MS. IFILL: A late night tax cut vote, a Senate showdown on earmarks, mixed grades on Afghanistan, a setback on healthcare and the death of a diplomat, tonight on “Washington Week.”

REP. JASON ALTMIRE (D-PA): On this vote, the yeas are 277, the nays are 148. The motion is adopted.

REP. JOHN BOEHNER (R-OH) [House Minority Leader]: If we’re serious about getting the economy moving again, we have to end all of the uncertainty coming out of Washington.

MS. IFILL: With the tax deal done, Republicans claim victory in the House and Democrats claim victory at the White House.

PRES. BARACK OBAMA: We signed this bill to make sure that people are seeing a bigger paycheck come January.

MS. IFILL: While Senate Republicans force Democrats to slice billions of dollars in pet projects from both parties out of a budget bill.

SEN. JOHN MCCAIN (R-AZ): The American people said enough with the spending. Enough with the pork barrel earmark spending.

MS. IFILL: But much remains to be completed.

SEN. HARRY REID (D-NV): I don’t think that’s really what the American people want to run out the clock. We are in session if necessary up to January 5th.

MS. IFILL: Even as the courts threaten to undercut the president’s signature healthcare law.

KEN CUCCINELLI [Attorney General of Virginia]: You have to stay within the boundaries of the Constitution.

MS. IFILL: Plus new scrutiny for the war effort in Afghanistan.

HILLARY CLINTON [Secretary of State]: There have been, there will continue to be obstacles and setbacks, but our conclusion is that our partnership is slowly but steadily improving.

MS. IFILL: How will the sudden death of Ambassador Richard Holbrooke change the diplomatic calculus?

RICHARD HOLBROOKE [Special Envoy to Afghanistan and Pakistan]: The American public should understand that this is not going to be solved overnight. It is going to be a difficult struggle.

MS. IFILL: Covering the week: Janet Hook of the Wall Street Journal, Pete Williams of NBC News, Martha Raddatz of ABC News, and Doyle McManus of the Los Angeles Times.

ANNOUNCER: Award winning reporting and analysis, covering history as it happens, live from our nation’s capital, this is “Washington Week with Gwen Ifill,” produced in association with National Journal.

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ANNOUNCER: Once again, live from Washington, moderator Gwen Ifill.

MS. IFILL: Good evening. Almost as if their coaches were about to be turned into pumpkins, the House voted to extend the expiring Bush era tax cuts at one minute before the stroke of midnight last night. Impending holiday deadlines focused the legislative mind in Washington. Remember the Christmas Eve healthcare vote? Well, this year is no different. So now, with any number of critical issues still hanging fire, every victory is one that can be universally claimed.

PRES. OBAMA: Candidly speaking, there are some elements of this legislation that I don’t like. There’s some elements that members of my party don’t like. There’s some elements that Republicans here today don’t like. That’s the nature of compromise.

REP. BOEHNER: We want to stop all of the tax hikes for at least the next two years, and secondly, we ought to have a funding bill through September 30th at 2008 levels before the stimulus and before the bailouts and all the other nonsense that’s gone on here.

MS. IFILL: All the other nonsense. You know, this time last week, Janet, we were talking about the liberal revolt on the House floor and even on the Senate floor. What happened?

MS. HOOK: Well, over the course of the last week, which was consumed by talk about this tax deal, two things happened -- at least two things happened among liberals. For a lot of liberals, they looked at the deal and found on closer inspection it wasn’t quite as bad as they thought it was at first. They found stuff to like in it. And the other liberals looked at it, hated it, fought it and found they were powerless to stop it. So the debate starts in the Senate and I think that’s where the sorting through process – people said, well, you know, let’s consider the alternative. And also, there was all this focus on stuff in the bill that Democrats hated. Well, there was also a lot of stuff in the bill that they liked: an extension of unemployment, insurance benefits and tax breaks that they probably wouldn’t have gotten any other way other than pairing it with a lot of things that the Republicans liked. So that’s what Obama was talking about. That’s a compromise.

MS. IFILL: But today when he was talking at the bill signing, it also sounded as if he had bought into a basic Republican tenet that these tax cuts could be stimulative and that’s something which he had resisted, at least tax cuts for the highest end.

