be a big swing towards the republicans in the 6% to 7% swing is perfectly understandable and frankly doesn't much require any kind of ideological positioning or thinking. i think is sort of misleading to jump on changes and the percentage of people who identify as conservatives or moderates or liberals. those tend to be trailing indicators rather than leading indicators and people react and the realities. in this case getting scared, really scared about what's going on in seeing big active government configuring because they've been queued by the republican opposition that not only did that a government not hope, but it really is the cause of all these problems. so if we just cut it back, we will return to some kind of a

nirvana. the question that i think is important to ask that we almost never ask in this town because it is considered elitist or snobbish if you do it, which is, what is the public's run about the policy and in fact legitimately concerned about the consequences and the reality of what's going on in the face of a recession that could turn into the depression that people think t.a.r.p. is a bad idea, does that mean washington should not in a good? hats off to george w. bush for doing what has to be done any crisis in spite of its unpopularity and his party in his country. whatever the problems with it, it was a massive success. i would say the same horrors the stimulus and ironically if you're going to criticize that is because it's small, not too large. same for the auto company bailout. and you can apply that than to

the new agenda. well, how are we going to produce more jobs and economic growth in the short term. because if we don't get growth going come you can't deal with it by cutting spending because the decline of revenues from low growth will overwhelm any savings from cutting spending alone. that's the kind of talk were not getting. and one of the really sad thing is that this sort of party coming in now with lots of new members and energy is articulating agenda, that if you look at it in pure substantive terms, doesn't have a chance of doing anything about the problems that are consuming the american public right now. final point, david broder in his column in more than his column, talked about the desire of the public for people in congress working together.

and i think in general, that reflects a basic feeling they've always had, which is the lake to see politicians agreeable and coming together and doing the right thing. of course, the right thing differs among those people and they don't fully expect the fact that there are profound differences about how to go about these problems and that their very behavior and aligning themselves with parties that are consistent with their ideology has reinforced this ideological polarization and intense partisanship. i don't think there's a golden mean i'm dealing with the deficit or in finding any policy. i think we ought to be looking at the substance of those policies and understand that the public scott to be brought into this and some more substantial way before going to get anything done. >> tanks. let me start by saying of course as tom suggested with weeks to

count returns come in the elections not over. and my eyes, as many others are turned to alaska waiting for this write-in. i'm not referring to the senate race, but the critical position of the mayor of wasilla. i'm wondering if levi johnson can get into the double digits. [laughter] to spring forward bigger things of course. i want to start with a story that i've told many times before after an election with a dramatic victory for one side or the other as a cautionary note. it's a story that takes place in the first year anatomy class in medical school and the professor using the socratic method turns to the class and said, for the question of the day, ms. richards, what human organ, when appropriately stimulated grows to eight times its normal

size? and she read them and said i refuse to answer that question. so she looks around the room and says mr. porter, mr. porter says the people of the human eye when it enters a darkened room. the professor says that right. on ms. richards said three things to say to you. one, you didn't do your homework. two, you have a dirty mind. three, you are doomed to live a life of unfulfilled expectations. [laughter] that applied to liberals after the 2000 -- he'll use it. markley is it any wonder tribute. did you? last night it came from al franken. actually, it came from ward and he forgot. [laughter] and so, for the many freshmen coming in, it's something to

keep in mind. now, the argument about whether voters have swung towards a much smaller government i've found quite striking. a cnn poll that asked the question of voters, was the first thing you want government to do in this next year? and coming out on top by very wide margin of 37% was an economic stimulus. i'm not sure how that squares with the notion that voters have decided not do what they want to do is taking me back to government. and what it suggests to me is that while there is no doubt that we have many more people who self identify as conservatives right now, that americans are as they have always been pragmatic. they go for what works. end of this government that's working, that's fine. if it's not working and they see government schooling up, they want to turn to the private sector. once the two screws up, though, like and look for something

else. now, i'm going to give a series of almost bullet points. the most interesting statement on election eve came from the most likely speaker designate, john banner. and i quote for new majority will service your voice in the people's house, we must remember it's the president who said the agenda for our government. now, you could have one of two interpretations of that statement. the first is that the civics training for elected officials is abysmal and that perhaps they are to read the constitution that they refer to quite frequently. [laughter] my guess is that several framers would be spinning in their graves at the notion that the president sets the agenda for a country. president is the thicket of who disposes of an agenda that is set to the congress. now i don't think that john boehner is ignorant of the basics of the constitution.

