The political and economic consequences of the government shutdown and the impact should the U.S. default; Janet Yellen to lead the Federal Reserve; and SCOTUS takes on the campaign finance law.
GWEN IFILL: Political paralysis in Washington with stalemate, gridlock, and perhaps the beginning of a breakthrough, tonight on “Washington Week.”
REPRESENTATIVE JOHN BOEHNER (R-OH) [Speaker of the House ]: (From tape.) I don’t want to put anything on the table. I don’t want to take anything off the table.
MS. IFILL: Cautious deal making.
SENATOR HARRY REID (D-NV) [Senate Majority Leader]: (From tape.) We have this simple, simple request: open the government, let us pay our bills.
MS. IFILL: Careful positioning.
PRESIDENT BARACK OBAMA: (From tape.) We’re not going to pay a ransom for America paying its bills.
MS. IFILL: A political poke or two.
SENATOR TED CRUZ (R-TX): (From tape.) This afternoon, President Obama has invited the Senate Republicans to the White House. If I’m never seen again, please send a search and rescue team.
MS. IFILL: And public exasperation.
MAN: (From tape.) Let’s get off this my way or the highway stuff. You know, let’s compromise.
MS. IFILL: Autumn in Washington, as the Supreme Court returns to debate campaign finance and the president picks a new leader for the Federal Reserve.
JOAN YELLEN [Vice Chair, Federal Reserve]: (From tape.) We can and must safeguard the financial system.
MS. IFILL: Covering the week: Joan Biskupic of Reuters, Greg Ip of the Economist, Alexis Simendinger of RealClearPolitics, and Jim Tankersley 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.”
ANNOUNCER: Once again, live from Washington, moderator Gwen Ifill.
MS. IFILL: Good evening. Two things you need to know as the government shutdown is poised to enter its third week: the political ground has collapsed under the Republican Party and Americans are now saying they are more worried about dysfunctional government than they are about jobs and the economy. That’s from two new polls out this week. My guess is this is why.
REPRESENTATIVE NANCY PELOSI (D-CA) [House Minority Leader]: (From tape.) It’s very clear one person has the key to open government, and that’s the speaker of the House.
PRESIDENT OBAMA: (From tape.) I’m ready to head up to the Hill and try, but I’m not going to do it until the more extreme parts of the Republican Party stop forcing John Boehner to issue threats about our economy. We can’t make extortion routine as part of our democracy. Democracy doesn’t function this way.
REP. BOEHNER: (From tape.) What the president today was if there’s unconditional surrender by Republicans, he’ll sit down and talk to us. That’s not the way our government works.
SENATOR JOHN MCCAIN (R-AZ): (From tape.) How is this going to end? We know how it’s going to end. We know how it’s going to end. Sooner or later, the government will resume its function. Sooner or later, we will raise the debt limit. The question is, is how do we get there?
MS. IFILL : Good question, Senator McCain, because amid all the finger pointing and all the blame, there has been some movement tonight driven in part by evidence that voters are getting just a wee bit sick of all this. So is there movement at the White House, Alexis?
ALEXIS SIMENDINGER: There is movement on Capitol Hill and at the White House. And it seems shocking to say that to have the various parties talking is an enormous step forward, but in Washington this week, that is actually where we are.
So we had the president bringing lawmakers, both Democrats and Republicans, from the House and the Senate to the White House. And we had an interesting – we watched an interesting meeting. The speaker of the House brought around 20 folks from the House Republican Conference to the White House to have a discussion with the president, which had been absent for all this period of time. Senate Republicans came to the White House today.
And so what we saw – this is where we are right now. We don’t have a deal. But where we are is yesterday we were talking about just the idea of trying to tackle the debt ceiling limit, the borrowing authority. Then Republicans overnight started to blend together the idea of dealing with the funding bill, ending the shutdown. Those two things seem to be blended together in the discussions along with this longer term – it’s like the sweetener part of it: let’s get to the bigger policy discussions of the budget. And it’s happening on the Senate side too. There’s no legislation. There’s just ideas going back and forth, but, in Washington, that’s a breakthrough.
