MS. IFILL: Tonight, we look at the year just passed and how it will affect the year to come. Welcome to “Washington Week’s” year in review and preview. Turns out, elections do matter.

PRESIDENT BARACK OBAMA: There’s a reason we have two parties in this country. And both Democrats and Republicans have certain beliefs and certain principles that each feels cannot be compromised.

REP. JOHN BOEHNER (R-OH): On January 5th, the American people are going to watch their Congress do something differently.

MS. IFILL: The Democratic majority has eroded and the newcomers are about to arrive.

SEN. MARCO RUBIO (R-FL): If we can’t deal with the issues of earmarks, how are we going to deal with a thirteen and a half trillion dollars?

MS. IFILL: On tap, challenges to health care.

SEN. JOHN MCCAIN (R-AZ): We will stop the out of control spending and tax increases and repeal and replace ObamaCare.

MS. IFILL: Efforts to revive the economy.

REP. KEVIN MCCARTHY (R-CA): The land of opportunity has become the land of shrinking prosperity.

MS. IFILL: Promises to cut the budget deficit.

REP. MIKE PENCE (R-IN): The American people know we can’t borrow and spend and bail our way back to a growing country.

MS. IFILL: And as one combat mission winds down, another drags on.

SEC. ROBERT GATES: 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.

MS. IFILL: Who has the upper hand? We sort through it all with the reporters who covered the year. Michael Duffy of “Time” Magazine, Todd Purdum of “Vanity Fair,” Karen Tumulty of the “Washington Post,” and David Wessel of the “Wall Street Journal.”

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, from Washington, moderator Gwen Ifill.

MS. IFILL: Good evening. At year’s end, we can use this week between two holidays to take a deep breath. And after a year as eventful as 2010 and looking forward to one that promises to be at least as consequential, it helps to look back and forward, which is what we’ll do tonight. Remember Velma Hart? She’s the Obama supporter who told the president she’d become exhausted defending him, then she lost her job a few months later. In many ways, finding the best answer to her question and the remedy for her exhaustion defined the year in politics. The question becomes now looking back on it all, Karen, how did that shake out?

MS. TUMULTY: Well, I think it shook out as a pretty conventional midterm election. All year long, right up until Election Day, the Democrats kept telling us elections are really choices between two candidates and the Republicans kept saying no, this is going to be a referendum on the president. And that’s what midterms are for after presidential elections.

They are often the American public kind of putting its foot on the brake just a bit. And ultimately what happened was people expressed their disappointment that the economy had not improved as much as they had hoped. They expressed their frustration that they did not believe President Obama had put as much focus on improving the economy, their fears that the deficit was getting too big, that government was getting too big. And so they have now demanded that everyone sort of reorient themselves.

MS. IFILL: David, we heard so much about the bad economy. Yet at year’s end it felt like the stock market had rebounded, retail sales, Christmas sales had really bounced back. Have we turned a corner or is it too soon to say?

MR. WESSEL: I think we’ve turned a corner. The problem is that it’s better, but not good. So the good news is that the economy is growing again. You’re right, the stock markets up 10 percent this year. Employers are beginning to hire, and at this pace in 25 years from now we’ll be at full employment again. So the problem is the pace of the improvement is so slow that many Americans can be excused for saying, hey, I don’t think the recession’s over yet. And so it’s not surprising that those people are dissatisfied with the president and the Democrats. They would have turned on any incumbent party that was unable to deliver something better than they got.

MS. IFILL: In fact, if you listen to what even the victorious Republicans had to say after the election, they sounded like they’re aware that people are pretty unhappy with them as well.

MR. DUFFY: I think they behaved in a way after the election that was surprisingly, I think for some, modest, at least for a few days. They said we hear this. We recognize this is not exactly a referendum on our agenda. It’s just simply one against the president in many ways, or against the economy.

How long they remain modest is really a question. The thing that struck me about Ms. Hart’s comment at the beginning was that – she used the word exhaustion, which I thought was particularly tough and apt for both how people felt about the politics, which are enervating and depressing, and the economy, which has been so slow. That word was, I thought, particularly indicting for the whole country.

MS. IFILL: But it seems also that when you go back and you look at the year, which was a long year, you think about the things that actually did happen. Health care bill was passed, financial reform was passed. Even things that were incredibly unpopular like TARP and bailouts, actually a lot of that money now has been repaid. Was it a better year than we were able to see with our noses pressed to the glass?

