MS. IFILL: The Republican president campaign got its jumpstart here this week in Iowa, but the state pay rollercoaster had nothing on Wall Street. We’ll talk about the story from here and from there, tonight on “Washington Week.”
It must be getting serious. 
REP. MICHELE BACHMANN (R-MN): I have a very consistent record of fighting very hard against Barack Obama and his unconstitutional measures in Congress. I’m very proud of that record. 
GOV. TIM PAWLENTY: She said she’s got a titanium spine. It’s not her spine we’re worried about. It’s her record of results. 
MS. IFILL: The candidates are sharpening their attacks. 
FMR. GOV. MITT ROMNEY: I predict in this place, on this day, in November of 2012, President Obama will not carry the state of Iowa. 
MS. IFILL: Leading up to the Iowa straw poll, the jockeying has begun. We see who will struggle and who will survive. 
FMR. GOV. JON HUNTSMAN: If you want to know what I’m going to do, I’m going to do exactly what I did as governor. It’s called leadership. 
MS. IFILL: The common target: President Obama, who spent the week pushing back against the tidal wave of bad economic news – a credit rating downgrade –
JOHN CHAMBERS: The political brinkmanship we saw over raising the debt ceiling was something that was really beyond our expectations.
MS. IFILL: – and a wild stock market. 
PRESIDENT BARACK OBAMA: In the aftermath of this whole debt ceiling debacle and with the markets going up and down like they are, there’s been a lot of talk in Washington right now that I should call Congress back early.  The last thing we need is Congress spending more time arguing in D.C.
MS. IFILL: A week when arguments mattered. Covering the story: Dan Balz, of the “Washington Post,” Jackie Calmes of the “New York Times,” and John Harwood of CNBC and the “New York 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, reporting from Iowa this week, Gwen Ifill
MS. IFILL: Hello from Iowa, the summer kickoff to voting in the first caucus state next January. Tomorrow there’s a straw poll. Last night there was a debate. In between, we’re here at the Iowa State Fair with Dan Balz from the “Washington Post,” who’s been here with me all week trying to figure all of this out. 
So Dan, as you’ve been here, what’s been the most amazing thing you’ve seen? 
MR. BALZ: Well, I mean, the debate, on Thursday night, was such a contrast to what we saw two months ago in New Hampshire. That was a sleepy debate. This was an eruption. We’ve been waiting for this race to kind of heat up, to get people engaged. And we saw that Thursday night. Almost everybody in the group had something to prove and they were going at one another in a way we have not seen up to now. 
MS. IFILL: Who needed to break out, was there someone who came with more to prove? 
MR. BALZ: Well, Governor Pawlenty from Minnesota clearly needs all the help he can get. His campaign has been struggling. The straw poll will be a big moment for him and I think he needed to take on Congresswoman Bachmann because she’s got more momentum. And so he came in with something to prove, but there were others, too. Governor Huntsman wanted to make an impression in his first debate. Newt Gingrich wanted to erase the idea that his campaign was totally floundering. And Governor Romney was able to kind of float mostly above the fray as he did in the previous debate.   
MS. IFILL: So did anybody pull it off, anybody who really wanted to do it pull it off? 
MR. BALZ: Well, I’m not sure there were any clear winners other than perhaps Governor Romney again because everyone else was focused on somebody else. 
MS. IFILL: Didn’t hurt himself. 
MR. BALZ: He did not hurt himself in the list, I don’t think, but he’s sitting there, worrying about Rick Perry, the governor of Texas, who’s going to get in on Saturday. 
MS. IFILL: Let’s talk about Rick Perry, the governor of Texas. It’s not like we didn’t know that he was seriously considering this, but his timing seems suspicious. 
MR. BALZ: Well, his timing is exquisite, if you will. I mean he made it clear on the day of the debate that he was going to announce on Saturday, just as the speakers begin to give their speeches in Ames on Saturday, he’ll be in South Carolina, drawing all the attention away, and then, on Sunday, after a quick trip to New Hampshire, he’ll be here in Iowa for a couple of days of campaigning. 