MS. IFILL: This week it certainly is. So, Jim, I wonder sometimes whether these kinds of breakthroughs, this movement is because reality is colliding with the politics here and people are beginning to finally see the result of all of this squabbling and all of this uncertainty on the economy.
JIM TANKERSLEY: Yeah. The reality is that this is bad for the economy. If you’re a government worker, obviously, you’ve been feeling it already – paychecks went out this week that were half the size of normal paychecks for government workers. At my son’s school, the big question at drop-off the last couple of weeks has been, are you essential? Are you essential?
MS. IFILL: But only in Washington.
MR. TANKERSLEY: Only in Washington, but around the country there are effects too – national parks are closed; people who depend on recreation for their livelihoods are struggling, and you have who just – people who sell things to government contractors, people who are government contractors. Regional newspaper front pages around the country are full of people who are fed up and who are struggling from the effects of this. And it’s only going to get worse and that’s getting back to Congress.
JOAN BISKUPIC: It’s interesting when you talk about the topics that have been discussed this weekend. What’s missing, the Obama-sponsored health care program that was part of what triggered this in the first place.
MS. IFILL : Not just part of it. It was at the heart of the dispute.
MS. BISKUPIC: But where is it now? Where is it now? And is a part of any of these discussions? And didn’t all this obscure in some way the start of the health care exchanges?
MS. SIMENDINGER: You know, it’s a fascinating question. It’s definitely something that has occurred to the White House because in any other context, if the government had not been shut down, we would have been talking about the part that was ramping up, right, this enormous new marketplace for buying insurance which had the rockiest of rocky starts by anyone’s description or estimation, including the Health and Human Services Department, which is having to manage this new technological architecture. That didn’t get obscured but it sure got downplayed in the media attention.
But in the discussions that are happening, among the members of the House and the Senate and the White House now, health care has not left the table yet. Republicans certainly in the House are walking further away from it, but you could tell Senator Cruz has not. And, in the Senate, Senator Collins today was offering her version of a debt ceiling proposal to the president.
MS. IFILL: I think a six-month extent or –
MS. SIMENDINGER: It’s actually of – to January, but it includes some tweaks, some fixes to the Affordable Care Act and presenting that to the president would he be willing to take that whole thing as a package. You know, the White House is trying to say, that doesn’t meet the president’s template or what he’s been saying, but we’re very willing to discuss – you can tell the language has really come down from arsonists and hostage takers to we’re talking and we’re listening.
GREG IP: Jim, when you look at the kinds of elements that seem likely to end up in this package, does it strike you that there are vital things that are missing, especially vis-à-vis the economy?
MR. TANKERSLEY: Well, I think, Greg, it’s a great question. One of the real things we haven’t dealt with here is that there’s a sequester in place right now that appears to be on track to be locked in. There’s some discussion of maybe relaxing a little bit, but it’s had effects on the economy. Some of it’s been offset by monetary policy, as you know. But other parts of it haven’t and that’s been a drag on growth. And I think if we end up going another year with the full sequester in place, that’s going to continue to hold back the economy. And that’s something they’re not really even talking about how to undo.
MS. IFILL: But one of the things they are talking about – and it all got wrapped up together – is this debt ceiling. That was the president’s real platform of outrage, which is you can’t not pay your bills. But he was getting an interesting pushback this week from some of the same Republicans who started the Obamacare argument, which is, you know, it wouldn’t be that bad. It would be OK. We’d survive it. Who’s right?
MR. TANKERSLEY: Yeah. That’s wrong. (Laughter.) I think if you think about it this way, if you are, say a baseball team with a payroll, and you suddenly tomorrow are told you have to get rid of 30 percent of it, you’re not going to be nearly as good of a team. The same is true with our economy. If you take 30 percent of the spending power out of it right away, which is what would happen if we take 30 percent of the government’s spending power, which is like four percentage points of GDP out of the economy right away because we have to balance the budget because we can’t borrow anymore, that means people don’t get Social Security checks or they don’t get veterans’ benefits or something. That money has to come from somewhere and that’s money that creates jobs and fuels the real economy.
