, I have to say -- and I think the last election showed -- the American public has no appetite for increased spending at this point. And, in fact, it was a pretty decisive election. When you see the political center independents move from having supported Democrats by 18 points in 2006 to supporting Republicans by 19 in 2010, that shows you that appetite is just completely gone.
REHMLet me ask you something, Dave.
HEUVELI think it was a misread of it. I think this is a misread (unintelligible)...
REHMThis is a question I raised yesterday. If we had open primaries, would that be a different story?
WINSTONNo. Because, again -- and here's the thing. The political center is a center-right group. That's why, at least Republicans, when they actually offer some solutions, do well. In 2006, when we were trying to make everything local and didn't want to talk at a national level, we got beaten pretty badly. But, ultimately, this election -- but this election is about two things. It wasn't just the spending.
WINSTONIt was the sense of who do they have more confidence in to get this economy moving and creating jobs. And the one thing I'm going to tell you about the Bush tax cuts -- again, from 2003 to 2007, they increased revenues by $800 billion. And the Tax Policy Center if -- said, if we got rid of them -- and that's Urban Institute and Brookings -- if we got rid of them, taxes will go up on 894,000 small businesses. That's why you see Republicans digging in their heels.
HEUVELI think it's a misreading of the 2010 election...
REHMAll right. We'll take a short break here. And when we come back, it's time to open the phones. 800-433-8850.
REHMAnd it's time now to go to the phones. First to Cincinnati, Ohio. Good morning, Dan. You're on the air. Dan...
DANHi, Diane. I appreciate your taking my call.
DANI just have a quick comment and then a question for the panel.
DANI keep hearing an analogy being made between the government and a family at a dinner table. And it's really disappointing because it's only half the analogy. Yes, you lose income. You may be forced to make difficult cuts. But you can also look for employment or additional sources of revenue, which is something that they continually leave out of that analogy when they make -- the Republican continually leave out of that analogy when they make it.
DANMy question for the panel is how they think the electorate is going to come down on this -- in the 2012 elections and whether or not they think that disappointment on the Democrats' side for not having any revenue increases in the deal is going to outweigh the anger of the middle class at the Republicans for really using them as a bargaining chip or as a hostage to get what they wanted without having the revenue increases in the deal. And...
REHMI think you're going to hear a variety of responses. Susan.
PAGEYou know, I think, by the time we're voting next November 2012, people are not going to remember what happened in the debt reduction deal that they negotiated. What people are going to be thinking about is, where's the economy? Has the employment rate gone down? Do people feel a little more confident about things? And that's what's going to be the -- that's going to be the critical point for President Obama and for everybody else running for office then.
KIBBEI think the reality -- when you look at what's actually going on in the economy, this is a failure of the Keynesian motto. We can't spend more money. We have a $1.4 trillion deficit. We can't continue to artificially expand credit and hold down interest rates because they're virtually at zero right now. And the Fed cannot sustain that. The only thing left to do is to actually get that burden of spending in regulation in debt off of the private economy. That's how you unleash economic recovery.
REHMSo how do you think -- in response to his question, how is this debate likely or not to affect the 2012 election?
KIBBEI think this will be the debate, the economy and how too much government has affected the economy. I think that's where the Tea Party is going to continue to drive the conversation, and I look forward to that conversation.
HEUVELI think the economy, obviously, will be the issue. But I thank your caller for bringing up this analogy between government and family at a dinner, you know, at a dinner table because families make investments, good investments, wise investments in their future. They'll borrow in the short term to make those investments.
HEUVELI think that the -- where the economy stands -- but, particularly if this White House comes forward with whether it's like a national infrastructure plan or some kind of plan for jobs, and also exposes who these Republicans represent. I think Americans now better understand that in terms of the raw extortion we've seen in this deal.
HEUVELI think important also to explain that we need to recapture -- Democrats need to recapture government and take it back from the lobbyists and corporate interests, very tough with a Democratic Party that is also -- not as badly -- but is also mortgaged to those interests. So it's going to be tough and, I think, made tougher if there are assaults on vital programs like Medicare.
HEUVELBecause you remember just a -- six weeks, two months ago, Diane, in the 26th Congressional District in New York, in my state, Kathy Hochul won a very important victory, even though there was a lot of Tea Party and other money pouring into that district, because of Paul Ryan's Medicare plan, a plan to gut Medicare. So Democrats had a winning issue.
HEUVELAnd if that is taken off the table, plus a lousy economy still in place with people not understanding the importance of the need to boost demand and growth in the short term, then, I think, it's a tough ride for this president. That's why there's a lot of independent mobilization underway as I wrote about in The Washington Post. Rebuild the dream.
HEUVELScores of people around this country mobilizing to put back progressive Democrats in the House, to take back the House and to rebuild a different kind of politics.
