Friday, March 21, 2008

MS. IFILL: Big debates over big issues that could have a direct effect on your life, tonight on "Washington Week." Fasten your seat belts: high gas prices, collapsing credit, and big Wall Street bailouts.

MAN ON THE STREET: Everybody is watching the price of gas. Nobody is talking about the price of a gallon of milk. I got two kids and a gallon of milk is almost $5.

PRES. GEORGE W. BUSH: In the long run our economy is going to be fine. Right now we are dealing with a difficult situation.

MS. IFILL: The nation's economy is rocking and rolling, but not in a good way. Who pays the price? Sooner or later the presidential candidates will have to deal with all that, but first they've got an election to win. Barack Obama spent the week wading in and through one of the nation's most confused and painful debates - race.

SEN. BARACK OBAMA (D-IL): The anger is real. It is powerful. And to simply wish it away, to condemn it without understanding its roots only serves to widen the chasm of misunderstanding that exists between the races.

MS. IFILL: Did Obama manage to change the subject from the topic of his controversial pastor? Can he keep his critics at bay? And will a last-minute Bill Richardson endorsement help? For Hillary Clinton the answer to those questions may come in Michigan and Florida.

SEN. HILLARY CLINTON (D-NY): We won't achieve universal health care. We won't end the housing crisis and get the economy moving again unless we win in Michigan and Florida in November.

MS. IFILL: The Democratic primary by the numbers.

And at the Supreme Court, gun control front and center. Is an outright weapons ban constitutional? The arguments pro and con. Covering the stories this week, David Wessel of "The Wall Street Journal," John Harris of Politico, Alexis Simendinger of "National Journal," and Linda Greenhouse of "The New York Times."

ANNOUNCER: Celebrating 40 years of journalistic excellence, live from our nation's capital, this is "Washington Week" with Gwen Ifill, produced in association with "National Journal."

ANNOUNCER: Once again, moderator Gwen Ifill.

MS. IFILL: Good evening. Nobody in the administration may want to use the word "recession," but for many Americans, that's just semantics. In the metrics of their lives, the bad news is pretty clear: everything costs more and what doesn't seem pretty insecure. It was hard to ignore this week's headlines as the Federal Reserve came to the rescue not once, but twice with interest rate cuts and bank bailouts. The Bear Stearns collapse sobered even Wall Street's most steadfast optimists. But there are at least two optimists left, President Bush and Treasury Secretary Henry Paulson.

SEC. HENRY PAULSON: We place a high priority on the orderliness of our financial markets. Bear Stearns had a liquidity crisis and so we felt it was very important that this be resolved as a way to minimize impact on our economy.

MS. IFILL: These things often need translation, of course, and fortunately we have David Wessel here to do it for us. So should the average Joe taxpayer, homeowner, you name it - should they be very afraid, David?

MR. WESSEL: Well, certainly be afraid. I think, Hank Paulson and Ben Bernanke, the Fed chairman, are pretty afraid. What the treasury secretary was saying is that if the financial system implodes - if a big investment bank like Bear Stearns had gone under, the web of securities and deals that they have made with other people would likely have pulled other people under. And when that happens, it's not bad just for the people who work on Wall Street. It's bad for the people who rely on credit, and that's most of us, whether its student loans or the loans that your employer gets to buy a new machine. So what the treasury secretary was saying is absolutely true - that if you don't have a strong financial system, it's very hard to have a strong economy.

The question is, if what they're trying to do is avoid a remake of the Great Depression, which unfortunately is not completely out of the question anymore, which is a little frightening, what can they do?

MS. IFILL: This is the biggest rescue we've seen since the Great Depression that most people weren't alive for.

MR. WESSEL: This is the most pervasive financial crisis in a generation. And there are a couple of big issues. One is - and they've done a lot. They have done a fiscal stimulus package with - in record speed, in a town where partisan agreement has been pretty scarce. The Fed has cut interest rates two full percentage points since January and they've crossed lines that they haven't crossed since the Great Depression. The Fed is lending money to firms like Bear Stearns, which it previously did not do.