MS. BISKUPIC: And won’t we have more repercussions then internationally also? I mean, certainly the states are going to feel more than they already feel with what we’ve had so far, but talk a little bit about repercussions globally from that.
MR. TANKERSLEY: Yeah. I sat down with the head of the OECD this week and he was saying –
MS. IFILL: The office of –
MR. TANKERSLEY: The Organization for Economic Cooperation and Development.
MS. IFILL: Thank you. Not that we all didn’t know that. I was just saying.
MR. TANKERSLEY: Right. Yeah. Right. Sure. Sorry. Anyway, they’re a big international organization focused on the economy and they are very worried that this could trigger a global recession, not just an American one.
MS. IFILL: But here’s the other thing I’m curious about too, which is people think that the president basically cried wolf on sequester, that it took effect and now they’re basically letting it stay in effect, and we seem to be doing fine. How does the president deal with the idea or the Democrats deal with the idea that maybe there’s a sense that there’s crying wolf about the potential economic impact of the government shutdown or of the debt limit not being raised?
MS. SIMENDINGER: You know, it’s an interesting question because it is true that a lot of the polling suggests that a lot of Americans haven’t been touched by the government shutdown in parts of the country that we don’t live in.
MS. IFILL: Except for the idea that the government would shut down.
MS. SIMENDINGER: But they’re very aware of it. And on the debt ceiling element of it, the borrowing authority part of it, really smart people are saying that the American people – and this is showing up in the polling – that these things are blended together in their idea of Washington dysfunction, and it does constrain their consumption, their buying. And you’re already seeing that level – you can see in some of the – the Michigan study that just came out today that confidence in the economy has gone to a nine-month low. So it has – it’s a psychological element as well as the economic or the prediction elements.
And I think the president did suffer from that trust deficit after the sequestration, but I think that, in this particular case, we’re starting to see more and more of a pickup that this is a bad thing.
MR. IP: You know, you mentioned the polls, and I really have to ask because we’ve seen this movement on the Republican side towards compromise. At the same time, they’ve got some pretty bad polling numbers. Is that just a coincidence?
MS. IFILL: You think there’s a connection between –
MR. IP: Well, that’s what I –
MS. IFILL: You’re such a cynic.
MR. IP: I guess I’m a conspiracy minded person, but really –
MS. SIMENDINGER: Greg. Greg, I’m worried about you. No. Yes.
MR. IP: Help me out.
MS. SIMENDINGER: There is in every estimation and admitted from members of the Republican conference on the House an understanding that the polling did not show up well for them, whether it’s the Gallup survey or the NBC/Wall Street Journal poll that came out on Thursday night. Only Senator Cruz seems to be so sanguine about it, saying the poll itself is an error and it doesn’t tap into the sentiment of most Americans.
MS. IFILL: He bases this on his own polling?
MS. SIMENDINGER: Yes, his own – his finger on the pulse of America.
MS. IFILL: OK.
MS. SIMENDINGER: But in this particular case, on Capitol Hill, they’re very aware of it, and their own pollsters are telling them that this is what they’re picking up to. So they’re persuaded that there is a connection. And I think that this is something that the White House strategically was thinking we would get to, and we’re here.
MR. TANKERSLEY: And I’ll tell you who else is really worried about this and putting a lot of pressure on Republicans and Democrats is the business community. We saw a lot of advertisements this week from retailers, from manufacturers, folks who –
MS. IFILL: Chamber of Commerce.
MR. TANKERSLEY: Right. And when you’re out talking to small businesses – I was in Ohio last week, same thing. People are saying, we can’t invest. We have no idea what’s going to happen with the government, whether they’re going to make good on their debts. So there’s worry among the business community and that is ramping up pressure.
MS. SIMENDINGER: And the president talked to governors and governors, bipartisan groups of governors – and you can see in the states that they’re feeling it too, and he was talking to them.
MS. IFILL: I was actually going to make that point because my favorite quote this week came from the governor of New Jersey, the ever-quotable Chris Christie, who told the Philadelphia Inquirer, if I was in the Senate right now, I’d kill myself. (Laughter.) Not to put too fine a point on it. You can always count on Governor Christie.
