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South Carolina Moves Up Primary; Federal Reserve Responds to Markets

August 10, 2007 at 6:35 PM EST
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JUDY WOODRUFF: And to the analysis of Shields and Brooks. That’s syndicated columnist Mark Shields and New York Times columnist David Brooks.

Gentlemen, thank you for being here this Friday night. It’s good to see you.

The financial markets, way down, way up, down again. They ended up a little bit down today. The Federal Reserve pumped in billions of dollars. Effect on policy and effect on the body politic, David?

DAVID BROOKS, Columnist, New York Times: It depends on the spillover. I mean, I think if it’s just the financial markets, as the two financial experts we had on earlier in the program seem to suggest, it won’t have a broad effect on the body politic.

And the reasons for that are that the world economy is phenomenally strong, as they said. For those of us who are not professional economists, the number I always look at is just productivity, because that’s really about the underlying health of the economy. And the latest productivity numbers were, I think 1.8 percent, 1.9 percent growth, which is not fantastic, but OK.

So I think what we’re seeing is a basically healthy economy with this housing market and all that, without a lot of spillover, at least in the abstract, on the electorate. But that is not to say there’s not a lot of economic anxiety out there.

And to me one of the crucial questions of the 2008 election is that economic anxiety tied to broader anxiety about the war and about the state of the country, or is there something new going on where you could have economic anxiety while we have decent economic growth?

JUDY WOODRUFF: Could that be what’s going on, Mark?

MARK SHIELDS: Well, I’m not sure, Judy, but I do think that this is the last pillar of the Bush administration has been the good economy that David described. I mean, it’s been — even critics have to concede it’s been low unemployment, low inflation, low interest rates, high corporate profits.

And if, in fact, this is a real shaking of that, with everything else, the immigration bill gone, no prospect of a domestic agenda, the Iraq war being enormously and conspicuously unpopular, then it really does have political anxiety and political impact.

I think there is not a human face on what’s happened so far. I mean, it’s not private equity or hedge fund managers or whatever. But I think when the human dimension of people losing their homes, and then those homes going unsold once they’re repossessed because of the softening of the market — and this is an economy that’s rested very much on consumer confidence — then housing values in the neighborhoods affected where the houses are repossessed go down, I think that’s going to have a ripple effect that has both political and economic implications.

JUDY WOODRUFF: We saw one mortgage company go under and laid off hundreds of people, but broadly speaking that hasn’t happened yet.

DAVID BROOKS: Right. But if it did, it would have some impacts. As I said, I don’t think that’s happened. I think the broader issue is, do people feel more economically insecure, even while unemployment is low? Do they feel their wages are stagnating?

And then the crucial debate, which I think is shaping up between Republicans and Democrats, Republicans believe that wages may not be keeping up with productivity, but the system fundamentally works. If you get educated, if you get people better educated, they will see their incomes go up. A lot of people on the left think, no, the system is now so fundamentally broken even with skills and education they will not see their incomes grow up. And that leads to radical consequences.

Election moves closer to 2007

David Brooks
The New York Times
For Republicans, that's good news, because they want the earlier the better, because as soon as there's a nominee, George Bush is no longer head of the party. They got somebody else.

JUDY WOODRUFF: The presidential campaign calendar. The South Carolina Republicans announced this week they are moving up earlier to January the 19th. Now New Hampshire and Iowa both say they're moving up. This election isn't happening until '08, but it's getting closer to '07, Mark.

MARK SHIELDS: It is getting closer to '07, Judy, and I'm very upset about it, as a citizen, because I really believe the genius of the nominating system, with all its drawbacks and all its shortcomings, has been the Iowa-New Hampshire electorates. I think they are very special.

I think they take their responsibilities very special, very sincerely and seriously. They go to see candidates. They hold candidates accountable. After New Hampshire, it's the last time candidates have to talk to real voters. It's the last time that they have to answer questions from schoolteachers, and truck drivers, and nurses without their intervening media consultants. After New Hampshire, it's all tarmac landings at airports and TV studios.

And I'm fearful that we're compressing this so much that we're going to use that special quality and we're going to have a de facto national primary where the under-financed underdog candidate, whether it was Pat Robertson or Pat Buchanan or Jimmy Carter or George Bush the first in 1987, has a chance in an Iowa to spring an upset, just by connecting with voters. And I'm fearful that we're looking where big money is going to be the determinate in our politics.

