MS. IFILL: Glasses half full and half empty – mixed signals on both the economic climate and on the presidential campaign trail. We’ll get to the bottom of the glass tonight, on “Washington Week.”

Europe is reeling. Tax hikes are looming. And Washington can’t seem to agree what to do about it.

SENATOR TOM UDALL (D-NM): On this vote the yeas are 51, the nays are 49. The motion is not agreed to.

PRESIDENT BARACK OBAMA: Congress may not be leaving. And we can all spend Christmas here together.

MS. IFILL: And even today’s good news about the declining jobless rate is open to interpretation.

REPRESENTATIVE ERIC CANTOR (R-VA) [House Majority Leader]: Today’s unemployment numbers certainly look good on its surface. However, if you look at the number of new jobs created, there’s just not enough new jobs being created in America.

MS. IFILL: Meanwhile, the always fascinating Republican presidential contest continues to captivate. Herman Cain on the defensive.

GINGER WHITE [Atlanta Businesswoman]: It wasn’t complicated, and I was aware that he was married.

HERMAN CAIN [GOP Presidential Candidate]: We are reassessing and reevaluating.

MAN [Reporter]: But are you staying in the race?

MR. CAIN: We are reevaluating and reassessing.

MS. IFILL: But as he stumbles, the spotlight shines more brightly on Newt Gingrich.

NEWT GINGRICH [GOP Presidential Candidate]: It’s very hard not to look at the recent polls and think that the odds are very high I’m going to be the nominee.

MS. IFILL: As Mitt Romney keeps his eye trained on the White House.

FORMER GOVERNOR MITT ROMNEY (R-MA) [GOP Presidential Candidate]: It shows that they are awfully afraid of facing me in the general election.

MS. IFILL: Covering the week: Greg Ip of the Economist, Jim Tankersley of National Journal, Karen Tumulty of the Washington Post, and Jeff Zeleny of 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.

(Station announcements.)

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

MS. IFILL: Good evening. So pick your poison. Were today’s jobless numbers good news or not good enough? Will Congress agree to extend the payroll tax cut holiday or will they fail to agree on how to pay for it? And did the world’s central banks come to the rescue of the struggling euro this week or was it a mere Band-Aid? Greg Ip’s headline, “A Very Good Week”; Jim Tankersley’s was “Contagion Catastrophe.” We turn first to the optimists. Greg, what do you say? Why do you say that this was a good week?

MR. IP: Maybe I just wanted to be positive for a change, Gwen. But if you look at the job numbers we had today, they are positive numbers. I mean, 120,000 new jobs created, it’s three months in a row now, north of the 100,000 mark. This is the best train of job creation we’ve had since the springtime. If we keep up this pace, we should see sustained declines in the unemployment rate.

Is it a barnburner? No. But considering that five months ago there was an active debate about whether we were going back in recession, I’d say, pretty good.

Now, the decline in the unemployment rate, 8.6 percent from 9 percent, a very big drop – not all that meets the eye though. Part of that drop is because some people stopped looking for work. But I don’t think that should overshadow the overall good news. And there’s been other positive signs – Black Friday sales apparently were very good. Factory activity has been pretty good.

And most important in my view is on the policy front we’re seeing movement on some of the riskiest areas. Here in the United States, talk about extending the payroll tax cut. In China they’re like easing banking requirements. And, most important, in Europe, perhaps finally some glimmers of light that leaders there are getting to grips with the debt problem.

MS. IFILL: But, Jim, you kind of sketched out the worst-case scenario when it comes to Europe and the debt problem.

MR. TANKERSLEY: Right. And I would agree with almost everything Greg has just said. These are all positive signs. The problem is they all pale in comparison to the threat being posed to the United States and the global recovery right now by Europe. It’s a scary possibility but it could happen. If Italy defaults, say, and a bunch of Italian banks failed, and that spreads, American banks are exposed, credit dries up around the world, suddenly we’re not just looking at a global recession. We’re looking at a global great depression again. And this is going to be a conceivable and quite possible outcome so long as European leaders have not actually come together and done the hard work of rescuing the euro zone.

