MS. IFILL: Capitol Hill standoffs, wars ended and continuing, tyrants dead and alive, and a presidential campaign about to catch fire, 2011 in review and 2012 in preview, tonight on Washington Week.

An eventful year. The House changes hands.

REPRESENTATIVE NANCY PELOSI (D-CA): I now pass this gavel, which is larger than most gavels here, but the gavel of choice of Mr. Speaker Boehner.

MS. IFILL: And the ripples are still being felt.

SENATOR HARRY REID (D-NV): It seems that everything we’ve done this last year has been a knock-down, drag-out fight.

MS. IFILL: Mostly in fights over spending and taxes.

PRESIDENT BARACK OBAMA: I’ve been left at the altar now a couple of times.

SPEAKER JOHN BOEHNER (R-OH): Giving the federal government more money would be like giving a cocaine addict, all right, more cocaine.

MS. IFILL: Stubborn unemployment as the economy stumbles.

PRES. OBAMA: We got hit by a truck. It’s going to take a while for you to mend. And that’s what’s happened to our economy.

MS. IFILL: And the world changes abroad.

SAIF AL-ISLAM GADHAFI: Plan A is to live and die in Libya. Plan B is to live and die in Libya. Plan C is to live and die in Libya.

MS. IFILL: The Arab Spring topples leaders in Libya, Tunisia, Egypt, and the upheaval continues. U.S. forces kill Osama bin Laden and leave Iraq, but the fight goes on in Afghanistan. The president struggling, congressional approval in single digits, what are the options?

NEWT GINGRICH: I don’t think right-wing social engineering is any more desirable than left-wing social engineering.

MS. IFILL: Republicans up and down, in and out.

MITT ROMNEY: If you can’t stand the relatively modest heat in the kitchen right now, wait until Obama’s hell’s kitchen shows up.

MS. IFILL: Now comes decision time. We take the long view tonight with Helene Cooper of the New York Times, Michael Duffy of Time Magazine, Doyle McManus of the Los Angeles Times, and David Wessel of the Wall Street Journal.

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

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

MS. IFILL: Good evening. We end the year as we began it, with upheaval of every sort: economic, diplomatic, military, and political. This week’s standoff and last minute deal on the payroll tax cut were not unlike the fights we’ve seen all year long. Each side stared each other down practically up until Christmas Eve.

PRES. OBAMA: This isn’t a typical Democrat-versus-Republican issue. This is an issue where an overwhelming number of people in both parties agree. How can we not get that done? I mean, has this place become so dysfunctional that even when people agree to things, we can’t do it? (Applause.) It doesn’t make any sense. (Applause.) Enough is enough.

SPEAKER BOEHNER: Sometimes it’s hard to do the right thing and sometimes it’s politically difficult to do the right. It may not have been politically the smartest thing in the world, but let me tell you what. I think our members waged a good fight.

MS. IFILL: Did this week’s fights remind you of anything? I felt like yesterday we saw both John Boehner and Barack Obama getting out there and blaming the other, and one of them, obviously, coming out ahead, but I feel like we’ve seen these fights before.

MR. DUFFY: Yes, it feels like the past is prologue. We’re going to see more of them as we head into 2012. What we saw this week over the payroll tax holiday is really a metaphor. I think it was going on all year long, particularly inside the GOP, civil war inside the Republican Party between its money and Washington-based power structure, which kind of was okay with the status quo, and the tea party, anti-Washington, anti-federal spending wing, which has gained a lot of power inside the party over the last year.

All year long, Gwen, that tea party wing has had the upper hand. It’s really the one to watch both in Washington and on the campaign trail as they begin to choose a nominee.

MS. IFILL: David, we saw this play out, but with a different outcome during the debt limit – ceiling limit debates earlier this year, and it does seem like if it’s – it’s the fallout from 2010.

MR. WESSEL: Absolutely. You know, the president is dealing with a Republican Congress and the speaker of the house does not apparently have control of his troops. And so as the president says, he thought he reached a deal with Speaker Boehner earlier this year on deficit reduction and the speaker couldn’t bring the membership of the House with him. And the president says that’s exactly what happened this time, only this time, in the end, the speaker managed to quarrel enough troops, so that none of them showed up on the floor of the House today and the two-year – two-month rather extension to payroll tax survived.

MS. IFILL: Yes, except one other thing they always say, they all say it’s about jobs. They all say it’s about serving the American people, but it’s also about whether the president is tough enough and whether John Boehner actually has control of his caucus, which – as we sit here tonight, what does it seem like?

