>> schieffer: welcome back to "face the nation." well, after congress reached the last-minute deal to raise t debt ceiling and avoid defaulting on the nation's debt, the stock market took off. the s&p 500 finished with a record high thursday. that was beaten again on friday. but the deal only lasts a few months, and we could find ourselves right back on the brink early next year. so to talk about what that all means we're joined by mark zandi, chief economist of moody's analytic. mark, let me just ask you the basic question-- how much was the economy hurt by this

shutdown? >> it was hurt. by my calculation, it cost us about $24 billion in g.d.p., that's the value of all the sthingz we produce. so just to put that into context-- that shaves about a half a percentage point from growth in the fourth quarter, and i expected the economy to pick up pace but now i think it's unlikely. we're stuck in a slow-growth lackluster kind of environment. >> schieffer: i guess that lead to my second guess, does the reopening now, will it bring money back in somehow? could it be recovered during the holidays? >> we'll get a lot of it back. the shutdown was disruptive to lots of different parts of the economy, to trade, to mortgage lending, to and obviously tourist destinations. a lot of that will come back. i think prevading the entire economy is this uncertainty which i think the effects of that are corrosive have been accumulating and obviously given the nature of the deal that we're going to take this into next year will continue.

>> schieffer: and what about just sort of how this is perceived in other countries around the world. does that have an impact on the economy itself and our credibility? >> yeah,kou know, it does. i think global investors forgive us a lot because it's not clear to them where else they put their money. i mean, you look across want world, would you put your money in europe? china? where would you go? so we're the beneficiary of that. but that only takes us so far and i think global investors are start toking to real doubt-- when senators and congressmen openly question whether weather it's okay to default on the debt or other obligations, i think that makes people not only nervous here but across the glebe and that will cost us in terms of a higher interest rates. >> schieffer: do you think anything changing since standard & poors downgraded. >> in the terms of political brinksmanship, no? this from my perspective was debilitating and disconcerting,

particularly because we had people who are lawmakers actually openly debating whether we could-- if not pay on the debt of our treasury, you know, pay social sciewrpt recipients. was this an okay thing? i don't think that kind of conversation is particularly useful and it makes me more nervous. >> schieffer: you know, when this was happening-- and i asked some of the questions that people answered by saying, "they're just trying to scare the markets and so forecast" when i asked people, "do you really want to let the country go into default?" what do you think would have happened? can anybody know because this is stepping into the unknown. >> you know, bob, my job is to opine about a lot of different things and some things i say with less conviction than others. i can say with a high degree of conviction that if we go down that path it's going to be cataclysmic for our economy and not just a month or year or two. this will extend out for decades. we just can't even contemplate going down that path.

in my mind the most important thing to come out of this process is for all of us decide we're not going to do this again. >> schieffer: i think the senator republican leader has convinced himself of that. >> he sound pretty convincing. i think if we get a group of folks like that in the room and they're all coming to even a reasonable-- we-- in my view, a grand bargain would be great. it would be nice if we goot that, but it's not sms ns. all that is necessary is we have to decide we're not going to shut dun gft down and we're not going to default on our obligation, and if we do, that the underlying economy is pret good shape and that will shine through and we member in a pretty good place. >> schieffer: i want to thank you for coming by this morning. we will be back with our panel of astute analysis. it's a growing trend in business: do more with less with less energy. hp is helping ups do just that. soon, the world's most intelligent servers, designed by hp, will give ups over twice the performance,

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gerald seib is the washington bureau chief for the with the journal. michael gerson, columnist for the "washington post," and stuart rothenberg is the braips behind the "rothenberg political report." you're also the body behind the the "rothenberg political report." >> i am ( laughter ) >> schieffer: rana you just heard what mark zandi just said. what's your take on that? >> my opinion is very similar to his. i think that this round of fighting has been particularly debilitating. i think what was really interesting is right after we got a deal, the price of gold actually rose. now gold is a safety asset. that's what people go into when they're worried and that to me was the markets telling us we don't want another kicking of the can down the road. we don't want to be here again in a few weeks. we want some certainty about the future and about what our economy is going to be like, i think business c.e.o.s particularly want that. they've cut off spending. they're not investing right now. they're waiting it see whose exphapped that will continue for another quarter or two. >> schieffer: gerry. >> one of the things you saw in

