MS. IFILL: Democracy’s tests on the streets of Egypt, where the government of Hosni Mubarak is under fire, and in the halls of Congress, where the president defends the State of the Union, tonight, on “Washington Week.”

SECRETARY OF STATE HILLARY CLINTON: The Egyptian government needs to engage immediately with the Egyptian people.

MS. IFILL: But that’s not what’s been happening this week. Thousands took to the streets, challenging an old, staunch U.S. ally. That foreign policy test joins President Obama’s domestic policy tests.

PRESIDENT BARACK OBAMA: We need to out-innovate, out-educate, and out-build the rest of the world. (Applause.) We need to make America the best place on earth to do business.

MS. IFILL: Pro-business, but also pro-health care, and with fresh promises to tackle immigration reform and roll back Bush tax cuts.

PRES. OBAMA: Before we take money away from our schools, scholarships away from our students, we should ask millionaires to give up their tax break.

MS. IFILL: Lawmakers sitting side by side, across party lines, were polite in the room, but not necessarily in agreement afterwards.

SEN. JOHN CORNYN (R-OK): Unfortunately the president sent a very mixed message last night as far as I’m concerned.

REP. ERIC CANTOR (R-VA): Using the word “invest” in this town means through the prism of the federal government, to me means more spending.

MS. IFILL: We explore the State of the Union here and abroad Nancy Youssef of McClatchy Newspapers, Jackie Calmes of the “New York Times,” Susan Davis of “National Journal” and John Dickerson of “Slate” Magazine and CBS News.

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.”

(Station announcements.)

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

MS. IFILL: Good evening. We begin tonight with the dramatic events in Egypt and the ramifications they may have for U.S. policy in the region. The White House spokesman called the protests “a very fluid and dynamic situation.” That proved true late today, early morning Cairo time, when President Mubarak said his cabinet would resign, but he would not.

PRESIDENT HOSNI MUBARAK: (Translated.) There’s a fine line that separates freedom and chaos. I’m absolutely on the side of freedom of each citizen and expressing our opinions, and at the same time I am on the side of the security of Egypt and I would not let anything dangerous happen that would threaten the peace and the law and the future of the country.

MS. IFILL: Presidents Obama and Mubarak spoke right after that. And then the president made his own statement at the White House.

PRES. OBAMA: I told him he has a responsibility to give meaning to those words, to take concrete steps and actions that deliver on that promise. Violence will not address the grievances of the Egyptian people, and suppressing ideas never succeeds in making them go away. When I was in Cairo, shortly after I was elected president, I said that all governments must maintain power through consent, not coercion. That is the single standard by which the people of Egypt will achieve the future they deserve.

MS. IFILL: Now, for most Americans this was all brand-new. Where did these protests spring from, Nancy? And did the United States see them coming?

MS. YOUSSEF: Yes and no. In a way they were 30 years in the making – all of Mubarak’s rule. There’s been a greater disparity between rich and poor in that time. There’s been more frustration. You’ve got a whole youthful population that can’t support itself – can go to school, can do good things, and yet has no opportunity, and the prospect of looking at 60 years of that. You have a country where 50 percent of the people live under the poverty line, which by the World Bank standards are $2 a day. So the seeds were there and were really growing year by year.

What surprised the White House was the pace at which it happened. And that was really, I think, drawn out by Tunisia. That is, Tuesday, when we started seeing these protests, they were small and they started to die down Wednesday. But today as people gathered for the first time at Friday prayers and heard their clerics telling them to go out and fight for this country, people saw the first opportunity that they’d ever seen in their lives in many cases to maybe bring about change.

MS. IFILL: Watching the way the administration grappled with this, from Hillary Clinton’s statements earlier in the week, to Joe Biden yesterday, to the president today, it seems as if they couldn’t quite find their footing, especially since Hosni Mubarak is such a key ally for them in that region.

MS. YOUSSEF: That’s right. They’re trying to walk a very thin line. On one hand, this is an administration that’s promoted democracy and popular movements and for real grassroots movement to happen in countries, and at the same time they’ve depended on Egypt heavily as an ally, particularly in the Middle East peace process. And so how do you support people who might lead to the removal of a very key ally and in fact put in someone who would be a foe to your goals, you being the United States?

MR. DICKERSON: Nancy, what’s the makeup of this movement? You mentioned at Friday prayers they heard – people hearing from their clerics, but was that – is that the sum total, is this a religious-led protest in the street or are there other things motivating people?