MS. IFILL: Can I ask you about this payroll tax debate that we’re having, both of you, because, you know, I don’t know what to believe anymore. It sounds like if they just ran into each other at loggerheads last night on the floor of the Senate, and on the other hand, people are saying, oh, there’s going to be a deal by the end of the year, what’s true?

MR. IP: Well, I’m inclined to believe that what we saw this week pushes towards having a deal. It started on Monday when Mitch McConnell made it clear that Senate Republicans were prepared to support a payroll tax extension in some form. John Boehner on Thursday said yes to the payroll tax extension and to extended unemployment insurance benefits. The argument now is how to pay for it. The president and Democrats would like to pay for not just this payroll tax cut, but an expanded one by a surtax on millionaires. Republicans say, no way. They’d like to find some spending cuts. So we’re going through that kind of rhetorical dance that’s kind of a mandatory part of this process. But I think at the end of it, before Christmas, there will be a deal.

MS. IFILL: It sounds like the Republicans are in more disagreement with each other than they are with the president.

MR. TANKERSLEY: There’s disagreements among House Republicans about whether or not you actually want to do this. Many of them don’t believe it’s been a very effective tax cut and they don’t like the idea of paying for a temporary tax cut with tax increases over a long period of time. So I think the bigger debate, though, is going to come down to does the economy need this? And the president knows that it does. He knows this is his best chance to get some sort of simulative measure and that’s why I think in the end they compromise and this gets done.

MS. TUMULTY: And what are the consequences if this deal doesn’t get done, other than the Democrats think they’ve got themselves a nice little issue here.

MR. TANKERSLEY: Right. Well, they do have a political issue because these are taxes – this is a tax cut for working people. I mean, anyone who gets a paycheck pays payroll taxes. The consequences for growth, though, are large, probably up to a point of GDP growth next year that we lose if this tax cut goes away. On the other hand, if the tax cut is extended and increased, then you could have even more of a boost – a tailwind to the economy, so a really big swing one way or the other.

MR. ZELENY: In terms of all the positive news released this week, I mean, so much of what is happening here is not here at all. It’s in Europe. Exactly what’s going on there next week with the European Summit and how important is that Secretary Geithner is going over I believe? What are the stakes here?

MR. IP: Well, when you ask folks in the administration what worries them most, it always starts and ends with Europe. You know what I mean? There’s a sort of helplessness, a sense that what the Europeans do is the single most important factor about how the U.S. economy and, frankly, President Obama’s reelection chances do next year. What we saw last week was that the fundamental problem is that the Europeans can’t agree on how much they should guarantee each other’s debts. And what we saw was movement towards a sense that maybe a series of bilateral treaties could do it. But there needs to be political buy-in and that’s what we’re waiting for at this summit that’s going to take place next week.

The other thing you need is for the European Central Bank, their version of the Federal Reserve, to step up and do a bit more of its own backstopping of debts but that won’t happen until that fiscal willpower is shown. Tim Geithner, I believe, is going there just to try and buck up the spirits and try and put a little more pressure on them to try and come to an agreement. And – (inaudible) – there neither the United States nor the IMF is going to come in and make it easy for them and take the hard decisions away from them.

MS. IFILL: You talk about Tim Geithner, but how big a role did the Fed, Ben Bernanke’s Fed, play in being the goose – to goosing this agreement among all these world banks?

MR. TANKERSLEY: What the Fed did this week was take some coordinated action with other central banks across the world – the bank of Japan, the European Central Bank – to make it easier for European banks to borrow in dollars. Stocks like that a lot and the market went up in the middle of the week because of it. But don’t expect this to be a be-all, end-all solution, or anything close to it. This is not a redress for Europe’s debt problems. It’s just a way to make things easier, buy a little more time while the Europeans try to figure this out amongst themselves.

MS. IFILL: What kind of movement are we seeing? Is there a scenario in which everything begins to move in the same direction or does the gridlock that we see afflicting Washington begin to slow movement down on all of these fronts?

MR. IP: It is an excellent question. You know, if you left the politics out of it, I think the scenario would be for a pretty decent economy next year, 2.5 to 3 percent growth. I think Jim and I would probably agree on that.

MS. IFILL: What? You two agree?

MR. TANKERSLEY: No. We do. That’s crazy.