MS. COOPER: Well, today, you know, in the light of what’s happened – what happened yesterday and what happened this morning, the president certainly looks like he was finally tough enough. He’s been battling this whole narrative all year that every time he goes to the mat with Congress, he’s the one who blames. He gives in. But in the past couple of months, ever since September, when President Obama came out after Labor Day with his jobs speech and he started going around the country promoting this jobs plan, he knew that Republicans in Congress were not going to go for. The White House made the conscious decision that President Obama would now start to run against the Republicans in Congress. Beyond that, one thing that I found really interesting today is for the last couple of months, all that David Plouffe will say is that the Republicans always overreach. They really believe at the White House that the Republican Party ends up hurting itself by overreaching and going too far and trying to have too much. That seems – you know, today seems as if David Plouffe may have been right.

What happens, you know, in the next couple of months. We may soon be writing and talking about, you know, President Obama blinking again on something else, but –

MS. IFILL: Doyle.

MR. MCMANUS: It seems to me that two things were different in this case from the earlier episodes, and the first is the one Helene mentioned. Finally, after those botched talks with John Boehner in August, President Obama planted a flag with that jobs speech, and that’s what he’s been campaigning on all along and Democrats who have been dispirited, not knowing where the president was, what he would give away, finally had a set of talking points they could get behind. But the second thing – and this is equally important, it seems to me, is that the earlier fights were on Republican ground. They were about spending cuts. They were about debt ceilings, holding the deficit down. That’s an easy fight for Republicans to win. This one finally was about a tax cut that the president – the Democrats wanted and it had the Republicans on the back foot as they say in soccer. It had them trying to explain why this was one tax cut they didn’t want. It’s a small deal. It’s not clear to me that President Obama is going to be able to engineer circumstances of this favorable time and again, as we go ahead.

MR. DUFFY: I would also say that this is also probably a big pivot point for John Boehner. We may not know it for a few more months. His speakership probably will last simply because they don’t have anyone – the party on the House can actually agree to rally around instead.

MS. IFILL: Not Eric Cantor?

MR. DUFFY: Probably not. But it’s a – the expression at the White House this week was the speaker cannot deliver a pizza and his effectiveness – they know now, and so – I’m sure Mr. Boehner knows that his effectiveness inside his own caucus is at an all time low. That’s not good going forward in terms of progress on any front for the country in 2012.

MS. IFILL: One thing we know for sure is that everybody in the White House, on Capitol Hill, and on the campaign trail, they’re all reading tea leaves, they’re all reading polls, and none of them likes what’s coming out of the nation’s capital. We just asked the folks who are running for president, all of them running against Washington.

GOV. RICK PERRY: I’m an incredibly proud American. (Applause.) And I know something. America is not broken. Washington, D.C., is broken.

MR. ROMNEY: Well, having spent my life in the private sector, I understand where jobs are created.

MR. GINGRICH: Let’s be candid. The only reason you didn’t become a career politician is you lost to Teddy Kennedy in 1994.

MS. IFILL: So we know that the rubber’s going to hit the road in Iowa in just a week, just over a week. How much is running against Washington going to be helpful for people who are now trying to succeed, to get to Washington, Helene.

MS. COOPER: I think it’s going to be enormously helpful. I mean I think Americans right now are pretty sick of Washington. You look at the congressional approval ratings, and they are – they’re lower than they’ve ever been. You have people right now in polls, peoples saying that this is – they believe this is the worst Congress in history. And so I think that can help. Which is really interesting when you hear the people at the White House talking about this as well, and they talk as if President Obama’s not in Washington. He’s really stove up his own outsider credentials in a lot of ways, and he’s been able to do that because in some ways, he has sort of held sort of Washington at bay. He doesn’t have a lot of the relationships within Washington, which has hurt him, when he’s trying to get bills pass and when he’s trying to do real negotiating, but I bet you, on the campaign trail, we’re going to be seeing, next year, President Obama talking a lot about Washington – Washington as this other being.

MS. IFILL: I always – I’m always amused about people running against Washington who desperately want to get to washing and I wonder how they figure this out, especially if they’re not speaking the language that American voters want to hear.

MR. WESSEL: Well, I think that they’re focus grouping this and they’re looking at polls. And they’re seeing that people want change. And I think the challenge that the president –

MS. IFILL: Heard that before.