MS. IFILL: Who is – we’ve been sitting here at the State Fair. We’re right across from what they call the soap box, where all the candidates show up and talk to voters, and they’ve been doing it all week long. We’ve seen Sarah Palin here today. Michele Bachmann is across the street. Who is really touching the core with Iowa voters, can you tell? 
MR. BALZ: Well, I think you have to say that it’s Michele Bachmann. She – she got into this race late and immediately zoomed to either the top or near the top of the polls. She’s done very well here. This is a Republican electorate that likes fiscal conservatism and social conservatism. She’s tapped into the tea party. She’s tapped into evangelicals. She knows Iowa. She’s an Iowa native and she’s played that card hard. So that’s one of the reasons that Governor Pawlenty is worried. I mean, both of them need a victory in the Iowa caucuses to really establish themselves next year, and one of them is going to be disappointed tomorrow. 
MS. IFILL: You mentioned the social conservatives and the economic conservatives. A lot of Iowans say that we pay too much attention – people like you and me – to the social conservatives. Who wins the day, besides the band, who wins the day in contests like this? 
MR. BALZ: Well, in the past, the social conservatives have been a critical element. Mike Huckabee won the caucuses four years ago on the strength of his support from the social conservative part of the party. But a lot of those folks today are just as worried about economic issues as some of the social issues. So –
MS. IFILL: Especially after the week we’ve just had. 
MR. BALZ: Right. I mean, we have a different environment this time than we’ve had in the past, so it’s not as clear cut. 
MS. IFILL: Let’s talk about expectations for the straw poll and whether the straw poll matters. There’s a lot of mixed debate about that, whether the straw poll is really that important or whether it’s just a showcase for the most committed, most engaged voters. 
MR. BALZ: Well, you can argue that the straw poll has kind of passed its prime. Here you have a case in which the frontrunner, Mitt Romney, is not actively competing. Rick Perry, who is very high in the polls, even though he’s not an official candidate, will be elsewhere. And you have some of the people who are well down in the polls actually competing. So what comes out of this? I mean, the other – the other reality of the straw poll, Gwen, is that somebody who doesn’t do as well as they are expected to do could find themselves threatened with being driven out of the race. And it’s unclear whether an event like this should have that kind of power. 
MS. IFILL: Well, and there are people like Herman Cain, the former CEO of Godfather’s Pizza and Ron Paul, the libertarian candidate, who have a lot of passionate supporters in a state like Iowa, who could turn things upside down. 
MR. BALZ: Certainly Ron Paul could. I mean, there’s every expectation that Ron Paul will be in the hunt to lead in the straw poll on Saturday. As you say, his followers are very passionate. He has a great record in straw polls because it’s a small group of people who turn out. Now, in Ames, I mean, the numbers of people are significantly larger than in some of the straw polls elsewhere. There were 14,000 last time and there were 23,000 the time before. So it’s a different animal. But Herman Cain has support in this state and Rick Santorum – I mean, we can’t overlook Rick Santorum. He’s got support. 
MS. IFILL: He’s been to 68 counties I think he said in the last few weeks. 
MR. BALZ: He said that in the debate and he has been all over the state in the last few weeks.     
MS. IFILL: How many of these have you been to, have you covered? 
MR. BALZ: Well, I think the first straw poll I attended was probably the 1990 – may have been 1988 or even 1987.
MS. IFILL: So you’ve been around the block on these a couple of times. 
MR. BALZ: I have been to Ames for a number of these. 
MS. IFILL: Does this feel different? 
MR. BALZ: Well, it does feel different. I think that the – I think the combination of the debate on Thursday night and the straw poll and the state fair, obviously, opening right in the middle of that, has drawn a bigger crowd of all of us, and so the attention to this event is somewhat or significantly higher than we’ve seen in the past. 
