PETE WILLIAMS: Both sides in the Mideast conflict look to the U.S. for help, while Washington tries to find its fiscal footing. I’m Pete Williams in for Gwen Ifill this week on “Washington Week.”
The president dispatches his secretary of state to help end hostilities between Israelis and Palestinians.
SECRETARY OF STATE HILLARY CLINTON: (From tape.) The United States welcomes the agreement today for a ceasefire in Gaza. For it to hold, the rocket attacks must end, and a broader calm return.
MR. WILLIAMS: Is the U.S. still the key to stopping the violence? At home, posturing and positioning over the fiscal cliff negotiations.
MARTHA RADDATZ [ABC News]: (From tape.) Could you accept a deal that does not include tax rate increases for the wealthy? Is that something that’s acceptable?
REPRESENTATIVE NANCY PELOSI (D-CA) [House Minority Leader]: (From tape.) No.
MR. WILLIAMS: And a candid assessment of the stakes from one of the GOP’s rising stars.
SENATOR MARCO RUBIO (R-FL): (From tape.) The fiscal cliff is a complete creation of the political branch in Washington, D.C. And it’s an example once more of a dysfunctional process that threatens our economy and millions of people across our economy.
MR. WILLIAMS: Is stalemate in Washington stifling the economic recovery? Joining us this Thanksgiving week: Peter Baker of the New York Times; Molly Ball of the Atlantic; and Jim Tankersley of National Journal.
ANNOUNCER: Award winning reporting and analysis, covering history as it happens, from our nation’s capital, this is “Washington Week with Gwen Ifill,” produced in association with National Journal.
ANNOUNCER: Once again, from Washington, sitting in for Gwen Ifill this week, Pete Williams of NBC News.
MR. WILLIAMS: Good evening. We hope your holiday went well. President Obama and Hillary Clinton could not have expected their week to unfold as it did. The president was hoping to focus new attention on the promise of U.S. relations with the Far East. Secretary Clinton was with him on what she thought would be her last overseas mission. Instead, Mr. Obama found himself on the phone with Middle Eastern leaders as Israel and Hamas in Gaza rained down rockets on each other. And Secretary Clinton headed for the region hoping to use a ceasefire to search for longer term answers.
SEC. CLINTON: (From tape.) Now we have to focus on reaching a durable outcome that promotes regional stability and advances the security, dignity, and legitimate aspirations of Palestinians and Israelis alike.
MR. WILLIAMS: But she also made it clear the U.S. is firmly supporting its ally, Israel. Peter Baker was traveling with the president. Peter, with all the changes in the region, how has the U.S. role changed in this process?
PETER BAKER: Well, of course, you saw President Obama taking a very hands-on role in this, something that he’s been reluctant to do at times in the past. He had a bad experience trying to involve himself in peacemaking in the Middle East in the beginning of his presidency, grew a little disenchanted I think with how intransigent the players were. He and Bibi Netanyahu, the prime minister of Israel, have a troublesome – let’s say – relationship to say the least.
And, yet, he decided in this case he had to directly dive in. He’s making phone call after phone call. He’s in and out of these Asian summit meetings and grabbing the phone to talk to Netanyahu, talk to President Morsi of Egypt. And he recognizes something that almost every president eventually discovers, which is that America is still the indispensable player when it comes to these sort of conflicts in the Middle East.
MR. WILLIAMS: It is the indispensable player? It hasn’t changed with the Arab spring?
MR. BAKER: I think even the Arab spring has not changed that. And, in fact, what you see here is the evolution of the Arab spring and our relationship to it, particularly in the form of this relationship between – new partnership between President Obama and President Morsi of Egypt.
Very interesting history here, of course – President Morsi from the Muslim Brotherhood, just a few weeks back before the election, the Americans and the Obama administration very upset at Morsi for not doing more to protect the embassy in Cairo during some of those protests there.
This week, you saw this sort of new partnership developing. They were on the phone repeatedly, 11:30 p.m. at night, 2:30 a.m. in the morning, again, from Air Force One. Morsi was the key, as far as he could see, to solving this problem. He was investing a lot of his own capital – President Obama was, in this new partner in Egypt.
