MS. GLORIA BORGER: Two big items checked off the president’s to do list – signing financial reform into law and extending unemployment benefits, but it was a sloppy firing with an unknown government employee that forced the White House off message this week. I’m Gloria Borger sitting in for Gwen Ifill tonight on “Washington Week.”

PRESIDENT BARACK OBAMA: We finally overcame the procedural blockade of a partisan minority in the Senate to restore unemployment insurance for about 2.5 million Americans who are out of work and looking for a job.

SENATOR MITCH MCCONNELL (R-KY): He went out of his way to misrepresent the position of Senate Republicans. Of course we ought to extend unemployment, but we ought to pay for it.

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: The economic outlook remains unusually uncertain.

MS. BORGER: So who should we believe and what’s the best way to help those hit by the recession? The video clip that caused an uproar, followed by the firing and then the backpedaling.

PRESS SECRETARY ROBERT GIBBS: A disservice was done for which we apologize.

SECRETARY TOM VILSACK: I started off by extending to her my personal and profound apologies.

SEC. GIBBS: The president expressed to Ms. Sherrod his apologies for the events of the last several days.

MS. BORGER: Inside the firestorm that put the media, the White House and the issue of race front and center. Or was it just a bungled personnel matter? And in the post-9/11 era has America’s intelligence community gotten too big and unmanageable? Covering these stories this week: John Harwood of CNBC and the “New York Times,” Naftali Bendavid of the “Wall Street” Journal, Michael Duffy of “Time” Magazine, and Dana Priest 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.”

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ANNOUNCER: Once again, live from Washington, sitting in for Gwen Ifill this week, Gloria Borger of CNN.

MS. BORGER: Good evening. If you follow the economic news here in Washington this week then you would know that President Obama signed one of his most far-reaching accomplishments, the financial reform bill. And it’s designed to prevent another economic meltdown. Meanwhile, Democrats in Congress in a largely partisan vote finally passed an extension of unemployment benefits for nearly 2.5 million people. And the chairman of the Federal Reserve, Ben Bernanke, was quite cautious when describing the state of the economy calling it, quote, “unusually uncertain.” Needless to say Republicans and Democrats were not silent about their philosophical differences on how to handle this uncertain economy.

PRES. OBAMA: After years of championing policies that turned a record surplus into a massive deficit, the same people who didn’t have any problems spending hundreds of billions of dollars on tax breaks for the wealthiest Americans are now saying we shouldn’t offer relief to middle class Americans.

REPRESENTATIVE JOHN BOEHNER (R-OH): For 18 months, we’ve had a government that believes that change is only possible by passing, 2,000-page, trillion-dollar monstrosities one after another. Americans are still asking a question: where are the jobs? And all President Obama has to offer them is more stimulus spending, more debt, higher taxes, and more job-killing regulations.

MS. BORGER: Naftali, those are pretty tough words. So big win for the president this week, the Democrats had to fight tooth and nail, had to go it alone, why is extending employment benefits so controversial?

MR. BENDAVID: Well, the reason is that cutting the deficit and reducing big government has become a central pillar, maybe the central pillar in the Republican message. And they said that it was fine to extend unemployment benefits, but they needed to be paid for. And so you had sort of this perfect political fault line almost where the Democrats are talking about compassion and helping those who are struggling in a difficult economy. The Republicans were talking about big government and deficit. Neither side thought it was in their interest to back down. And that’s why it took so long.

MS. BORGER: Now, John, this week the president also had another big signing ceremony. And that was signing financial reform. Yet when you look at the polls, the American public is not giving the president any credit for passing this legislation that most of the public actually supports.

MR. HARWOOD: Well, exactly. And the big part is part of the political problem. The president is pursuing things that he campaigned on, 2008 – financial regulation – he’s been talking about that for some time, just like health care and then economic stimulus which came late in the financial crisis. But what’s happened is because it has been so difficult to get the economy back on its feet, to restore employment, to fill that hole of eight million jobs, it has become difficult for the Obama administration to get credit for anything and Republicans have done an excellent job of associating the president and the bad economy with these big wins that he’s had legislatively –

MS. BORGER: Big government, right?

MR. HARWOOD: – financial regulation, more big government. Health care, more big government. They’re even making the same argument on a small business lending bill that the administration’s trying to push. They’re making some progress on that. But it’s not law yet and this is where the fault line is on that issue.

MS. PRIEST: So John, how big of a problem are deficits for the Democrats?