i think it's part of what has become a concerted effort ideas led along with jeb bush and many others to lower expectations and try and dampen the fervor of new people coming in who may say this isn't about us, but who believe that it is and you really do want to turn up the heat and pass an agenda that is in fact one that will take a meat ax to government and one that could not be enacted at this point, but might bring a big enough public backlash. and it reflects another reality, that for both parties right now, while we're going to have continuing clashes between them, some of the most interesting struggles for both will be internal. for the republicans, is a set of pragmatic leaders whose goal first and foremost is to win elections. as mitch mcconnell is the second most interesting statement said our primary political goal is to make sure

barack obama is a one term president. the second goal is to win a majority in the senate and keep their majority in the house. but a lot of new members coming in did not come in with that as their primary goal. their primary goal is to dramatically reduce the policy course that is being sent in washington. and this can be a lot of a lot of elements of tension there. and tension we thought reflected in the rather stunning statement of jim demint is a cautionary note the new members of the senate coming in coming to be on committees but never mind those committees as they all try to co-opt you into coming up with policies. and what you should do is forget about that and go on the floor and do things that did nothing to do with working together. now i've never heard a politician say to incoming members of congress, nevermind the committees are going to serve on. it's a quite extraordinary statement.

but jim demint, who i suppose you could say for mitch mcconnell has been like the neighbor freddy krueger living down the street. [laughter] that we've had a whole series of krueger families move in on the block. [laughter] for obama it is the continuing disaffection of his last, which is also kind of funny when you see all of these stories suggesting that obama has moved so sharply to the left. if he's made so sharply to the left, why is the left so dissatisfied? but they are. and the for statement that was of great interest will be election even his confession statement, russ feingold saying it's onward to 2012. now i'm not sure that that means that russ feingold is already planning a primary challenge from the left to barack obama. it may mean that he is looking towards what future he will have and i'm sure it will be a robust one in the world of politics and

policy in the public interest. but it's a suggestion there had been for the president ahead. as we look at some of the areas where cooperation is possible, let's start with trade come with the president has indicated that he wants to move towards enactment of the free trade agreements with colombia and south korea. doing so will mean finding probably more republicans willing to support them in congress and democrats and they face of organized labor, which is already unhappy because they didn't get the kind of labor reform, card check or anything resembling it that they wanted. and of course that's now dead. certainly john kline is not going to be inclined to do anything on that front in the house of representatives. and this will be another burr under their saddle, along with many other liberals. can he make compromise and still keep his own base intact?

just a few other points. before we get to the agenda for the next congress, we have to navigate through a very difficult thing to accession. one critical question, which has been raised already by many and it's obvious this can they reach some kind of an agreement? basically at the pump attacks issue at least for another year. and were going to be watching, first of all coming to see whether the campaign that began a couple months ago, anticipating a way of conservatives to discredit and delegitimize the lame-duck section. because after all, diesel people who have been thrown out by voters will get heated up. if it does, it'll make it more difficult to do the kinds of things that pragmatic republican leaders would prefer to push off. because if they can't reach some agreement on taxes, one, tax increases will take place on january 1 with the new congress coming in on january 3rd. and that will be a jolt to

people and a whole host of ways. one of the more interesting statement three before the election came from the republican congresswoman from wyoming suggesting that if they didn't do something about the estate tax, that some of her constituents would kill themselves. i mean, literally that she has only people on people on dialysis who would pull the plug so that they wouldn't screw their children out of the ranches or other properties that they have. it kind of made you take notice. but beyond the estate tax, can a fragile economy take a sharp tax increase for everybody? some of the new collection of people coming in on january 3rd if you haven't reached an agreement on taxes insisted their version of compromise is capitulation, make them all permanent. how long will it take to reach the kind of agreement that might basically continue things for a year, where you can take the battle at next year. the same thing, we haven't had a