JIM TANKERSLEY: Speaking of key players, can you tell us a bit about Secretary Clinton’s role in all this and how that’s played out?
MR. BAKER: Right. They were on their sort of last buddy-buddy trip, that is President Obama and Secretary Clinton. They were in Bangkok together. They were visiting the Reclining Buddha. They were making jokes about 2016. Joe Biden’s head was exploding back here. And then, suddenly, she’s on a plane zipping out of Phnom Phen to say, I’m on my way. We’re going to try to directly involve ourselves in this.
That’s interesting because she has not played this sort of shuttle diplomacy role in the Middle East quite the way that some of the predecessors had, right? Obviously, Kissinger, and Jim Baker, and Condi Rice to various extents had been these – back-and-forth missions. This is her sort of first one in her own twilight days as secretary of state. She’s getting ready to step down come inauguration in January.
MOLLY BALL: And what do you think the relationship between Obama and Morsi tells us about the future for the region?
MR. BAKER: Well, they see this as the possible key to beginning to unlock of some of this. If Morsi, through his relationship to Hamas, is able to begin to bring them to the table in effect, that offers a lot of potential. But they’re very – I think the Obama administration is very cognizant of the fact that this wouldn’t be easy.
The president came under a lot of attacks during the campaign for not having visited Israel during his first term in office. They had planned to find a way to try to get there sometime early in the second. That’s now put on the shelf. It’s too early, given what’s just happened in Gaza, to think about sending the president unless he has something good to announce. That maybe off a little more in the future.
MR. WILLIAMS: Tell us a little bit about the calculations for Morsi because as I understand it, the people on the street in Egypt are not necessarily urging him to look for peace; they sort of like the idea of turning up the heat on Israel. So what’s the line he’s walking?
MR. BAKER: It is a difficult and dangerous line for him. You’re right. The people I think that traditionally have been his base of support are very much on the side of the Palestinians in this case, very much outraged of what they saw as Israel’s heavy-handed response to the rocket attacks. And, yet, he chose to put that aside, which is one thing that President Obama I think likes about him. President Obama sees in President Morsi a man who has been an engineer, sort of precise, no guff, no nonsense, and actually not as ideological as a lot of people would have thought a Muslim Brotherhood president would be.
MR. WILLIAMS: And we also see perhaps a new relationship between President Obama and Prime Minister Netanyahu?
MR. BAKER: Well, that’s a really good question, isn’t it, because their relationship is would be complicated on multiple levels. There’s this continuing conflict with Hamas in the Gaza, with this continuing tension with Iran just over the horizon. What is it going to be the next step in getting Tehran to back off on its nuclear ambitions? We saw very fraught back-and-forth during the campaign about that. I don’t think that President Obama or Prime Minister Netanyahu necessarily have a better relationship today than they did a month ago.
But President Obama was very clear in every public statement to say Israel is right to defend itself, has every right. He refused to tell them not to go in on the ground. President Obama was doing nothing to let any air exist between the two of them, at least in the public sense.
MR. WILLIAMS: Why not say that it’s a better relationship now? I noticed it was interesting that Netanyahu sort of went out of his way to say to say he agreed to the ceasefire after consulting with President Obama.
MR. BAKER: Right. President Obama did urge him to take the ceasefire and there definitely was a collaboration in that sense. I just think that there’s, you know, a lot of history of distrust there to overcome. And, you know, it may be that this happens in the next year or two, but I think really what the Obama administration is waiting for is the next Israeli election to see what that brings.
MR. WILLIAMS: All right. Peter, thank you very much.
Anyone driving from New York to New Jersey on the George Washington Bridge sees the steep cliffs of the Palisades from which damsels in distress once dangled at the end of silent movie episodes filmed there, literally cliffhangers. Anyone driving from the White House to Capitol Hill on Pennsylvania Avenue can’t see the fiscal cliff, but it could be much more perilous. Over the past week, we’ve heard some optimism for a happy ending but also some tough talk about no compromises.
