Full Episode: Obama Year-End Wrap Up, Sanders Campaign Sues DNC, Congress Passes Spending Deal and Fed Raises Rates

GWEN IFILL: As the first voting draws near, the president takes stock and we do too, tonight on Washington Week .

PRESIDENT BARACK OBAMA: (From video.) Since taking this office, I’ve never been more optimistic about a year ahead than I am right now. And in 2016 I’m going to leave it out all on the field.

MS. IFILL: Taking the long view.

HOUSE SPEAKER PAUL RYAN (R-WI): (From vide.) The spending bill had some big wins for the country. Whether it’s lifting the oil export ban, increasing military spending or renewing health care for the 9/11 first responders.

DONALD TRUMP: (From video.) I will do everything in my power to beat Hillary Clinton.

FORMER FLORIDA GOVERNOR JEB BUSH (R): (From video.) So Donald, you know, is great at the one-liners, but he’s a chaos candidate.

MS. IFILL: From governing to politicking, from interest rates to terrorism fears, it has been an eventful week. As the president leaves for vacation, we assess the year in the White House, on Capitol Hill, on the campaign trail, and at the Fed.

Covering the Week, Peter Baker, chief White House correspondent for The New York Times ; Dan Balz, chief correspondent for The Washington Post ; Amy Harder, energy correspondent for The Wall Street Journal ; and Eamon Javers, Washington correspondent for CNBC.

ANNOUNCER: Award-winning reporting and analysis. Covering history as it happens. Live from our nation’s capital, this is Washington Week with Gwen Ifill . Once again, live from Washington, moderator Gwen Ifill.

MS. IFILL: Good evening. We’ve reached that part of the year where everyone begins to take stock. At the White House, the president tried for a victory lap.

PRESIDENT OBAMA: (From video.) I said at the beginning of this year that interesting stuff happens in the fourth quarter, and we are only halfway through.

MS. IFILL: President Obama seemed upbeat, perhaps because he was headed to Hawaii, as he claimed credit for a budget, pitched forward to criminal justice reform, and insisted again that he does have a plan to defeat ISIS. Peter, does the president have a reason to be optimistic?

PETER BAKER: Well, look, he finished the year in some ways better than you might have expected at the start, right? He had just lost the Senate and was back on his heels. People thought we were heading into a pretty strong lame duck moment, and in fact in 2015 he’s had some things to show for it, particularly on the international front. Climate change, most recently, in Paris, an Iran agreement on their nuclear program. He’s working on things like Syria and other things. But it’s been a progress – a certain progress to point to.

And on the domestic front, there hasn’t been a lot of fireworks this year, but there have been things that they got accomplished. They got trade authority so he could negotiate a deal with the Pacific Asian nations. They had a fix on the Medicare doctor thing that’s been stymieing them for years, a budget deal that went without a government shutdown or crazy kind of stuff, an agreement on National Security Agency surveillance. So, you know, it hasn’t been flashy, but he got some things done.

Having said that, as you mentioned, the ISIS thing sort of hovers over it.

MS. IFILL: He was talking about squeezing ISIL’s heart, but I wasn’t quite certain what he was proposing that was different from what he’s done.

MR. BAKER: He hasn’t proposed anything new. Basically, what’s he’s done since Paris, since San Bernardino is kind of come out and say: Look, what I’m doing is working. We’ll do a little more of it. We’re going to do a little more airstrikes here, a little more support for local forces there. But basically my strategy is going to work. Be patient. It’s not a satisfying message politically. And the small gains he had seen in the polls kind of in the middle of the year have now dissipated. He’s back down to about 44 percent in our poll, approval rating, which is where he was at the start of the year. So that’s kind of a disappointing ending for him I think.

DAN BALZ: Peter, can I ask you a question? I mean, a year ago at this point we were talking about the shellacking that the Democrats had taken, and him in particular. What did they take away from that? And what adjustments did he make in the way he decided to approach this year?