MR. HARWOOD: Well, deficits are some problem because the public now – because the deficit has ballooned since Obama has been in office, and of course it ballooned before that, when President Bush was in the latter part of his term. You have big deficits, at the same time, you have high unemployment, and today, in fact, the economic team for the administration came out with a mid-session economic review. They said unemployment is going be 9.7 percent this year, 9 percent in 2011, and still 8 percent in 2012. That’s higher –

MS. BORGER: It’s not where they want it to be.

MR. HARWOOD: No, when he’s running for re-election the rate is likely to be higher than when he took office. And when you have conditions like that, people are upset and they associate what’s happened under your watch with the economic problems.

MR. BENDAVID: But you’d think because of that, because there’s so much joblessness, that unemployment benefits would be this huge beneficial issue for the Democrats. But it’s not clear that it is. And the Republicans are making all kinds of arguments, for example, that giving these benefits to these people is actually a disincentive for them to go out and find jobs. And so that’s an argument of course that infuriates Democrats. They say it’s an insult to working Americans and so forth. But that’s the kind of debate that we’re seeing right now.

MS. BORGER: The Democrats say it stimulates the economy, right? That these unemployment benefits are spent immediately.

MR. BENDAVID: Absolutely. They say it’s one of the most stimulative things you can do because people who don’t have much money and suddenly get a little bit of an infusion, go out and spend it on things they need right away.

MR. HARWOOD: To be fair to the Republican argument, don’t some Democratic economists -- Larry Summers in his past life -- have said that there is some disincentive effect. They just think it’s outweighed now by the stimulative effect of this money. And the fact that the job market is so weak that that’s more important than deterring some people –

MR. BENDAVID: Well, sure. It’s an ongoing debate. And to me it’s reminiscent in some ways of debates we’ve heard almost since the 1980s about welfare and sort of does that encourage people to sit on their hands rather than doing anything. But it shows you how volatile and how sensitive these issues are. And the debate on the Senate floor was really pretty emotional about this. You had Tom Coburn, who’s an obstetrician, saying how beautiful it is to deliver babies and he doesn’t want those babies saddled with debt. And then you had Barbara Boxer getting up and saying we should be worrying about kids and whose parents don’t have jobs and have to explain to their children about how they’re suffering, and that sort of thing. So this has really reached sort of a fever pitch as we head right into election season.

MR. DUFFY: Both of the sides have increased their – I guess their volume as the comments about the economy and diagnosis of what’s wrong have become less clear. And Bernanke, as Gloria noted, was on the Hill this week, talking about it. Now, last time he was up there he was a little more upbeat, this time less, so what’s changed, John?

MR. HARWOOD: Well, look, after a springtime of good economic news, where people thought perhaps we were going to get into a rhythm of monthly creation of 200,000-300,000 jobs, maybe bring that unemployment rate down a little more rapidly, we’ve seen that slow down. And we had barely any private sector job creation in the last report that we’ve gotten. We’ll see what happens the next time. So there’s a sense that the recovery has lost some steam even though we’re not likely to dip into a second recession.

So then the question is, how aggressive does the Fed get now? There are some tools, even though interest rates are very low, there’re some tools still at their disposal, things like buying – adding to their balance sheet, buying some more long-term assets that would – might get the economy going. But those are controversial. Bernanke has said that small business lending is very important and that’s become a big theme for the administration, but they haven’t been able to get it through yet.

MR. DUFFY: And you can’t do much on interest rates.

MR. HARWOOD: Exactly. They’re pretty handcuffed on interest rates. They’re quite low right now. Some people, in fact, want the Fed to stop paying interest to banks to hold reserve money as a way of stimulating some lending and economic activity.

MS. PRIEST: So Naftali, how long do the unemployment benefits last? When will they expire?

MR. BENDAVID: That’s a good question. They were extended until the end of November. That creates a very interesting scenario because Congress is likely –

MS. BORGER: End of November.

MR. BENDAVID: – the end of November, after the election. And Congress is likely to be in a lame duck session at that point. So in other words, the Republicans probably will have gained ground in Congress. But those Republicans won’t have taken office yet. And that’s going to create a very interesting political dynamic when the renewal comes up again.

MS. BORGER: But there’s another political dynamic here, too. You talk about big government, government spending, $787 billion stimulus program. The administration is out there. And some experts are also saying that, yes, in fact, as a result of the stimulus program, you’ve saved or created two and a half million jobs. But how can you sell that politically because it’s very hard to tell people, you know what? We’ve saved this job that would have otherwise been fired. But people don’t really get that.

