GWEN IFILL: The ping-pong economy, the new immigration fight, and Chuck Hagel's not so good day, tonight on "Washington Week."

Wall Street and the housing sector are rebounding, but job growth is stagnant, consumer confidence shaky. What's up with the economy? In Washington, bipartisanship roars back.

SENATOR CHARLES SCHUMER (D-NY): (From videotape.) For the first time ever, there's more political risk in opposing immigration reform than in supporting it.

SENATOR MARCO RUBIO (R-FL): (From videotape.) The issue of immigration is not a simple one, but I think we have an opportunity to do it right. And if we do, I think we'll do a tremendous service to our country and to its future.

MS. IFILL: Will immigration reform finally happen? And Chuck Hagel's rocky confirmation hearing.

SENATOR JOHN MCCAIN (R-AZ): (From videotape.) Please answer the question. Were your correct or incorrect when you said that the surge would be the most dangerous foreign policy blunder in this country since Vietnam? Were you correct or incorrect? Yes or no.

FORMER SENATOR CHUCK HAGEL (R-NE): (From videotape.) My reference to the surge being the most dangerous --

SEN. MCCAIN: (From videotape.) Are you going to answer the question, Senator Hagel? The question is: were you right or wrong?

MS. IFILL: The president's Pentagon choice finds his worst enemies are in his own party. Covering the week: David Wessel of the Wall Street Journal; Fawn Johnson of National Journal; Karen Tumulty of the Washington Post; and Doyle McManus of the Los Angeles 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."

(Station announcements.)

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

MS. IFILL: Good evening. The U.S. economy is a puzzling thing. Today, it added 157,000 jobs, but the unemployment rate ticked up to 7.9 percent. Also today, the DOW industrial average closed above 14,000 for the first time in five years, yet the government reported this week that the economy actually contracted in the fourth quarter of the last year for the first time since 2009.

So as Congress agrees to delay a showdown over the debt ceiling and faces a March 1st deadline for across-the-board spending cuts, what to make of this darned economy, David?

DAVID WESSEL: Am I supposed to answer that?

MS. IFILL: Yes. It's all on you.

MR. WESSEL: OK. So it is confusing. The stock market is up. Employers are hiring, very slowly. In fact, the government now tells us that they hired a lot more people last year than the government had previously believed. Auto sales are up 14 percent ahead of last year. As you said, housing is coming back. On the other hand, this week, the Federal Reserve said the economy took a pause at the end of year.

MS. IFILL: What does that mean, pause?

MR. WESSEL: I don't know, but it's not good. Economies aren't supposed to pause. Unemployment is high, 7.9 percent. Among men between 25 and 54, prime age men, one out of six is not working. So I think when you cut through all this, what do you see?

Well, the stock market is going like this and the economy is going like this. That can't last. I can't explain the stock market, except maybe there was a gigantic sigh of relief. The Republicans aren't going to force the U.S. Treasury into default. The Europeans aren't going to blow themselves up economically. And so there's a kind of sense of relief.

I think when you cut through everything, what do you see? You see an economy that's growing slowly. Now, growing is better than not growing. The Europeans are trying the not growing thing. That's not good. The private sector is definitely healing. In the last three months, the private sector added 625,000 jobs. And the public sector, state, local and federal governments cut 25,000 jobs.

But what we see here is there is the prospect that the government could actually start making things worse again. We have these across- the-board spending cuts. Alan Krueger, the president's economist, said today that it was really important for Congress to avoid what he called self-inflicted wounds to the economy.

So it would be really ironic after a period where, arguably, the government rescued the economy, are we now in a situation where the government will, because it cuts too much too fast, turn in the opposite?

DOYLE MCMANUS: So that means that the Keynesians are right? The answer should be another stimulus package, tax cuts, more government spending?

MR. WESSEL: Well, as you know, there are people who argue that.

MS. IFILL: Not that there's political appetite for it.

MR. WESSEL: Yes. It's not going to happen. That's for sure.

MS. IFILL: OK. Yeah.

MR. WESSEL: What Krueger is talking about, the president's economist, is at least let's not cut too fast. The only way we can get anything that resembles stimulus is if there was some miracle, and we got a long-term deficit reduction thing, and the president stuck some infrastructure spending in in the first couple of years. But even that looks pretty unlikely.

KAREN TUMULTY: You know, there was a bit of a kerfuffle this week, criticism by the Republicans over the White House's decision to disband the president's jobs council.