MR. PURDUM: I think in a hindsight it will turn out to be a better looking year than we were able to see. Obviously part of what the Republicans were reacting to is they felt President Obama got too much done. It’s not that they thought he was doing nothing or being ineffective, he’s being punished in some ways for his very effectiveness and for getting these landmark pieces of legislation through. Even at the last minute, nobody thought he was going to get Don’t Ask, Don’t Tell really this year. And then the final cherry on the soda, the START treaty at the end of the lame duck session. We all thought the lame duck session was going to perhaps a waste of time and maybe not get anything done.

MR. DUFFY: I was going to say, one of the paradoxes probably of 2011 is that while there will be much less progress legislatively, the president may end up being more popular as a result of it.

MR. PURDUM: It’s easy to have a foil. It’s good to have a foil to play off of against. He’s been dealing for two years with a recalcitrant Democratic Congress of his own party with whom he’s often had very tense relations, but is supposed to be friendly with them because they’re all in the same party and he’s supposed to be able to get things done. So now if he’s dealing with a hostile House of Representatives, maybe it will be better for him.

MS. IFILL: Just listen for a second to something the president had to say at the yearend news conference which kind of sets the tone for what he thinks he wants to do.

PRES. OBAMA: My singular focus over the next two years is not rescuing the economy from potential disaster, but rather jumpstarting the economy so that we actually start making a dent in the unemployment rate.

MS. IFILL: Singular focus. You wrote today that the corporate tax cut is on his plate. How does that – how does that square with what he said about the unemployment rate?

MR. WESSEL: Well I think actually the president doesn’t really mean jumpstart the economy. We’ve been trying to jumpstart the economy for two years now with one after another of kind of putting the paddles on the chest and giving it a jumpstart. Most recent when the tax cut that Congress approved that surprised us, the payroll tax cut. I think what the president’s going to talk a lot about now is getting growth going again. He’s going to try to do things that make the economy better now, but really better in the future.

I think he’s looking through 2012. He’s thinking if we can get on a good trajectory it will be okay. The corporate tax reform that he’s thinking of proposing in the State of the Union, I think, is formed by two things. One is they really want to do something that appears to be pro-business. That seems to be the flavor of the month. But secondly, when they look at what they can do to help the economy, they’re limited to things that don’t cost anything. And the advantage of the corporate tax reform they’re thinking about is for every winner there’ll be a loser and it will be revenue neutral.

On the list of things that don’t cost anything, there are things like corporate tax reform and regulatory revamp and all that will come to the fore.

MS. IFILL: Things that don’t cost anything. That’s an effect, maybe, of the Tea Party’s success this year.

MS. TUMULTY: But if we could just go back to the revisionism in that comment of his. His suggestion was that his singular focus until now had been rescuing the economy from going over the edge. That really wasn’t. He took on health care, which I think most people in the White House would now say is perhaps a war of choice that he did not need to do. In the middle of the year, we had a gigantic oil spill in the middle of the Gulf of Mexico. There was a lot of stuff going on this year that were outside – some of it inside his control, some of it outside his control, but very distracting. And again, people got frustrated when they saw that the economy wasn’t being addressed I think with the kind of singular focus that they were hoping.

MR. DUFFY: I thought that the surprising thing about President Obama’s end of year press conference is when he said, “I don’t think either side has a monopoly on good ideas.” And to me that was the quotation that really sort of tees up both the promise and the limits of what might happen in 2011. He will have to contend with many more Republicans, many of them from the Tea Party movement both in the House and in the Senate who are not merely conservative Republicans, but a much more ‘take no prisoners, no surrender’ Republicans. And that will make the progress more difficult for him, certainly compared to what we have this year.

MS. IFILL: Which brings us back to what’s going to happen on the Hill as opposed to what will happen at the White House, which is it’s a new set of players and they’re talking almost exclusively about spending issues. How does the president begin to maneuver himself around that, or how do they maneuver themselves around him?

MR. PURDUM: Well, first of all, in three to six months if employment hasn’t improved, people are going to be saying to Speaker Boehner what he said all last year to President Obama, which is where are the jobs? So the pressure’s on then now to make a difference through policies, whether it’s spending cuts that restore confidence or continued tax reform. So far, except for people like Paul Ryan, the incoming chairman of the Budget Committee, who’s put this very ambitious roadmap out, the leadership of the Republican Party has been quite cautious about proposing any of the sort of spending cuts that would really make a meaningful difference in the deficit, unlike, say, David Cameron prime minster in Great Britain, where they have put forward a range of really transformative kinds of things about the British social welfare state. So I think, first of all, the thing to watch is how serious they are about real spending cuts. And there’s very little evidence to date that they’re that serious.