single appropriations bill enacted into law. continuing resolution running now. what will happen with? with a push that forward a few months of the major battles over the budget that could and probably will lead to lease one shutdown of the government get put off for several months? what about the s.t.a.r.t. treaty? and then keep in mind that we will have two major ethics trials taking place during this lame-duck section. in the year plus in which we had a very strong and close working relationship for some, a model of bipartisanship. for other i sense that the see no evil, hear no evil ethics process was underway. but between ranking member joe boehner and so locker in on the house ethics committee fell apart right before the election when all the republicans demanded that those trials of maxine waters and charlie wrangle take place before the election. now, it was never practical

frankly because they were in tough reelection battles themselves. it was a political shot and i suggest we may have, before we get underway, partisan pitch battles under ethics issues. finally, just two more points. one, there's little doubt that the policy agenda will be a constrained one. we will move from the most productive congress in the last 50 years in our lifetime. much of the focus will shift to executive power. how much the president can do through executive orders, executive agreements, regulatory power and bureaucratic action. "the wall street journal" will once again discover summer. in its files article i of the constitution. and you're going to find a lot of people in congress with a tug-of-war over the use of executive power and the courts will play a role as well. and whether courts, filled with

judges, most of whom would've come out of the executive branch without a long-standing bias towards the executive and congress will suddenly change as it is an executive controlled by people they don't like and a congress with a substantial role by people they do is point to bring us into a completely different venue. finally, let me say we will see some action, possibly on trade. education is worth mention. energy is an area where there could be a significant amount common ground. one of the most interesting tugs of war will be over infrastructure, where a business community that poured a lot of money getting republicans in the majority won a major move on infrastructure. it's in their interest not just in jobs, but in terms of making sure transportation quarters for. new members coming into not wanting major new area of government spending and infrastructure. and can parties get their act together on that? it's another very interesting

area among many that we can talk about in the remainder of our time. >> thank you. while i think some of you are playing down the notion that there is a message from the voters here, norm, you in particular mentioned the message the republicans have taken that and a lot of media as well as a notion. i think you're freezing was that what people want is a dramatic reversal in the course of government. whether that is inaccurate definition of what voters want, that does seem to be the agenda of the republican party. and so, my question and let's start for example with health care as one of those things. i'd like to add each of you what conceivably bite the republicans be allowed to do on health care. and how might the democrats, many of them suffered as a result of that bill, how might

they respond. i would take to get each you in, starting with dio, mort. they might the president yesterday said he was willing to tweak the health care bill and the republicans are all calling for repeal and replace. and you know, i'm supposed to -- tea party people just want to repeal and forget about replace because i've not seen -- i think many of them think that providing health care to the uninsured is something that's not explicitly referred to in the constitution and therefore is an illegitimate form of government. so you've got a very wide range of opinions about what to do about health care. the 1099 form, you know, that the congress required that every transaction that any business

conducts of any kind over $600 has got to have a 1099 form issued about it is deemed by everybody to be onerous. it was a fund-raising mechanism. and that's certainly going to be pulled out of the bill. that sort of easy. i mean, the republicans really think that repealing the health care bill is a job creator because they believed that if small business looks that says -- and i'm not quoting, not a tea party person, but lamar alexander. very moderate republican who said that right before the election he was with the chain restaurant owners, which is one of the biggest small-business groups in the country. and they claimed to him that the health care bill was going to

put a burden of $40,000 per employee on them in administrative taxes, mandates, all of that requirement and that encouraged them to have employees. so republicans really believe that repealing or substantially amending health care is a major item on their agenda. now, this has the makings of total breakdown of the government. i mean, i can well see that the republicans in the house, particularly, are going to pass bills, one after the other after the other to one, repeal into and have it the implementation of the health care bill. either way, there is a 22 page document that was issued today

by eric cantor, which you can download, which talks about the steps that the house republican envisioned putting into effect. now, one of the items is that to bar the irs for any and hhs from the funds that it takes to implement the health care bill. this is not only a savings. one of their administrative savings, but it's a way of throttling the implementation of the health care bill. well, if they just don't appropriate the money, and this inhibits the ability of the administration to follow through on health care reform and could be the makings if there's a big defunding, could be jamaicans of a government shutdown among many. i don't see it coming to terms here on health care.

