MS. IFILL: Battling it out in the battleground states, the jobs puzzle, the tea party rises again, and who suffers when Congress doesn’t act, tonight, on “Washington Week.”


REPUBLICAN PRESIDENTIAL CANDIDATE MITT ROMNEY: It’s good to be with my friends in Nevada.

MS. IFILL: Neck and neck, as Barack Obama and Mitt Romney search for a breakout message.

PRES. OBAMA: America’s not built from the top down. America’s built from the middle up. America’s built from the bottom up.

MR. ROMNEY: I’m going to make sure we finally have a president that’s serious about getting our budget under control and by the last year of my second term, we’ll finally have a balanced budget in this country.

MS. IFILL: But a new jobs report offers no clarity. More jobs added, but the jobless rate goes up, too.   Meanwhile, Congress leaves town with much left undone, As yet another tea party candidate trounces yet another establishment candidate, this time in Texas.

TED CRUZ: When we started, they said this was impossible. And you know what, they were right. I couldn’t do it, but you could.

MS. IFILL: Covering the week Amy Walter of ABC News, David Wessel of the Wall Street Journal, Susan Davis, USA Today, and Karen Tumulty of the Washington Post.

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. If you listen closely to the major party candidates for president, you’ll see two men at war over a narrative. For President Obama, it is this, that Mitt Romney is out of touch, will raise your taxes, and will not tell you about his. This was the president today.

PRES. OBAMA: At a time when too many working families are already struggling to make ends meet, they want to give millionaires and billionaires and folks like me tax cuts that we don’t need and that the country can’t afford, even if middle class families have to pick up the tab for it. Those are their priorities.

MS. IFILL: For Governor Romney, it is this that he is the man with the experience to turn the country around without raising taxes or abandoning national priorities.

MR. ROMNEY: My plan is very clear. I will not raise taxes on the American people. I will not raise taxes on middle income Americans. And the president’s assertion and his ad’s assertion to the country are simply false.

MS. IFILL: Trouble is neither of these narratives seems to be shifting this frozen in place election. New polls show President Obama with a slight edge, but not a big one. Is this just where the pre-convention political status quo is supposed to be in August, Amy?

MS. WALTER: Well –

MS. IFILL: Maybe?

MS. WALTER: Maybe, but really, what’s most remarkable about where these two candidates are right is how disliked they are by the American public in August. Usually, we wait for October to dislike our candidates this much. So I went back and looked and where President Obama is right now with his favorable rating – this is not job approval, but how do you feel about him personally – is lower than any incumbent president going into his convention since George H.W. Bush in ’93.

MS. IFILL: Really?

MS. WALTER: And if you look at where Mitt Romney is, depending on which poll you look at, it’s either the lowest favorable and the highest unfavorableS since 1988 – in fact I couldn’t go back any further to see these numbers – or since 1996 with Bob Dole.

MS. IFILL: What’s driving this? It’s not just because people woke up and said, I don’t like him. It’s more than that.

MS. WALTER: It’s because they’ve seen nothing but negative ads since April. And since all of us get to live in the Washington, D.C., media market, which covers Virginia, you all know what it’s like to turn on the television and just see the nonstop – it’s just negative ad after negative ad. Barack Obama has known – his campaign has known really very early on that the way to win this race is to make it a referendum on Mitt Romney and to make him an unacceptable alternative. And they have done that in one sense by raising his negatives or think that’s the way to make him unacceptable. But he still has –

MS. IFILL: Romney people figured out the same thing.

MR. WESSEL: But doesn’t – isn’t at some point the Romney campaign going to figure out that they’re going to have to sell the candidate and his program, that it can’t just be a referendum on Obama?

MS. WALTER: No, it’s a great point. And that’s why you’re starting to see a couple of things happen. The first is you’re starting to see Mitt Romney now tell his own story. Speaking of ads, there’s a new ad right now, Mitt Romney driving his own car.

MR. WESSEL: Yes, driving while doing the commercial.

MS. WALTER: Driving while talking. Okay, at least he’s not on the cell phone. At the same time, he’s actually trying to talk and drive, but where he tells his story in his voice. Because if you talk to voters, they will tell you, we just don’t know anything about this guy, Mitt Romney.