Well, the Supreme Court dipped its toe into politics this week as well, revisiting one of the most contentious issues it will decide this year: limiting campaign contributions. This is not Citizens United, but it could change the way individuals support candidates. How is that, Joan?
MS. BISKUPIC: Yes. This is about limits on the aggregate or total cap that an individual can give to candidates, a political party committee, or a PAC. And it’s been challenged by a man by the name of Shaun McCutcheon, businessman near Birmingham, Alabama, who says, I’m not going to challenge the individual base limits, you know, the $2,600 that you can give to an individual candidate in a two-year election cycle but I’m going to challenge the overall aggregate totals that are limiting me because I want to give to more candidates; I want to give to more political committees. And he, backed by Senator McConnell, and backed by the Republican National Committee, before the Supreme Court on Tuesday saying these violate our First Amendment speech rights.
Now, the Supreme Court in the past has said that government has more leeway to regulate contributions because contributions, you know, raise the specter of possible quid pro quo as opposed to what was at issue in Citizens United, which was independent spending by corporations and labor unions. So this is a more direct way that a contributor can try to win favor with an officeholder.
MS. IFILL: I’m always curious about the way these cases get to the court. And in so many of these really strongly ideological cases, they go out and they find a plaintiff who will then take it and challenge the issue until it gets to the court. Is this what’s happening with this guy, McCutcheon?
MS. BISKUPIC: Well, and this is what’s happening, yes, because we had – these things have been slowly coming up from various quarters, primarily from Republicans. Those break both politically and ideologically with a lot of Republicans seeing their eye on a Supreme Court that’s been looking much more skeptically at federal regulation of campaigning financing, look at this as speech.
The court has in the past said that this is a First Amendment speech right, but where this case is different is that it’s not about spending. It’s about a more direct element that in the past, the Supreme Court has said, you know, it requires a little bit more latitude on the part of governments because they could give either the appearance of corruption or actual corruption.
MS. SIMENDINGER: One of the things that I understand is that Citizens United in a way came up as maybe some second guessing about it or maybe some hints about what might go forward. Can you explain what they were talking about?
MS. BISKUPIC: Well, there’s this dichotomy in – this all traces back to a 1976 ruling called Buckley vs. Valeo, which was the Supreme Court’s look at the post-Watergate reforms. And in that ruling, the court drew this distinction between government’s ability to regulate independent expenditures versus contributions.
And a couple of the justices said, you know, why do we still have that? Is that – you know, do we – should government have that kind of latitude for contributions? And, at one point, they were talking about whether – you know, to actually make it harder for government to restrict contributions.
And Elena Kagan, who was the former solicitor general for President Obama, said, wait a minute. What about going the other way, making it harder – you know, making it easier, frankly, for government to then come in and regulate expenditures, in effect, reversing Citizens United? And Solicitor General Don Verrilli, who succeeded her, was at the lectern, and he said, far be it from me to argue that you shouldn’t go backward – (laughter) – which was a nice moment in the courtroom.
MR. IP: Joan, give us a sense of what the oral arguments were like, what was the atmosphere like in the courtroom and did you get a sense that any particular justice dominated the questions or really aroused people’s interest with his –
MS. BISKUPIC: Well, Justice Elena Kagan, who, as I said, would flashback to September of 2009, when the court heard Citizens United, she was actually at the lectern, arguing on behalf of the Obama administration to reject it.
MS. IFILL: So she was very active in these arguments.
MS. BISKUPIC: She was completely active. There she was – you know, up on the bench having been appointed by President Obama in 2010, and she was there right out of the box trying to defend the government’s regulation here. So she was quite active.
The person who I was looking for, Greg, was Chief Justice John Roberts, because, as we know, he has taken so much criticism for the Citizen United ruling, which, just to remind everyone, five to four along ideological lines, allowed much more corporate and labor union money into elections. And I wondered if he would tip his hand a little bit. And what we saw was him more muted in this argument, looking as if he would not like caps on how much an individual could give to a candidate, but maybe allowing caps to political parties and PACs.