What was this? And what difference does it make?

MR. WESSEL: Well, I don't think it makes any difference at all. I love watching the Republicans criticizing the president for disbanding something that they said didn't do any good in the first place. It seems really like it was an active political theater that had run its course. I think that it was said that the president hadn't met with them in over a year. It was -- it just -- it never had, in my opinion, any purpose other than PR, and now that's --

MS. IFILL: It was just another blue-ribbon commission.

MR. WESSEL: Even worse. It didn't even come out with much of a report.

FAWN JOHNSON: Well, and there was a lot of talk on Capitol Hill this week about the upcoming budget cuts and whether or not there's any appetite in Congress to stop that. And I can't help wondering what that does for the economy.

MR. WESSEL: Well, I think you're right that there's not much appetite to stop. And I think the betting is now that the across-the- board spending cuts that were supposed to take effect at the beginning of the year were deferred for a couple of months until the 1st March are more likely than not to take place. The Republicans seem to have just realized that if they do nothing, they'll get these spending cuts. It will mean some cuts for -- the defense contractors are very worried about that. It won't be good for the economy, but now that they've settled the tax question and the -- it may not be all that bad, but it will definitely be a minus.

MS. IFILL: And have they settled -- by delaying this debt limit deadline -- have they settled that or is that yet another -- I feel like there are all these dominos waiting one after another to fall.

MR. WESSEL: Right. So March 1st, the spending cuts hit. March 27th, the government's authority to operate runs out. And then the debt ceiling is hit again on May 19th or something. I think that the Republicans appear to have decided they don't want to have a fight over the debt ceiling. So having -- that's pretty clever. They didn't raise the debt ceiling. They suspended it for a couple of months.

MS. IFILL: Yeah.

MR. WESSEL: So I think they're signaling that they want to have a fight over spending and they don't see the debt ceiling as a very good lever. It could come back later in the year if things are bad, but it does look that way to me.

MS. IFILL: Why does it feel like we're going to be talking about this some more? Thank you though, David.

MR. WESSEL: It's good. It's good. It's good for economic reporters.

MS. IFILL: It's good though. You made it very clear. I like that. It will full employment for you. It has become an article of faith in Washington that common ground is the Capitol's most valuable and illusive real estate. So it was remarkable to watch four Democrats and four Republicans announce that they are working together to come up with a compromise on one of society's touchiest issues: what to do about the 11 million people now living in the U.S. illegally?

SEN. MCCAIN: (From videotape.) Elections. Elections. The Republican Party is losing the support of our Hispanic citizens. And we realize that there are many issues in which we think we are in agreement with our Hispanic citizens, but this is a preeminent issue for those citizens. We cannot continue as a nation with 11 million people residing in the shadows, and we have to address the issue and it has to be done in a bipartisan fashion.

MS. IFILL: We'll come back in a moment to the use of the word "citizens." President Obama followed up with an endorsement.

PRESIDENT BARACK OBAMA: (From videotape.) I believe we are finally at a moment where comprehensive immigration reform is within our grasp. But I promise you this: the closer we get, the more emotional this debate is going to become. Immigration has always been an issue that inflames passions.

MS. IFILL: And that's where things get sticky, because all the players in this -- the president, the Senate, the House -- they may not be talking about the same things. I'm not certain they're all on the same page, Fawn.

MS. JOHNSON: Well, they are and they aren't. There are going to be differences and we're going to start to see them explode very soon in the next couple of months.

But the thing that's got everybody so excited about this is that while there are different entities coming from different points of view, they're arriving at the same place. You have tea party Republicans who are saying that we have to legalize this 11 million undocumented population. And that has never happened before. This is a brand new era for the Republicans. And there are some Republicans that I've talked to who are actually irritated that nobody has noticed that. So everyone is -- there's been a real shift on just the whole debate since the last time that we talked about it, which was in 2007.

But the problem starts to come when we decide about citizenship. Do these undocumented immigrants -- do they get to have citizenship? And if so, what has to happen first. So the president wants a certain path to citizenship. That doesn't mean that they don't have wait or that they don't have to meet certain criteria.

The Senate Bipartisan Commission that we've just heard about wants citizenship to be conditioned on border security. And that's a term that could be -- you know, it could be defined impossibly high or ridiculously low, and we just don't know. And then there's less that we know about what's going on in the House, but there are some conservative House Republicans that say we don't want anything special for them in terms of citizenship. They seem to be upset with even widening the lanes, so to speak, about letting more people in. And that's going to become -- those are all things that could kill the negotiations.