MS. TUMULTY: And we will get some really clear indications within the next six weeks. We will get them in the president’s State of the Union address. We will get them in his budget, which the White House announced is going to be about a week late. But that’s a document that in divided government you can almost guarantee the minute it gets to the Hill, it is going to be declared dead on arrival. But what you get out of the president’s budget is some sense of where he thinks he can hold the line, where he is going to draw the distinctions, and also a sense of what his priorities are going to be. It will start the argument.

MR. WESSEL: But I think the Republican leadership has quite a challenge. They do not have a unified caucus. They have people of very different views, very different backgrounds. Whole lot of members of the House who’ve never been in the House before. I think the reason they talk so much about cutting spending in general is that’s one of the few things they can really agree on. It will be interesting to see when the Korea-U.S. free trade agreement comes up, for instance, will the Republicans be for that or against it? There’s any number of issues that –

MR. PURDUM: Increase the debt ceiling.

MR. WESSEL: – the debt ceiling.

MS. TUMULTY: In March, the continuing resolution –

MR. WESSEL: They’re going to be tested as to whether they can look like they’re an organized political party.

MR. DUFFY: I was going to say that. I think – let’s not count the president out as a player in that. And that is he has the capacity, as Karen was hinting at, to surprise. He can surprise us in January at the State of the Union and come out for a complete freeze on federal spending. It could happen. Or even broader tax reform –

MS. IFILL: He’s talked about that before.

MR. DUFFY: He could say just freeze at 2006 levels. It was a huge budget. It’s like there’s plenty of money. But he could surprise a lot of people and really scramble the Republicans.

MS. IFILL: But I was interested in – Karen you said the term “wars of choice.” There were other wars of choice like – for the left there was a war of choice over gays in the military; he didn’t need to do that, except that he was under pressure from the left. And on the right, for Republicans, the war of choice was over earmarks, which in some cases was cutting off their own noses to spite their faces, both of them to satisfy people in their base. Are there other obvious wars of choice which stand to be waged before we get to job creation, or maybe hoping that the economy heals itself? That’s a tough one.

MR. WESSEL: I think – I’m not sure I quite agree the way you put it. I think the reason earmarks have become such a big deal is that there’s such a clear symbol of congressional inability to control spending. So they have great symbolic value beyond just their base.

I think, as Karen mentioned, the debt ceiling vote is a big one. Everybody knows the debt ceiling has to be lifted. The United States government is not going to default. But nobody wants to be the 51st vote in the Senate for that or whatever the – whatever – the 200-something vote in the House. So people will be using that as a bargaining. I think on the budget, the question will be, as Todd said, okay, Paul Ryan had this plan but he didn’t have to get anybody to vote for it. Now, he’s going to be chairman of the Budget Committee. Can he put a budget down that he can get a majority of Republicans to be for?

MR. DUFFY: I think the wars of choice for the Democrats are whether they come back and try to do the DREAM Act or something on immigration just to make it more difficult for the Republicans with that group of Hispanic voters. I think for Republicans the war of choice is do they really go through with repeal and replace health care reform?

MS. TUMULTY: Yes, it’s exactly –

MR. PURDUM: That’s a very interesting question. And then for President Obama – since the election, people have said he should do what President Clinton did, which is move to the center, triangulate, co-opt Republican ideas. And President Clinton did some of that. But we mustn’t forget that what he also did was hold the line on a couple of key things: Social Security, Medicare, other things. And he dared the Republicans in those two government shutdowns; he said, “I won’t accept the level of cuts you’re proposing.” And he won. He won unequivocally in those shutdowns by the end of the day. So the question is where is there a place that President Obama might draw a line like that? And I don’t think we know yet.

MS. IFILL: Does it matter at all who is the president’s right hand in all these debates? When you stop and think about it, it’s been quite the exodus from the West Wing, from Larry Summers to David Axelrod about to leave, to Rahm Emanuel running for mayor of Chicago and we can presume others at times. Does it matter who’s in there? Does it change?