The question is can they do enough to keep the banking system from shrinking? If all the banks try and shrink and they don't lend money - credit is the lifeblood of the economy - the economy starves. And is there anything they can do to cushion the blow of these falling house prices, which is the ultimate cause of this. Falling house prices are depressing consumer spending, making people anxious, and because there're so many securities built on house prices, they're pulling them down, too.

So there's a lot of substance here and then of course there's the politics. It's very hard, after Bear Stearns, for people in Washington to say to their constituents, "we had to bail out Wall Street, but I'm sorry, there's nothing we can do for you. Your house is under water." And so I think the pressure on them to do something now on housing directly for the homeowners is just almost insurmountable.

MS. SIMENDINGER: David, Ben Bernanke, the chairman of the Federal Reserve, got a lot of credit for being innovative and swift. How has he changed through this first - I guess, first crisis?

MR. WESSEL: Well, it's interesting. This is his second year in office. His first year was devoted to being the un-Greenspan. He wanted a very democratic policy committee. Everybody could speak. They'd issue consensus statements. They were going to have this system of targeting inflation and it would all be transparent. The crisis hit and he has learned on the job that there's a reason that committees have chairmen and at times like this you need to speak with one voice. And we're actually pretty lucky. We got a guy who is chairman of the Federal Reserve whose entire academic career was spent trying to figure out how this financial panic led to the Great Depression, and he's being very creative and aggressive.

MR. HARRIS: Let me ask you, as most of the people managing this crisis are free-market conservatives. Is there any idea that's governing this or does philosophy fly out the window when you're in a crisis and they're just trying to put their holes in the dike wherever they can?

MR. WESSEL: One of my colleagues says "there are no libertarians in financial crises" and he was corrected by saying, "there are no libertarians in office in financial crises." Mr. Bernanke is not ideological. I think he's very pragmatic and he's shown that. I think there has been some resistance in the Bush administration, and for some good reason, as to not want to bail out people who made foolish mistakes and then encourage people to make foolish mistakes in the future. But I think ideology is going by the boards and now it's like can we prevent some kind of serious economic catastrophe?

MS. GREENHOUSE: So, David, if they do decide to bite the bullet and say we have to do something for the consumer, we have to do something for housing, what are the range of options that are realistic or might actually work?

MR. WESSEL: Well, one thing is clear is that things that used to be seen as radical are now on the table. They could buy up mortgages at less than face value. They could provide aid directly to banks in order to shore up their capital. There's actually a lot of stuff being talked about now.

MS. IFILL: Okay, well thank you.

The political campaign of course, careened all over the place this week from high-minded dissertation about race in America to potentially low-minded snooping in passport files. On the day before he delivered his major address on race, I got to ask Barack Obama whether it was inevitable that racial politics would roil this campaign.

SEN. OBAMA: I'm not sure if it was inevitable. I think it would have been naïve for me to think that I could run and end up with quasi-frontrunner status in a presidential election as potentially the first African-American president and that issues of race wouldn't come up any more than Senator Clinton could expect that gender issues might not come up.

MS. IFILL: In his speech, Obama threw down the gauntlet to the nation at large arguing that racial resentment often goes both ways.

SEN. OBAMA: Like the anger within the black community, these resentments aren't always expressed in polite company, but they have helped shape the political landscape for at least a generation. Anger over welfare and affirmative action helped forge the Reagan coalition. Politicians routinely exploited fears of crime for their own electoral ends.

MS. IFILL: John, I was in the room for that speech in Philadelphia and I remember at the time thinking he's trying to thread a pretty tricky needle here. Did he pull it off?

MR. HARRIS: Well, he certainly did, Gwen, with one of his audiences. Liberal elites loved the speech. Most liberal media commentators thought it was a brilliant address. A lot of Democrats, including, as we saw with Governor Richardson, Democratic superdelegates, thought the speech was an impressive statement.

I sometimes as a reporter think - you know, you hear, what's this Obama phenomenon really all about? What is all the shouting about and is it for real? This speech reminded us what this guy has some very special (moves ?). What does a good politician do - somebody like Obama versus a more average politician? First off, you take a big difficult subject and you talk about it in intimate, conversational tones. It seemed to me also he gave a speech that sounded like a sermon, but in fact it was intimately political. There were all sorts of different groups that he was touching and reassuring in that speech - a very political speech. And finally, you take a situation that looks at first like a political disaster and turn it into a plus. Pop quiz here, what recent American politician does that remind you of?