The second thing is they believe they have time. They think that the convention is when people start to tune in. We don’t need to give specifics before then. Nobody’s paying attention to this back and forth, tit for tat. They will when we lay that out for them. But he is – the third thing is he’s starting to lay out some specifics, even though they’re not completely specific, by saying, I have a five-point plan. You hear this now for the first time in his stump speeches. It’s not just a big picture about how bad the economy is, how terrible Mitt Romney is – I’m sorry – Barack Obama is, how terrible things are under his stewardship. It is here are the five things I’m going to do to make things better. Very vague five things, but at least trying to outline the fact that he has five points.

MS. TUMULTY: So they’re going to have a big infomercial, but are there – given how frozen in place –

MS. IFILL: What do you mean they’re going to have a big infomercial?

MS. TUMULTY: That’s what – I mean, they’re going to sell the candidate. They’re going to use the convention as modern conventions are used, as infomercials. But you know, so many things were supposed to shake the dynamic of this race. The Supreme Court decision on health care, you know, all the outside money, and yet, it stayed frozen. Are there any events between now and the election that could actually change things?

MS. WALTER: So this race is as stuck as it is because Americans are as polarized as they are, too. I mean, you really see when you look at these polls and we talk about undecided voters and independents, there’s really very few of those people. So regardless of how you feel about certain events or whether it’s the Supreme Court or whether it’s about any other event that happens between now and November, you’re going to – you have already picked a side. Right, so it’s going to be Mitt Romney’s fault or Barack Obama’s fault no matter what. That said, I do think, in terms of seeing the numbers move, I do think that picking a vice president is going – we might see a little bump there, and I do think the convention – I mean, traditionally, you have had a bump. And I think the one issue that – the good news from Mitt Romney is, the one issue he’s had is that he hasn’t necessarily completely coalesced Republicans yet. I don’t think they’re – they’re not looking around for somebody else, but the enthusiasm for Mitt Romney is not as strong as – among Republicans, as strong as the enthusiasm for Democrats for Barack Obama.

I think the convention will help do that. You’ll see Republicans all come home. Democrats are already there. And then those independents, depending on where they sit, that could move this race.

MS. DAVIS: Do you have a sense from the polling if voters are engaged in the presidential or is the negative ads, the blanketing of information just tuning them out?

MS. WALTER: I think that is an excellent question and we’re starting to see – and when you talk to voters out there, they say, we’re not paying attention. I’m not ready to tune in yet. I still don’t know enough. I’m not getting the information that I want.

MS. IFILL: I’m still trying to –

MS. WALTER: Seeing a lot of it –

MS. IFILL: Still trying to figure out where those sideway dancing horses are. They’re much interested in that right now.

MS. WALTER: They’re much more interested in that and of course, the synchronized diving.

MS. IFILL: Of course, which we’re all waiting for.

Well, let’s move on, because this is the first Friday of the month, as close as it comes in our culture to an economic yardstick for this struggling economy. So here is the news. The economic – the economy added 163,000 new jobs in July, yet the jobless rate ticked up from 8.2 to 8.3 percent. In other words, the economy, like the presidential campaign, continues to run in place. But why and what if anything is being done about it? David has a new book out, “Red Ink: Inside the High-Stakes Politics of the Federal Budget.” So perhaps, David, you have the answers –

MR. WESSEL: I have all the answers, all the –

MS. IFILL: – conversation. I’m stuck.

MR. WESSEL: It is confusing. So the economy – the government does a survey of employers and that survey found that employers added 163,000 jobs in July, which is twice as many as any of the previous three months. So that was on, without a doubt, good news. And it was nice to have some good news on the economy. But they also go and do a survey of households and that found fewer people said they have jobs, so that’s why the unemployment rate went up. The first number is probably a better signal of where the economy is, compared to last month. But the unemployment rate is so high that it just tells you – think of it this way. There’re 12.8 million people out of work officially. That means they’re still looking for work. That’s as many people as live in the state of Pennsylvania, which is our sixth largest state. So there’s no way the economy is healthy.

The markets love the numbers. The stock market –

MS. IFILL: That’s what I was going to ask about. What’s that about, why?

MR. WESSEL: I think there was a sigh of relief on the markets. I think people were really afraid we were about to have another recession. The stock market ended the day higher than any time since May. But it wasn’t good enough news to make the Federal Reserve relax. And if you read what all the economists were saying today, they’re pretty pessimistic about the rest of the year. And there really are two reasons. One is, it was a year ago, this time of year, last year, that U.S. government debt was downgraded by Standard and Poor’s because Congress was dysfunctional and couldn’t deal with the deficit. No progress there. We still have this prospect of spending cuts and tax increases at the end of the year. And there’s a lot of worry about what’s going on in Europe, which continues to get worse. It’s so bad that even the Chinese are worried about it.