MR. TANKERSLEY: New term but my favorite classic question of the court: did Justice Thomas ask a question?
MS. BISKUPIC: No, not since February 2006, Jim.
MR. TANKERSLEY: Right.
MS. IFILL: Why at this point would he offer –
MR. TANKERSLEY: Right. Yeah. Why would he weigh in?
MS. BISKUPIC: No. No. No. He did not ask a question. Right. So we’re going for – I think he’s going to go for a personal best.
MS. IFILL: And then, in the end, is it possible at all that we could see a reversal of Citizens United? Surely, that is the fondest wish of many of the conservatives on the court.
MS. BISKUPIC: Not out of this case, Gwen, but what it could take is if we had either of our 77-year-old justices, Antonin Scalia or Anthony Kennedy, decide to step down in the near future and have a new Democratic appointee. Then you wouldn’t have –
MS. IFILL: Yeah. I said conservatives. I mean the liberals on the court, yes, obviously.
MS. BISKUPIC: Yeah. Yeah. They’ve got four of them.
MS. IFILL: That’s true.
MS. BISKUPIC: And they’re on the younger side now because our two newest justices have to be – happen to be Democratic. So rulings have been reversed before. It would be a very big deal but it’s not like Democrats don’t have their fingers crossed for possibly another nominee.
MS. IFILL: We love that first Monday in October.
MS. BISKUPIC: It’s so great.
MS. IFILL: Some things at least still opened this week in Washington.
I can’t recall a time when there has been so much suspense about who would become chairman of the Federal Reserve. Well, the president ended that suspense this week by picking outgoing Chair Ben Bernanke’s deputy to succeed him. If confirmed, Janet Yellen would be the first woman to run the Fed. This is how the president described her.
PRESIDENT OBAMA: (From tape.) Janet is renowned for her good judgment. She sounded the alarm early about the housing bubble, about excesses in the financial sector and about the risks of a major recession. She doesn’t have a crystal ball, but what she does have is a keen understanding about how markets and the economy work, not just in theory, but also in the real world.
MS. IFILL: What he means she didn’t have a crystal ball? I thought that after all the buildup to this appointment, she’d at least come with one of those.
MR. IP: How did that slip through the vetting?
MS. IFILL: Why didn’t she have a lock on this job from the beginning if he was praising her so much this week?
MR. IP: That’s an interesting question. If you go back five or six months when this was still a big question about who the choice would be, there were a variety of leaks from the White House that suggested they were looking at a couple of people. And perhaps the president would have preferred Larry Summers. Larry Summers was his chief economic adviser the first two years of his first term. He was Treasury secretary back in the ’90s.
If you look at Larry Summers and Janet Yellen, what’s interesting actually is not how different they are but how similar they are. They both started life as academic economists. They made huge contributions in areas of macro, of labor markets, and so on. They’ve spent all this time in public life. Janet Yellen, back in the Clinton administration, was chairman of the Council of Economic Advisers.
But what the word was from the White House was that Obama wanted somebody who was a really steady hand in a crisis.
MS. IFILL: And Yellen was not part of his tight inner circle during the financial crisis, but Summers was.
MR. IP: Well, that’s right. Correct. And also we’ve seen from this president that he does tend to like to appoint people that he knows and he’s comfortable with. There’s a lot of people who aren’t comfortable with Larry Summers but Barack Obama is not one of them. He really liked Larry Summers. And you got the sense that he had a very high degree of comfort having – he would have had a high degree of comfort.
The problem was there are a lot of people that Larry Summers rubbed the wrong way over the years, who would not have been comfortable with that job. And unlike some of the other controversial appointments, like Chuck Hagel, it was Democrats, not Republicans. And so there were many who were raising questions about the fact that Larry had been on the wrong side of the debate on regulation. He wanted less of it when we should have had more of it. And, also, you know, his personality can be a bit alienating.
MS. BISKUPIC: Greg, this is – everybody is talking about firsts here. And I’m not going to ask you about the first woman. I’m going to ask you instead about the first Democrat since the ’70s, since Paul Volcker, right?