MR. IP: I mean, the big question mark is, you know, how much do the politicians shoot the economy in the foot, just like they did this year?

MS. TUMULTY: And 2 to 3 percent growth, what does that mean for jobs? I mean, is this escape velocity?

MR. TANKERSLEY: Sure, it would be nice if we had some escape velocity. Two to 3 percent is right around escape velocity and you probably need about 2.5 percent growth to get to sustained job creation. But we’re not there really right now. It would be great if we were up to 3, 3.5, 4 percent, then you’re really starting to chip away at that unemployment rate. Thirteen million Americans are still out of work. This is going to take a long time to come down and to get the economy back where it needs to be. So roaring growth would be great. Two and a half would be better than we’ve got now.

MS. IFILL: I have to ask a political question in all of this because we’re laying a scenario which none of this is going to change anything fundamentally between now and the election. So is this something where everybody, including our international partners, are keeping an eye on the political consequences of action or inaction?

MR. IP: Oh, absolutely. But, I mean, frankly, everybody is so consumed with their own political problems, they’re not exactly worrying about anybody else’s political problems. But, you know, one of the issues about the payroll tax debate right now is both Republicans and the Democrats are trying to figure out how far they can push the other depending on who wins. The Democrats right now think they have a winning argument. We want to cut taxes for the middle class and the Republicans don’t want to do it our way because they want to protect millionaires.

Also, although I think it’s in the interest of both sides to come to a solution here, I think at least from the case of the Democrats, it’s in their interest to push the Republicans a little bit harder because they think they have a winning political argument.

MS. IFILL: Oh, great. And we’ve got five weeks before voting starts to begin in New Hampshire and Iowa. And that’s going to take us to where our next segment because much of this week’s political news boiled down to kind of reading these kinds of tea leaves. Herman Cain admitted an entanglement, shall we say, with a woman his wife knew nothing about. The woman claims more than that happened. Will he stay or will he go?

MR. CAIN: We’re going to reevaluate the whole strategy. Tomorrow in Atlanta I will be making an announcement, but nobody is going to get me to make that prematurely.

MS. IFILL: Nobody could do it. And Newt Gingrich, who’s rising in the polls, he’s beginning to talk about what he would do as president.

MR. GINGRICH: I have to confess that while I was hoping for a wave, we’ve had sort of a tsunami.

MS. IFILL: Rick Perry had another brain freeze.

GOVERNOR RICK PERRY (R-TX) [GOP Presidential Candidate]: Those of you that will be 21 by November the 12th, I ask for your support and your vote. Those of you who won’t be, just work hard.

MS. IFILL: Twenty-one on November the 12th – that’s the two things. Neither of them seem to quite work. And the president launched a bit of a stealth campaign with this low-profile video.

PRES. OBAMA: The 2012 campaign is underway and the outcome will depend not on what I do, but on what you do.

MS. IFILL: But the Cain rollercoaster is where the story is tonight. Big announcement tomorrow, Karen. Do we know what it is?

MS. TUMULTY: No, we don’t. And, in fact, this evening, believe it or not, it’s taken this many days for Herman Cain to go back to Atlanta and actually sit down and talk to his wife face to face about this. He says that if she doesn’t want him to continue running, he will not. On top of that, in my reporting today I discovered that Cain has summoned a lot of his big donors and a lot of his closest advisers to a meeting tomorrow morning in Atlanta where presumably he’s going to tell them his decision before he announces it publicly at what was supposed to be the grand opening of his big national headquarters in Georgia.

MS. IFILL: So tea leaf reading – this could be cutting either way. Are any of these details which Karen just laid out could be leading to him saying, I’m staying in the race? My wife has said, don’t let the bad guys get you down, or it could lead to my wife has given me cover and I’m out of this?

MR. ZELENY: It could. And some of his supporters believe that he will stay in actually. Of course, they want him to stay in, but they think that he may try and sort of build himself up a little bit more because he is almost certain to not be the Republican nominee. I think everyone can agree on that. And he’ll have to have a life after this, which will include speeches and other things.