MR. BAKER: Yeah. It turns out losing the Senate may have been the best thing that ever happened to him, because he was no longer tethered to the Democrat majority in the upper body, which he didn’t agree with on a lot of things. And he found himself I think kind of liberated a little bit, willing to make deals with the Republicans. And he had a partner in Mitch McConnell, who wanted to show that the Republicans in the Senate were worthy of governing and worthy of the majority, and wanted to get some deals done.

And they did it on things where there was a confluence of interests, like trade and things like that, on the budget, and even on some of these tax extending provisions that they had. He didn’t go forward with a lot of stuff that liberal supporters would have liked to go forward, because he decided that was just beating his head against the wall. And if you stop beating your head against the wall, it starts to feel a little better.

EAMON JAVERS: Peter, today he talked about the fourth quarter of his presidency, the last half of the fourth quarter of the presidency. He’s really getting down to the wire here. Do you get the sense that he has any kind of a different game plan for the last year, when this huge presidential race is going to be out and all the oxygen is going to be kind of sucked out of Washington and onto the campaign trail? How does he govern, how does he change what he’s doing in that kind of a context?

MR. BAKER: It’s called Air Force One. (Laughter.) You’re going to see the president get on the plane a lot this year – this coming year. He’s going to get on there seven, eight, nine times, I think, to go overseas. A lot of presidents do this in their final year of an eight-year presidency, because you have the most latitude, of course, in the international front when Congress is busy and no longer caring about you, and focusing on who your successor is going to be.

He has some opportunity. You talked about criminal justice reform.

MS. IFILL: Right.

MR. BAKER: That’s probably the biggest area where there seems to be a moment of possibility between the two parties coming up in this final year. And he wants to pass the trade deal that he did negotiate.

MS. IFILL: The Pacific trade –

MR. BAKER: The Pacific trade deal. And there’s question as to whether he can get that done. But you’ll see him travel a lot because being on the international stage is the one place where he still has some room for maneuvering.

AMY HARDER: Peter, you talked about how the climate agreement in Paris was a big success for him, and indeed climate is a big legacy issue for the president. In the spending bill that Congress passed today and Obama signed today in law, it lifted the oil export ban, which a lot of environmentalists think goes counter to his commitments in Paris. How do you think the White House is handling that perception among his environmental base?

MR. BAKER: Yeah. There’s a lot to actually criticize, even in the Paris agreement, if you’re from the environmental left, which would be, you know, there’s really no binding nature to this in terms of the actual targets. Anything that 190-some countries agree to, you have to wonder if it really does all that much. There’s a lot of smoke and mirrors, arguably, behind it. But what he’s pointing out is we’ve never had anybody get to this point. And you have to get to this point to get to the next point.

And his word today he used in the press conference a lot was persistence. This is part of a persistent strategy. Bear with me, in effect, we’ll get to where we ought to go to. Not very satisfying sometimes to his own supporters, who would like what they feel is more drastic action. And obviously this is criticized a lot from the right as well. Coal states and a lot of energy supporters feel this is going to be damaging to them as well.

MS. IFILL: The president also seems to be leaning away from the potential for failure when he talks about slippery slopes, especially when he talks about Syria. That’s caution, right?

MR. BAKER: He’s very cautious on this. He had a meeting this week with some of the newspaper columnists. It was an off-the-record session but some of the information kind of came out.

MS. IFILL: Just happened to come out.

MR. BAKER: Just happened to come out. It’s hard to imagine how that happens. (Laughter.)

MR. : Those columnists.

MS. IFILL: That would be Peter Baker –

MR. : Yeah, thanks to Peter Baker writing those columns.

MR. BAKER: Well, David Ignatius, who wrote about it elliptically somehow in the paper next to me that Dan represents. But in any case, what you heard him say, apparently, to these columnists is, it isn’t worth it. You know, the people who want to send ground troops there, it isn’t worth it. ISIS is not an existential threat. He doesn’t see it that way. Now, this is where he’s gotten criticized, right? He said they were the JV team at one point. He said they were contained at one point. His – you know, he’s had a very measured assessment of ISIS, and that has been controversial for him and leaves him in a tough position.

