>> production assistance for "inside washington" was provided by allbritton communications and "politico," reporting on the legislative, executive, and political arena. >> well, we got it done, it brought our economy from the brink of disaster. >> this week on "inside washington," congress brings the economy back from the brink at the stock market tanks. >> investors believe there is a high probability the economy will go into another recession. >> how about that debt deal? >> this is a satan sandwich. >> we could take that to the american people and say that is

the right way? >> of the economy is in the obama presidency? >> how are we going to put people back to work? >> what is the future of the tea party? >> did tea party take that town hostage? >> we forced the town to have an adult conversation about spending. they was not -- would not have done it without the tea party. captioned by the national captioning institute --www.ncicap.org-- >> well, how about that? at the last minute, congress limb over the finish line and the nation avoided the first default in its history. but on thursday, the stock market took the biggest nose dive in over two years. investors feel that the economy is stalling and our global concerns as well. according to the latest cbs news-"new york times" poll, 82%

of americans think congress is doing a lousy job. >> you have got to give me a reason to buy something. >> investors are worried that we are headed for recession and they want to get out while it is good. >> there is not much more washington can do right now and even if there was, there's not much trust. >> evan, how much of the lack of confidence in the economy is attributable to months of dithering over the debt ceiling? >> the public is missing the boat here. there actually is good news. the good news is that after years of denial that there was a problem, this summer, washington, in its own confusing and inscrutable way it started to deal with it. for the first time, washington is talking about entitlement reforms, tax reforms, all issues the they are going to have to deal with. they i doing it in a completely chaotic and -- to the public apparently -- revolting way, but

they are starting to deal with these problems. >> evan finds good news, mark. how about you? >> evan is ever the optimist. a friend said that to compare this to making sausage is a libel on the sausage industry, and i think it is absolutely true. the formula -- evan is right, they wrestled with it, but the formula they came up with is the wrong prescription. what you need is demand in the short term and reform on spending in the long term. we did not get either. we are going to have less demand, less economic activity and encouragement in the next 12 months. we are going to see the gross domestic product shrank in 2012. >> margaret, at any good news? >> am i in the middle of a satan sandwich here? we were all focused on the debt deal. suddenly, we look at the rest of

the economy and thought, wait ao anything to help the recovery, and in fact, we get that a double-dip recession brought everybody woke up like kids at a volleyball game following one ball and then they realized anything else is going on and, kaboom. there is not going to be any demand at the bottom because there are no jobs. >> charles, are we headed for a double-dip recession, or are there brighter tomorrows? >> is, i have to respond. so much error, so little time. this had nothing to do with the wrangling over the debt ceiling, the stall the market. it had to do with mostly italy and spain, but mostly italy. the eighth largest economy in the world apparently going over a cliff. he is too big to it -- it is too big to bail. the interest rates on italian

bonds went over 6%, and the prime minister of italy goes on television in the middle of this on wednesday and declares his economy sound. he is not going to do anything. that is what put the world markets into a swoon. europe is in big trouble. >> the unemployment rate dipped slightly to 9.1%, and the private sector added 154,000 jobs, at 37,000 government jobs because of the minnesota state shut down.owar 117,000 -- >> there is no signs of any growth, and we are cutting spending at a time when we should be adding spending to stimulate the economy and jobs. >> but there is a larger -- >> the way it worked in 2009 and 2010.

>> italy's problems are related to our problems in this way. western democracies and dug themselves into a giant hole by paying for welfare -- by creating welfare states they could not pay corporate europe has a bigger problem than we do, and charles is right, it will be the immediate trigger because italy is going down the tubes. but it is all related. i must europe -- unless you're up digs itself out of all, economic hope is 0. >> i was at a chicago couple of months ago, talking to people in a nice home that lost 40% of its value. how do you come back from that? >> what it does in reality is it forces people to be prisoners of where they are. if you live in flint, michigan, and you have a chance of getting a job someplace else, the sun belt or another state, you cannot sell your home.

you become a prisoner of the place. that in itself stops economic activity and growth. the one point i would say about europe is that germany is the one great success story. if you think that -- if you think what they faced 20 years ago with the reunification of germany, and the fact that they are basically keeping europe going at this point, there is something to be learned there. >> italy should have the germans' culture. i don't think that is going to happen. >> germany's policies have been impressive -- >> germany did try spreading it in mid-century. it is not exactly succeed. but i think evan is exactly right, this is a crisis of the entitlement state. they have been living high on the hog without resources for decades. we are just entering that stage.

the irony is that we have a president and a party in this country who are trying to make america in name of equality and fairness more like you're up exactly at a time hysterically when the european experiment is imploding in front of our eyes. >> northern italy is a little bit like to germany. it is southern italy where many of the problems are. >> unfortunately, italian bonds don't make a distinction between northern and southern. >> yes. >> i will just make a defense of a humane and just society as a measure or progress. it is not whether we add more to the abundance of those who have much, but to those who have little, and they have been left out of this debate. >> this deficit reduction package is grotesquely unfair and is also a bad economic policy. >> did we get 100% of the discretionary cuts we were looking for? no, we got 2/3.