So, Molly, does it look like the economy could be rescued before the second reel of this movie starts in January? (Laughter.)
MS. BALL: I think there’s reason for optimism and reason for pessimism. And the reason for pessimism is basically that it’s Congress, and we know what the track record is there. And there are so many incentives toward gridlock.
But the reason for optimism is that we, at least in these sort of preliminary – you know, the parties sort of sniffing each other out, there have been a lot of happy noises coming off of Capitol Hill.
Now, I think that masks the fact that the two sides are still quite far apart on the substantive issues that are on the table, but they are at the table, and they realize, I think, that the American people really want them to be at the table in good faith trying to solve this problem.
Now, I’m a little wary of saying this because it’s a bit of a Democratic talking point, but it’s also true that we’re not talking about instant fiscal calamity on January 1st. Certainly, there would be a reaction in the markets, and certainly going off the cliff isn’t a good idea. We had Bernanke saying that a couple of days ago. But it’s probably not the case that things would immediately explode.
MR. WILLIAMS: So lay out for us how it could go. What are the three ways you think it could actually break?
MS. BALL: There’s basically three options here. Number one is we go off the cliff. Nothing gets done, either deliberately or accidentally, because there’s – because it’s an impasse. And then, you know, we see what the economic consequences are and there may be a scramble to put together a deal after the fact.
Number two is that there is some – is that a grand bargain is reached. The big deal that everybody claims to want that they’re actually able to get their act together between now and Christmas and accomplish that.
And, number three is the sort of middle way – that they find some kind of interim arrangement. They kick the can down the road, which, again, there’s a great track record in Congress for that kind of action. They put together some kind of Band-Aid that buys them more time with the hope of – or perhaps making a framework to put something bigger together next year.
MR. WILLIAMS: What form would a Band-Aid take in rough terms?
MS. BALL: Well, it probably would be a stop gap that takes care of a couple of months, that preserves more or less the status quo, that forestalls a lot of the spending cuts that the deadline is coming up for, and also probably forestalls a lot of the tax hikes that the deadline is coming up for.
MR. BAKER: You know, a lot of us are going to be recovering from gorging this last couple of days. We’ve had our turkey. We’ve had our mashed potatoes. We don’t want to do the workout. What do voters want in this deal? Are they prepared to do the hard working out to pay off the calories we’ve just consumed? What is the electorate telling these leaders here in Washington?
MS. BALL: Right. I mean, obviously, nobody wants to sacrifice, but it’s very interesting. You have a lot of interest groups claiming that the political will is on their side. And when you dig into the polling, people do want compromise. Despite the noises on both sides of, oh, we’re willing to walk away from the table, people do want a compromise and they’re sick of the gridlock.
They do want tax hikes on the wealthy. This was asked in the presidential exit poll. This has been asked in a variety of polls for a while. And people do want to see those Bush tax cuts expire on incomes over $250,000, which is a major Democratic stance in these negotiations.
They do not want to see entitlement cuts, which is something that Republicans appear to be demanding, and which certain centrists are saying has to happen. People don’t want to see Social Security benefits, Medicare benefits cut. They’re willing to see cuts to defense it seems, and that’s also part of the sequester agreement. But they don’t like cuts to other parts of the federal budget.
MR. TANKERSLEY: So, Molly, how are the politics of this shaping up? If we’re looking at this purely from a strategic perspective, who has the upper hand and who’s sort of playing from behind here?
MS. BALL: Well, Democrats certainly feel they have the upper hand. And you’ve seen – to what extent it’s posturing or not, you see a lot of sort of swagger coming out of Obama in his press conference last week and Democratic leaders saying, we’re willing to go off the cliff. We are not going to compromise on the tax hikes. You notice they’re talking much less about the spending cuts that also they say would be part of a so-called balanced deal.
But I think on some level Republicans realize that they don’t have a lot of leverage in this situation. Certainly, people want to see both taxes and spending, but the Republicans that I talk to are a little bit nervous. And you see them also coming out with some tough talk, Speaker Boehner saying that he even wants to bring health care back into things.