MS. IFILL: Bill Clinton. Altogether now.

MR. HARRIS: Exactly. So it clearly seemed to elevate him, at least in the minds of Democrats. He took a crisis with this Reverend Wright controversy and turned it into an opportunity.

MS. SIMENDINGER: Okay so, John, what about the other element of the audience listening to it? I heard Rush Limbaugh and conservative radio right afterwards. What was their take?

MR. HARRIS: Well, of course, Rush Limbaugh and conservatives didn't like it. To me, the question of whether the speech was a success or not - and we simply don't know the answer, we will find out - is how did Joe Sixpack react to it, not Rush Limbaugh, but white and in particular white lower and lower middle class Democrats, ethnic voters. It's not clear that they had the same swooning reaction to the speech that a lot of commentators did. My colleague, Carrie Budoff Brown at Politico, went into ethnic Democratic neighborhoods in Philadelphia afterwards. She found out lots of people knew about the speech. They knew about the Reverend Wright controversy. They were much more concerned about Reverend Wright's remarks than they were how Obama tried to explain them away.

MR. WESSEL: Let me ask you a question, Gwen. You're the daughter of a preacher.

MS. IFILL: As it happens.

MR. WESSEL: And one of these things is - this offers us white people a window into what's being said in black churches, and not only black poor people churches but middle class churches. And is - what did we learn from this? What should white people learn from this about what's going on -

MS. IFILL: I'll be the guide for all the white people in the world - but here's the thing really, which is that - and Obama said this, which is that Sunday mornings are the most segregated hour of the week, and it's true: we all worship separately and therefore we don't understand the way we speak to each other, the grievances which are aired in these ways. I think one of the most interesting things about this speech, the effort he made was to reach beyond that and to try to explain both sides to each other, which seemed to be a breathtaking and not necessarily successful effort.

MR. HARRIS: Well, I thought it was quite powerful, but the reason I have questions about the long-term impact of this speech is that I believe Obama was making headway with a lot of white independent, even conservative voters because they thought if we elect president Obama, we can be done talking about race. That will prove we've moved beyond history. We're no longer a racist country and we're going to basically end this long, agonized conversation about race. And in fact what it says and what Obama was saying is "Look, no, we need to discuss race more. We need to put this further on the table." And we'll see how people react to that - to that challenge that he made.

MS. GREENHOUSE: John, so maybe what you're saying is Obama has two challenges and they might be actually working at cross-purposes. Success in one might not be so successful in the other. He's got to win the Democratic nomination.

MR. HARRIS: Right.

MS. GREENHOUSE: He's got to assuage concerns among Democrats. And then he's got to win - if he does that, he's got to win the general election. So that's a dilemma, right? He's got to use one - he's trying to use - find a discourse that will work on both halves of that and is a possible - is that possible?

MR. HARRIS: Well, I think you've described it exactly. He certainly helped himself with the speech, given the dire circumstances he was in with the Wright controversy. I'm not sure he's helped himself in the general election.

MS. IFILL: I do want to speak to what happened today with Bill Richardson, who of course managed to give him a nice little Easter gift at the end of the week. Let's listen.

GOV. BILL RISHARDSON (D-NM): It is time, however, for Democrats to stop fighting amongst ourselves and prepare - (applause) - and prepare for the tough fight we will have against John McCain in the fall.

MS. IFILL: Now, the reason why - one of the reasons why that Richardson endorsement was so important is because obviously he was a superdelegate who's trying to send a signal that while Obama was struggling with the week's good and the bad news, that Hillary Clinton was working on another front trying to prove that she, not Obama, is the most electable candidate in the fall. Bill Richardson put a little poke into that. So that contention hinges from now on what happens in two states where the votes so far have not been counted, Michigan and Florida.

SEN. CLINTON: Senator Obama speaks passionately on the campaign trail about empowering the American people. Today, I'm urging him to match those words with actions to make sure that the people of Michigan and Florida have a voice and a vote in this election.