MS. IFILL: OK. Well, the obvious backdrop for all of this continues to be the fractious presidential campaign. Typically, the Republicans have been the ones fighting – Jeb versus the Donald, Rubio versus Cruz, and everyone else hoping for a piece of the action.

MR. TRUMP: (From video.) I am totally committed to the Republican Party. I feel very honored to be the front-runner. (Applause.)

SENATOR TED CRUZ (R-TX): (From video.) For Marco to suggest our record’s the same is like suggesting the fireman and the arsonist have the same record because they’re both at the scene of the fire.

MS. IFILL: And then today, the Democrats got in the action as the DNC and the Clinton campaign accused Bernie Sanders of political dirty tricks.

JEFF WEAVER: (From video.) Rather incredibly, the leadership of the DNC has used this incident to shut down our ability to access our own information, information which is the lifeblood of this campaign.

MS. IFILL: What a way to go into the holiday season. That is not holiday spirit. First, explain what that this dispute was about between Bernie Sanders, Hillary Clinton, and the Democratic National Committee.

MR. BALZ: I’ll try to explain it as simply as I can, but it’s complicated. The Democratic National Committee maintains a voter file, a large database, that the campaigns are allowed to use and then add their own proprietary information to it based on the work that they’re doing out in the field – the calls they’re making, the contacts they’re making, their ratings of different voters. A vendor for the DNC had a glitch and the firewall that’s supposed to keep proprietary data separate from the other camps opened up for a 40-minute period. Bernie Sanders’ campaign noticed it and they went in and accessed some of the data of the Clinton campaign. In essence, they took proprietary data.

This was – it was discovered. The senior people in the campaign said we can’t do this. They fired one of the people. There were four people who accessed it. But the DNC, as retribution in launching an investigation, said the Sanders campaign cannot have any access to this file, which means – they’re now in the middle of a campaign. They’re, you know, five weeks from Iowa. They are making calls every night. They can’t access what they’ve had before. And so they’ve come out and sued the DNC to get access to it.

MS. IFILL: We’ve come a long way since the days when Bernie Sanders absolutely on pain of death, practically, refused to criticize Hillary Clinton, defended her on the emails. But now it seems like the gloves are off.

MR. BALZ: It’s quite a remarkable turnaround. And as you say, you know, this has been a pretty civil campaign between the two of them. And this somehow has exploded over the last 24 hours since the news first came out. Part of it, I think, is – you know, is that the Sanders campaign feels aggrieved, but on the other hand the Clinton campaign says, now wait a minute. You guys were in the wrong. You went in. You didn’t have to download this data.

MS. IFILL: Take advantage of this glitch, yeah.

MR. BALZ: Yeah. So that fight’s going to continue. There’s a debate Saturday night in Manchester, New Hampshire. No doubt this will come up, at least in part. But both sides are kind of using it to energize their forces right now.

MS. IFILL: Yeah. Republicans. Let’s talk about the Republicans. (Laughter.) What’s going on? What do we expect? What did we come out of that debate with? It feels like everything is up in the air again.

MR. BALZ: Well, it is. You know, we’re at the end of the year and I think there are very few people within the Republican Party, or outside the party, who have a much better idea of how this is going to turn out than they did six or eight or nine months ago. Donald Trump is leading in all of the national polls. And in fact, in the wake of his controversial statement about banning Muslims from coming into the United States, he’s gone up in the polls. He went up in a poll that we did this week. He’s gone up in several other polls. His margin ahead of the second-place candidate is bigger than it has ever been at this point. And yet, you have this feeling still that this is quite an unsettled race. Ted Cruz is rising in Iowa. There’s a real competition underway in New Hampshire. And so we head into a very, very crucial period with everything on the line and nobody quite sure who to go after.

MR. BAKER: I think the most interesting moment in the debate was really Ted Cruz and Marco Rubio, both 44-I think-year old senators, Cuban-American backgrounds. Conservative but very different in their approach and very different their politics, right? Are they – they seem to be competing the same mantle?