>> that is the senator bernie sanders and congressman paul ryan, a democrat and republican respectively. congressman cleaver from his recalls the steel -- from is the route calls this deal a satan sandwich. --i don't know what a sit-in what a satan sandwich is. and in what we're seeing is the center of gravity move on the public debate. historically, has been the liberal position to spend x more on education and health and the conservative position to spend x-50%. now it is how much we are going to cut. that is a real defining difference in what had gone before. the other point that you cannot ignore is that once extortion has been used, and it has been used by the tea party -- we are

going to bring it defaults, going to bring the government to shut down -- don't think it is going -- it isn't going to be used by democrats won a republican is in the white house. >> in that case, obama is an extorter because he would say becaus -- because he said he would veto if there was not revenues. it is ridiculous trade with the majority of democrats in the house in voting yes? now, is 50/50. did the majority of members of congress and the tea party vote yes? yes, 57%. who are the hostage takers here? >> washington is doing it in as possible.ashion as but it is at steering the good news. there is a real debate going on about how we deal with these

issues. i know they did not deal with entitlements the first round, but the day at this commission, not at the commission is going to have to look at entitlements -- that this commission coming out and the commission is going to have a look at entitlements. both parties are heading towards tax reform. if that comes out of this, that is good news. our tax system is full of junk that slows the economy, is incredibly inefficient. the only thing propping it up are the interest groups and lobbyists. both parties seem to be heading in the direction, because there is no all their alternative, of going after deductions and loopholes. you could lower tax rates in half if you got rid of all that junk. >> why do we have a debt limit? it does not limit the debt. why do we have such a thing? >> we raise it each time --

>> without the gimmick, nothing else works. >> i was chastised last week by dr. krauthammer, so i don't want to -- >> i backed you on fox. >> what a privilege, and i thank you, charles. one of the disturbing think this week is senator mcconnell, who played a useful role, said that the way work is a template for congresses to come. >> what happens when congress returns from its well earned vacation, mark? >> evan's optimism about tax reform -- it is that interest groups, it is and lobbyists. it is money -- it is not interest groups, it is not lobbyists. it is money.

money that they put into the political system. we now have an unlimited money in the political system. if you think you are going to get tax reform without in some way it clearing up the money -- >> there was no money in politics in 1986? >> there was a lot less money in politics, and ronald reagan ran at three times president and every time he did, he ran by the limits of individual expenditures and individual contributions. >> obama ran -- >> he ran socialize campaigns, charles, and it worked. >> obama is the one -- >> changed -- >> pledged to live within the limits, and blew them up because he would get more money -- >> i agree. >> stop being naive. tax reform is doable. evan is right. you can slash rates and increase

productivity, and it is a blow for fairness. >> look, i think because the money makes it extremely hard, really hard, they are boxing themselves in. they have no place if you are going to get to these numbers and get some revenue, the only way to do it is through tax reform. >> charles, president grover norquist has said that nobody can be on the joint super committee of caped men deciding on this that approves of any revenue increase -- >> then how is it that the speaker of the house publicly offered to raise revenues by $800 billion if norquist is president? >> because i am, he dropped it. >> is that a rhetorical question or real question? john boehner -- the public is now acknowledge, and you will

finally -- republicans acknowledge any will finally concede, the concessions on medicare spending and john boehner agreed on the revenue. margaret is right. the condition of the super committee is that you have to oppose any tax increase/revenue increase, and that is going to lead to -- >> you have just had the most obvious public counter-argument to exactly what you are saying in the fact that the speaker of the house in public accepted a raise of almost $1 trillion. how can you argue that no republicans will raise revenues? it is ridiculous. >> who looks good, who looks back, who looks lost and you will that? >> -- lost an bewildered? >> to quote tom gallagher, even the winner of the mud wrestling contest comes out covered in

mud. nobody is enhanced, nobody has grown in the eyes of the public. the public is basically turned against washington and against everybody in this city, probably including us except margaret. >> i believe i heard john boehner isaid he got 90% of what he wanted. >> i think there is no question that john boehner did not win a victory. he looked a little bit weak in the knees -- john boehner did win a victory. he looked a little bit weak and it needs when he had to pull -- back week in the knees when he had to pull back before his caucus. >> how is harry reid look at this? >> let me disagree with my colleague for a minute. i think john boehner was diminished by this. he looks like he was being led by his caucus. he and a grand bargain, $800 billion -- he had at the grand bargain, $800 billion, but he could not sell that to his

caucus. he would have looked like a statesman if yet been able to. >> congress is always going to look back at a situation like this. the issue is, going forward to the election, whether the two parties will revert to demagoguery. will the republicans just say democrats want to raise taxes, and the democrats say that republicans want to throw granny under the bus? or will something more positive -- for instance, will one party impose tax reform -- i hope it is obama, he has an opening -- but will they put forward a positive vision or just negatively demagogue? >> i think boehner strengthened himself. he got everybody on board. he got almost briefing he wanted and he did well. -- got everything he wanted and he did well. i think the big loser was obama. in terms of the process, he was