MS. IFILL: What we learned this week, Alexis, is neither state is really willing to hold a revote no matter who's paying for it in order to make this happen - what she was calling for. So is there a solution anywhere in this?

MS. SIMENDINGER: Well, one of the things that happened when this went off the cliff this week and it seemed like actually having do-over was not going to happen is that people went back to the drawing board in both Florida and Michigan desperately trying to look for some alternatives. Now it looks more and more like the alternatives might actually be proportional splitting of what actually occurred in January with the voting and maybe kicking it to the DNC - the Democratic National Committee.

There are still some threads of hope that maybe in each state there might be an effort to have another vote, but it seems incredibly remote. So the idea now is are there some ways in which Florida, for instance, can look at the way both candidates were on the ballot, look at the results on January, 29th, do a proportional kind of split. That's being talked about. Michigan maybe going back to a split that's 50-50, but the whole point is no matter what ends up happening, however the state parties duke it out in the DNC, the two candidates need to agree and what we saw this week is that there was one candidate who was very, very eager - Senator Clinton - to have a do-over and one candidate who felt she's the one who needs it most, why should I help her? And Senator Obama just simply said I'll abide by whatever the DNC decides to do and just hope to slow-walk it out to the point that his nomination seems almost inevitable.

MS. GREENHOUSE: So this transcends Pennsylvania. How much - how much of this could change for Hillary if -

MS. SIMENDINGER: Well, Senator Clinton, if she were to try to eke it out, eke out a nomination by trying to catch up within 30 or so pledged delegates, she was hoping definitely to have Michigan and Florida in her camp. She is now turning to Pennsylvania, but even with the math left in the 10 contests remaining, she is unlikely to be able to catch up or exceed what Senator Obama has ratcheted up. She might come closer in the popular vote. That's another option she's trying to make. But primarily what she's left with now is appealing to the superdelegates and trying to make some persuasive case to them, as she was already doing in reaction to Senator Obama's speech, "look, I'm the more viable candidate in the general election."

MR. HARRIS: And thus contradicting her soundbite right there that the will of the voters should be absolute.

MS. IFILL: It depends on what you mean by "will of the voters."

MR. HARRIS: Exactly, but it seems like she's almost counting on a sort of mysticism, as the - the miracle happening. I can't get anybody on the Clinton campaign to actually walk me through how will this happen, under what scenario does the Democratic Party say "Barack Obama, an African-American, and with the backing of the most reliable constituency in the Democratic Party has more votes, but we're going to give it to someone else." How does that happen?

MS. SIMENDINGER: Well, one of the things that I thought we heard from Governor Richardson today was a discussion about how it is that this needs to be pulled together and that Senator Obama has the momentum and the support of superdelegates. He was speaking as a superdelegate who was inspired by Senator Obama to get off the fence and support him. And what Senator Obama is hoping is that he'll be able to do that more and more and more and that it will look inevitable for him by the time the contests are done in June. And then it will look more petulant and petty for her to continue to keep chipping away at trying to litigate this to the superdelegates. And at some point, the superdelegates are going to have to say enough is enough.

MR. WESSEL: Is there anybody with stature in the Democratic Party who can bring these two candidates together and say we've got to settle this?

MS. IFILL: It's a question we ask every week to a different reporter at this table and maybe you have the answer.

MS. SIMENDINGER: Well, one of the things that has come up is are there some graybeards out there who have not declared, like an Al Gore? Al Gore has, as you've noticed, been reticent. He has not actually declared. I know that Howard Dean, the chairman of the Democratic National Committee, has talked to the candidates, has talked to Al Gore, has talked to anybody out there who he thinks potentially would have sway with the Democratic Party. All those are quiet, private talks. People complain that Howard Dean doesn't look like he's actually in this fight, but what I hear is that he is - that the problem for the DNC is, and this is the phrase you keep hearing, you can't make people do anything. You can't make them agree.

MS. IFILL: Okay. Well, they don't want to have a fight all summer. We'll cover it all summer.

Let's move on to the Supreme Court where the nation's toughest gun control law came in for some scrutiny this week. Does the District of Columbia's 32-year-old ban pass constitutional muster? The arguments played out this week and Linda Greenhouse was there. What did the justices hear in these arguments, Linda?