MS. HOOK: Right. And that is probably the thing that infuriated a lot of liberals. And Democrats in general had been campaigning for a really long time and Obama made it central to his campaign against extending the tax cuts for the richest, the upper income brackets. And so that was bad enough. And then, you know, to add insult to injury, the deal included this estate tax deal that levied a tax on inheritances that was much higher than anybody had been talking about before. So that fury was somewhat quelled in the Senate, though, by a kind of pragmatic look and said, well, it could be worse next year. And so the Senate vote was like – what was it – 81 to 19. I mean, they don’t have votes like that in the Senate very often. So then it goes to the House and the liberals fought a lot harder there and it look a lot more Sturm und Drang to get it through. But, you know, in the end, there too they had practically a landslide roll call at midnight, as you said.

MR. MCMANUS: Janet, just a week ago it looked an awful lot though like those House liberals were at least going to insist on amending one part of it, I guess the estate tax part, to prove that they could amend it and send it over to the Senate. How come that went away?

MS. HOOK: Well, they actually did have a vote on the estate tax and it went down. And it was actually an amendment that had passed – an identical amendment had passed a year ago but I think at that point it was perceived – well, first of all, preceding that vote they’d had this monumental vote in the Senate so the pressure was on for them to move it along. And, frankly, people kind of saw the writing on the wall and a lot of people voted against the estate tax change. It would have imposed a higher rate than the bill from the Senate. They voted against it because they just wanted to get it over with.

MS. RADDATZ: Janet, one thing: I noticed today at that signing ceremony, two very prominent Democrats were not there: Nancy Pelosi, Harry Reid. What’s the story behind that?

MS. HOOK: That’s right. The two leaders of the House and Senate did not show up at the signing ceremony for a bill that was probably one of the biggest things that Obama’s done this year. And there’s not a lot of love for this deal and it was very interesting. When Nancy Pelosi gave her speech on the floor at the end of the House debate last night, she – it was an angry speech. She does not like this deal. She did say, I give Obama credit for the stuff that he got in there, you know, the unemployment – you know, the Democratic side of the ledger is what she talked about. But, you know, she wasn’t – this isn’t something she had her hand in. It wasn’t something she was proud of.

MR. WILLIAMS: As I watched this process, I wondered if part of what was going on here is that Congress is just sort of out of practice on compromising. Is that the case?

MS. IFILL: And if I could piggyback on that, on the Senate side, this earmarks debate, where they pull the budget bill off the floor and Republicans basically won without compromising to take – what – $8 billion in earmarks out of the bill?

MS. HOOK: Yes, that’s right. Well, compromise is kind of a habit that things have been so partisan there hasn’t been a lot of that going on. But earmarks have always been a big part of the way deals are cut. You know, you get your project. I get mine. But the midterm elections put such a cloud of scandal around earmarks that when Harry Reid tried to bring up this big spending bill, a lot of people – he thought he had the 60 votes to get it past the filibusters but the Republicans started going south, even though they had put in some of the earmarks. And so he had to pull down the bill and they’re going to do a funding bill that’s just much more kind of putting the government on autopilot.

MS. IFILL: And the government is not going to close down.

MS. HOOK: The government is not going to close down.

MS. IFILL: Okay. You never know. At the end of the year it’s always a question. Well, another domestic issue this week: a federal judge in Virginia dealt the first substantive blow to the Obama administration’s biggest achievement – it’s healthcare law. And the ruling, which concludes it is unconstitutional to force individual to purchase health insurance coverage, is just a start of a big legal debate. What was the judge’s reasoning? It was different from what other judges have said about the same kind of challenge.

MR. WILLIAMS: This was the third court case. The two had approved it. He said that this provision is unconstitutional. And here was his argument: he said the Commerce Clause gives Congress very broad power to regulate economic activity, but not economic inactivity. And he said the decision by someone not to buy health insurance is inactivity. You can’t drag them into the stream of commerce and then regulate them. Now he said that – therefore, you can’t compel people to buy insurance.

Now, the Obama administration had argued that that’s a false way to look at it, that there’s no such thing as someone who’s completely outside because if you choose not to buy insurance, you’re eventually going to get sick. You’re going to get hit by a bus, an anvil will fall on you, something, you’re going to need medical care. And you can’t stay outside. You will eventually be part of this, and therefore this is a false choice. But he rejected that argument.