you had two basic philosophical differences between the parties on this issue. the democrats and the administration believed that their highest priority was to extend -- give access to health insurance to the 51 million people who were uninsured. all the republicans cared about was lowering the cost of health insurance and the government set the rules, create the mandates, essentially take over the insurance companies and turn them into public utilities. the republicans believe in a free market in health insurance. i your policy across state lines. you know, it's the mandates as possible. i don't see how they ever come to terms on this and i can see it is the roots of a conflict or

in the entire next two years. >> i think it will be -- i agree with mort. i think it will be a source of conflict between the parties over the next two years. but i do think an advantage to cruise to what is on the books now. and i think republicans will encounter great difficulties. the first panel -- i can't remember whether it was carol or bob reported on the exit polls. you know, the public was absolutely divided on this. there was not a majority in the country favoring repeal of health care. if anything, leave it alone or strengthen it. and prove it in some ways. and you really get tired. obviously you can't repeal it with the senate as is. and obama in the white house. you can harass bureaucrats and we see a lot of that.

you can try to define, but i think obama would be to go to the mat and shut down hhs. if it's a part of hhs and remind me, are the funds for the administration of the social security included in that bill? so let's have social security checks that go out because of a disagreement between the president and the republicans in the congress. but of course it probably won't come to that. i mean, if boehner has anything to say it will come to that because he's a legislator. that is running so fast to keep ahead of his troops and it's very difficult. here's the other thing i anticipate. there is a philosophical difference, mort. but ron wyden worked for five years with bob bennett and

attracted about a republicans to a plant that is not our different in many respects from i would've favored it to what eventually got passed. but it is dramatically different from what the republicans are prepared to do now in health care. by the way, included a mandate among many other things and substantial subsidies for individuals low-income households. but mitch pulled the plug and he said you're all off this bill. before rama was inaugurated because word on the go shooting over health care. because even if we turned it into a bill more toward liking, obama and the democrats would give credit and we would not have the kind of political success we want. so there's less principle and more partisanship in my view. final point is many provisions of the health care begin to

unroll. some have already now. and almost all of them are very popular. it shows that the broad public doesn't know much about them, including, by the way, tax credits for small businesses which have led to a really market increase in the number of insurance among small businesses. but all the other insurance provisions that are really quite popular, i predict the senate -- because it is controlled by the majority will hold hearings in which various people come forward to talk about the favorable elements of the health care bill now and that's going to begin to get away from the rhetoric of government takeover of health care, socialized medicine and that's panels. >> i find some of the arguments that we see over the health care bill almost surreal. if you look at what people like dean durenberger, performer republicans senior from minnesota or mark mcclellan who

was ahead of fda and the set up for medicare and medicaid services under bush. this is the kind of planned with some problems that moderately conservative republicans have put forward as the alternative to clinton's bill in the early 1990's come with any of the ideas coming out of the right. so it just shows how much a lot of the debate dialogue have shifted. and whether this is a government takeover of the insurance industry, alice rivlin who is not exactly a raging leftist on some of these issues that she thinks the changes are the best way to bring real competition to the process. we'll see. i'm a little bit of a skeptic of the notion that if we just let people buy insurance over state lines everything will be fine. we have this notion if we let people buy credit cards across state lines everything will be fine. and what happened? of course it was a race to the

bottom. everybody went to the state that all the credit card companies that gave them the loosest regulations and that's why we have an enormous public backlash and credit card reform in the last congress. but all skype is a separate set of arguments. talkin about repeal or repeal and replace put the wind a little bit of a tricky ground. and that's why it started with repeals and then move to repeal and replace. and now of course we'll keep the popular things. no more preexisting conditions. well, how do you get to a point where there's no more preexisting condition unless you vastly expand the risk pool or otherwise of course people will join the system. why pay for insurance? wait until you get cancer and then you can go in and get it. you've got to have a different kind of system. and it's the logic that led to both of the wyden proposal and what the heritage foundation was discussing many years ago before they said we know wrote that. who're you going to believe, me

or your own eyes on this, to the notion of a mandate. are you going to repeal the end of lifetime and the annual amounts? you know, used to think $2 million -- lifetime limit. who could ever reach that? a couple of weeks in the emergency room and intensive care unit in your bumping up against that. or letting people keep insurance for their kids up to the age of 26. he can't begin to unravel something without having all of the kinds of consequences and that will be difficult. one thing that john boehner said before the election when he was asked about the health care bill was were going to first move to repeal a $557 billion in medicare card that make up most of the financing of this program. well, i was first a little bemused that he uses terms cuts. remember the debates we had hope in the reagan and bush administration when democrats talk about cuts and republicans that i want for that was.