But I think Republicans realize – and you see in this sort of conciliatory way they’re talking about taxes, right? They’re saying, even though we don’t want these tax hikes, we are still willing to bring in more tax revenue.
MR. WILLIAMS: Speaker Boehner’s reference to the Obamacare was in an op-ed he wrote in the Cincinnati Inquirer this week. So what is that all about? Is that a way of sort of showing the voters how tough they still are and making it easier then to compromise?
MS. BALL: That seems to be what it is. It seems to be a little bit of a tactic and maybe a sop to the base. I think a lot of conservative Republicans are worried about what they see as Republicans going squishy, because you have Republicans saying that they are willing to abandon the Grover Norquist no tax pledge. You have Republicans making very conciliatory noises about immigration reform. And so the base is concerned that the party is basically just going to go along with Democrats on everything. So that may have been a way to reassure conservatives that he hasn’t abandoned them.
MR. WILLIAMS: All right, Molly. Everything here seems to be “to be continued,” but this is certainly one of them.
While avoiding the fiscal cliff will prevent the economy from sliding down into recession, it won’t put 12 million people back to work. And Jim has written in National Journal that President Obama has to contend with four other forces if he wants to get the economy on better footing. So, Jim, what are those forces.
MR. TANKERSLEY: Well, these are the forces that have been holding back the recovery in big or little ways over the last few years, ever since the recession ended. And the good news is that a couple of them are starting to abate.
Let’s start with the one that’s getting better – housing. The housing market absolutely was the main driver for why this recovery has been so slow and it’s really starting to turn up. Home values are going up. We’re seeing more activity, homebuilder sentiments going up. These are good things.
The two sort of wild cards from abroad have been Europe and China. Europe is basically back in recession. China has lowered its growth from the last couple of years and so it’s sort of a soft landing, it appears, over there.
And then the fourth thing has been volatile gas prices, high and volatile gas prices. And this has been a plague in consumer spending because if you’re paying more to fill up your tank, you’re going to have a hard time buying things on Black Friday and other sort of consumer engines of the recovery that we need. So for the recovery really to pick up and gain steam, we kind of need breaks in all four of those to get there.
MR. WILLIAMS: Let me ask you about thing that was in your article. You said that there’s always a concern that the contagion in European banks would spread to the United States. We’ve been hearing this warning or this concern for a year and a half. Why hasn’t it?
MR. TANKERSLEY: Well, there’s a couple of reasons. First, American banks have taken some steps to really improve their capital positions, make themselves healthier basically –
MR. WILLIAMS: By not loaning money to anybody. Yes.
MR. TANKERSLEY: Well, that’s been an unfortunate byproduct, and there’s a lot of reasons for that. But, part of what’s going on here is they are building up buffers. The other part is the European banks themselves have not spread a lot of contagion so far around the world. We see growth drags from Europe not buying as much of our stuff or China’s stuff, but then we haven’t seen a massive spreading financial crisis emanating from the European Banks.
MR. BAKER: Jim, you mentioned the world economy. Of course, President Obama was in Asia for this trip this week, and he’s sitting down with other Asian leaders at the summit in Phnom Penh and they talk about the economy. And the two X factors they mentioned are European, as you mentioned, and the United States. To them, we’re the X factor, particularly the fiscal cliff. Everybody brought that up with the president. They said, what’s going on? He even got asked by a Buddhist monk while visiting a monastery in Bangkok. How much is the rest of the world dependant on or worried about what we’re doing here in terms of our fiscal cliff?
MR. TANKERSLEY: Well, you wouldn’t know it from the rhetoric of the last campaign we just went through, but America’s economy right now is one of the most important driving engines of the global recovery for as halting as it’s been, for as slow growth has been compared to what we needed it to be to be full employment.
America’s still chugging along compared to Europe. And the world needs that. And so it’s impossible to understate how important getting past the fiscal cliff in a constructive way would be to helping the global economy recover.