MR. BALZ: Well, they’re – I think each of those candidates, and they’re both very skillful candidates, believes that in the end they will face the other in the finals of the nomination battle. Now, neither one can explain what happens to Donald Trump in that scenario – (laughter) – but they’ve been pointing at one another now for, you know, six or eight weeks. And it really came out in that debate, particularly over the issue of immigration, and then continued for several days. The issue is that Senator Cruz is trying to keep Rubio in the box as having supported a path to citizenship. And during that gang of eight battle over the Senate bill a couple of years ago, Cruz offered an amendment that would have allowed people who are here illegally to gain legal status. So Rubio is trying to say, well, you are basically where I was. And Cruz is trying to say, as he said in this, we’re in totally different places. But this is a fight that had to have – had to come and will continue until we see some resolution of it in Iowa, New Hampshire, South Carolina, and on.

MS. IFILL: Quick.

MS. HARDER: Going back to the Hillary Clinton and Bernie Sanders spat, do you think people outside the beltway are really going to care about this? What kind of impact could it have on the voters for both of these candidates?

MR. BALZ: Well, you know, as I say, it’s an inside game. People are not going to get fixed on it. But the degree to which one side or the other can use it as an energizing force to rev up their folks – you know, that race had kind of settled in and both sides, I think, need something to get it going again, and particularly Sanders.

MS. IFILL: OK, and somewhere Martin O’Malley is smiling as well. (Laughter.) While they were fighting on the campaign trail, Republicans and Democrats were striking dealings on Capitol Hill.

SPEAKER RYAN: (From video.) I don’t think this is the way that we should be governing, but we are where we are and we have a bipartisan compromise where, by the way, I think we’ve got some good wins. And, look, Democrats won some things too. That’s the nature of bipartisan compromises.

REPRESENTATIVE NANCY PELOSI (D-CA): (From video.) Of course, the omnibus was a compromise. But under the leader’s leadership we came a long way. It is a monumental improvement over the special-interest-ridden appropriation bills that House Republicans were offering this year.

MS. IFILL: Even the president was praising the deal. So what was different this year, Amy? We’ve never seen such camaraderie around budget time before.

MS. HARDER: Well, I think we found the sweet spot between a lame duck speaker and a honeymoon speaker. We saw Speaker Boehner. He as the one who crafted the budget deal that set the overall spending levels, which took some of the pressure off the new House speaker, Paul Ryan. And then he comes in, everybody really wanted him to be speaker, there was so much buildup to that. And then he comes in and he listens to a lot of the members a little bit more than some said they were listened to under the Boehner terms. And then you have this deal.

And so I think it’s a combination of the honeymoon phase, which you often see, and then this lame duck period where Boehner was able to get the spending bill – the spending numbers down. And that brought on some of the Democrats. And because you needed the Democrats to pass the spending bill, that opened up an area of compromise.

MS. IFILL: Now, the best examples – or at least one of the good examples in this budget document is something you alluded to earlier, which is this oil export ban, which was – first of all, I didn’t know there was an oil export ban. Turns out there was, and Republicans wanted it lifted. And this bill would do that in exchange for some sweeteners for Democrats.

MS. HARDER: Right. I saw the oil export ban, which was – you know, just a little background – put in place in the 1970s in the aftermath of the Arab oil embargo, sent gasoline prices skyrocketing, and so Congress passed several bills to do that. And so, coming back to the spending bill, it was viewed as sort of the glue that held everything together. It was the big GOP victory. And Democrats were willing to entertain it, in part because a lot of American voters don’t know about it. And so it made it easy to negotiate around it.

MS. IFILL: Like me. (Laughter.)

MS. HARDER: Right, like you. A lot of people don’t know about it.

MR. JAVERS: But ultimately, it’s not that common in Washington to undo something that’s been in place for 40 years, right?

MS. HARDER: Right.

MR. JAVERS: So want I’m wondering is, you know, how did we get to the place where something that was viewed as an absolute sacred cow, you just could not remove that, suddenly this week, poof, it’s gone?