MS. GREENHOUSE: Well, this was a very unusual, fascinating moment because the nine current justices are doing something you rarely see them do, which is kind of having to go back to basics and make up constitutional law. There's very little law on this now. You're going to get pushback from viewers because everybody thinks they know what the Second Amendment means. We know what the Second Amendment says. I think I can do this by heart, but I wrote it down just in case. "A well-regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed." Is that clear?

MS. IFILL: What is the militia and who are the people?

MS. GREENHOUSE: Exactly. So this was really a back-to-basics argument. There are two things the court has to do in this case. One is does the Second Amendment convey an individual right to own a gun for personal use not in connection with service in a militia? That's the kind of threshold question. If they get beyond that, they then have to look at the District of Columbia law or any other law that comes down the pike and say, okay, you have a right. We have lots of rights. We have a right to free speech. It doesn't mean you can libel somebody or perjure yourself. Every constitutional right that we have comes bounded by restrictions. And so the secondary and I think the key question here is what kinds of restrictions and how do we judge them?

MR. HARRIS: One thing I was curious about this, the District of Columbia is a liberal jurisdiction. Probably 80-90 percent of the people would want this bill. But why would the Supreme Court wade into this? There wasn't, at least in the District, some big question that was yearning to be decided. It didn't seem like.

MS. GREENHOUSE: Well, what happened was a libertarian lawyer backed by the libertarian - distinguished libertarian think tank, the Cato Institute, brought a lawsuit - rounded up some plaintiffs, recruited plaintiffs, brought a lawsuit, and the court of appeals here did something extremely unusual. Wrote a sweeping opinion that said there is an individual right and any infringement on that right shall be judged by the strictest constitutional standard. And that scared even some lawyers in the Bush administration who said by that standard, even the rather modest federal restrictions on gun ownership are in peril. And that got them off to the races. And so when the District brought its Supreme Court appeal back in the fall, the court granted it.

MR. WESSEL: So when you sit there in the court, which way are they likely to go, do you think?

MS. GREENHOUSE: Well, I think there was a general consensus among folks who heard the argument - and of course the audio was made available and the transcript is available so people can judge for themselves - general consensus that the court - at least five members of the court are quite likely to find that there is an individual right. As to where they go from there, what standard they use to judge infringements on that right, is much more of a guessing game. And that's really where the rubber meets the road, as often happens in constitutional cases. It's really - it's really the details.

MR. HARRIS: Would they be keeping themselves busy for years if they decide there's that right and then trying to decide where the right begins and -

MS. GREENHOUSE: Well, that was -Justice Breyer asked that question. Justice Breyer said to the lawyer for the plaintiffs, do we really want judges from now until the cows come home, not - he speaks more eloquently than that, to have to look at every single gun law in the country and evaluate it? Don't we want to leave this - leave some play in the joints for local control? Local control used to be a good slogan for - on the conservative side. So that is part of the issue.

MS. SIMENDINGER: In truth, is that the practical application? If I'm sitting around in my urban area or my rural area and I'm thinking how is this going to affect me, is that what's going to happen as a result of this?

MS. GREENHOUSE: Well, if the court finds there's an individual right, then certainly plaintiffs all over the country will go to court and test the boundaries of that right. And we'll have a very interesting - we'll take it out of the legislature and put it in the courts and we'll have that conversation.

MS. IFILL: There was one - briefly, one last thing. There wasn't necessarily complete agreement within the Bush administration about how to approach this.

MS. GREENHOUSE: Well, that was very interesting. Paul Clement, who's the solicitor general, went up and made a very nuanced argument that there is an individual right, but don't go too far. And Dick Cheney - Vice President Cheney - didn't think that was quite good enough, and so he signed on to a congressional brief that took a much harder pro-gun ownership line.

MS. IFILL: You don't get to see that a lot, disagreement about issues like this especially. So we'll be watching for that - for those decisions. Thank you, everyone. Keep track of daily developments on "The NewsHour with Jim Lehrer." And we will see you next week right here on "Washington Week." Have a happy and blessed Easter. Good night.