MS. YOUSSEF: It’s a great question because the Muslim Brotherhood, which is the largest sort of organized opposition group that we have in Egypt really didn’t come out until recently for this movement, so this didn’t seem to be as much a religiously driven movement.

I think more than anything it was a youth driven movement. Earlier in the week, before Facebook and Twitter and the internet and the cell phone service was cut off, people were reaching out to each other and encouraging them to get on the streets. But these were young people, people under 30, people who’ve only known the Hosni Mubarak regime and the prospects of his son, Gamal, taking over. So I think it’s fair to say it’s a mix, but really primarily a youthful one.

MS. IFILL: I just think it’s important to point out that your family is from Egypt and when you say “we,” that’s what you are talking about.

MS. YOUSSEF: I’m sorry. That’s right. My parents are both Egyptian and I’ve been going to Egypt my whole life. And I was just there in May. And I was struck by the tension that you feel there. It’s just right below the surface. People begging for money. Men, whom I thought had tremendous pride, asking you for a dollar, the difference that it makes in their lives. It was tremendous. I was there and it’s something I’d never thought I would see in my lifetime. So it’s been extraordinary.

MS. CALMES: And Nancy, we saw in George Bush’s administration that he promoted democracy movements abroad, throughout the Middle East and that was partly his rationale for going to war in Iraq and setting it up as an example to the rest of the countries. Then we saw that several countries then, when they did have elections, Islamist groups took over and it wasn’t exactly what the U.S. wanted.

MS. YOUSSEF: That’s right.

MS. CALMES: Is that what is most likely to happen here should Mubarak fall from power?

MS. YOUSSEF: You raise a good point, which is we don’t know who would go in his place. We’ve heard a lot about Mohamed ElBaradei, the former IAEA head and also a Nobel laureate, but he’s more popular outside of Egypt than he is within. He’s seen as an outsider and too much of a secularist. It’s possible there could be a military-led –

MS. IFILL: What about his son, Gamal?

MS. YOUSSEF: These protests are as much about the president as they are about his son, so to replace him with his son is not an option. So what you’re hearing people say is “we want Mubarak out,” but you’re not hearing who they want in his place.

What’s interesting about what President Bush did is, you talk to Iraqis now and they’ll say “gosh, we wish what was happening in Tunisia and Egypt had happened in our own country.” In the Middle East, Iraq is not seen as a democratic movement. It’s still seen as an occupation. Tunisia is seen as a democratic movement.

MS. DAVIS: Nancy, do you have a sense of what role WikiLeaks has played in this?

MS. YOUSSEF: WikiLeaks, I think, played a bigger role in Tunisia, in that Tunisia’s leadership – President Ben Ali and his wife Laila, in particular were so ostentatious about their wealth and the disparity between them and their people. And there was a number of cables that came out from WikiLeaks that had the U.S. diplomats outlining the corruption and the extent of it. And at the risk of being crass, there was a feeling, I think, among Tunisians, my goodness, even the Americans can see how corrupt our government is. And I think that contributed to the movement that we saw in Tunisia. And I don’t think without Tunisia, Egypt would not be happening.

Tunisia was a huge wake-up call to the Egyptians that really, we the people can bring about real movement. And I think it’s seen as a real small window that people feel compelled to try to take advantage of.

MS. IFILL: I feel like we’re just scratching the surface. We’re going to come back to this in our webcast after the program. Nancy, thanks.

We turn now from the international to the domestic. The president’s State of the Union speech set the stage for what is sure to be a series of tests. What will be framework be for the fight over budgets, spending, costs? Which fight is the president willing to pick, immigration, tax cuts, health care?

PRES. OBAMA: I have heard rumors that a few of you still have concerns about our new health care law, so let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you.

MS. IFILL: And so how will Republican priorities play out within the GOP and without?

REP. PAUL RYAN (R-WI): Health care spending is driving the explosive growth our debt and the president’s law is accelerating our country toward bankruptcy.

MS. IFILL: And how will Tuesday’s bipartisan kumbaya moment last? How long will it last or has it ended already, John?

MR. DICKERSON: Well, that moment lasted and it was fine. What was striking, though, is that we’re at a very exciting moment here. You’ve got the Republicans still feeling strong after their election, momentum with them, but the president is also feeling his own momentum. His approval rating is up. He’s reorganizing his White House. And we’ve now seen with the State of the Union, the opening arguments and the discussion we’re going to have about how to shrink government, it’s going to go on through this year and on into the election.