MR. WESSEL: Right. I think the challenge the president has is he’s going to campaign on change, again, even though he’s been in the White House for three and a half years. And the only way he could do that is to make it seem that Congress is the problem that needs to be changed.

MR. DUFFY: If you’re looking back over what – the year that Republicans have spent out there trying to unseat Obama on the campaign trail has rot. It’s a real mix bag I think for Republicans. I mean think about the conversations that that party has had just within the last couple of weeks and months. They’re questioning, second guessing the verities inside the Republican Party, such as U.S. involvement overseas for years, really not a debatable point inside the Republican Party. The integrity of the Federal Reserve, not really on the table until this year. You know, Newt Gingrich made a play last weekend sending out Capitol police to round up judges. The whole debate – while trying to keep the focus on the president, they have managed in some ways to pull the party in this conversation much further to the right. And I would have guessed at the beginning of the year so much so that even Ron Paul is coming out to fight for his right to drink on pasteurized milk.

MR. WESSEL: And the president thinks he benefits from that, because to the extent of the Mitt Romney, whoever the nominee is, is pulled to the right, he thinks it makes it easier for him to appeal to those voters in the middle, the one who may decide the elections.

MR. MCMANUS: Although in a sense, isn’t that just a hangover still from the great tea party surge of 2010? And to me, the underlying question is have they timed it wrong? Is the tea party over? There’s a lot of polling which suggests that Americans have now had time to look at the tea party, the candidate in this race who is the embodiment of the tea party, Michele Bachmann, who invented the tea party caucus, ain’t doing so hot right now.

MS. COOPER: And that again goes, again, and I keep saying, I don’t mean to keep parroting Plouffe, but, again, goes to his disbelief within the White House about Republican overreach. You go too far and that – and the backlash ends up being that so many independents are disenchanted.

MS. IFILL: But does that mean that Republicans are overreaching and they’re disempowered, or does that mean that the tea party, in fact, is more powerful. If the conventional wisdom is right, they’re the ones that pulled John Boehner this week.

MR. DUFFY: I think this is the existential crisis they face is they begin now their second year of trying to unseat the president. Whether they can find a nominee, who can unite these two wings, which have – this tug of war, the civil what I called it, has been going on all year. I’m not convinced they can and whether their timing is right or not, I think you’re right. They seem a little behind the times. I think it’s possible that it may not be timed well enough to pull them back together. We’ll see. I don’t know.

MS. IFILL: Does that explain this very interesting and weird pre-campaign year we’ve seen so far, where every week on this program, there’s been a different frontrunner, and they’ve been up, and they’ve been down, and the up usually has – corresponds with their outsiderness, and the down – do they take themselves down or someone else decides oh, they’re not the solution. Whatever it is, a weak president, and yet they can’t settle – very unconventionally for Republicans, on a strong challenger.

MR. MCMANUS: Sure, that’s part of it. Look, but this is also a pattern we’ve seen with a party out of power before. The true blue base of the party, whether it’s a Republican base or a Democratic base has a kind of moderate choice in front of it. In this case, it’s Mitt Romney, who, in a sense, is the establishment candidate. And that’s not that satisfying in the out year, when you really want fundamental change, when you really want to do something radical. So you try each one on for size and it’s a process of elimination.

MS. IFILL: You know, you go back over this year and you know that a lot of things didn’t happen. And we saw – we got caught up in Washington in some of the crazier things which lead to a deadline and then it falls apart or it comes together. But there’re a lot of big things that did happen, not only here, but around the world. And when you look at it, you think to yourself, does anything that happened in Washington speak to those issues? Does anything that happened in Washington – let’s take them apart. Michael mentioned a couple of them.

One is the foreign policy issues. We have seen the rise and the – in some cases, victory of the Arab Spring, in some cases, not so much. In Libya and in Egypt, yes, in Syria, no. We have seen U.S. forces pull out of Iraq, but stay in Afghanistan. We have seen the death of North Korean tyrant who has been our enemy for his entire lifetime. Do we have any domestic conversation about it? Do these events drive any kind of the conversation we’ve been having here, in 2011?

MR. MCMANUS: Not really, Gwen. I mean, in a way, from my standpoint, the most disappointing thing about the Republican campaign as a foreign policy walk is that there really hasn’t been a coherent foreign policy debate here. There’s been a series of attempts to take shots at President Obama. And at times, that has put the Republican candidates in paradoxical positions. In the case of Newt Gingrich, being in favor of intervening in Libya a week before he was against intervening in Libya.