MS. DAVIS: Is there anything that the Fed can do to juice the economy right now?

MR. WESSEL: Well, that’s a good question. So the Fed told us this week that they’re on red alert. And if things don’t pick up, they’re going to do something soon, which probably means September. Too late to do anything good for the economy. Could you keep the stock market healthy? And so that’s the only effect I think they can have on the short run.

MS. TUMULTY: But – so all these events that are going to transpire at the end of the year. You know, potentially these automatic cuts going into effect. Is there any evidence that Congress is going to do anything to reassure the markets, to reassure the people who are worried that we’re headed to another one of these big traumatic moments?

MS. IFILL: Or would congressional action actually scare them? (Laughter.)

MR. WESSEL: Yes, everybody likes uncertainty until they find out what – (inaudible) – they’re worried about uncertainty until they know what uncertainly is. Well, look, Congress has done one thing. They’ve inched towards – Sue knows – a plan to at least prevent a government shutdown right before the election. Congress essentially loaded a gun and pointed it at the American economy and set a trigger. And it said that if we don’t come up with a deal on the deficit by the end of this year, the trigger’s going to go off. And it’s now five months away. There’s no sign that they’re doing anything to find an alternative plan to the trigger. My guess is they’ll take the bullets out of the gun. But we’ll have to see. There are number of people, most of them Democrats, who are now saying, unless the Democrats and the president say they’re willing to trigger these tax cuts and spending – tax increasing and spending cuts at the end of the year, that the Republicans won’t really be forced to negotiate it.

MS. WALTER: So that seems like the president – if the Fed can’t do much and Congress can’t do much, what can the president do between now and the election to make people feel any better about the economy?

MS. IFILL: We keep hearing the Romney folks say and it’s their mantra that the president’s not doing anything, that he doesn’t have a plan. He’s the president after all.

MR. WESSEL: Right. And the president says, well, here’s my five-point plan and those evil Republicans in Congress wouldn’t sign off on it. The fact is there’s nothing Obama can do now that’s going to make the economy better. And every day that the conversation is about something than the economy is a day that’s good for Barack Obama. So I expect Mitt Romney, if they have any sense on the campaign, will try to steer the campaign back to the fact that the economy is lousy because at some point, people don’t care why it’s lousy. They just want it to be fixed. And if they want a change, it’s going to be really hard for the president to campaign on the platform –

MS. IFILL: One more quick question and we’ll talk about it some more in the webcast. In your book, you talk about this lack of political consensus around the debt and around the deficit. Is that likely to change?

MR. WESSEL: I don’t think so. And I think it reflects something that Amy said. You know, in the book, I quote Doug Elmendorf, the head of the Congressional Budget Office, which is one of the few institutions in Washington that actually works as it was designed. And he sums it up this way. The problem with the deficit is that the American people want more benefits, primarily for the elderly, than they’re willing to send to Washington in taxes. And that’s going to be true after election as well.

MS. IFILL: Thank you, David.

MR. WESSEL: You’re welcome.

MS. IFILL: Members of Congress didn’t run in place. They ran out of Washington, leaving behind an election year tangle of loose ends, ranging from drought relief to cyber security to a postal service on the brink of collapse. Bipartisan agreement exists somewhere within all of these issues, but not enough to enact legislation. For example, more than one fifth of the nation is in extreme or exceptional drought. But Congress still failed to agree on emergency aid for farmers. How does that happen, Sue?

MS. DAVIS: The Job Bill is probably one of the best examples of how even simple issues can get tied up in election year politics. America’s farmers, I mean, it seems like one of those issues that it would be extremely easy for Congress to find a resolution. Part of the problem – and it goes back to these budget issues that David’s talking about and the division in Congress – is the two parties fundamentally disagree about how we solve almost every problem facing this country, whether it’s how we deliver our mail, how we build our roads, or how we help America’s farmers. The politics that are going on here is the House passed a bill, a multimillion dollars – hundreds millions of dollars to assist farmer, mostly cattle is what’s being affected a lot by the drought. And Democrats and Republicans, as well, in the Senate, they passed a farm bill. They passed a five-year Farm Bill, something that they say will bring down the deficit over the long-term, even if it’s going to spend a lot of money out front. And House Republicans, they don’t want to spend the money on anything. There’s a political view right now that the best thing Republicans can do on the Hill is keep their heads down and let Mitt Romney and Barack Obama be the focus of American political talk.