MS. HARDER: It was a really concerted two-year lobbying campaign on behalf of this big united oil industry campaign and some key senators and representatives on Capitol Hill. You saw – you know there was maybe a dozen reports put out in 2014. Most of us don’t pay attention to reports, but they help build the public debate toward the issue. I also think there wasn’t a lot of concerted opposition to oil exports. You had a couple of oil refineries that were going to lose some of their profits, and so they opposed it. Environmentalists were distracted with the Keystone XL pipeline, which, of course, President Obama rejected last month.

MR. BAKER: For those who might not understand, like Gwen and me, what is the downside of it? Why not? What’s wrong about it?

MS. HARDER: Right, I mean, that’s a great question. And it didn’t really come through on a lot of the debate. Congress passed this so quickly it doesn’t seem like there’s a big downside. Some of the critics – it’s a little bit of a fragmented opposition. You see environmentalists who oppose it on climate change grounds. They think if you allow more oil exports, you’ll encourage more drilling, and that will encourage more carbon emissions. You have some consumers who are, of course, worried about gasoline prices being higher. That was the biggest concern. And those reports that I referenced, all of them, everybody from, you know, Harvard to the government concluded that it would not raise gasoline prices.

MS. IFILL: But politically, the old horse-trading thing, the Democrats got something for this on renewables.

MS. HARDER: Right. Right. And it’s funny because both Minority Leader Pelosi and Paul Ryan both declared this a victory for them. And the Democrats secured five-year extensions of wind and solar tax credits, which, you know, I talked to one senator, Senator Martin Heinrich, a Democrat from New Mexico who’s pretty liberal on these clean energy issues, and he said we would not have been able to get these extensions if we did not have the oil export ban. Now, of course, I spoke with House Majority Whip Steve Scalise, a Republican from Louisiana, and he said, well, we got a permanent policy and they only got a temporary policy. (Laughter.) So it’s a victory for us.

MR. JAVERS: Everybody wins.

MS. HARDER: Right.

MR. BALZ: Amy, you mentioned Speaker Ryan and being in a honeymoon phase. What does this tell us about the kind of power he might be able to wield? Is he – does he have a longer leash from the conservatives than John Boehner did? Or is this just a kind of a year-end example of a gift he got he won’t be able to replicate?

MS. HARDER: I think time will tell. I mean, what tea party is kind of what I’m thinking. Look on Capitol Hill. They passed a $1.15 trillion spending bill. The tea party members of the House were relatively quiet. And so I think that’s part of – they were kind of – you know, it’s the honeymoon period. I think they felt like they were listened to more than they were under Speaker Boehner, like I said. But I think time will tell whether or not he’s going to be able to continue this. I think and he’s going to have to lean more on Democrats. And I think that could eventual come back to hurt him even more than it did Boehner.

MS. IFILL: There’s nothing like a honeymoon. I’ll bet you – I’ll bet you the president thinks that from time to time.

MR. JAVERS: He can’t remember his honeymoon. (Laughter.)

MS. IFILL: He can’t remember it. (Laughter.)

And finally, one of the least surprising, but most dramatic government actions all year, the Federal Reserve moved to raise interest rates for the first time in nearly a decade. We saw this coming, but why this timing, Eamon?

MR. JAVERS: Well, they raised it by a quarter of a percentage point. And they raised it at the point which they felt like it was inevitable that they had to do it, but it wouldn’t do too much damage to the overall economy, right? There’s a real push-pull here with interest rates.

MS. IFILL: Gradual, incremental.

MR. JAVERS: Right. After 2008 they ratcheted interest rates down fast. If you look at a chart, it goes straight down like a cliff to near zero. It’s been near zero for years and years and years. And this was the Fed saying: Finally we think we have the confidence now to take the training wheels off the economy and let it go on its own. And we’re starting to get a little bit worried. If we keep it down too low for too long, we could have a couple of negative outcomes.

One is inflation could start to tick up. We haven’t seen that so far, but that could be a problem. And also, there’s a theory that if you keep interest rates down really low for a long period of time, what you end up doing is encouraging all sorts of risky, speculative behavior, and you create other bubbles in the economy going outward from the Fed. So they said, we don’t want that either. So now is the time where they felt comfortable to take those training wheels off.