So he wants to leave on a high note. And some of his supporters don’t believe that his is the high note that he wants to leave on. So he has nothing else to do. He can keep running for president. There are no rules here. He can keep going to debates. But, at the other point, it all boils down to what happens in his Atlanta house. But the bigger story here is what happens to his supporters? In Iowa, only a month ago, he had 23 percent of support of likely caucus-goers. That’s down to 8 percent according to the new Des Moines register polls.

MS. IFILL: Just in like the last week this drop.

MR. ZELENY: Right. So where are these people going? It certainly speaks to the rise of Speaker Gingrich. But it’s a very fluid five weeks ahead – I mean, four and a half weeks ahead here.

MS. IFILL: But who’s counting, right?

MR. ZELENY: Who’s counting? But, to me, like that’s the most important question: his supporters, where are they going?

MR. TANKERSLEY: Jeff, can you tell me a little bit about what’s different in Iowa this time around? It certainly seems like a different kind of campaign than I remember covering or having seen in the caucuses before.

MR. ZELENY: For one thing, the whole campaign has been fueled by debates. It’s almost a national primary, if you will, in terms of everyone has more equal access to the candidates. So voters are not seeing the candidates as much in Iowa or in New Hampshire. It’s sort of the Fox News effect. It really is an efficient way to see a lot of Republican voters by going on television again and again and again. It also speaks to the rise of Newt Gingrich. But some Republicans though are like, hold on a second. There’s actually a reason to going out to doing these visits. It’s to build organization and ground game, and also for the general election. Iowa and New Hampshire are very important states in the general. And by building this enthusiasm and the ground game that we call it – it’s not happening as much this year except Mitt Romney is probably doing as much of it as anyone.

MS. IFILL: And isn’t there a little rising by the sword and dying by the word, or whatever that cliché is, which is you win because of the Fox effect but you also lose if all of a sudden everybody starts paying minute attention to all of your shortcomings?

MS. TUMULTY: That is I think in some – that’s one of the major reasons that this primary season has had almost a sort of clown-car effect to it because these are the – you know, you could make a mistake. Iowa and New Hampshire were also like off Broadway tryouts and you could make a mistake and it wouldn’t go viral or it wouldn’t immediately be on the late night talk shows. You could get your talking points together, your message together. You could test it out, see what was resonating. And, you know, all of these candidates – only Mitt Romney among them has ever done this before, are having to sort of get up to national campaigns immediately.

MR. IP: There is an interesting question though. I think a lot of people have always anticipated that after Iowa and New Hampshire, in the first early voting states, the race quickly gels, it becomes clear. There’s a couple of frontrunners, maybe there’s a winner very soon. Do you think that pattern repeats this year or do you think it becomes much like what we’ve seen so far – a long, drawn out primary fight?

MR. ZELENY: I think if Mitt Romney wins the Iowa caucuses, which he’s really trying to do now, it could be a shorter primary cycle. But, if not, it could go on for a long time. And a big part of the reason is the Republican Party has changed its rules this year. So it used to be a winner-take-all – if you win Florida, you win all the delegates. Now, until the end of March, it’s proportional. So second place is a big deal. Coming in third place is not bad either. So it could go on for a long time.

And one other thing is a lot of states moved back their primaries because it’s so expensive to hold separate presidential primaries. So if this goes on for a long time, the delegates you need to win are going to come in April, May, and June, which could sort of keep this thing going.

One thing about Newt Gingrich, though, I want to ask you, Karen, since you spent so much time with him for so long. Are we seeing a new Newt Gingrich, an old Newt Gingrich, a hybrid?

MS. TUMULTY: I wouldn’t know that. I’ve actually asked him about that and he says that he is more mature, and he says hopefully – he hopes that he is more disciplined than he has been in the past. He put out the word to his staff this week that nobody is to be quoted, even off the record, criticizing Mitt Romney. Well, let’s face it. This is a guy who made most of his political career going for the jugular, from practically the minute he got to Congress. He has decided that he needs to be upbeat, that he needs to stay focused on policy and on big questions. When he goes into debates, he scribbles a little smiley face on his notes to remind him to smile more often.

MS. IFILL: Has he been smiling? Did I miss that?

MS. TUMULTY: He does. He says his granddaughter sits there and counts the number of smiles. So the question is, can he maintain this discipline? And as some of his friends will tell you, Gingrich has often been at his worst when things are going well for him.