MR. BENDAVID: I think you can. I think they’re in a very difficult – that is the Democrats are in a very difficult situation for that reason. To go out there and have your slogan be “it would have been a whole lot worse if not for what we had done,” that’s not a winning political slogan.

MR. HARWOOD: Even if it’s true, and outside analysts say it is true, that it would have been worse without the stimulus. It’s hard to sell.

MS. BORGER: Right, so – and then the other big issue coming up is tax cuts. And we all know that tax cuts are wonderful things for politicians. But the Bush tax cuts are set to expire on the wealthy. And there’s a little bit of confusion about what’s going to happen on the Hill on that.

MR. HARWOOD: I think this is one of the most fascinating sort of crosscurrents that we’re seeing begin to play out right now. The more you have this weakness that we’re seeing in the summertime that leads people to think, wow, maybe we better do more to stimulate the economy, the stronger the Republican argument gets for wait a minute, you don’t raise taxes on anybody in the middle of a recession. Now, the administration says – the president, Tim Geithner, and Larry Summers, say this is very inefficient way to stimulate the economy because the people who would get these top-end tax cuts wouldn’t really spend the money and it wouldn’t have the same effect. And we need the money to reduce the deficit in the long term. But you’re seeing more pressure, Mark Zandi, the independent economist who Democrats often cite in support for their spending programs, said doesn’t make sense to raise them on anybody until the economy is in stronger shape.

MS. BORGER: So what happens politically?

MR. BENDAVID: Well, the interesting thing is the Democrats are split. The Republicans are pretty unified. They want to renew the Bush-era tax cuts. The Democrats are a little bit split because some of them feel – as John was saying, you don’t let tax cuts expire on anybody in the middle of a recession. But most of them, and certainly Nancy Pelosi and some people in the administration, are saying emphatically that while we should continue the middle class tax cuts, we need to let the ones on the wealthy expire. It’s a little bit of an internal Democratic fight as well as the fight between Democrats.

MR. DUFFY: There was a report in your newspaper, I think, this morning that said that at the moment there aren’t 60 votes either for just the middle class tax cuts continue or for the ones on the wealthy. Is it possible we could get to the end of the year where they all expire for lack of 60 votes?

MR. BENDAVID: That’s possible. But my guess is what they’ll do is they’ll extend them – they’ll just extend the whole thing for a couple months, right? So it goes beyond the election. It goes beyond the beginning of the year. There’s a new more Republican Congress in town. And they deal with it then at a slightly – slightly less volatile time I guess you would say.

MR. DUFFY: So like unemployment, they’ll kick the can down the road a ways.

MR. BENDAVID: That’s what’s going to happen.

MR. HARWOOD: Yes, but I think the scenario that you raise is the nightmare scenario for all incumbents. That they would all suddenly be responsible for taxes going up on everybody. That’s why I think it’s not going to happen.

MS. BORGER: That’s not exactly what they had in mind. So all right. Now we’re going to switch to some topics because we’ve been talking about how the president’s not getting any credit for his legislative successes. We did not talk about what exactly happened this week and there’s another reason that this president’s accomplishments were overshadowed, and that was a controversy over the almost instantaneous firing of an Agriculture Department official due to outrage over something she said.

Now, as it turns out, Mike Duffy, as you know, there is much more to the story than that. So who is Shirley Sherrod and why is she so suddenly famous?

MR. DUFFY: Well, she’s a lifelong rural development expert from southwest Georgia who gave a very remarkable speech to an NAACP group in March in which she argued that it’s poverty, not skin color, that divides Americans, which was also then twisted by a conservative website into making her seem like a racist. And when word of that doctored video reached the White House earlier this week someone there, we’re not sure who, seemed to move with unusual dispatch to make sure that people at the USDA fired her that day. And so sure enough, later that night as she drove home from work, she pulled over to the side of the road and resigned by email.

The next morning, it’s only Tuesday, when the full context of that speech in March to the NAACP became known and available on the internet, it was clear that she was anything but a racist. And the apologies began. And until yesterday, they were still continuing.

It was a ghastly 48 to 72 hours in which no one looked good. It proved that an environment that’s already pretty toxic politically, an attitude to shoot first and ask questions later can take the career of someone who has spent her life helping people who need it upside down.