MS. IFILL: And it should be said what John McCain was just talking about was -- what he talked about Hispanic citizens. He wasn't talking about this population. He was talking about voters --


MS. IFILL: -- who did not vote for the Republican Party in large numbers.


MS. IFILL: So, Karen, forgive me. Fawn mentioned 2007, but it does sound like an echo of some place we've been before.

MS. TUMULTY: Yes. In fact, the things that people are talking about now -- enhanced security on the border, you know, cracking down on hiring of illegal immigrants, a legalization program -- all of those things were actually done. They were actually written into the law in 1986. And I went back and looked at the signing ceremony where President Reagan declared that future generations of Americans will be thankful for our efforts to humanely regain control of our borders.

In fact, that law, the last comprehensive immigration reform that this country attempted, actually left the country with the exact same problems that it had then only worse. Back then, there were something like three to five million illegal immigrants. Now there are 11. Rather than settling this question of who gets to be an American -- you know, it's now more inflamed than it has been in memory. And it's in part because of that law and its failures, I think, that we are exactly where we are today.

MR. MCMANUS: As I understand it, the critique of the 1986 law is in part because it amounted to an amnesty and that turned out to be an encouraging thing, a magnet for more immigrants. So how does the kind of law that's being talked about now escape the problem of being branded as amnesty?

MS. TUMULTY: Well, the real problem with that law was it did have a legalization. Ronald Reagan was actually willing to use the word amnesty. But what it lacked was the enforcement.

It was the big thing in the law, the most contentious part, was that for the first time ever, it was going to become illegal to hire somebody who was not authorized to be in this country. So they made it illegal, but they never enforced it. In fact, in the fiscal year 2006, exactly zero employers got fined for this.

MS. IFILL: Is that part of the argument now among so many people on Capitol Hill that if you just -- it's like -- almost like the gun debate. If you just enforce the current laws, we wouldn't have this problem?

MS. JOHNSON: Well, I think that was a really -- that was the argument that in effect killed the last attempt to do this in 2006 and 2007. I think that it -- people are becoming a little more sophisticated now and understand that it's actually impossible to enforce the law based on the tools that we have now.

And the other big flaw of the 1986 law, in addition to the enforcement, was they didn't come up with a rational system for what they called the future flow of immigrants. So that means that there was no way for employers to get the employees that they needed. And so you're stuck in this kind of -- you've got this weak law that has a difficult way of verifying whether someone's here illegally. You have no way for the employees to come in legally. And so they come in illegally.

MR. WESSEL: Karen, can you talk a little bit about the players here? I mean, there's some familiar faces. John McCain has been on this issue before. It's not surprising given where he comes from. But the real fresh face here is Marco Rubio. He seems to spend a lot of time in the last few days going out to conservative talk radio to soften the ground. How important is this to him and how important is he to the whole issue?

MR. TUMULTY: Yes. Marco Rubio is a really interesting player here, in part because of this own story. He is the son of immigrants, legal immigrants.

MR. WESSEL: From Cuba to Florida.

MR. TUMULTY: Right. He is just an icon among conservatives who really do see him as the future. And he has a way of talking about this issue where -- he had Rush Limbaugh essentially eating out of his hand. So I think that a lot of Republicans do look to Marco Rubio as sort of finding the path through here.

But, at the same time, you have people like David Vitter, senator from Louisiana, saying, you know, Marco Rubio is really just na�ve and he doesn't understand. He's just setting us up for everything that's failed in the past.

MS. IFILL: And what about the president's role, Fawn? He clearly -- they beat him to the punch in the announcement.


MS. IFILL: He went to Las Vegas the next day and said, oh, yeah, me too, and we hope that they mean it. But does he just sit back and let Congress take the lead?

MS. JOHNSON: For now, that's I think what he's deciding to do. This has been a really delicate dance between the White House, and the advocates, and the people on Capitol Hill. And it's been going on behind the scenes for months. You know, how hard does Obama have to come out to push for this and before he starts to alienate the Republicans?