And the case the president made was we are at a turning point in this country. We need to adapt. We are going to fall behind China and India if we don’t adapt. And yes, we want to shrink government, but we need to invest in education, infrastructure, and energy.

And the Republicans are saying just the opposite. We don’t need more government. We need less. We need the clog of government out of the engine of the American economy so that the free enterprise system can do all of these great things the president outlined in his speech.

What’s interesting, though, is while the president was trying to define this debate in Washington, he was also trying to sort of rise above it. And in his speech, he talked a lot about sort of the American dream and the promise of the American dream of prosperity being not available to everybody. Things had changed, he said. But the minute he said that, he also then got into this huge pep rally mode, where he talked – and it was a very optimistic speech talking about that America had always in its history been able to turn around at this point, sort of singing the song of America.

And when I was pressing a White House official and saying, what about the details that aren’t in this speech, he sort of got irritated and said, that’s not what this was about. This was about talking to people who are worried that their kids are not going to have a future. And the president is trying to reach to that and say, I have a plan for the future and here’s what it is. And the White House is going to try and do more of that. They’re always trying to do it, but even more now in this new –

MS. IFILL: Well, let’s – yes, in this new moment. Let’s all talk now about what intent was because often these set moments in Washington are as much about intent as execution. On Capitol Hill, where they sat side by side and held hands, what was – you were up there, Susan – what was the intent of that set moment for, not only the Republicans, who were watching the president that night, but the Democrats as well?

MS. DAVIS: I think the president hit a really good tone in the sense that he said nothing divisive at all in his speech. He gave his political opponents very little ammunition to come out either that night or the next morning and say “He’s here, we’re here.” Essentially Republicans said, we like everything he said, we’re just not sure he believes it be to the extent we do.

And I think this acceleration of where this fight is going is quick. It’s in a couple of weeks. And we’re going to have the president who’s going to put down his budget and is going to outline his priorities and House Republicans are going to outline in two weeks a spending bill that’s going to fund the federal government that’s going to cut in the neighborhood of $60 billion. And rubber’s going to meet the road.

And I think the House Republicans – the Republican Party in general, but specifically in the House – they’ve been almost obstinate. They’re not moving. You heard Eric Cantor say earlier. The president said, I think part of the way out of this is to spend on energy, on infrastructure, invest in America, which Republicans see as codeword for spend. And they’ve said no, no spending.

MS. IFILL: And yet, Jackie, I heard a lot of pro-business talk. When he’s talked about leveling the playing field and he wasn’t talking about civil rights, he was talking about the corporate tax code; I thought that’s an interesting link. He was talking about the pro-business stuff, but at the same time bringing up things he didn’t need to bring up, like immigration reform, which people obviously have problems with.

MS. CALMES: Right. Well, and in fact the business community is for immigration reform and the business community is also for a lot of the things he was talking about in terms of increased spending, for infrastructure in particular, education as well, certainly research. And the president knows that and he knows – he was sort of putting the Republicans in a box in a way. He knows – the State of the Union speech wasn’t as specific as certainly we’re used to under President Clinton or under most presidents.

Partly that’s because he’s gotten – President Obama’s gotten some big things accomplished in the past two years, but also he’s playing defense now. The Republicans are more in charge, run the House. So he’s – they’re calling for these big spending cuts, like Susan said, but they haven’t put the specifics to it, yet. And he knows – they’ve already shown signs of how difficult that’s going to be. And so the president was sort of tweaking them a little further by making the case with a national audience for why some spending is good spending – it’s investments.

MR. DICKERSON: As I was talking to somebody in Republican House leadership, and they were saying what happened after the speech is the president got to look like the optimistic guy, the one who talked about America’s vision, and then we came afterwards, the budget chairman, the Republican budget chairman, came in and he’s the guy who is going to enslave your children. It’s the – they are left talking about specifics and all of those specifics are hard and painful and the president, last year, talked a lot about how this year would be all about hard choices. We’re going to have a big, long, painful conversation. And now he’s moved off that. He did talk about freezing spending for five years to save $400 billion.

MS. CALMES: Which is two years on top of the three he’d already proposed.

MR. DICKERSON: Right. He’s doubling down on the previous pledge he made. So it’s a small – it was sort of the bare minimum –

MS. IFILL: That didn’t happen, by the way, it should be said, because the budget never got to him.