Now, there was a fallback. The Obama administration had said, well, okay. It’s not really Commerce Clause power. It’s taxing power. And here they had a little stronger argument because Congress does have very broad power to tax almost anything. And the judge said, well, I agree with what the president said, initially when he was asked about this, it’s not a tax. He said, you know, even though they stuck it in the tax code, look at it – it’s really a penalty and not a tax. And by the way, Virginia had argued, how can you tell it’s not a tax? Because if everybody follows the law, it doesn’t raise any money at all. The tax was penalty. If you didn’t buy insurance, you had to pay the tax.

MS. RADDATZ: So it gets to the Supreme Court, how does the Supreme Court handle it? When might that happen?

MR. WILLIAMS: Well, as for when, I mean, in theory, if either party in one of these lawsuits – and there are two dozen of them – asked for expedited review, it could get it through the Appeals Court maybe in a year, maybe the Supreme Court, under the most optimistic scenario, would take it up in their term that begin next October, October of 2011. I think that’s theoretically possible, but not realistic. So we’re not looking at probably until the Supreme Court’s term that starts in the fall of 2012. As for –

MS. IFILL: It has all the formulas for something that ends up with the Supreme Court, lower courts --

MR. WILLIAMS: Yes. Well, I mean, there’s – look, there’s already a split. That’s the easiest way for the Supreme Court to say, we have to take this case because the lower courts are divided. They’re already divided. You have a division. And one judge in Virginia said it’s good and one judge said it’s not. So there’s already a division. And I guarantee you there will be a lot more. As for what the court will do, you know, this area of the law the court has been all over the place.

Under the Rehnquist court, when he was chief justice, they had a very narrow view of the Congress power under the Commerce Clause. Recently, this Supreme Court has taken a somewhat more generous view. But, you know, this has been one of the most litigated areas of the entire Constitution and it’s just very hard to tell what the Supreme Court would do.

MS. HOOK: You know, up on the Hill, Republicans were delighted with this ruling because they’ve been campaigning on the repeal and replace. They want to repeal the healthcare law and replace it with some other thing. I’m just wondering, do you see that this helps or hurts the kind of legislative and political cause on – (inaudible)?

MR. WILLIAMS: Well, it certainly gave that argument momentum. And, you know, before this even became a big issue, there were some law professors out there who were saying, this may be an issue. And I was astonished that no Republicans really picked up on that until very late in the debate. Orrin Hatch and a few others members brought it up. But even they, I think, didn’t think much of this argument. So if this decision has done nothing else legally, it’s legitimized this argument and given it a sort of Sunday clothes that it can walk around in for a while.

MR. MCMANUS: Pete, I gather that this decision doesn’t stop preparations for the healthcare program going forward. Some of those provisions have already kicked in and that they’re all – there’s still a bunch of other new cases pending that haven’t even reached this level. Are they being argued on the same ground and is there anything out there that might bring the machinery of government that’s putting these healthcare plans in place to a halt?

MR. WILLIAMS: The good news for the White House here is that the judge said, okay. I think this provision that says you have to buy insurance is unconstitutional. But I’m not going to do what Virginia asked me to do, which is to order it stopped.

MS. IFILL: Why didn’t he do that?

MR. WILLIAMS: He said, look, I could be wrong about this, and there’s plenty of time. There’s two or three years before this thing kicks in in 2014. There’s plenty of time to let it work through the courts, so there’s no need to do this. And, by the way, this turns out also to be very important. Virginia wanted the entire law struck down. He said, no. You could just saw this part of the law out and leave the rest of it intact. Now, many people would say that takes the engine of it away, the incentive for the insurance companies to agree.

MS. IFILL: That’s what the White House said actually.

MR. WILLIAMS: Right. Exactly. But I think the fact that he has done and sort of laid this marker down, other judges who may also agree with him that it’s unconstitutional may be hesitant to put a hold on it if he didn’t. Now, the other big case was argued just this week and that’s the one in Florida brought by 20 states, mostly all but one, Republican governors and attorneys general. It was argued this week and the judge there seems to think it’s unconstitutional as well.

MS. IFILL: So far we’ve seen a Republican judge rule against the law and two Democratic appointed judges ruled for the law. One has to just wonder to the degree that there’s partisan motivation for any of it?

MR. WILLIAMS: Well, I mean, judges always hate it when you bring that up. The very thought strikes them as horrid. But it’s certainly starting to look that way. And who knows? That could continue all the way to the Supreme Court.