MS. BORGER: So I guess the question is what did everybody learn here? We heard Robert Gibbs say this week, you know, we learned, we live in a 24-7 news cycle. And we have to kind of sit back and think more and we reacted too quickly. But –

MR. DUFFY: I think your lesson would be if you’re the White House, to order your steps more carefully. Do your homework. This is a White House like all presidents who learned during the campaign that speed skills and to honor every threat, and especially ones that come from the right-wing blogosphere which in the past has tripped up this White House a couple of times. They learned to be fast during the campaign and their first year in office they kind of slowed down a bit. And there were a couple of things that came along that they did not respond to quickly enough. This put them – they were on the hair trigger for this one and this is a case where they had an opportunity to think it over and they didn’t. And now I think they regret it.

MS. PRIEST: Wasn’t it also an indictment of the media? The tape wasn’t really doctored. It was just heavily edited, right? So everybody just replayed it, didn’t even bother to look at the entire thing.

MR. DUFFY: It was a 43-minute speech which is remarkable in a lot of ways because it’s so heartfelt and her story is so amazing. You could blame it on the media and obviously there is a lot of blame to go around here. But I think it’s mostly just on probity – people were not careful enough. They moved too quickly.

MS. BORGER: The story was that she didn’t help this white farmer who in fact went on television and said “she did help me.”

MR. HARWOOD: The truth was precisely the opposite.

MS. BORGER: Exactly. Exactly.

MR. DUFFY: And the story is quite amazing. Her job was to basically help people who need assistance from the government, the USDA, in getting it. She spent her life doing this. She helped this one white couple who somehow had been dimed out in the video as being the victims of reverse racism. They of course at 82 were alive and on their farm, and had a great story to tell about her. The speed with which it turned around almost equaled the speed at which it had gotten screwed up in the first place.

MR. HARWOOD: I have a question that is part vent, part question. This episode seems to me to embody everything that is stupid and sick about our political and media culture.

MR. DUFFY: Exactly.

MR. HARWOOD: All hormones, no brains, no particular integrity in the telling of the story and in the reaction to the story. All of us live in this world and are part of the world. Do you yourself have any optimism that anything good’s going to come from this? That there will be any level of reflection that might alleviate the mistakes the next time it happens?

MR. DUFFY: I think the only thing that comes out of this that is good is actually Shirley Sherrod’s story. She grew up in this tiny county in southwest Georgia where her father was killed at the age of 17, murdered by a white man who was never even charged. They burned crosses on her front lawn. The night he dies, she dedicates her life to staying in Georgia and working on the problem of race. She does that for the next 40 years. Her mother is the first black official elected in Baker County. She’s the first statewide official in the USDA who’s black. In an office that she says still only has one fifth – this is still a fairly segregated little agency. And yet you watch this video and hear the story about how she had this raised self-consciousness as a result of dealing with this white couple after all this anger she had. And that’s one you show your kids. That’s a video that’s for the ages.

MR. BENDAVID: Mike, has there been any sort of sense of regret or anything along those lines from conservative organizations that are responsible for this? This grew out of the spat between the NAACP and the Tea Party about who’s racist and who’s not racist. That’s –

MR. DUFFY: It’s an important point, yes. The video was posted on a website, by Andrew Breitbart who was upset that the NAACP had accused the Tea Party of being racist and this was last week’s tempest in the teapot and this was the answer. That’s not a lot of remorse, although some of the – the FOX network had actually amped up some of the stuff on Monday night and they did walk back and said “we should have looked at it further” – they deserve credit for that. And the other thing is that the United States Department of Agriculture, which has a long history of short-shrifting and shortchanging minorities, blacks, women, in agriculture – Tom Vilsack, the man who apologized so profusely on – that was Wednesday – really did cast light, a new light on just how far that department has come in just the last few years.

MS. BORGER: And very quickly, although this isn’t a question, it’s a question that could take a whole show, which is that ironically this is a White House, first African-American president, that goes out of its way not to be defined by race, yet things like this always occur, seem to occur. And so what are the risks here really for this first African-American president?

MR. DUFFY: When you take up race on your own terms, at your on time, say the 150th anniversary of the Emancipation Proclamation, you can have an inclusive conversation about it. When you find yourself talking about it because someone else raised it, it’s very hard to get past the division.

MS. BORGER: And very difficult for this White House.

And now for something completely different, we’re going to turn to the topic of national intelligence. In the wake of the attacks of 9/11, the intelligence community has grown by leaps and bounds. But the question is, has that all been for the better? In an investigative series by Dana Priest and her colleague at the “Washington Post,” William Arkin, there you see it, even Defense Secretary Robert gates says, quote, “there has been so much growth since 9/11 that getting your arms around that, not just for the CIA, for the secretary of defense is a challenge.” Dana, you spent two years looking into this. Is this growth better or just bigger?