they were lowering the rate of increase. when no cuts are bad. but think of what happens if they put out a proposal to basically eliminate all of those things, most of which would be in any fiscal program to train them at cost of a medicare if you're going to get the fiscal house in order as mitt romney said in his op-ed the other day, you've also got to do with medicare. if you don't do with medicare, then are not going to have any kind of a planned to deal with the fiscal problem. i can assure you that democrats might demagogue social security under any circumstances. if you get attacked for medicare and come up with a fiscal plan that says we're going to tackle social security, but we're going to leave aside defense. we're going to continue to cut other taxes and we won't touch the health system, you're not going to have any kind of an agreement. so this moves into very, very tricky territory. and i agree that it could and probably will lead to at least one of the many shutdowns of government that we have.

the bigger thing to watch for there is when the debt limit gets its ceiling approaching sometime in the spring, which leads me to a second and related question to tom. i will debt limit and perhaps a starting point, how will this urge to have this powerful, however percentage of the electorate you want associated with clearly strong and vocal segment that wants to dramatically cut spending? how will that manifest itself? how far will that get? will that affect service on potential crisis having to do with the debt limit? how will we see that play out? >> this is clearly a part of republican majority priority to deal with spending. in some ways its immediate

spending. it's not dealing with what transpired was talking about initially, which was our medium and long-term sort of structural imbalance between revenues and expenditures, which is a serious matter. ironically it's almost all symbolic and counterproductive i would argue. i mean, cutting spending now, money nonfederal employees is one of the dumbest things you can do when the economy is in the shape than now. it would probably have little impact on the deficit itself. it's patrolling at the margins. and that sort of anti-stimulus at a time when even martin feldstein and others are calling for more stimulus. but i think the fights will be there and they'll come back again and again, bill by bill, suggestion, they'll try to stay

away from specifics and do broader sort of percentage cuts until the administration to find the waste, fraud and abuse to do so. listen, i have a sort of machiavelli in view of this thing. what would keep barack obama from being reelected? one is a challenge in the primaries. and that's probably all about afghanistan and nothing else. the other is we never get out of this slow growth 2% or under. republicans cutting spending in the short term probably increases the probability of more immediate pain, fewer jobs, lower growth. over two years, that puts obama in worse shape. but the public now in its own mind has come to believe. that's what we've got to do. like households we got to cut

spending and that's going to produce new jobs and economic growth. >> other thoughts? >> you know, i view the next two years is a great empathetic game of chess if you like. maybe it's only checkers, where each side is going to try to maneuver the other one into the blame for what doesn't happen during the next two years and for the fact -- just think about this for a second. in order to get back to 5% unemployment, we've got to create 200,000 jobs a month for five years. we are currently creating jobs at the rate of 12,000 jobs a month. the fastest period of growth -- five-year period of growth in history -- postwar history with 90,000 a month. so that gives you some idea of how far -- how far short we are at doing what we need to do in order to restore the economy to

health. i submit that that is not a good sign for anybody's reelection if they haven't done something about that. and i think the republicans are now in charge of the house of representatives. they are going to be judged, to. and obama is going to be judged for sure on whether he can get something going. but all i see is an inability to get stuff done and over and over who's going to get blamed for it. >> in light of that, let me take you back to john boehner. remember is the president to set up for our government. can't blame us even afford a majority now. they think you're absolutely right. we'll see questions of is the also whether obama can be as agile as clinton was when we move towards the shutdown of the government with a speaker who is