MS. IFILL: Even with that kind of frozen in place action, we didn’t expect a lot to happen in election year, but I was surprised at the extent of the things they did not do, especially something like drought release.

MS. DAVIS: Well, there’s also been this expectation in this Congress that everything’s going to happen after the election. It’s been – it’s everyone’s punting or punting on every issue and there’s this idea that this lame duck session is going to be the – after the election, between the next Congress, there’s going to be this furious work period –

MS. IFILL: Is that going to happen? Has anyone ever seen that happen?

MS. DAVIS: Well, in the – I would say in the last lame duck is when they extended the Bush tax cuts. So there tends to be this – there’s this trend right now in Congress and politics that they don’t – Congress can’t act unless there’s brinksmanship, unless there’s a real threat, whether it’d be defaulting, whether it’d be shutdown, that we need some real consequence to force their hand. And Chairman Lucas, who is the Farm Bill chairman, he said, go home, go home to your districts this month and talk to your constituents and build the momentum, so when these guys come back in September, they feel that they have to act. And they don’t feel right now.

MS. TUMULTY: But where is the political incentive to get anything done because you go out on the campaign trail and everybody is just promising they’re going to stand by their principles and never waiver. I mean – where the reward?

MS. DAVIS: There’s two things I think that’s interesting. One is that the Senate often gets blame for where legislation can move. And in these cases, the Farm Bill and postal reform, they passed with large bipartisan majorities in the Senate. Right now, it’s really the House, which is unusual, because the House tends to be the place that the majority can work its will. Republicans are divided, even within themselves, particularly on fiscal issues. And John Boehner, the speaker of the House, doesn’t want to have his party on display, fighting about spending, and becoming a distraction to Mitt Romney. I think Republicans think that Mitt Romney has a very good chance of defeating Barack Obama in November and they don’t want to do anything to screw it up. So their resolution is do nothing at all.

MR. WESSEL: Do they worry at all about the fact that the polls show that they’re even less popular than the press?

MS. DAVIS: I think they do on a broad extent, but to the extent that it’s going to affect the elections in November, they’re so low that I’m not sure they can go any lower. So by not doing a drought bill or a postal reform, it’s not going to affect them any more than it already has. And also, just by the political outlook, election forecasters – Republicans are confident they’re not going to lose the majority. Election forecasters, right now, put them at maybe a 10-seat loss on the high end and they’re willing to take that.

MS. WALTER: And what did happen, too, in the olden days you would say, grassroots lobbying, call your Congress person, make sure that they’re doing what we told them to do. Are they not – are they hearing it and ignoring it, or they’re just saying, you know, I’m not hearing it at all?

MS. DAVIS: I think they’re hearing it. I definitely think they’re hearing it, but there’s – I mean – Farm Bill is a good example. You have a lot of congressmen who come from farm states who are very openly talking about how they want to move this bill. Frank Lucas, who’s the chairman of the committee, is a Republican and he’s very openly saying I want to move this bill.

MS. IFILL: Is the problem then they – there is no immediate impact in people’s lives? They put in a stop gap, for instance, or the postal service is going to default, but your mail isn’t going to stop coming.

MS. DAVIS: Your mail is not going to stop coming in August. Farmers are – they can do this retroactively when they come back in September. There’s this idea of we can deal with it later. We can deal with it later. And if there’s no immediate threat, I feel like Congress just doesn’t want to do anything right now. There’s just a gridlock that seems – that’s just frozen in place, much like everything else.

MS. WALTER: Can anything change that? I mean, is this a Congress that can deal with a real serious crisis, like if something happened tomorrow –

MS. DAVIS: That’s a great question. Kevin McCarthy is the number three Republican in the House, said something really interesting this week at a breakfast with Reporters, where he said, he fundamentally thought Congress could not do big pieces of legislation anymore, that they get so tied down, that the way to address big problems is by smaller piecemeal legislation.

MS. IFILL: Well, and yet –

MR. WESSEL: But then they’ll get bigger. (Laughter.)

MS. IFILL: And yet, people still want to come to Congress, shockingly. (Laughter.) They want to come and increasingly there are new faces who want Washington to do less, actually, not more.

The latest is Texas Republican Senate Nominee Ted Cruz, who, with tea party support, came from behind to win and defeat Lieutenant Governor David Dewhurst this week.

MR. CRUZ: Tonight is a victory for the grassroots. (Applause.) It is a testament to Republican women, to tea party leaders, and to grassroots conservatives.