MS. IFILL: Dan, as always, thank you so much. That’s it from here. I will be back at the end of the program with a few of my final thoughts, but until then my friend and colleague Judy Woodruff of the PBS “NewsHour” will take it in Washington. 
MS. WOODRUFF: And thank you, Gwen. And while you’re enjoying the Iowa State Fair and covering the candidates, we are here in Washington keeping an eye on the other stories of the week. We have seen a rollercoaster in the markets, first sparked by the downgrading of the U.S. credit rating by Standard & Poor’s, which provoked a harsh response from the president. 
PRES. OBAMA: On Friday, we learned that the United States received a downgrade by one of the credit rating agencies, not so much because they doubt our ability to pay our debt if we make good decisions, but because after witnessing a month of wrangling over raising the debt ceiling, they doubted our political system’s ability to act. This is the United States of America. No matter what some agency may say, we’ve always been and always will be a AAA country. 
MS. WOODRUFF: What followed was an up and down stock market, driven by deficit concerns, anxiety over Europe’s economy, and some mixed economic news here at home. Welcome, Jackie. Welcome, John. But John, let’s start with this S&P announcement. With a week of hindsight, any better sense of why they did it? 
MR. HARWOOD: Fundamentally, Judy, it was political. Standard & Poor’s, early in the spring, looked at the amount of deficit reduction that major players were talking about, the Simpson-Bowles Commission, the Paul Ryan budget in the House, what President Obama put out in his own framework was about $4 trillion over 10 years. And they said, okay, that’s the benchmark. If they achieve the $4 trillion over 10 years, then we will consider that a sound result and preserve the AAA. 
They were alone in setting that standard. The two other major agencies, Moody’s and Fitch, did not set that standard. Then you had this torturous political process over this summer that culminated in the deal. Everyone else seemed to blow with the political winds once that happened. People assumed a somewhat more optimistic view -- well, at least they got a deal. We didn’t default. Now, they’ve got a special committee to come up with more savings. Standard & Poor’s said, no, look how messy that process was. We’re going to downgrade you. And the interesting thing was the administration was critical of their decision, but President Obama has been repeating many of those same criticisms of the political process trying to turn them against Republicans. 
MS. WOODRUFF: Because he wanted a bigger deal in the first place, too, and was not able to get it. And –
MR. HARWOOD: Exactly. And he wants to pin that on Republicans. To some degree, Standard & Poor’s did, too. They pointed in their report to the intransigence of Republicans on being willing to raise any revenue as part of a deal as why they saw the political system as gridlocked. And so you – in some ways, the administration was affronted and outraged by this. Tim Geithner attacked them; so did the president. But they also echoed some of the arguments that S&P made. 
MS. WOODRUFF: Jackie, why was the White House so upset, when as John said – I mean they – they wanted a bigger deal, too? 
MS. CALMES: Well, it’s interesting. When the news first came out last Friday night, by Saturday, the White House was staying fairly quiet. They put out a statement, but they didn’t want to pile on. Only, you know, speaking on background were officials complaining about the decision, not least that Standard & Poor’s made a $2 trillion mistake. Now, when you’re looking for a $4 trillion end result, a $2 trillion mistake is not minor. So then the rationale became this political one. But by Monday, you know, the president and the others were far more critical. But just like John said, they picked up on the argument that Standard & Poor’s was making about political dysfunction. 
MS. WOODRUFF: But they ended up looking, as some people – as I heard some people say – defensive in all of that. Was that – that wasn’t their intention. 
MS. CALMES: I wouldn’t think so, but it’s hard not to be defensive when, for the first time in history a ratings agency downgrades the United States credit on your watch. But you know, just to pick up on what John said, you know, so you saw on Ames, Iowa, in the debate last night that a lot of the Republicans have continued to hit on this as being Barack Obama’s downgrade. But one of the things it says in that report that hasn’t gotten – in Standard & Poor’s report that hasn’t gotten much attention is the fact that they said, in addition to their downgrading from AAA to AA+, and there’s a negative outlook for the United States future credit rating, they said that a big part of their assumption in doing this was the fact that they assume that the Bush era tax rates for the high earners would continue because Republicans won’t let them expire on schedule. They said if those did expire on schedule at the end of 2012, their outlook might – they might raise the outlook from negative to stable. 