not going to have anywhere near the power -- possibly the power to overreach and create a backlash as with gingrich, but also the power over his own colleagues would not occur to say if were going to get a second consecutive term of the majority, with got to work with this guy. can boehner do that? the fact that eric hunter is coming out with a 22 page majority leader's agenda, never mind what the speaker has say and that mike pence, who is leading the leadership has been all over television same compromise? build the kind of compromise we want is capitulation basically, suggest that the task there becomes very difficult as well. and i think there will be difficulty with the public that has a deep antipathy towards washington, but that leaves even more to believe if you just cannot the waste, fraud and abuse, you really can dramatically streamlined this government. when you start to cut -- and that includes a freeze on all

discretionary spending at 22,008 levels. nevermind if we have another hurricane, another oil spill, another crisis of any sort, how you begin to sort all of that out, you're going to start to see programs that people relying on shaved. and what will be as interesting as anything is whether the older voters who make up the bulk of this reaction -- and some of it was a reaction against the health care bill. it's people like medicare say we've got ours and are going to take some of the best to give to others. nevermind. some of these changes will impinge against them and how they'll react to all of that may be one of the most interesting political developments over the next year. inaccuracy and eric cantor at greater threat to republican leaders than freddy krueger. >> and suggesting that in the nightmare said jon banner may have over the next few months, there may be at least as many revolving around his own colleagues as the democrats and

the white house. but i think in the end it's the president has held accountable, even though the president isn't in a position to deliver. i think one of the unfortunate things about washington talk as everything is always symmetric. and now, it's both are false and they're going to do this and he's committed to that. and we don't look at the substance of what's going on. i mean, we need to somehow get higher growth. i don't know anyone under the circumstances who argues that cutting spending in the short term will increase jobs in the short run or growth. and so, we have to be able to say that. and the president has discovered one of the dilemmas of contemporary american politics. we have parliamentary labour party is, you know, ideological polarized internally unified, but we don't have majority are in will because of the senate as

parliaments do. if we didn't have a filibuster, if we have majority rule, obama would've put his archers amulets into place. health reform would've been passed in three years without the cruddy deals with ben nelson and so on. and then he could have made adjustments if more stimulus was needed. and ultimately be held accountable. the irony is the get something that is in part and looks different and worse because of the republican opposition. he is the one who has to be held accountable for it. >> let me give you the optimistic scenario here. and there is a potential deal to be had that might bring stimulus and economic growth, that she could imagine being plausible. and not as democrats get more infrastructure spending in a fairly big chunk.

and in return, we get some additional short-term significant tax cuts, including the payroll tax holiday and a few other things that might actually work and begin to create and amulets. and maybe also as a part of that deal. we know that teens can't come of the incoming chairman of the ways and means committee is engaged with conversations with kent conrad about tax reform. you could see a deal that would in fact involve a pretty dramatic transformation of our tax system. when that would be more efficient and effect as i could be part of a larger package. the odds of that happening are not great. but the fact is even with this gulf between the parties and the growing electromagnets pulling them apart, there may be something that could be done. >> and there is an idea fully around the bill gholston has been porting primarily andy's not alone.

felix brolin has been promoting for years and that is a national infrastructure bank, a kind of independent dictation freed for politics that would take out significant infrastructure project based on merit and basically leverage a small amount of government money and attract and lots more private money to get it off the sidelines in order to develop major systems. now, you know, obama has finally -- keep her posted back in the 2008 campaign and then forgot about it. suddenly it's reemerge. i mean, i have seen in obama's policy prescriptions, indications that he is willing to move a little bit. the infrastructure bank is one, which is a mangy was based on private capital. yesterday he said the most important thing we have to do is

make sure that small businesses hiring. the business is the foundation of our economy. that's different from a kind of antibusiness tone that you've heard from the administration a lot. a small business bill, which finally got past contained a lot of tax breaks for small business. it may be that the sun has dawned in the administration, that the private actor really is where the jobs get created. in improving the climate for private-sector job creation is what they have to do. now if that's true and they can sit down with the republicans and say how can we do this? they can make some progress. and i think that's largely tax cut. some tax reform and so on. >> there's an infrastructure bank that has a model that obama has enthusiastically reported which is the greenbank which was