out to lunch. seagate four p he gave four -- he gave four appearances on washington and people were scratching their heads. the big winner, the biggest cliche in american history, the american people. you write that down. as you admitem -- it, mark, and it allows it to increase water present -- the goal is to increase 100% or 50%? it has been and always a ratcheting up of the size of government brought now we are actually having a debate, discussion and we will have real action on cutting. >> the big winner, the american people. >> there you go. >> if there is a winner, it is the tea party. tea party right now is in the position that if they and

threaten even the suggestion of a primary challenge for any republican member, they are terrified and will do anything that the party wants. -- anything in the tea party ones. this is what we saw in the democratic party at generation ago. we don't care about the general election, we will beat you in the primary. >> orrin hatch. >> senator lugar. >> lindsey graham. >> what about the president? he did go to a lot of meetings. >> that is what he does, he goes to meetings and he gives a lot of speeches. unfortunately, none of them are scorable. >> the president believes we can all get along and he gives away -- gives a lot away at the beginning. if i could quote mark, you pay sticker price and go out without a radio. >> what are the prospects for

barack obama's reelection? >> ♪ happy birthday . >> i turned 50 tomorrow. by the time i wake up, i will have an e-mail from aarp asking me to call president obama and tell him to protect medicare. >> that is president obama at his 50th birthday party in chicago. on his actual birthday, the stock market tanked. the jobs numbers are terrible. companies are sitting on cash but they are free to let go of it because they do not know what will happen in the future. jim vandehei and mike allen in "politico" say that absent a the president's ability to defy gravity, the numbers needed to defeat -- lead to defeat. >> you have got to be

pessimistic if you are a democrat every election becomes, referendum on eigha the incoming's record. -- in combat's record. state-by-state or he is in trouble, even states he carried last time. >> the polls tell us that people are furious at congress. who suffers most after this deal? >> you can hardly get worse than 82% disapproval of congress briefed obama's stayed up given out at the economy was. -- given how bad the economy was. historically, president with these numbers would not win re- election. but somebody has to beat him and that does not seem to be a somebody now that everybody agrees on. they are waiting for governor

rick perry to save them from the dismal selection of candidates. i don't think that is going to be the second coming. he has got 7000 people coming to an 80,000 -- >> 8000 -- >> 8000 coming to a 75,000-seat stadium. as mark knows from his days as a political operative, you want a small room for a big crowd. >> the assumption in washington is that obama will win by default. he could basically run -- does not have to say anything. republicans don't have a good candidate, he wins by default. i think that assumption has changed in the last couple of weeks. now, for the first time, obama is going to have to do something affirmative to win. he is not going to be able to run on health care. he had this letter list and it is ok, but i don't think the voters care about it. he will have to stake out a

position. >> barring an unforeseen event that could change everything, what is he do? >> excuse me -- i think of him and i get a frog in my throat. he will run at the most negative campaign in history. he does not have a record. he has 9% unemployment, simpson- has 9% unemployment, debt going through the roof. it is eight years before we get change. what fueled the is he will have a $1 billion, the root of all evil according to mark, money, the satanic element in our politics, and it will all the negativity and in my work. -- and it might work. >> there was a victory for the tea party and a victory, more importantly, for the american people. instead of talking about spending and more taxes, we're talking about less spending and taxes.

>> that is the tea party congressman from idaho. they happened of tourists and hostage -- has been called terrorists and hostage-takers, but they will tell you they did what they came to washington to do. >> they are right. tea party force the issue. they might have done it in a way that was displeasing and not always the smartest, and i am still waiting for their plan to cut social security and medicare. >> the republican budget. >> well -- >> they walked over click on that wachovia -- walked over a cliff and for that, demonized at the first series proposal in 30 years. >> i would not say they were advertising their opposition to the tunnel and programs. >> obama said he would cut medicare.

>> yes, he would cut at the chilean out and devoted to a second entitlement to -- caught half a trillion out and devoted to a second entitlement. that is the distinction. >> according to cbo, regarded as neutral and authoritative, they are going to privatize medicare to the point where the out-of-pocket expenses under the paul ryan plan will be $20,000 -- >> and your plan, mark? >> my plan is that we work on medicare. what bothers me most about this debate -- labrador is right, they change the terms. one side says no tax increases, one at side says don't touch medicare. what about people who don't have a lobby in washington, don't have an interest or a pac? >> the tea party?

>> their popularity has waned, putting the full faith and credit of the united states on the brink of disaster was not a wise move, even though i agree with evan, we needed to get the spending. >> mark says the plan is to work on medicare. up until now, that is how democrats had to answer. now the tea party has made a change in people actually have to have an answer on that, and that is a great achievement. >> last word. thanks. see you next week. for a transcript of this broadcast, log on to insidewashington.tv.

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