WINSTONTo go back to the analogy and to use it in a slightly different way, I mean, it is sort of like a family sitting around the dining -- or the kitchen table, except that the person is out of work. Yes. You're going to need to be physically responsible in that situation 'cause you need to get through, you know, the next couple of months.
WINSTONBut the bottom line is the solution to the situation is getting a job, right? And so that you can be able -- and that's what this country is facing. This isn't about, you know, increasing the amount I can spend on my credit card. This is about, how do I find gainful employment to get the family working again?
REHMAnd that's precisely what Therese in Palm Coast, Fla., wants to know. Good morning.
THERESEGood morning. I have three quick comments. One, I can't see how jobs and economic growth can happen when investors and corporations are sitting on their $6 trillion in profits and not investing in jobs. Also, Republicans are constantly saying, which annoys me to no end, that they are "following the wishes of the American people" by not raising taxes.
THERESEBut numerous polls show that the majority of Americans want taxes raised on the wealthy and the corporations. It's time for those who have prospered for years on the backs of the poor and the middle class pony up. But, finally, the Tea Party makes a lot of noise and receives a lot of media attention. But there's a very angry populace, who are growing in numbers and will be heard loudly and clearly in 2012.
REHMAll right. Thanks for your call. Matt Kibbe.
KIBBEWell, there's economic reasons why corporate America is sitting on the sidelines. They don't know what the rules are. They don't know what the tax treatment is. They don't know if the regulations are going to be changed on them midstream. So they're sitting on the sidelines because there's all this uncertainty about what the government plans on doing.
KIBBEBut it's also important to look at what -- at a study I just read by the Kauffman Foundation, understand that corporate America is not going to solve this problem. It's got to be small businesses. It's got to be start-ups. That's where jobs are created in this country. And all of the talk about increasing regulation, increasing taxes scares the heck out of these folks. And that's the danger in this economy.
REHMYou know, Susan, I'd be interested in whether USA has done any polling on this. But I've heard of a lot of people say that large corporations, small business not hiring because of "uncertainty." On the other hand, I hear people saying Republicans are not hiring because they don't want the economy to improve. They want to see the economy fail because that will, indeed, make Obama a one-term president.
PAGEWell, there are conspiracy theories that Republicans would feel just fine if the economy limped along in this terrible state, or even got worse, because it would help the -- in the presidential election 2012. Of course, it'd probably hurt incumbent Republicans running on the Hill if the country looked like it was really in trouble.
PAGEAnd when it comes to companies doing hiring and investing, I tend to think if you believe in the free market system, you would not think there is a conspiracy toward this. I mean, companies want to make money. We know that Therese is right. There's a lot of money that we wish -- in corporate profits that we wish was being used to hire people and to make investments and so on.
PAGEBut it's -- I guess I find it hard to believe that there is a corporate conspiracy at work here.
THERESEI don't believe in a corporate conspiracy. But I do think you see corporations, Wall Street, made whole. They were not restructured. There was nothing done to make them accountable for financial crisis, which their greed was responsible for in other factors. But listen, there's a patriotism involved here. Why do we not demand that those who've done well, done so well by America, do right by America?
THERESEAnd I think we're seeing corporations sitting on trillions to trillion and not participating, even in things like a private-public national infrastructure bank. That would be the most patriotic idea of rebuilding the country that is deteriorating in its basic infrastructure. I -- so I do think there are legitimate questions, Diane, that must be raised about corporate behavior, Wall Street behavior, in being made so whole while middle class, low income people are having a budget balanced on their backs.
REHMWhat do you think, Matt Kibbe?
KIBBEI think the Tea Party started this outrage about bailouts over Wall Street. And what we've done is change the rules of the game again and again and again to hold the irresponsible, including big banks, including companies that made bad bets based on bad assumptions -- instead of holding them accountable, letting them go through bankruptcy and letting them fail, like the market process would allow for. We've bailed them out.
KIBBEAnd both Democrats and Republicans are culpable in that. But if you look at something like the so-called financial reform bill, what we did is we basically took implicit socialized risk and made it explicit. So banks like -- city banks like Goldman Sachs, yeah, they're making corporate profits. We enabled it through this process. And Barack Obama was there right next to President Bush letting that happen.
THERESEThen why doesn't the Tea Party, for holding these corporations -- not small business, these huge corporations accountable in terms of not allowing protection of corporate tax agents, not allowing these kind of loopholes that so enabled these corporations to escape and evade the accountability that the Tea Party claims it seeks from those bailed out when they should have been held accountable?
WINSTONTwo points. First, one of the reasons that corporations aren't spending that money is because they found at other locations overseas -- they've not brought their money back, in fact -- is a better place for them to be able to spend money. China is a more favorable business environment. That's just an atrocious outcome for the United States. We have to change that. That's...
REHMSo there is no sense of patriotism where big business is concerned?