MS. WOODRUFF: So they sort of dangled that. So John, the stock market reaction has just been crazy this week. It’s been way up hundreds of – down 600, up 400, down 500, up – end of the week a little bit up, but – but is that all due to the downgrade by Standard & Poor’s?
MR. HARWOOD: No. And look, a lot of it is hard for any of us to explain. It’s the most volatile stock market that I’ve seen. First of all, you had – Alan Greenspan, last weekend said fundamentally this was not a credit event; this is a blow to the American psyche. So everyone was processing that. I think the market was processing that on Monday. At the same time, we’ve seen declining consumer confidence, declining business confidence, weakness in Europe, in the European banking system. They’ve got their own full blown debt crisis there. 
MS. WOODRUFF: And that’s having an effect here. 
MR. HARWOOD: Exactly. So the market goes down, then it recovers. The Fed acts on in the middle of the week and Ben Bernanke said we’re going to keep rates low for two years. Initially, it was funny to watch the ticker as they were releasing that announcement. First the market went down, then it went way up, then the next day went down again. 
MS. WOODRUFF: And behind the Fed’s decision, Jackie, it’s interesting because they essentially projected two years of a weak economy. And so they said we’re going to keep interest rates low. What cemented that view because it wasn’t so long ago the Fed was saying, we’re not really sure whether things are going to turn around or not? 
MS. CALMES: Well, it’s become pretty clear that you’re going to have continued high unemployment. You know, we’ve all known from the beginning pretty much that this was a downturn driven by a financial crisis. They’re always slow. It’s slow getting out of them. And employment lags. But it’s become – in the course of the recovery there’ve been these other headwinds that keep coming at us. In 2010, it was the Greek debt crisis and other things, the Japanese tsunami, the new – the latest Euro crisis. So it’s become – with the passage of time, it’s clear that this is going to continue to be a downturn. Both the Fed’s monetary policy and Congress’ fiscal policy are – there’s limits to what they can do. 
MS. WOODRUFF: Then, John, that leaves the president in a box. I mean, he’s getting – the Republicans are screaming that he’s not doing what they want him to do. The Democrats are saying he’s giving in too much. Where does that lead? 
MR. HARWOOD: Well, he’s in a terrible bind politically because the unemployment rate, which previously the administration said would get down to about 8 percent by Election Day – now few people think it’s going to get that low. Instead of looking at 3, 3.5 percent growth for the next year and a half, much lower growth. So the president’s got to sit there and say, what can I do to stimulate the economy and what can I propose that Republicans will accept? He’s looking at things like expanded payroll tax cuts. Has been a Republican idea in the past, but Republicans are cool to it now. Other forms of stimulus for business – new higher tax credit. He’s got an infrastructure bank, $50 billion, has a lot of bipartisan support for that idea, but Republicans right now aren’t interested in anything that involves direct spending by the government. 
So I think hopes within Washington for some kind of a stimulus package are pretty low. Something will probably pass, but it will be much smaller than most economists think is necessary for the scale –
MS. WOODRUFF: And Jackie, the president announced this week that he’s not going to call the Congress back. He said something to the effect that’s a last thing the American people want right now is for Congress to be here squabbling. Did they even consider doing that? 
MS. CALMES: I don’t think so. I haven’t found any evidence that they did. And – because they know, it’s just going to look worse if Congress comes back because there is no quick fix. In fact, when they come back, we know because of this deficit reduction deal that cleared the way for the debt limit to rise, that we’ve now got this select committee, 12 people – six Republicans, six Democrats – that is supposed to come up with recommendations for an additional $1.2 to $1.5 trillion in savings. And they’re supposed to do so by November 23rd
You know, it’s going to be hard enough. And the hopes are fairly low if nonexistent for this committee. So the idea – you know, for them to finish by November 23rd – the idea that Congress could do anything constructive in the month of August is beyond farfetched. 