MS. IFILL: Oh, great. I’ll get mail from judges now. This is good. Now we move on to foreign policy and a major new report card on the war effort in Afghanistan. Progress, according to the president and his defense secretary and his secretary of state, is fragile and reversible.

ROBERT GATES [Secretary of Defense]: Our goal isn’t to build a 21st century Afghanistan. Our goal is not a country that is free of corruption which would be unique in the entire region. What do we need to do along with our partners and the Afghans to turn back the Taliban’s military and violent capabilities to the degree that the Afghan government forces can deal with them.

MS. IFILL: But is this happening? Martha is just back from another of her reporting trips – sixth one this year?

MS. RADDATZ: Sixth one this year. Yes.

MS. IFILL: To the region. How does what we just heard Secretary Gates say and what the president has said, how does that square with what you saw?

MS. RADDATZ: They certainly are lowering the bar when you hear Secretary Gates.

MS. IFILL: Yes. It sounded like it.

MS. RADDATZ: I think it squares with what I saw in this sense. In the south, in Helmand province, in Kandahar province, things have improved because that’s where the bulk of the surge forces are. That’s where the bulk of the 30,000 additional troops that President Obama sent in there are. People are feeling better there. They feel more secure. In other parts of the country – and I spent a good deal of time in the eastern part of the country on the border – there’s some heavy fighting still going on there. And in the north and the west things have deteriorated. So I think the fear there is that some of the Taliban have squeezed into other areas that they’re getting out of the areas in the south.

MS. IFILL: Are you talking about Waziristan and the area along the Pakistan border?

MS. RADDATZ: Along the Pakistani border in the east of Afghanistan –

MS. IFILL: Right.

MS. RADDATZ: – along that border there’s some heavy, heavy fighting still going on. And some of those areas have deteriorated.

MS. IFILL: So what Pakistan does here is an important part of whether the strategy is working.

MS. RADDATZ: It’s such an important part. And I know they made a point of that at the White House in the Af-Pak review concentrates on Pakistan a lot. They are very serious about getting these safe havens cleaned up. I also went to the SWAT Valley in Pakistan. The Swat Valley two years ago when I was there was being overrun by the Taliban. It was an extremely dangerous place. This time the Pakistani militaries moved in. But basically what happens over there is the Pakistani military goes after the places that they feel are a threat to them. That’s not Waziristan. What they’re not doing is going after those places and going after al Qaeda in Waziristan and that is where the U.S. has not been as successful and still wants the Pakistanis to step up.

MR. WILLIAMS: Martha, I got the impression that one of the reason the fighting is so much worse in that area near the Pakistani border is that the Taliban in the past this time of year would go hightail it into Pakistan. And this year they’re not. They’re staying. Why is that? And what does that say about what they think the future is going to be?

MS. RADDATZ: Here’s sort of a simple answer: the weather is still pretty good over there. So usually in the winter time the fighting slows down and it hasn’t really slowed down this time. But there is free passage on that border. I mean, as we all know, you can’t really seal borders. And so they’re back and forth at that border. They have made progress. They’ve really made progress in some of those areas there but there’s still back and forth.

MS. HOOK: Based on what you saw and what’s in the report, what do you think this means for Obama’s plan to begin to draw down troops? I mean, it sounds like what you’re saying it the areas where we have a lot more troops things are better, so you draw them down. What’s –

MS. RADDATZ: As many troops as you have over there – and you have about 100,000 troops – you don’t have enough really to go into all these areas and that’s one of the problems. But I think what you will over the next four years – and the bottom line on this strategy is there are going to be four more years, that during those four years you’re going to see a significant drawdown back to probably where we were last year. I think it will start next year and I think what you’ll see next year in the July 2011 date is them saying, okay. We’re going to take out this many now, probably not a significant amount. We’re going to take out this many in six months, in other year, and by 2014 you’ll see how that drawdown happens. And, of course, it’s dependant on the Afghan security forces.

MR. MCMANUS: And that’s from 100,000 now to I guess about 65,000. Is that –

MS. RADDATZ: I don’t know the exact number. I don’t think you’ll see a lot in the 2011 but by 2014 they want to have all combat troops out. Now, remember, Iraq has allegedly all combat troops out, but there are 50,000 troops still there.

MS. IFILL: It sounds like a tug of war which is not going to be resolved anytime soon. Welcome back.