MS. IFILL: Or when the president poked back at Mitt Romney by saying, we’ll see, ask bin Laden whether I’ve been an appeaser or not.

MR. MCMANUS: Exactly. To take an issue that is core to many, many Americans, and should be core to most Americans, Afghanistan. How long are we going to stay in Afghanistan? What’s our strategy going to be? Well, Mitt Romney has some answers. Newt Gingrich has some answer, but you really haven’t seen a fully rounded debate on that.

MS. IFILL: You just got back from Afghanistan. Are they having that kind of rounded debate on the ground?

MR. MCMANUS: The military’s having that kind of rounded debate because President Obama has given them a set of deadlines and a set of numbers. They’re 94,000 troops now. They’re going to be at 68,000 in September of 2012, in the middle of the election campaign. They’re going to be at a smaller number after that. So they have to adjust. So there is, in fact, a very robust debate on exactly what strategy you use and what number you get to.

MS. IFILL: Do we hear that debate happening here, at the State Department or at the White House, or are they completely consumed with domestic reelection prospects?

MS. COOPER: There’s definitely a debate at the White House, particularly about Afghanistan. There is a wing at the White House that thinks that we’re not being – even our aggressive pullout timetable is not aggressive enough. And there’re people who are pushing for, come next summer, for President Obama to come out and announce something that’s even more aggressive as a pull out.

They think that Americans have completely lost their appetite for war. And they look at that as an opportunity for President Obama to reap some kind of political benefit from saying, you know, we’re now pulling out in Afghanistan. I – he can make – when it comes to foreign policy it’s where he’s on his firmest ground, when he starts talking about what he’s done over the past three years, he can stand up – and you’ve heard him say, I’ve taken out more bad guys. Ask Osama bin Laden if I’m an appeaser. He can legitimately say that with the CIA, the drone strikes that he has taken out so many of the al-Qaida leadership in Pakistan and Afghanistan. And so he thinks that he would be under very – on very firm ground there. But whether that, now, whether that translates to the rest of the American populace, whether American voters are thinking that, I don’t –

MR. WESSEL: Well, the polls show that he’s favorably viewed by Americans on foreign policy and unfavorably viewed on the economy.

MS. IFILL: Except on Iraq. We saw – it looks like it’s crumbling. The moment we decided to leave, which – there have been critics, including John McCain, who say that is exactly what was going to happen, that all of the treasure that we invested in Iraq is now falling apart because we pulled out too soon. Does that have any – does anybody listen to that and go, yes, a good point?

MR. DUFFY: I think there are –

MS. IFILL: Especially after a week like this?

MR. DUFFY: I think there’re people who can look at the events of Iraq this weekend on both sides and say, yes, I was right about. We shouldn’t have been there in the first place because these conflicts have been going on for centuries with or without American troops on the ground. And other people who are writing already that this is a reason why Obama was wrong to pull them out or pull them out so quickly.

But I agree that this is a strong position – the president has a very strong base right now on foreign policy, and he probably has greater latitude to do things than he did six months ago. And you can even see that in the way the Republicans on the campaign and in Congress talk about the president. At midsummer, they were talking a great deal about competence and management here in Washington by the president. They’re not talking about competence and management. They’re talking now, in Mitt Romney’s case, about looking for the soul of America, whatever that means.

MS. IFILL: What does that mean?

MR. DUFFY: I think it’s a different kind of conversation about it that might be more cultural, might be more about somehow Mitt Romney’s view of the world, but not – not about competence, not about management. It’s going back to ideology, I think. And that – that –

MR. WESSEL: Maybe on the foreign policy side, but on the economy – I think they will – they’re not going to attack him on foreign policy because that’s where he’s strong. They’re going attack them on the economy because that’s where he’s weak.

MS. IFILL: Well, let’s talk about that, though, because the attack on the economy could be – it could be broader than just what’s happening here. We saw what happened with the Euro zone, huge, perhaps with potential for huge ripple effects back home. Do we see that and can it play a role in this campaign debate?

MR. WESSEL: Well, it definitely will play a role in the debate. I mean, we’ve all written that it’s very unusual for a president to get reelected with such high unemployment. I think what the president is hoping is these recent signs of favorable momentum in the economy will continue and that the economy won’t be in good shape by the election, but people will think it’s in better shape.

The concern is, and you’re absolutely right to mention, Europe – the shockwaves from Europe if Europe continues to fumble could disrupt our recovery, and the rest of the world is slowing down, too. China and the rest of Asia are slowing down. So it’s a very uncertain thing. Economists always say the economy is uncertain, but this time, they really mean it. And so I think it’s a real tug of war between the natural vibrancy of the American economy and does it get going again or is it once again pushed down by all these events from outside.