MR. HARWOOD: Judy, I think the practical reality inside the White House was as hard stopping it as it was for investors to look at the Dow going up and down; it was the same inside the White House. Market goes down, high anxiety. Market goes up; glass of wine, everybody’s feeling a little bit more relaxed. And I think to the extent that the market would have kept going down, then you might have had a situation where it felt like more of an emergency. You’d call Congress back. But in the absence of that, when things seemed by the end of the week to stabilize, as the president said, what good is it going to do to call them back and argue some more and not pass anything? 
MS. WOODRUFF: Well, it does seem at this point, Jackie, that any hopes that there are are pinned on this so-called select super committee, they’re calling it. 
MS. CALMES: Right. 
MS. WOODRUFF: What are we to make of the people who were chosen for that by the congressional leadership? 
MS. CALMES: Well, they’re all, the Democrats and Republicans, party loyalists, fairly high ranking, you know, committee chairmen or leadership figures. Several have been on this kind of committees before, whether the Bowles-Simpson Fiscal Commission last year or the more recent talks that Vice President Joe Biden headed that were sort of a preliminary to this deal they cut to raise the debt limit. So these are people, most of them who have experience at this. It begs the question why do we need another committee? Well, just to – it was just a way to get a deal. And so – but hopes are very low. They do have to come up with something, though. 
MS. WOODRUFF: And I just want to pick up on – you’ve done some interesting reporting this week, Jackie. You’ve been talking to Republicans out there, not the ones who were sitting in Congress, but who were saying there does need to be a balanced package. 
MS. CALMES: Well, this has been true most of this year. You can go back to last year. And – but it really has gotten legs recently as the markets and the economy have shown such weakness and volatility. What you’ve had or what’s been striking is the number of macroeconomists, private sector economists and forecasters, and major Republican figures in the old days, standard bearers for Republican economics philosophy who are saying that sort of the three main things that the current Congressional Republicans stand for are the wrong medicine. And that is we need a stimulus now, but in the long term we need to bring down the debt, but the tax – and that should include tax increases which Republicans are against, and spending cuts. 
MS. WOODRUFF: And this is people like Martin Feldstein, who worked for President Reagan –
MS. CALMES: Exactly. Hank Paulson, who was treasury secretary under George Bush; Pete Domenici, who ran the Budget Committee in the Senate for years. 
MS. WOODRUFF: And John, but only in less than a minute, are these ideas that people elected to office are likely to adopt? 
MR. HARWOOD: I think to some degree. I do expect that at the end of the day, either moving separately or with the special committee, some action will be taken to spur economic growth. I think it’s going to be difficult for members of Congress to be home in their districts while people are so anxious about their economic futures to come back and say, we’re not going to take any steps. All we’re going to do is cut. 
But we’ll see. We’ve seen that certainly this new contingent in the Congress, very conservative, has been resistant to a lot of the normal political pressures that we’ve been used to covering over the years. 
MS. WOODRUFF: And maybe back home in the districts they’ll hear a message and they’ll come back and think differently. We’ll see. 
MR. HARWOOD: Exactly. 
MS. WOODRUFF: Jackie Calmes, John Harwood, thank you both. That is all the time we have for now. We are leaving a little early tonight to give you the opportunity to support your local PBS station, which in turn supports us. I’m Judy Woodruff in Washington warming the seat for you, Gwen, while you enjoy the state fair. 

MS. IFILL: Thanks, Judy. Follow “Washington Week” and the PBS “NewsHour” online for all your straw poll results all weekend and for more on Rick Perry’s announcement for president. In the meantime, I want to go find a corn dog. I love Iowa. See you next week on “Washington Week.” Good night.