MS. PRIEST: Well, people inside don’t actually know. And that’s the most frustrating thing I heard. Is that it’s gotten so big that they can’t tell whether it’s making us safer anymore. But just some of the parameters, we started out looking at the secret level. And it was so big, there were so many things to count, we said we can’t do this even in two years. So we’re going to go to the top secret level. There’re fewer people that work on top secret programs. And so that’s what we did and we still found 1,300 government organizations that were – that work, half of them – a quarter of them were re-created or new after 9/11 and nearly 2,000 companies that help those agencies work at the top secret level. And of course contracting and how big that has gotten was a big part of the story.

All of the intelligence agencies are really dependent now on contractors. It’s not just to fill a surge after 9/11. It’s really dependent to do their core mission. And Leon Panetta, the CIA director, said as much in an interview. He said, we have people doing our operations now, and he doesn’t feel comfortable that he has enough control over them and wants to try to rein that in. But as Defense Secretary Gates said, I can’t even get a head count in my own office about how many contractors there are. And that’s the other thing we found in the series. That they don’t know how much this costs, how many employees it employs, how many different agencies are working on the same thing, which is another problem that we found, is 41 agencies working on following the flow of money to and from terrorist networks. So really they don’t have a lot of the basic information that you would want them to have to make smart decisions. So some of the progress – information sharing – has definitely gotten better. Relations between the top level of these agencies has definitely gotten better. But I had the sense at the end that the largeness of it has overwhelmed some of those – some of the good points, some of the progress that’s been made.

MR. HARWOOD: One of the things that’s so interesting about this is we’ve been talking earlier about big government and President Obama. But this is big government that grew up not by anybody’s ideological inclination but by the shock and the fear and the survival instinct as a country that was generated by 9/11. What did you find in the reaction to the series from conservatives who are pro security, from liberals who may be skeptical about spending so much on defense, and the intrusiveness of this apparatus?

MS. PRIEST: It really didn’t fall at all like that. I found that on all sides peopled were worried about big government. And not because they thought in the hawkish or dovish sort of way, but really they – it seems to resonate in this larger theme that government isn’t functioning like it should anymore. And so even went on a lot of FOX News and other Republican type programs, and there, the real issue still was is government so big, and can’t they do anything right, and that sort of thing. So it resonated.

MR. DUFFY: So there’s self sufficiency in a way, but I’m wondering about something different. You sort of implied that all the secrecy has on one sort of tactical or terrorist level made us safer probably. I guess the question I’m curious about, is big government itself, 1,500 secret agencies, itself eventually going to be a bigger threat? I mean, even paranoids have enemies as the joke goes. (Laughter.) At some point, is big government just a danger in and of itself? And do the people you talk to actually raise that question?

MS. PRIEST: Well, some of them do. But the question there that gets raised is the domestic issue, whether this government apparatus has started to cross line into domestic surveillance, and in knowing everything about you, which by the way they do. In terms of all of your records and things like that, they’re stored in big vats, big data centers, so there is a lot of that worry, too, that just goes against the grain of distrustful American ideals.

MR. DUFFY: And why we think we have secrecy.

MS. PRIEST: And why we think – yes.

MS. BORGER: So this 1.7 billion intercepts you wrote about every day by the National Security Agency, it kind of reminds me of “Raiders of the Lost Ark” that at the end it gets stored in some room. What do they do with all of that information?

MS. PRIEST: Well, very small number of – amount of it gets actually analyzed because it’s so big. The NSA has really turned into a mega-contributor in this, but they now can scoop up so much that they don’t know – they don’t have enough people to analyze it. And so it goes into these acres – football field size data centers where it gets mined and then stored there until they can hire enough people to look through it and find –

MS. BORGER: It’s not very comforting, not very comforting. Well, thank you very much, Dana. Thank you very much to everyone. And before we go tonight, we want to note the passing of long time journalist Daniel Schorr. He died today at the age of 93. He worked as a print reporter for the “Christian Science Monitor.” He went to CBS News in the ’50s. And in the time of Watergate wound up on President Nixon’s infamous enemies list. He helped launched CNN in 1980. He did an occasional special right here on PBS, and continued his career with National Public Radio. We send our condolences to his family.

That’s going to wind things up for us tonight. I’m Gloria Borger. Gwen will be back around the table next week on “Washington Week.” Good night.