read hans idea which does exactly the same thing to create green jobs. >> it really is though. i mean, these were. and more than tax cuts, it would increase demand, which is what's really holding back business investment as confidence that there will be enough vitality and demand to merit due investment. >> is later than i thought that i'd like to open it up to you folks in the audience who might have some questions. and i see one right down here. we have microphones? >> bob wake her from credentialed financial. it seems to me that cynthia loomis is really onto some pain with the estate tax because it seems to me that republicans cannot possibly allow the estate tax to snapback on january 12 a

million dollars floor with a 55% rate. and so, i wonder, norb, whether you think that some deal on the estate tax might serve as a kind of in and all under which a larger deal could be formed on the income tax rates as well. >> well, i think you're right, bob, that there's a nightmare scenario with the estate tax. but if you want and exhibit a in the dysfunction of government over the last few years, we knew that the estate tax was going to the situation that is now, but there's no estate tax, but you also have to go back and calculate capital gains on assets to people may have had for 50 years and then moved to this trick on a they should have been able to work out a deal which was on the table two in

three years ago, which is simply to keep it at the $3.5 million individual brief exception and brave. republicans were holding out for a much larger number. and i were going to get into a series of negotiations. and here too is going to be a tug-of-war within the parties as to whether you want to reach that deal, even if it means you play the usual endgame negotiations or chicken ran up to the end of the lame-duck section. and while logic would suggest that you reach a deal, logic doesn't seem to applied in many of these cases up to now. >> anyone else? yes, sir. yes, ma'am. >> i apologize if you address that this morning, but could you talk about the interplay between the fiscal pressures that states will continue to deal with and the response of the federal

government and that will be an ongoing concern. as you know, states don't have the luxury of continuing to rack up deficits. >> i see no prospect that there's going to be any help from the federal government to the states and what you're going to have is a crisis in state after state after state, where, you know, state workers are going to have to be laid off. i think we've had the last quote, unquote bailout of the state. you know, there's one problem with all of this. and that is that some states have been frugal. some states have balance their budget in other states have been utterly profligate. so, there is no way that anybody has invented -- there ought to be a percentage of that for kind of formula that could be worked out to reward the states that have actually lowered their own

deficits. but i just think that this falls into the category of bailout and it's not going to be, you know, nothing can be done about it. >> and it's truly perverse because whatever remaining stimulants there is at the federal level has just absolutely countered by what is happening in the states. it's insanity. there are some policy analysts, mort, that have drawn up some proposals or you could have a program of revenue sharing. >> hey, that was an old republican idea, remember? but tie it to performance on dealing with pension liabilities and such other things. so in order to keep the money, you have to then act in a sort of fiscally responsible way when the economy returns and/or in a position. but avoid kryptonian cuts during times of economic downturn.

but instead the entire project is. >> in your common soldier for nowhere medicaid dollars for states propping up those deficits? >> i think absolutely. it's also interesting that in that romney's prescription for fiscal sanity it was to put an absolute cap on medicaid dollars. just get that money to the states and tell them you're on your own. i'm not sure that would be met by many of these republican governors with great enthusiasm that moment. yes, sir. >> there was a mention this morning of battle between a buck in and hence on the republican side. how about elections for house leadership on the democratic side? >> well, we're all waiting to see what nancy pelosi will do. i don't think it's at all clear

cut. and many of the people close to her, some believe she might step down. others that she won't shrink from the fight. and i'm not even sure she knows herself. if she does decide to step down from the leadership post, then i think it's basically a slam dunk for steny hoyer. cannot see anybody challenging him. and you know, will clearly have some battles a little bit further down the line including for the chairmanship of the democratic national campaign committee. i suspect that chris van holland, despite a big loss as part of this time would remain the rising star in a top leadership figure in the party. >> since forgetting into persons, i just have to do this. since forgetting it to personalities, the impact of sir palin over the next two years?