And I think he actually struck it almost exactly right in his speech. He went ahead and let the bipartisan group come out with their proposal first. He praised them during his speech. And he basically said -- I'm going to let you guys do your work. Here's what I want and let's talk about it. He didn't draw any lines in the sand, but then he also said, if you guys don't do anything, I'm going to -- I'm going to step in. And then, later, when he was on with -- I think it was Univision, he said, you know, three months is about -- I'm not going to tolerate that. So I thought that was -- I mean, it's a really -- it's a good role for him to play.

MR. MCMANUS: Fawn, let me ask about interest groups. In past eras, business has been on one side of this issue. They wanted lots of cheap labor.


MR. MCMANUS: Unions have been on the other side of the issue.


MR. MCMANUS: Is that still the case?

MS. JOHNSON: There are still some differences between business and labor on this, but actually they've been working together on the same issue for -- since 1996. In 1996, the AFL-CIO made a huge shift in its immigration policy. And ever since then, it's been slowly coming along with the idea that it needs to help with any number of immigration issues that don't have to deal with employment.

So right now, the U.S. Chamber of Commerce and the AFL-CIO -- which, ironically, are situated a block or so from each other here in Washington -- are working on something to do with guest workers or temporary workers per se, foreign workers who come in on visas. The ALF-CIO is very keen on making sure that we don't have any -- if they would have their druthers, no guest workers at all, but, you know, perhaps, you know, permanent type of labor. And so they're going to try and help with the deal and then I think what happens, because they present it to members of Congress and say, if we can agree on this, then you guys should take it.

MS. TUMULTY: It's a delicate balance.


MS. TUMULTY: Because on the one hand, they want to set up a system where businesses can get the labor they need when there's a labor shortage, but they don't want this to become a pretext for not hiring Americans and paying them.

MR. WESSEL: But aren't the unions dealing with the same things that the politicians are dealing with -- that the demography of the United States has changed since '86, when this came up?

MS. IFILL: And public attitudes as a result have changed.

MR. WESSEL: Right.

MS. TUMULTY: Yes. In some unions more so than others --


MS. TUMULTY: -- the service workers, for instance, health care workers. They are in fact -- they know that if they are going to grow in the future, it is going to be by bringing in and bringing out of the shadows this immigrant population.

MS. IFILL: Okay. Well, thank you. We have to move on now to the testy Chuck Hagel confirmation hearing. Senators and former senators usually get the kid glove treatment when they go before their former peers. Not so for former Republican Senator Chuck Hagel, who President Obama has selected to succeed Leon Panetta as secretary of defense.

SEN. HAGEL: (From videotape.) I'm on the record on many issues, but no one individual vote, no one individual quote, no one individual statement defines me, my beliefs or my record. My overall worldview has never changed.

MS. IFILL: But by the end of an eight-hour hearing, he'd been called a flip-flopped, untrustworthy, and lacking in judgment. It's generally now agreed he did not do so well. What remains unclear is what happened, Doyle?

MR. MCMANUS: What happened? Well, you know, Gwen, as you said. Some former members of Congress do just brilliantly in front of committees -- (inaudible) -- Kerry.

MS. IFILL: John Kerry just last week.

MR. MCMANUS: Leon Panetta to take the other predecessor.

MS. IFILL: Yeah. Panetta.

MR. MCMANUS: They schmooze. They charm their colleagues. And then there's Chuck Hagel. (Laughter.) And that's just not who Chuck Hagel is. I mean, he started out with a -- as you just said, you know, no single quote. Well, he had a whole lot of quotes that were going to be a problem. He had a lot whole lot of relationships with Republicans that were going to be a problem because he's kind of an apostate in his own party.

But he's also kind of a prickly guy. And the first rule of a confirmation hearing is be agreeable. Don't be controversial. Don't be prickly. And that was kind of an unnatural act for Chuck Hagel. You could almost see the frustration in him. I was looking at the back of his head in the hearing room for some of the time, so I had to go back and look at the -- at the video to see the front of his head. It's not always great to be there in person.

You know, he pleaded ignorance on issues that he shouldn't have been ignorant of. He got tangled up in awkward attempts to explain where he had been on different issues. It was not a commanding performance.

MS. TUMULTY: You know, of all the exchanges, probably the most contentious was probably with Senator McCain. I mean, here you have two guys. They're both Vietnam veterans. They used to be very good friends. But you kind of got the feeling that there was something going on in this exchange that wasn't just about this nomination.

MS. IFILL: Or not just about the surge in Iraq, or was it?