JUDY WOODRUFF: Do you worry about that?

DAVID BROOKS: I do, and for similar reasons. The crucial thing about Iowa and New Hampshire is that, when you go and campaign with the candidates, there will be a couple reporters, maybe one or two at this stage. And then there will be crowds of 25.

MARK SHIELDS: That's right.

DAVID BROOKS: And so they actually do have a conversation. When you have a crowd of a thousand, it's nothing. It's just a rally. But the effect of South Carolina moving forward, it pushes all the others forward, Iowa and New Hampshire forward, really crammed into a January period.

For Republicans, that's good news, because they want the earlier the better, because as soon as there's a nominee, George Bush is no longer head of the party. They got somebody else. So Republicans actually want it a little sooner.

But then the other question is, you've got all these big states coming February 5th. If Iowa and New Hampshire are close to February 5th, then I think whoever wins those two states really will sweep through February 5th. But if there's a big gap between the early Iowa and New Hampshire and South Carolina and the big states February 5th...

Harm to early states

Mark Shields
Syndicated columnist
The only people who would be involved over the holidays in politics are single-issue zealots.

JUDY WOODRUFF: Even if it's just a few weeks, you're saying?

DAVID BROOKS: Right, I think then the momentum of those first states could be broken. And, for example, Mitt Romney could do well in the early little states, but Rudy Giuliani would have time to recover in the big states, and so he might not get swept away the way he might otherwise do.

MARK SHIELDS: I disagree with that scenario that David has laid out. I do think if the same candidate wins Iowa and New Hampshire that the candidate, unless there's some revelation intervening, is odds-on favorite, irrespective...

JUDY WOODRUFF: You do?

MARK SHIELDS: I really do. I still think they'll have -- if, in fact, we have breathing space between them. We've always had in the past -- we had eight days between Iowa and New Hampshire, and then we had at least 10 days, two weeks. So it's only the Republicans in South Carolina who are moving. It's not the Democrats, but that's what's scrambling the whole system.

And they push Iowa back to the point where you're talking New Year's Day, Christmas, I mean, Judy, political polling firms stop polling in the middle of December because people are preoccupied with Christmas presents, and parties, and children, and family, and reunions, and travel. The only people who would be involved over the holidays in politics are single-issue zealots. And the genius of Iowa and New Hampshire is you get this broad participation. And I'm afraid, you know, that would...

JUDY WOODRUFF: But the candidates can't just take off in December just because, say, Iowa is on January the 5th or something, can they?

DAVID BROOKS: No, they would be there. And as somebody said earlier in the week, they'd be running negative ads at Christmastime, and that would be unusual and jarring.

MARK SHIELDS: "Little Drummer Boy" and your mother...

Democrats appeal to various groups

David Brooks
The New York Times
Well, all the candidates in both parties hate the debates. They've lost control of their own campaigns. They can't determine their schedule, because they've got to go to the debates, they've got to spend a couple days preparing.

JUDY WOODRUFF: The week just finished. We saw several forums debates, the Democrats, it was DailyKos, the liberal blog site, there was the AFL-CIO, the National Association of Black Journalists, the gay and lesbian forum. What are we learning about these Democrats?

MARK SHIELDS: We're learning that the proliferation of debates has been very good for Senator Hillary Clinton. I think you can make the case that Senator Clinton, by the extent of her performance in these debates, has lengthened her national lead in the polls. I hasten to add that national numbers are a lagging political indicator when it comes to individual primary states like Iowa and New Hampshire, but still she's enhanced her position.

I think overall they've hurt the party. I mean, the Democratic Party's problem is that it is seen as a confederation of coddled interest groups and that they seem to approach every constituency with, "What do you want? Let me tell you, I'm with you."

And with each group -- I mean, there's a defensible case to have it before labor, before the gay and lesbian, before the Hispanics, before the -- you know, next, it's going to be the Irish-Jewish Home for the Incredibly Short. I mean, they just go to these little groups.

And voters say that's a doubt they have about Democrats, whether they can speak to the entire nation as one. And I really think that the proliferation -- plus, it takes away from the drama of debates themselves, I mean, which historically have been very important in voters' judgments. There's just too many of them.