MS. RADDATZ: Thank you.

MS. IFILL: No one was more intimately involved in the stop and go process in Afghanistan, especially its nexus with Pakistan, than veteran diplomat Richard Holbrooke who passed away suddenly this week at the age of 69. Most reporters in Washington and most diplomats around the world had dealings with Holbrooke at one time or another. He was brash. He was brilliant. And he was often frustrated. Is that the case on his last mission as well, Doyle?

MR. MCMANUS: It was, Gwen. He was all of those things. The last extended conversation I had with him, he told me that this job was the most difficult one he had ever tried: repairing American relations with Pakistan –

MS. IFILL: And that’s saying something considering the jobs he had over his career.

MR. MCMANUS: Exactly, although with Richard Holbrooke, you don’t know whether he was saying it for a fact. Every mission was going to be the most difficult. But I think this one was. If you think of getting these countries that don’t deal with each other to deal with each other, marshaling the civilian side of the U.S. effort to match the efficacy of the military side. And he said he didn’t know if success was possible. And tragically he never lived to find out. But he was very good at what he was doing. He had an unusual range of talents for an American diplomat. I mean, there are lots of American diplomats who are terrific scholars of a region. There are lots of American diplomats who are very good negotiators. Holbrooke added a couple of things to that. He was a bureaucratic manipulator of enormous prowess. He was a collector of interesting people. He trained an awful lot of people in the Foreign Service. He was a politician. One of his accomplishments – he was most famous, of course, for the Bosnia peace agreement in 1995 when he took the warring leaders of that part of the world, basically locked them up on an air force base for weeks until they finally gave in to him.

MS. IFILL: In Dayton, Ohio. Yes.

MR. MCMANUS: In Dayton, Ohio. But another thing he did which many thought was impossible was he actually negotiated a settlement between the Congress and the United Nations on American dues at the U.N. and that required an ability to operate in Congress and American politics. And then finally, Richard Holbrooke was a great charmer, not just of politicians but of reporters. He spent lots of time with reporters. He was – he had a big ego. There are lots of people – this will shock you – in Washington who have a big ego. Not many wear their ego so openly as Holbrooke.

MS. RADDATZ: It’s refreshing though.

MS. IFILL: There’s something kind of appealing about that.

MR. MCMANUS: There was something actually charming about the transparency of it.

MS. RADDATZ: Yes. Yes.

MR. MCMANUS: And many of us dealt with it. But that actually got in the way of his career at a bunch of different times because he also had a capacity, partly through courting the media, to annoy enormously other people in the administrations he was in.

MR. WILLIAMS: But if you look at the sweep of his career, from Vietnam up until the present day, are there other people like Richard Holbrooke out there or have we seen the end of a breed here?

MR. MCMANUS: There are other American diplomats in this generation who you could certainly compare to Holbrooke in terms of range of experience and what they’ve been able to do. I’ll just name a couple. Ryan Crocker, who was the ambassador in Iraq. He’s now in academia. But one of the interesting things at that level is these guy often – as Holbrooke did – go out and then come back in high level jobs.

MS. RADDATZ: So you’re talking about people who can replace as well.

MR. MCMANUS: Well, these are people who can conceivably replace him. Chris Hill who was the ambassador in Baghdad, before that a North Korea negotiator. He has also retired. Interestingly enough, he was one of Holbrooke’s assistants at one point. But I think it is fair to say that Holbrooke was unique in his sense of drama and his willingness to act it out in public. I mean, there really isn’t anybody around who’s a lot like that.

MS. HOOK: Well, in terms of his impact on policy, I mean, did he leave his fingerprints anywhere in particular?

MR. MCMANUS: Yes. He did. He leaves a legacy in two senses. One, he did build a quite formidable team of experts in the State Department who are still there, still working on this, pulled a lot of the civilian side together. And he did put Pakistan front and center. He coined the term Af-Pak which he later had to drop. But he did quite an important role in shaping this policy.

MS. IFILL: And we send our condolences tonight to Kati Marton, his wife and his entire family. Thank you everyone. The conversation has to end here but it continues online on our “Washington Week Webcast Extra.” This week’s National Journal insider’s poll questions: will the tax bill make the president stronger or weaker. Check out the answers at Keep up with daily developments on the PBS NewsHour. And we’ll see you around the table next week on “Washington Week.” Good night.