MR. MCMANUS: Well, it was about all of those things. Actually, the fact that they had been friends and allies made it worse because it was -- well, I don't want to compare it to marriages or affairs, but the fact that they had been side by side on a lot of foreign policy stuff 10 and 20 years ago, and then had a break over the war in Iraq. And then Chuck Hagel didn't support John McCain when he was running for president.

MS. IFILL: He did the first time, but not the second time.

MR. MCMANUS: Right. Right. When he was actually a candidate.

MS. IFILL: Yeah. (Laughter.) The actual nominee.

MR. MCMANUS: When it counted. And then, finally, the fact that John McCain believes very deeply in his own positions and wanted to prove himself right and Hagel wrong and thought he had him on the surge -- all of that.

MR. WESSEL: OK, so it was great theater. As Gwen said, Hagel got beaten up. Is he going to get confirmed?

MR. MCMANUS: Yes. So far, he's --

MR. WESSEL: Finally, a yes or no answer.

MS. IFILL: What John McCain was looking for.

MR. MCMANUS: And it is bizarre that in a sense, that a -- probably the worst confirmation hearing performance that any of us can remember, of any nominee, certainly for a cabinet position -- Supreme Court's nominations are a little different -- and it all comes down to there are 55 Democrats. None of those Democrats have said they will vote against him. OK.

One Republican, Thad Cochran of Mississippi has said he will vote for Hagel. That makes him the unluckiest Republican in Senate because he announced that before this hearing. Republicans could theoretically try and filibuster. Forty of the 45 Republicans -- or 41, I guess, would have to stand in the way. One Republican, Roy Blunt, of Missouri has already said he won't -- he doesn't favor a filibuster. Very hard to do, very disruptive to do. So it looks as if, at the end of all of that math, Chuck Hagel is (in ?).

MS. JOHNSON: But, Doyle, what does it say to have a really partisan vote on this? I mean, I don't know if we can find anybody on the committee, any Republican on the committee who would vote for him. And I don't -- you know, a couple of Republicans on the floor, is that -- is that unusual that's going to hurt his --

MR. MCMANUS: It's unusual but it's not -- look, it has -- that has been happening more and more often.


MR. MCMANUS: Michael Mukasey, George W. Bush -- one of George W. Bush's attorneys general got in by a 50 to 43 vote, I think it was, that was pretty much or maybe few than that pretty much a party line. No. It is becoming more frequent that these votes become partisan. But for a job like secretary of defense, that's not a good thing.

MS. IFILL: So, you know, in the effort to take Chuck Hagel down, there were a lot of things that came up, mostly about his role in the surge, and what he thought about Iran, and what he thought about Israel. What didn't come up and how much do in the end, the substance of this hearing tells about what kind secretary of defense he would, will be?

MR. MCMANUS: You know, for those of us who are defense policy wonks, that hearing was a huge disappointment because American foreign policy and defense policy is at kind of a turning point. The defense budget has to come down. How and where are you going to cut? We are withdrawing from Afghanistan. How fast and what happens next? OK, 66,000 troops in Afghanistan right now risking their lives. The hearing lasted eight hours. By my count, about 10 minutes of it was devoted to Afghanistan.

So, on substance, this hearing didn't help us very much, but we have learned over the last few months very interesting things about Chuck Hagel. And one of them is how ruggedly anti-interventionist he has become since his vote for the war in Iraq in 2003. He was against the surge under George W. Bush in Iraq in 2007. He was opposed to the surge in Afghanistan under Barack Obama in 2009, told Barack Obama that he was getting rolled by the generals. He was skeptical quietly about the intervention in Libya. He now opposes any intervention in Syria.

MS. IFILL: OK. Well, we'll be watching to see what he does. Thank you all. We do have to go.

We want to take note of the passing, before we go, of two men important to our politics and our lives. Ed Koch, the three-term mayor of New York, who transformed the city he loved and became a celebrity in his own right -- absolutely everybody has an Ed Koch story -- and Max Kampelman, a diplomat who negotiated Cold War treaties, and during one memorable stage in his distinguished career acted as moderator for "Washington Week in Review." There he is. Ed Koch was 88 years old. Max Kampelman was 92.

We've got to go for now, but the conversation continues online on the "Washington Week Webcast Extra." You'll be able to find us still talking about the Massachusetts Senate race and other topics at And on our home page, you can also peek into the "Washington Week" Video Vault to see what Doyle had to say about the immigration story back in 2007. He looks the same. 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.