MS. IFILL: Well, and as successive candidates have discovered, whether it’s Rick Perry having these moments where he doesn’t know what he’s saying or Michele Bachmann rising and then falling or Herman Cain now, that white hot spotlight that we’re talking about can really challenge your own discipline. And I wonder if he –

MS. TUMULTY: Well, he’s been in that spotlight though for a lot of years.

MS. IFILL: This kind of spotlight though.

MS. TUMULTY: And he’s also – he is much more surefooted I think than the other candidates on sort of who he is and where he is on policy. That’s why this kind of apostasies that he’s said on immigration haven’t hurt him the way they did say Rick Perry. Nobody is going to believe that Newt Gingrich is not a conservative. And even though for all the years he was in Washington, people don’t think of him as an insider because most of the time he was here, he was sort of firebombing the place.

MR. ZELENY: It really is interesting, you see kind of a couple of different – how he’s viewed in Washington is different than how he’s viewed out on the campaign trail. But the voting record that he had from the early part of his time in Congress throughout the ’80s, which is moderate by a lot of standards, we’re going to see that revisited again, and again, and again. I think the Romney campaign, if they make the decision to sort of go after him, it’s going to be on his voting record.

MS. IFILL: Speaking of the Romney campaign, talking about where the white hot light is not, he seems to – if there’s anything that’s true about everybody who’s risen to the top here is that they are the anti-Romney. This has almost become a cliché already. Where is he? Why is he not breaking through?

MR. ZELENY: It’s been a slow and steady approach. I mean, he has sort of designed everything up until this point, except they were definitely not preparing for the Newt Gingrich thing. So right now the Romney headquarters is – all of his advisers are trying to figure out exactly how to react to this. Is Speaker Gingrich going to sort of go away on his own? Is he going to fizzle? Or are they going to have to make it happen? But Romney, of him – of his own he’s a better candidate than he was four years ago, no question, but he still is testier than he probably should be at this point. He’s done very few interviews. The only candidate who’s not done a Sunday show interview the whole time, and he’s prickly. He’s definitely – though still has so much going for him because he has done this before. I don’t think you can overstate that.

MR. TANKERSLEY: Karen, can you tell – speaking of the candidate that we haven’t talked about here, the president –

MS. IFILL: Oh, him.

MR. TANKERSLEY: Yes, oh, him. Yes. Who would he and his team rather face coming out of this: Newt or Mitt?

MS. TUMULTY: Well, judging from the number of criticisms and critical videos we’ve seen coming out of the DNC and out of the president’s sort of outside allies, it’s clear that they think Mitt Romney I think at this point would be the strongest candidate against him. And he is very much who they are preparing against. I don’t know what degree the Newt Gingrich surge has forced them to make any recalculations, but right now they seem to have their fire trained on Mitt Romney.

MS. IFILL: So are they counting on Newt Gingrich to collapse of his own volition or for his opponents to take him out without them having – because they haven’t spoken at all about Gingrich at this White House.

MR. ZELENY: I think they think that someone else will sort of handle that. And Ron Paul, we haven’t mentioned him yet, he’s going after Speaker Gingrich very hard in a web video and he has money to do it, and he is going to point out what he says are a bunch of inconsistencies. But the White House is also trying to define President – Governor Romney. I almost called him President Romney. They’re trying to define Governor Romney right now.

MS. IFILL: You’re going to get a phone call returned.

MR. ZELENY: So he sort of has a brand going into the Republican primary that he does not want.

MS. IFILL: Okay. And we should keep an eye on Ron Paul because he apparently does have the organization and the money to surprise –

MR. ZELENY: All across the country.

MS. IFILL: – in Iowa and all across the country. Thank you all very much. I know this was a kind of a quick show because we have to leave you a little early tonight so you can get the chance to support your local station which in turn supports us.

But the conversation continues online on the “Washington Week Webcast Extra.” Also online you can find my take on whether the payroll tax cut debate is destined to become Washington’s next train wreck. Stay up with daily developments online and on the air at the PBS NewsHour at And we will see you next week, on “Washington Week.” Goodnight.