>> look, i think that the little cover story that you see, you see occasional references to this route, but the person -- the people who got slapped the hardest i think in the selection, besides nancy pelosi and barack obama are jim demint and sarah palin. jim demint and sarah palin are responsible for the fact that the senate did not go republican. they are the ones who are responsible for christine o'donnell. they're the ones responsible for joe miller in alaska. they responsible for 10 buck in colorado. they responsible for assuring angle in nevada. in those -- those characters for a recheck it. in every single case, when the republicans won a senate seat, except in the randy paul case, the margin was considerably smaller for a tea party kind of

candidate and it was for regular. rob portman, dan coats, well, forget about mark curt. he's a separate case in illinois. he's a moderate to barely one, but that is a democratic state. but the regulars across the board finished far better off. you can even put marco rubio in that category both ways because marco rubio sort of moderated his case, but he got less than 50% of the vote as well. so, you know, i think that jim demint should not have been a happy camper yesterday. and furthermore, his colleagues mostly eight. and so i think he will have more troops than he had before, but his conservative caucus in the senate is not all that cash is not all that big. so the same applies to sir palin i think. you know, i think she's a

phenomenon. i think she's a rock star. i think she attracts cameras wherever she goes. she's a joke. you know, even within her own party, the idea that she would be the presidential nominee ahmad, you know, vast majorities of ordinary publicans is just unthinkable. she's got a following. no question about it. but i don't think that she's triumphed in the campaign. >> the majority of americans agree with you, mort. but i suspect the republicans do not. and i think you're right in your analysis of the act on the senate races of the tea party, but not in the house. the house really -- and the house, the energy impact to did he really did help the party. and a large number are coming in with an affiliation of one sort or another. and i think michele bought been

is starting her tea party caucus. think sarah palin, michele bought them, rand paul and jim demint is the new faces of the republican party. it is a nightmare for the party, but i think the quote adults responsible, figures and the party will have a hard time treating them with anything other than absolute respect. >> i say this not in terms of literal legislative power, but the ability in collaboration with us in the press of a sarah palin to frame issues in a way that leaves a really important legacy, the death penalty is a really germanic example of her framing an issue in such a way, in such an extreme way. nevertheless, it set up a whole chain of events in which moore quote reasonable people came in. you can't say the word -- you

can't use the word death panel. but it's like a death panel. and essentially she created an outer edge for the debate and made other things that would've been considered more extreme, seem reasonable and they became almost a kind of dominant theme in the debate. and i think it's really an extraordinary phenomenon here and i'm going to be really interested to see how that plays out his issues. >> let me just -- slightly contrary point of view. of course, you lame stream media type sweats -- [laughter] you know, what palin and demand were able to do was to channel this boat anger and disaffection in washington with a focus on democrats. there is a real chance that she will be able to channel disaffection and anger against the republican establishment it as osama search and they are not able to do much on the wish list

of those who got out there and nominated some of these candidates are lost. now, she can make the case that if there had not been this energy and anger channeled down by her and the others, that they would've fallen short in the house. there is at least a case to be made i think the case that mort made is probably a better one. i would not above rule out the possibility that unless the republicans dramatically changed their nominating process, that there will be a backlash against the establishment of that party, that could be strong enough to nominate somebody who is in fact outside that larger mainstream. the fact is when somebody is nominated, we have an economic problem that mort -underscore dwell with the inability to create jobs. it's what happens when you get a downturn caused by financial crisis. it's a jobless recovery. it could go on for some time.

you win a nomination and it's a choice between two people. and maybe that does from a third candidate in. if you have a sarah palin as the republican nominee, a barack obama. and then you've got a bloomberg coming in, that might increase the chances of a palin been able to win in a three-way race. >> not freddy krueger. >> well, it's something to keep in the back line. the person who i desperately hope will run for the republican nomination, mitch daniels of indiana says, you know, it is not written in the stars of the united states of america after 250 years these to remain a great power. and you've just described a scenario where we cease to be a great power. last night's >> i think that our time is that. last night i wanted to close on

that night. and thank you all of you. and thanks very much to our panel. [applause] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] ..

>> the supreme court heard oral argument tuesday in a case involving a california law banning the sale of violent

video games to minors. the law passed in 2005, but never enacted, prohibits the sale or rental to any violent video games to anyone under 18. a lower court ruled that the law is too vague and violates free speech rights. in this hour of oral argument, question lawyers representing california and the video game industry. >> with your argument first this morning in case 81488. >> may it please the court. the california law issued today before this court differs from the new york law issued in jennsberg in one respect. when new york was concerned with minors with sexual material outside the guidance of a