For a lot of reasons, but the biggest of which is we all live in an interdependent economy now. If we slow down or fall back into recession, that really hurts China, which sells us a lot of stuff. It really hurts Europe, which is – you know, we’re propping them up in some ways with our growth. So this is a huge deal, not just for us but for the entire world that we get this right on the fiscal cliff.
MS. BALL: Assuming – knock wood – that we do get past it, is there any meaningful economic policy that can or should come next in Washington?
MR. TANKERSLEY: A couple of things that could be done. And if we get past it with what you laid out there – I’m sorry, I think it was choice two, the grand bargain – and we show that Democrats and Republicans can actually work together to solve problems, you’ll probably see a market reaction in a positive way that could lead to more growth and they could build on that with some other compromises.
One of the biggest would be sort of a reinvention of government, meaningful tax reform to make the code less complex, more efficient in terms of how investment gets directed in the economy.
And then, things that really help medium and long-term job growth, like overhauling job training programs – both Democrats and Republican want to do it, figure out a better way to take the people who have been displaced by the slowdown in manufacturing or by globalization in general and get them into better jobs. That would be something that I think the parties could come together on and really help the economy.
MR. WILLIAMS: Let me ask you a question and ask you to weigh on this as well. So you mentioned these four factors. And there was lots of talk in the campaign about what the candidates could do to help the economy. But what can the president, or what can Congress, or – perish the thought – the president and Congress working together do to make any difference for those four areas?
MR. TANKERSLEY: Well, there’s a few things. The president is trying to accelerate the housing recovery even further by using the leverage that we have with the government basically underwriting most of the home lending market right now. He’s been thwarted by his own agencies, but he has a chance to appoint a new head of one of them. And if that happens –
MR. WILLIAMS: Which is?
MR. TANKERSLEY: The FHFA, and that would be a guy named Ed DeMarco who would be out and they would put someone in who would be more sympathetic to Obama’s housing policies. With Europe, I think the best thing that the president could do is put some pressure on the International Monetary Fund to write down or write off or suspend interest charges on Greek borrowing because if we can help Greece solve its problems, we can start a domino effect of positive things in Europe.
MR. WILLIAMS: Do you agree that there’s a lot the president can do improve the economy?
MR. BAKER: I think there are some things. And I think Jim knows much better than I do. I think there’s also a feeling in the White House though that they have put in the building blocks in place and can they get past this fiscal cliff moment. We’re on a track to a better four years anyway. When you heard during the campaign Mitt Romney promise 12 million new jobs, what you heard Obama say back is, we’re going to have 12 million new jobs anyway these next four years just based on where we are right now without even additional stimulus or additional X factors that would boost the economy on.
MR. WILLIAMS: We always talk about new cabinet secretaries. Would a change at the Treasury Department make much difference?
MR. BAKER: Well, everybody expects Tim Geithner to step down. He’s been there four years, pretty exhausted. The leading candidate seems to be Jack Lew, the White House chief of staff. Good relationship with the president right now, good relationships mostly on the Hill I think and so he’d have credibility there, but I don’t know how much the personnel matters.
MR. WILLIAMS: Molly, can Congress make much of a difference here in improving the economy, other than fixing the fiscal cliff problem?
MS. BALL: I mean, part of what Jim seems to be saying is that the economy is on not exactly a glide path but sort of already stumbling its way toward what needs to happen. And I always felt covering the campaign that that was sort of the dirty secret of both candidates’ rhetoric was that neither of them really had a concrete, achievable or constructive policy plan to move forward. It was really just sort of sit on your hands and hope things get better.
MR. WILLIAMS: All right. Thank you all very much. Thank you. That will have to wrap it up for tonight. We’re leaving a bit early because it’s Pledge Week. We like to think of it as giving you a chance to support your local PBS station, which in turn supports us.
So be sure to check out our “Webcast Extra” where we’ll talk more about Hillary Clinton’s last overseas trip alongside President Obama and what her future might look like. That’s at pbs.org/washingtonweek. I’m Pete Williams. Gwen Ifill will be back around the table next week on “Washington Week.” Good night.