WINSTONNo. It's not that it's patriotism. It's that they're supposed to have a company that works. If the company doesn't create the profits it needs, then, guess what? Jobs get lost here.
REHMIs it a matter of how much profit that corporation makes?
WINSTONNo. It's trying to understand, as a CEO, in terms of being able to say, if I do this, I can expect this outcome in the United States. At this point, they just don't understand what the outcome is going to be. You've got health care costs. You've got potential taxes. You've got trade laws that might happen, might not happen. There is no consensus run. And if I -- I want to go back to the wealthy and corporations 'cause this one does irk me quite a bit.
WINSTONAnd that is, again, people describe these Bush tax cuts as for the wealthy and corporations. Republicans would push back and say, no. We're talking about 894,000 small businesses, or 2,000 small businesses per congressional district. So how you set up that question is clear how the public's going to respond to it. If you said, do you support increasing taxes on 894,000 small businesses? You'd be lucky if you get into double digits.
REHMIt's interesting. We always come back to small business. But it's also the large corporations, is it not?
PAGEIt's true. But small business is the jobs generator in this economy. You know, Therese made another point. She said, the populace is going to be against us, and it's going to rise up. If that's the case, they'll win elections in 2012. And this deal will get changed because the current Congress can't tie the hands of a future Congress. This is not something that's set in stone.
REHMSusan Page, Washington bureau chief for USA Today.
HEUVEL(unintelligible) election do and election should matter.
REHMYou're listening to "The Diane Rehm Show." And to Haverhill, Mass., good morning, Richard.
RICHARDGood morning, Diane. Thank you for taking my call.
RICHARDI can't agree more with Katrina. You know, the country is looking for jobs, and the last thing we're thinking about right now is the deficit and an austerity program. England has gone that road on austerity. And the unemployment rate has gone up more. When the private sector is not hiring, it's up to the government to create jobs, like FDR did. Everybody benefits by the infrastructure, private and public and everybody does.
RICHARDAnd also, Barack Obama, his stimulus was not big enough, and he listened to -- he didn't listen to economists like Paul Krugman or Joseph Stiglitz. And now, like Susan said, there's no consensus to have another stimulus program. And also, part of that $800 billion, $300 billion of that was for tax cuts.
HEUVELYour caller gets it right. I mean, also in the austerity front, I think it's worth remembering that just a few days ago, we saw the most recent GDP growth figures. Boy, sluggish, anemic. And you look at Britain, where there is also an austerity program being implemented. The second quarter figure was 0.2 percent.
HEUVELWhen the private sector isn't working, isn't hiring, it is (word?). I mean, let's -- (word?) has been drowned in the bathtub like Grover Norquist along with government. We need to restore just common sense in terms of boosting demand and growth when the private sector is unable to, then we go back. And the best deficit reduction is job creation.
REHMAll right. I want to take one more call. St. Louis, Mo., good morning, Mike.
MIKEHi, good morning. Thanks for -- call.
MIKEI have a question about what you recently been discussing. We recently had a Tea Party rally in St. Louis -- it was last year -- and I was struck by the naivety of some of the people that were there, such simplistic answers to complex problems.
MIKEBut my main question is that we have had a lot prominent Republican politicians in recent years quite openly stating that they will not want Obama to have a second term. And I'm wondering what the connection is between those statements and recent problems with regard to budgets and the debt ceiling crisis.
WINSTONWell, first off -- and if you listen to Speaker Boehner, Speaker Boehner, his goal is to move things forward. If, in fact, that helps the president in terms of his re-election, so be it. His attitude is, if you can show that you can govern, all the better. Now, having said that, one of the reasons we're in this (word?) is 'cause there are real serious differences of opinion about what direction the country should be.
WINSTONAnd you're seeing that reflected in this debate and some other debates and debates to come in the future. This is a real choice that's emerging here.
KIBBEWell, let me address the question of naiveté. I think it's fundamentally naive to think that politics and the political process always has a better interest in mind than people acting on their own free will. They don't necessarily know what's best. And even if they did know what's best, they don't necessarily have the incentives to do what's best for the country. Politics is driven by incentives to get re-elected. That's the bottom line.
KIBBEAnd it's naive to think that the political process can always produce a better outcome. The president himself acknowledged that the stimulus wasn't, in fact, shovel ready. Well, that's a fundamental problem with spending somebody else's money. You're never going to do it as well as they would do it themselves.
PAGEAnd I would just agree with what David just said, which is that this is part of a very fundamental debate about the direction of the country and about the size and role of the federal government. And that's something we're going to be talking about for the next year.
REHMAnd I think we should not deny what our caller said, that is that several Republicans said early on. We want to make certain that Barack Obama is a one-term president. Thank you all so much, Katrina vanden Heuvel, David Winston, Susan Page, Matt Kibbe. Thanks for listening, all. I'm Diane Rehm.
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