MR. DICKERSON: – it was the bare minimum he could offer to be serious in this age where a lot more has to be done. But he didn’t do any hard talk, leaving that all for Republicans, who are having a funny talk between the establishment Republicans, who are saying “we want to cut a lot,” and the sort of Tea Party government folks, who are saying “we want to cut even more.”

MS. IFILL: Was that really a disagreement between the Tea Party Republicans and the establishment Republicans or is this just a –

MS. DAVIS: I think there is a question of how deep they’re going to go. I do think that what they’re doing is – the question they’re putting forth, I think, is a really interesting one. And we’re going to find out. The Republican position is we believe the American people are ready to feel the pain. Paul Ryan, the House Budget Committee chairman has said it. Jeb Hensarling, who’s a member of the Republican leadership, said it. Jim Jordan, who’s a Republican who represents the conservative faction in the House, said the American people are ready for, quote, “tough love.” And I think that’s a really interesting political question, when we’re used to politicians saying, we’re going to help you, we’re going to give you something, we’re going to assist you. And the Republican Party is essentially saying now, we’re not going to help you. We’re going to make life a little bit more difficult, but we believe that you’re with us on this. And I think that’s a fascinating political gamble to take.

MS. IFILL: And the gamble the White House is taking is that in reality people don’t really mean that.

MS. DAVIS: Exactly.

MS. CALMES: Right. And having lived through the Gingrich revolution, in 1995, and covering Congress and the difficulty they had in putting their campaign rhetoric into reality, I think the administration is probably right to bet that the Republicans are going to be in a bad place on this ultimately.

MR. DICKERSON: And from a political standpoint, at the end of the day, the president will be judged on the economy. He thinks these investment measures will actually help the economy. He’ll never be able to out-cut the Republicans. And in the end, if the economy is bad he can – if he says I cut all of this stuff; people aren’t going to give him any credit for it. The economy is either good or bad. So he’s never going to outdo them. So in the end, they’ll get – be responsible – this is how the White House sees it – for cutting and he’ll be able to at least say he was optimistic.

MS. YOUSSEF: John, is there any point, though, where the economy can be good enough for the president? That is, is it good or bad, or is there – is moderate improvement enough for him politically speaking?

MR. DICKERSON: Well, that’s the big, big, big question. And if it’s down – it’s 9.4 now the unemployment rate – if it’s down to 8 maybe, he can –

MS. CALMES: Which is still incredibly high.

MR. DICKERSON: – still high, but better. He can say things have improved. I have this optimistic message. So – but that’s – his hope is that some of this stuff will at least get us moving in that direction.

MS. CALMES: Since we’re talking about the State of the Union, I don’t want to let us forget that it was in last year’s State of the Union that in order to prove his fiscally conservative bona fides, the president proposed a bipartisan fiscal commission, which he then proceeded to set up. It reported – it didn’t – its report in early December didn’t get enough votes, the supermajority on the committee to force a vote in Congress, as the president proposed, but it got a majority, and that was more than most people expected, a bipartisan majority, including several very conservative Republican senators.

So this State of the Union, you would expect that the president would have come out and said specifically embrace it or propose an alternative. And he didn’t – that was a comprehensive plan, overhauling the tax codes to raise revenues and simplify the code, cutting military and domestic spending, and reforming the entitlement programs, Medicare and Social Security.

MS. IFILL: None of that.

MS. CALMES: None of that. And we’ll never know if he would have done that if Democrats had retained Congress, but certainly now that Republicans are in charge, his calculation is that they need to first put some cards down. It would not be politically wise for him to do so, and so he didn’t. And –

MS. IFILL: But I was also struck, and Nancy, tell me whether you noticed this too, he’s still a wartime president and there was only a passing, glancing reference to the war in Afghanistan. And I was thinking about this in this whole Egypt thing. He referenced back to a speech in Cairo and it was in a speech in Cairo that he promised to close Guantanamo in a year. That hasn’t happened either.

MS. YOUSSEF: Yes and there’s something that hasn’t gotten unnoticed at the Pentagon on both fronts. We’ve got over 100,000 troops in Afghanistan. We’ve had the promise of Guantanamo Bay closing for over a year. And that silence on wartime issues was I think startling for some people because he may have moved beyond it in some ways politically, but it’s a very real issue and they’ve got that July, 2011, deadline looming over them to prove some progress in Afghanistan. So to not hear any mention of that in the State of the Union was – it was sort of like living in two worlds in Washington. There is one in the Pentagon and the one once I leave the building, really.