MS. COOPER: I think what’s interesting about that is that this is the one area too that could really have a huge effect on President Obama’s reelection chances on the American economy and it’s the one area where he has so little leverage. There’s nothing he can do about it. He can yell at Merkel and Sarkozy and he could call the Europeans and say we need you to be more aggressive, but at the end of the day they’re on their own timetable and they’re doing what they’re going to do. And he’s – the people at the White House are really, really worried about that he met with some fundraisers last week and they asked him what are you most worried about, and his answer was the Euro.

MS. IFILL: You know, there are three constituencies out there who have expectations for 2012 – the public, the partisan, battlers, and the political candidates. What are their expectations if you can find a way, Doyle, to sum up – and all of you – kind of what the expectations are for 2012 in those constituencies?

MR. MCMANUS: I think the American people are still looking for answers to the right questions that the tea party posed. The American people do think Washington is broken, and they’re looking for someone who’s going to give them a convincing answer on why it’s broken and how they’re going to fix it. And that one isn’t resolved yet. That’s what a lot of the campaign is going to be about.

MS. IFILL: What about the political combatants, David?

MR. WESSEL: Sure, I think that the people – I was going to say – I was going to ask am I better off than I was four years ago, I think –

MS. IFILL: Yes. A question that never gets old, does it?

MR. WESSEL: Right. Never gets old and it’s a great question to ask, you know? Because people do worry about it. I think the political combatants are, as we’re talking about earlier, trying to figure out how tough is this guy. We know President Obama. He gives a great speech. But it’s going to be a tough campaign. There’s going to be a lot of money on both sides. And I think people are wondering what – he’s never had a tough reelection in his political career, and so this will be a real test.

MS. IFILL: He’s actually had charmed election campaigns.

MR. DUFFY: Hasn’t had that many elections.

MS. IFILL: Exactly. But Helene, doesn’t the White House – aren’t they feeling pretty good about them, like kind of smelling themselves right now, feeling that they’ve proven themselves tough in this big battle?

MS. COOPER: Today, they are. But as we know, Washington is a fickle being and political fortunes can turn on a dime. Remember how long the Osama bin Laden bounce lasted for President Obama back in May. Like, what, it was two or three days.

MR. WESSEL: And they bought themselves two months. We’re going to be back in this argument within two months.

MS. IFILL: That’s true.

MS. COOPER: So it’s – but there is also a belief that this guy is about to face the fight of his political life. I’m actually really excited about next year because I think as – as exciting as 2008 was to cover, I think 2012 is going to be huge because for – I think most people assume that this is going to be a very, very close election, and I think for President Obama to pull it out, he’s going to have to dig deeper than he ever has in his life. And whether he can do it or not is going to be fascinating to see.

MS. IFILL: I agree. And all the people running against him know that.

MR. DUFFY: I was going to say. What the funders want is money as much as they can get. And it’s really that simple.

MS. IFILL: The funders –

MR. DUFFY: Well, you said the constituencies –

MS. IFILL: Combatants, yes –

MR. DUFFY: – and that’s just another thing. We’re going to see a huge amount of money. The president believes he can raise between $750 and $1 billion. The Republicans know they cannot. They think – they’re going to try to get close. A lot of what was raised privately behind the scenes and by secret groups, we can’t keep track of. That adds a whole another element thanks to the court case from two years ago that allows all kinds of groups to play in all kinds of ways in places that we’ll never be able to keep track of. Even already in Iowa, next week, the super-PACs, the special groups are now spending more than the campaigns themselves. That will happen also on the Democratic side, which means it’s kind of a four-ring circus, and you can only see a couple of the rings.

MS. IFILL: Well, on one of the rings we can get to, but we’ll get to in future days, is the Supreme Court, which is scheduled to weigh in on hugely consequential issues which could have an effect on the outcome of this election as well.

Well, we’ll be watching them with Helene. I’m kind of excited to see what comes next. Thank you for watching. We have to go now, but the conversation will continue online, where we take questions you’ve sent us about the events of the year. You can find the answers on our website, at Holidays come and go, but the news keeps coming. Keep up with daily developments on air and online at the PBS NewsHour. And then we’ll see you again for an Iowa preview next week, on Washington Week. Happy Hanukkah, everybody, and Merry Christmas, too. Goodnight.