MS. TUMULTY: I think that some of the key players – Pete Rouse, the new chief of staff at the White House, longtime Capitol Hill veteran, has very strong relationships with a lot of people on the Hill. But they are also going to have to reorient themselves so that they get things done in different ways. It has been until now getting things through a Democratic Congress. Just about everything was happening on the legislative playing field. Now, they’re going to have to learn how to do things through the executive agencies. And they are also going to have to learn how to do things by marshaling public opinion behind them.

So I think it is very likely that what you’re going to see is the president out in the country a lot more and also using the executive branch perhaps in ways that we haven’t seen before.

MS. IFILL: So if we saw the president in the last year push things through because he believed it was the right thing to do, like health care for instance, or even gays in the military, which – gays in the military is different because it actually had a lot of public support. But health care did not necessarily. You see a retrenchment from that this year?

MR. DUFFY: I certainly think that if they do something like a broader freeze in the budget or some kind of broad tax reform, whether – he’s going to be helped in that if he has a different set of advisors who at least think more moderately or are more concerned about recapturing those independent voters who he’d lost through this last election.

MR. WESSEL: I agree, but I think it’s not only policy. I was astounded when Dave Camp who’s the head of the Ways and Means Committee, said that he met Tim Geithner, the Treasury secretary, for the first time after the election. I think they did very little –

MS. IFILL: The incoming head of the Ways and Means.

MR. WESSEL: Yes, indeed, a Republican. They did very little outreach to Republicans. They’re paying a price for that. And the other is who would have thought that two years into the Obama presidency we’d be saying this man can get big bills through Congress, but he can’t communicate well.

MS. IFILL: I know.

MR. WESSEL: And I think that there will be a new emphasis on trying to tell the story. You hear from the policy people all the time saying, we need a better narrative. It’s as if they are saying, we’re not getting credit for what we’re doing. In the final two years of the presidency, they’re going to be talking about ways to do that. I’m sure.

MS. IFILL: Okay, so now I can break my rule, which was I was not going to talk about 2012 until 2011 was over.

MR. WESSEL: Almost.

MS. IFILL: So now – 2010 was over.

MR. DUFFY: 2011 hasn’t started –

MS. TUMULTY: I’ve already been to New Hampshire. (Laughter.)

MS. IFILL: So I start with you. People are setting the table for 2012.

MS. TUMULTY: Well, one thing that’s sort of interesting is that at this point in the last presidential cycle, almost every serious candidate already had operations on the ground, campaign teams being built. A lot of these Republicans are holding back. A lot of them are saying they won’t even announce until the spring. I think – and one of the main reasons is that everyone is watching to see what Sarah Palin does.

MR. DUFFY: The other reason is that so many of them already have TV shows of their own, whether it’s on Fox or on the Discovery Network. They already have a kind of different way of communicating their stories and their lines whether they’re running – whether it’s Mike Huckabee on his show or Sarah Palin with her Alaska wild series. There are lots of different ways being experimented here that we didn’t see a few years ago in terms of just getting yourself out there. Whether it’s a good thing or not is unclear.

MS. TUMULTY: But one thing that does appear possible is that the Republican primary, which so often in the past has been this kind of orderly coronation of the next guy standing in line. This time around it’s likely to be a lot longer, a lot messier, and there may be some openings in here for people that we’re not thinking of.

MR. WESSEL: Is that good for Obama or not?

MS. TUMULTY: It depends on, I think, whether – if in fact the problem for him two years from now is what it is now, which is bringing back independents. The Republican primary process may push the party to the right in ways that could make it more difficult for them in a general. And certainly that’s what the White House is hoping.

MS. IFILL: Does that leave Obama with a fairly clear prance to the Democratic nomination without any Democratic challenges?

MR. PURDUM: I don’t think he’ll get any kind of serious challenge from the left. At least, I really wouldn’t expect that. He’s really done what – in “The American President” there’s a great line where Michael J. Fox tells Michael Douglas, that high approval rating isn’t worth anything unless you take it for a spin every once in a while. And I think President Obama –

MS. IFILL: Go to fiction – (laughter).

MR. PURDUM: I think President Obama took his approval rating out for the biggest spin in modern American history and he got dinged up by it and he got a lot of achievements. And so I think now he’ll have to recalibrate and he’ll have to go back.

MS. TUMULTY: And his approval, by the way, is still higher than either of the two political parties.

MR. PURDUM: And it’s been quite steady at around 50 percent for the better part of 18 months.

MR. WESSEL: If the Republicans go to the right and Obama is still looking a little shaky, is there a chance that somebody comes through with a third party this time for real?