MR. BAKER: So, Eamon, I’m going to the shopping mall tomorrow, and I got a 10-year-old kid I got to buy for. (Laughter.)

MR. JAVERS: Yeah?

MR. BAKER: What does this mean to me? I mean, what does this do for average Americans? Does it change their spending patterns? Does it change their costs? What does it do for consumers?

MR. JAVERS: Not yet. It’s a big, symbolic turning point in the economy because now it says: We’ve ended the era of near free, easy, low money. And now we’re going into an era where we think we might be raising interest rates. Ultimately though, it means that, you know, getting a loan of any kind is going to be more expensive, marginally now. It’s – 25 basis points is not very noticeable.

MS. HARDER: So we should have bought a house last week, is that what you’re saying?

MR. JAVERS: Right. Right, right. But it probably won’t be noticeable in mortgage rates either. Your credit card debt and other things probably won’t be affected dramatically by this. But in theory, over time, higher interest rates mean it’s tougher to borrow, more expensive to borrow, and you’ll be paying more on those – on those kinds of debt.

MR. BALZ: But is this – is this the beginning of what will be a steady series of increases? Does the Fed – what are the signals that the Fed is giving about kind of where they think they may be heading?

MR. JAVERS: Yeah. We don’t know for sure, because the Fed never says for sure, but somehow the market always manages to form these very accurate impressions of exactly what’s going to happen, right? (Laughter.) Goldman Sachs put out a note late tonight saying that they think there’s an 80 percent chance of another interest hike in March. So they think that that’s definitely coming, and we’re sort of on a glide path to that. And so for consumers, that means higher interest rates, again.

But also it means for banks probably more profit, because what we saw on Wednesday when they raised rates was, within minutes, some of the banks announced that they were going to raise the prime rate – that is, the rate that they charge for people to borrow from them. But they – a lot of the banks said, but we’re not going to raise the rate that we pay to consumers who have deposits. So there’s a spread there, and the banks are capturing and keeping that spread. So profitability for the banks here is one of the likely outcomes.

MS. IFILL: What about inflation worries? Wasn’t Janet Yellen in her statement signaling that she’s worried, potentially, might have to ratchet back?

MR. JAVERS: There is this – yeah, there is this concern out there that inflation would increase. And according to the economics textbooks, if you have these low, low interest rates, it should spur inflation at some point. And we just really haven’t seen it out on the horizon at all. What Yellen was saying in her speech was that she was concerned – one of the reasons she wanted to raise interest rates is because if they see the economy start to slow down later, they want to have some powder in the keg to be able to ratchet those interest rates back down again. That’s a tool that they can use. If it’s at zero, you’re at zero, and you can’t use that tool anymore.

MS. IFILL: And briefly, how did Janet Yellen come out? Smelling like a rose? Smelling?

MR. JAVERS: I think she pulled off one of the greatest Jedi mind tricks in Fed history this week. I mean, to use an appropriate metaphor this week. (Laughter.) I don’t know why that happened to be on my mind. (Laughter.) So what she did was, magically, without telling anybody, which would be an illegal and inappropriate leak, she managed to let the market expect exactly what would happen, the day it would happen, and the exact number of basis points by which they would raise. And the market, which had spent the previous year or more freaking out about any hint of interest rate hike, loved it, and the market rallied.

MS. IFILL: Maybe there was a lightsaber under her chair. (Laughter.)

MR. JAVERS: That’s right.

MS. IFILL: Thank you, everybody. I was going to avoid all the “Star Wars."

MR. JAVERS: You can’t avoid it! (Laughter.)

MS. IFILL: You can’t! Washington Week will be away the next two weeks so your local PBS station can bring you special holiday programming: next week and then the following week, from Vienna, the New Year’s celebration 2016 with host Julie Andrews. That could be me. While we’re away, be sure to check out our website for some special year in review content. And of course, later tonight and all week long, the Washington Week Webcast Extra year in review. We’ll see you next year on Washington Week . Happy holidays and good night.