MS. IFILL: So what this the return of the tea party, Karen, or was it never gone?

MS. TUMULTY: Well, it was certainly a big victory for the tea party because, you know, Ted Cruz was their candidate and his victory was extraordinary. He defeated – he defeated David Dewhurst, who has been the lieutenant governor of Texas for almost a decade, who outspent Ted Cruz by about two to one, who put $11 million of his own money into the race.

MS. IFILL: Who was endorsed by Governor Rick Perry.

MS. TUMULTY: Well, and that’s part of the issue, but this – there was a lot going on in this race. There was the tea party support. But there was also a lot of this kind of outside money that we have seen coming since the Citizens United decision, specifically an organization, an anti-tax organization called Club for Growth, which is not an anti-establishment organization, put in $5.5 million, which really helped to level the playing field a little bit.

Ted Cruz also benefited from the fact that this election date was delayed not once but twice, thanks to court action over redistricting. And finally, I think what a lot of people in the state understand, but people outside didn’t, that there is something of a family feud in Texas between what could sort of loosely be described as the old Bush organization and the organization of Rick Perry. And this was really the revenge of the Bushites.

Ted Cruz was – had been part of the Bush administration. He’d never run for office before he’d been Texas solicitor general, but he did have a lot of support from people who were aligned with the Bush operation, as opposed, which is – there’s a lot of tension between them and Rick Perry, the governor’s operation, which is what David Dewhurst was part of.

MS. WALTER: So how does Ted Cruz, a guy who was the attorney general, get to be the outsider and the grassroots candidate? How does that – and what is – what does that say about what is the tea party?

MS. IFILL: You know, that’s a good question because in Indiana was the state treasurer who rose up. There are all these folks, many of the folks –

MS. TUMULTY: But the solicitor general in Texas is not an elected job. I mean, this guy could never run a race before. You know, but the tea party is really sort of interesting, because it’s not really a party and in many ways, it’s not even an organization. I sort of compare it to a weather system. I mean, if the – (laughter) – if all the barometric indicators are just right, it can cause a real storm. And that’s certainly what happened here. But it’s also had some defeats this year. For instance, in Nebraska, where Deb Fischer is the Republican nominee state senator, she was the only candidate in that race who did not have any tea party support and she beat two tea party candidates.

MS. IFILL: Even though she was endorsed by Sarah Palin, so everybody thought she had tea party support.

MS. TUMULTY: Right. And you keep reading in the coverage, tea party candidate. No, she was not.

MR. WESSEL: It looks like the tea party will have a bigger contingent in the Senate, come November. Is that going to make the Senate folks any better?

MS. TUMULTY: You know, I think the important thing here is – and also, for instance, Richard Murdoch in Indiana knocked off Dick Lugar, a long-time senator. They are coming saying we are coming to stand by our principles and not to compromise. And I also think that these are going to be people – and also, whoever else is left in the Senate it’s going to be looking over their shoulders at these outside groups, like you don’t want to get on the wrong side of Club for Growth. You don’t want to get on the wrong side of the tea party. And I think that is going to matter. They’re not going to be listening as much to Mitch McConnell as they are worrying about somebody building a movement at home that would knock them off.

MS. DAVIS: Do you think that the Ted Cruz victory is going to fuel sort of tea party momentum, going into Missouri and Wisconsin, which are two states that have Republican primaries still to come?

MS. TUMULTY: You know, that is going to be very interesting to watch. There’s a tea party-backed candidate in Missouri, next Tuesday, Sarah Steelman, that’s backed by Sarah Palin. The tea party endorsement today went – in Wisconsin, went to a congressman who’s been running third in that race.

MS. IFILL: And you were just in Wisconsin. And you think Tommy Thompson, who is the equivalent of David Dewhurst, a well-known person, may not survive?

MS. TUMULTY: A four-term governor, who, a month ago, had a double digit lead, is now in a three-way dogfight with a former congressman and a hedge fund guy who hadn’t lived in the state for 24 years.

MS. IFILL: He told Karen, everybody calls me Tommy, but nobody wants to vote for Tommy. That’s the problem. (Laughter.)

Thank you, everybody here.  There’s so much more we couldn’t get to, but as usual, we’ll pick up where we left off, in the “Washington Week” Webcast Extra.  You’ll be able to find us online still talking, possibly about the Olympics, but also – also about Harry Reid, at  Keep up with daily developments over at the PBS “NewsHour.”  And we’ll see you again, right here, next week, on “Washington Week.”  Good night.