DAVID BROOKS: Well, all the candidates in both parties hate the debates. They've lost control of their own campaigns. They can't determine their schedule, because they've got to go to the debates, they've got to spend a couple days preparing. So they've lost control of their campaigns. They can't go to Iowa when they want to.

JUDY WOODRUFF: They don't have much time to prepare now. They're practically...

DAVID BROOKS: Well, they are practically -- and the viewership is going down, and so there this pandering factor. It's been interesting to me watching the candidates to try to pander without going overboard, so keeping one eye on the general election -- and that was especially true in the gay and lesbian debate, where if you read what they said, you get the impression all of them support gay marriage in their hearts. None of them can actually say it because they think it will hurt them politically if they got the nomination, so they're trying to walk, suggest, "I'm really with you, but I can't be with you." And there's a lot of pandering without totally trying to go overboard.

JUDY WOODRUFF: And, Mark, you're saying that's not healthy for the Democrats?

MARK SHIELDS: I don't think it's healthy for the Democrats. I really don't. I mean, I think if the Democrats are seen as little more than constituency coddlers caressing every erogenous zone of the body politic, it's not going to be helpful.

Talk of gasoline tax hike

Mark Shields
Syndicated columnist
And I really think that this is one where the president's locked in on his anti-tax ideology. I think there really is an understanding that we have to do something. We're about to run out of our highway trust fund in two years.

JUDY WOODRUFF: Quickly, very different, aftermath of the Minneapolis bridge collapse, a lot of talk about crumbling infrastructure, the need for the federal government to spend more. People were talking about possible gasoline tax hike. President Bush made it clear this week he thinks that's a bad idea. Where do you see this issue going, quickly, Mark?

MARK SHIELDS: Well, I think it's real. I mean, I think there's a sea change in attitudes in the country. The president's mantra has been historically, consistently, "You know better to do with your money than the federal government does."

And I just think -- and when you've got 77,000 bridges that are structurally deficient, the same definition as the bridge over the Mississippi in Minneapolis that collapsed, then, you know, I can't build it. I don't care how big the tax cut they give David, me, you, anybody else; we can't pool our resources and do that.

And I really think that this is one where the president's locked in on his anti-tax ideology. I think there really is an understanding that we have to do something. We're about to run out of our highway trust fund in two years.

DAVID BROOKS: My problem is, if you read the whole statement that he said, he really didn't come out against the gas tax. What he did, there was a long paragraph where he talks about how the appropriations process worked, and he said, "Earmarks come first, and then the only thing left over is what we do to our priorities." And then he said, before we think about taxes that might affect the economy, we've got to fix that process. And so I think that's a perfectly legitimate point, that the earmarks are taking control over our spending on whether they should go to bridges or anything else.

MARK SHIELDS: He's a born again...

DAVID BROOKS: Well, I'm not saying he's not against the gas tax. Every elected official, Democratic or Republican, is against the gas tax. I've never met a single one who's going to come out and say, "I'm going to raise your gas tax."

MARK SHIELDS: Jim Oberstar. I mean, Jim Oberstar and the Democrats, I mean, are doing it...

MARK SHIELDS: ... from Minnesota himself, the chairman of the committee in the House. And the reality is, I mean, you're right. I mean, Bill Clinton paid dearly for it. He raised gasoline by three cents a gallon, three-and-a-half cents a gallon in 1993 and he paid for it in 1994. It is a dangerous thing to do.

JUDY WOODRUFF: Well, what about Mark's point that this is not something the private sector or is it something the private sector...

DAVID BROOKS: Well, I know bridges and roads -- I mean, there are people who believe in road privatization, but I think overall, if you look historically, we've generally spent 1 percent of GDP on infrastructure. The last couple decades, we've been spending .7 percent, .8 percent. I think we've been under-spending on infrastructure, and I think you can make the case we should go back up to 1.0 percent, but that doesn't mean that the appropriations process is not fundamentally flawed with all the earmarks and all that other stuff misusing our priorities.

MARK SHIELDS: And the president who saw the budget increase by 50 percent during his first term, you know, never with the threat of a veto, has now become -- he's discovered the veto and threat. So I don't know where we are on it, but I think, if he does endorse and embrace a tax increase, even a five-cent-a-gallon tax increase on gasoline, I'd be surprised.

JUDY WOODRUFF: Well, we're glad you're part of our infrastructure, David Brooks and Mark Shields. I've been saving that one. Thank you.

MARK SHIELDS: In need of repair.