MR. IP: Correct. Correct.
MS. IFILL: Very good, Joan. We are very, very impressed.
MS. BISKUPIC: Supreme Court justices and Federal Reserve – (inaudible) – but how will Americans experience it? Will we see anything different? I mean, how will that – you know, if you’re talking about a Democratic appointee in terms of monetary policy it can’t be that radical, right?
MR. IP: Well, no. Especially if you look at the economy right now, there’s not many people who would dispute that unemployment is a bigger problem than inflation. So it’s not going to produce an immediate change in monetary policy.
Moreover, for the last few years, Janet Yellen has been the vice chairman of the Fed and she’s had a big role in the decisions that Ben Bernanke, the outgoing chairman, has taken, particularly to tell people that interest rates are going to stay low, at out around zero for several more years and to go forward with this so-called quantitative easing program. That’s the way economists refer to printing money. They buy bonds in an effort to try and stimulate growth and get interest rates down.
And the president made it clear both in his remarks this week and then through the whole vetting process that it was important to him that he have a candidate who cares much about unemployment as about inflation, and you’re more likely to find that with a Democratic than a Republican candidate.
MR. TANKERSLEY: Now, Greg, I have heard from plenty of folks this week, as I’m sure you have, about Janet Yellen and the issue of inflation. Is that going to be the big conservative knock on her, folks who oppose her confirmation?
MR. IP: It’s a very good question because she doesn’t have the job yet. She has to go through confirmation in the Senate. And you’re saying you can remember a time when there was so much like suspense about the Fed chairmanship. I can’t either. These jobs used to like sail through. It was the ultimate non-partisan vote. They would sail through the Senate with almost no opposition.
But in the last five years, the Fed has done a lot of controversial things, from bailing out Bear Stearns and AIG to pumping all this money into the economy through quantitative easing. A lot of people are very uncomfortable with that and most of the Republicans in the Senate are very uncomfortable with that. Bob Corker voted against her to be vice chairman in 2010.
MS. IFILL: The senator from Tennessee.
MR. IP: That’s correct. Yeah. And he said this week, you know, she did not seem very modest about what monetary policy can achieve. I haven’t seen any changes. I predict that she will have as many if not more no votes than Ben Bernanke did. And it doesn’t really have to do with her resume, which is, frankly, irreproachable in terms of qualifications. It has to do with the fact that this is a much more controversial issue than it used to be.
MS. SIMENDINGER: You know, when I think about the president’s deliberation about whom this should be, there was so much of all this pre-vetting on Capitol Hill. In the confirmation, what are they going to want to know from her about regulation or about – you know, we think of the Fed as independents, but how much are they going to pull out of her about where she would go, where she would take things? What does she have to commit to?
MR. IP: There are so many things that the Fed chairman has to, nowadays, especially in the highly regulated world we’re in, has to keep her eye on, and so she will get a lot of questions about regulation – not as many as Larry Summers would have, I might add, but she will get a lot of questions.
But I predict that most of the questions, especially from the Republican side, will be about monetary policy, how much more are you going to continue with this money printing?
MS. IFILL: Quickly. How does she play this? It seemed that Larry Summers was campaigning for the job and didn’t get it. She didn’t campaign at all.
MR. IP: No. Quite the opposite. She let the word out that she was not going to campaign for the job and she didn’t like anybody campaigning for the job on her behalf. And I think it’s because unlike Larry Summers, she is a sitting central banker and that was – that would not have looked good from the independence point of view.
MS. IFILL: So much for leaning in, ladies. She leaned back and she got the job. Thank you everybody.
We have to go now, but the conversation continues online, on the “Washington Week Webcast Extra,” where we’ll delve a little more deeply into the personalities driving this week’s Washington politics. That streams live at 8:30 p.m. Eastern and all weekend long on “Washington Week” – our website.
Keep up with daily developments on the shutdown showdown and other news on the PBS “NewsHour,” now seven days a week. And we’ll see you right again here, next week, on “Washington Week.” Good night.