MS. IFILL: That’s a question. Is there really – we love to talk about it. We love to talk about broker conventions and third parties.

MR. DUFFY: Maybe the way to answer it is to say that part of the Tea Party that’s worth watching this year, I think isn’t actually the one that comes to Washington, though that will be complicated and messy for the Republican Party – the conventional Republican Party. What’s happening is already we saw races last year around the country where there were three, four, five tea party candidates running for House , Senate –House primaries. We’re seeing already two and three Tea Party’s candidates run for city council races in places like Nashville and suburbs of St. Louis. Maybe what’s going to happen at the Tea Party level is going to happen in 2011 at the local level, where they just continue to push forward into the Republican Party.

MS. TUMULTY: They see their big push is going to be school boards.

MS. IFILL: So we spend all our time watching Sarah Palin, we’re missing the story perhaps.


MS. IFILL: Again. (Laughter.) Who can look away?

So let’s talk a little bit about leadership. So American public opinion is what it is, which is sometimes fickle. We think we’re following what it is Americans say they want, and then it turns out they are making other demands. So if you’re a leader and you’re trying to put your footprint on how to control, which is really all this is about for the next year, what do you pick? What is leadership? Who is a leader going into this? And not just party leadership.

MR. DUFFY: I think President Obama’s going to move, as David was saying from running in 2008, where it was kind of about him – a new generation, I’m a young guy, I’m the first African-American; I have a whole different kind of message than – to being about his record.

MS. IFILL: The hopey-changey.

MR. DUFFY: Right. It’s going to be less about him, I would think, his leadership stamp will change from one that’s sort of about me or about Obama to about missions defined, missions accomplished. That’s kind of more conventional.

MS. IFILL: If you’re John Boehner, then, what is your leadership –

MR. PURDUM: Well, he keeps saying it’s time to have an adult conversation with the American public about this tricky, complicated insoluble issues, and so far he’s said that a lot and there hasn’t been so much conversation. But I do think he’s sincere in his realization that their majority will be transitory and brief if they don’t have real accomplishments, too. And it remains to be defined what those accomplishments are, but I don’t think they believe they can just continue to be the party of no for the next two years.

MS. TUMULTY: Although his problem may be Mitch McConnell, who does continue to be the party of no. He did not put forward an agenda in this election. He said “we are running as a brake on Barack Obama.”

MS. IFILL: And proved it with every single vote that he cast in this lame duck session.

MR. WESSEL: I think it goes beyond the politicians. I think in general, there’s a loss of confidence in institutions and leaders, and people want something different. They want some contrition. They’re tired of these people saying, it wasn’t my fault. And they want to see somebody who feels – they feel has learned the lesson. So I think in both parties, people will be looking to see did they learn something, are they going to do business differently? And that goes doubly for the business leadership. And people really think American business, particularly Wall Street, let us down. And to the extent to which they think they’re going back to business as usual, that’s going to feed a very populist anger. So I think they really are looking for some signs that our leadership learned something from this economic disaster and not just rushing back and pretend like nothing big happened.

MS. IFILL: To the extent they’re looking at Washington at all.

MR. DUFFY: Right. Karen and I had these long conversations about how we’re in a particularly pendular era, where if you don’t perform, if you don’t get results, we’re going to kick you out. It’s happened two cycles in a row. It could happen a third time.

MS. TUMULTY: Three cycles in a row. Three cycles in four years.

MR. WESSEL: And it happened to some extent to CEOs, the only difference is they get a lot of money when they’re kicked out.

MS. IFILL: So one final thought.

MR. PURDUM: The last time we saw cycles like these really was in the immediate post-World War II period, where between 1946 and 1954, the Congress changed hands repeatedly and it was in the middle of the Korean War, economic dislocation, all kinds of tough times, not unlike our own situation.

MS. IFILL: Well, strap on to the trapeze, we’re going to be here with you. Thank you, everyone. We didn’t even begin to get everything here, but the conversation continues online on our “Washington Week” Webcast Extra. Check us out at Perhaps I’ll get everybody to even make predictions, or perhaps not. Congress is back next week. Keep track of daily developments on the PBS “NewsHour,” and for our fans in Los Angeles and throughout Southern California, beginning next week, you’ll be able to find “Washington Week” on KOCE Channel 50, same time, 8:00 P.M. Pacific, different place on the dial. Reset your DVRs right now.

We’ll see you and everyone else around the table again next week, on “Washington Week.” Happy New Year, everybody. And good night.