MS. IFILL: The other interesting thing, too, about Tuesday night, is that because of the effort to cross party lines, it created a different feeling in that room. There was not the jumping up and down to applaud vigorously the things you agree with and sit down on the things you don’t – you disagree with. It was almost like everyone was afraid to stand up and applaud anything at any length. And therefore it was a much more serious speech.

MS. DAVIS: Yes, I think that especially leading up to it, there was a lot of bad dating metaphors, bad –

MS. IFILL: A lot.

MS. DAVIS: – prom metaphors, who is your date going to be? I will say – and just anecdotally, both the members I talked to and staffers I talked to, who even had their own little cynicism in private going into it, it got positive reviews. I had staffers emailing me during the speech, saying “I know I was making fun of it but you can palpably feel the difference in the room. It feels more sober. It feels more grown up. It feels a little bit more – people are taking this more seriously.”

MS. IFILL: I felt that too, even though I wasn’t in the room, but the question, of course is, now, when leading up to 2012, and does something like that last, or was it just a good moment?

MR. DICKERSON: It doesn’t last because – well, what lasts is what was in the room, which was people were being nice and civil to each other.

MS. IFILL: You can’t even begin to do something until you’re civil.

MR. DICKERSON: But the president in his speech said we’re going to have big clashes. And so those big clashes – we’re talking about the central philosophical debate between the two parties about the shape and size of government and priorities. If you can’t have a fight about that, what business do you have being in politics? So there will still be the clashes. The thing is maybe there will be a week or so before people start judging other people’s motives and start saying they’re doing things only out of crass political reasons, but probably only a week or so.

MS. DAVIS: It is possible, too, that this could become an annual tradition. A couple of senators publicly – I think Ben Nelson from Nebraska is one of them who said, I like this; we should do it every year.

MS. IFILL: Yes, probably more the moderate senators said it than the –

MS. DAVIS: Yes and the ones up for reelection.

MS. IFILL: Exactly, the ones up for reelection. But I do want to get to that reelection part because it’s fair to say that 2012 – we’re now at the point – at this point – of course, it was an open seat, but Hillary Clinton had already announced her candidacy. And this is a different kind of setup, but there’s certainly some sort of attention being paid to the next round.

MR. DICKERSON: Well, three different quarters, one from a diplomat for a very close American ally. Mitch McConnell, the leader of the Republicans and somebody who was in the House leadership, today, was saying, six to eight months, that’s all the time we’ve got before that 2012 locks everything up, makes foreign policy different, makes domestic policy different. So there’s – that’s the window before we all get consumed with the next presidential race and it becomes hard to do.

MS. IFILL: So what happens in the next six to eight months, or at least what’s in everyone’s agenda the next six to eight months?

MS. CALMES: Well, certainly what’s going to happen is this whole budget fight is going to come to a head over the question of whether or not we increase the debt limit so the government can continue to borrow to meet existing obligations. Forget new spending.

MS. IFILL: That’s a philosophical and political fight.

MS. CALMES: Exactly. And it’s certainly going to be raised because if it’s not, well, we’ve got catastrophe. And so that will be the moment and it could come as early as late March, when each side is going to try to force action. The Republicans are going to demand certain things in return – spending cuts. But what happens between now and then will determine just how the fight – the specifics of the fight because the Republicans will have two more months to try to come up with specific spending cuts that they haven’t so far been able to do.

MS. IFILL: And the Republicans and Democrats may be fighting among themselves a little bit. We heard Harry Reid say this week, earmarks, that’s us. That’s not for you, Mr. President.

MS. DAVIS: Right. That was – I think Harry Reid – Harry Reid said it publicly. I think he spoke for a lot of members of Congress, when he said that, though. I think there is a – especially on the House side, there is a big willingness to go along with the earmarks ban, but a lot of the lawmakers will tell you in private they recognize that this is not what’s causing the deficit problems in this country. It’s a rounding error in what it comes down to you. I think earmarks, to the public in particular, have just become symbolic of government excess.

MS. IFILL: And they are the prerogative, which is Harry Reid’s point, of the members of Congress, and not of the executive branch. So we’ll be hearing more about that.

Thank you, everybody. We got a lot in. Our conversation has to end here, but it continues online. Check out the “Washington Week” Webcast Extra at and follow us on Facebook and Twitter. We’ll be keeping an eye on developments in Washington and in Egypt all week on the PBS “NewsHour,” and then we’ll catch you up again around the table, next week, on “Washington Week.” Good night.