the crise is consumer confidence took a plunge, and that has significance in the real economy, not just in the washington economy. and i think it's not because people are waiting for washington to settle the budget per se. i think they're acting on a sense of insecurity because they think things are sort of vaguely out of control. and i think that's one of the prices that's going to be paid here. one of the problems you have to think about is that is true heading into the holiday buying season. i don't know if there's a direct correlation between what am i going to buy at wal-mart for my kids and what's going on in washington, but there's some relationship, and where there is insecurity in the land already, washington keeps reinforcing the economic insecurity, and that can't be good. >> schieffer: michael, you're now hearing some in the business community say they may back candidates in republican primaries against some of these tea party people who have been holding out the big club over the so-called establishment republicans. where do you see this going politically? >> well, i think that you've

seen an epic disaster on the republican side. self-inflicted. most republicans realize that. except for the group that was decisive in the crisis itself. this was a significant escalation of tea party strategy. it was not just directed against the leaders-- mcconnell and boehner. it was directed against conservatives who disagreed with their strategy, who were attacked in radio ads. that is a little of bitterness we haven't seen. the reason it's a long-term problem as well, though, is balls boehner really is not in control of of an effective majority of some issues in the house of representatives. gingrich in 'nirks at least he could have a strategy. he could pursue tactics. boehner, because a significant portion of his conference is not on board, is limited in faz ability to pursue strategy. >> schieffer: well -- >> bosh the problem with this is that, that strategy by karl rove

and others in the business community, only gives ammunition to the folks at the grass roots. sure, there's a tea party in washington. there are a few dozen of them. but the problem for the republicans right now are republican grass-roots voters. they're angry. they don't accept the institution, the legitimacy of the leaders. and so, anything that looks like an organized effort by the-- quote, unquote-- establishment to defeat the grass-roots conservatives is going to be a problem. >> schieffer: but, you know, you have an organized thing going against people like mitch mcconnell. these pacs, tea party-supported pacs have run about $400,000 worth of ads already against mitch mcconnell who is the republican leader in the senate. they run about the same number of ads against lindsey graham. you just saw-- >> accept theiment at the grass roots is a little different than sentiment in washington, d.c. and at thes grass roots, the republicans, the conservatives, are angry-- at least the people who vote in primaries are really angry. so it's-- it's hard to motivate

establishment support at the grass roots. there is some of that, particularly in the business community. but the republicans face a problem at the grass roots. >> schieffer: go ahead. >> one thing i think is interesting, too, in the business community, a lot of things that business wants these days are actually sort of left leaning-- infrastructure spending, investment in k-12 education, which poses another sort of interesting challenge for the right. >> schieffer: gerry? >> i was going to stay, i think stu is right in the sense people in the tea party movement is not mad at obamaed care because the exchanges don't work. they think it's a metaphor for everything that scares them about government intrusion in their lives. it is almost a symbol of what they fear most. which is that washington is going to come get me. and that's very basic and it's very tea party and it's got nothing to do with sort of the debate about how well it works here. >> schieffer: let me just add one thing about obamacare, which senator warner, as he was leaving, what he wanted to say and we just wanted-- we ran out of time-- he says and the white

house is saying the same thing-- that despite all the glitches, despite all the bad publicity about this start, when you look at what's happening at the state exchanges and you look across the country, that about a half million people have begun the process to enroll. now, mind you, this thing is not very pretty the way it's unfurled. but they are really wanting everybody ton that. >> i would say, though, when you look at the economics of this, the worst outcome is a partially working system. because if you persevere and you really need health care and you go on and on and get to the site, you're getting people who need health care in the system. the goal of a health system is to get millions of people who don't need health care in a system. that's the way insurance works. that's called adverse selection. that's the real fear here is a year from now is the system is not working properly, how will the economics of that system work? >> schieffer: i want to go back to this situation in the republican party.

is there a war now? is this a war for the soul of the republican party? >> absolute. unquestionably. it's impossible to argue against that. at the grass-roots levels and senate races, a number of incumbent senators have primaries, mcconnell, lindy graham, thad corcoran of mississippi. no doubt. and it's going to be a civil war that continues past 2014, probably all the way through 2016. >> schieffer: so where does this dp? >> if i were a republican this is what i would be worried about. this is the number out of the shutdown that would worry me the most. in our polling, the number of independents who said they wanted republicans to control congress after the 2014 elections dropped 20 percentage point in worn month. that's problem. there's a civil war under way. what do the independents who tip the balance, what do they think? the tea party districts, the tea party representatives, they don't have to worry about that. they are soiled and the calls they got from back home said, "hang in there.

hang tough." there are a lot of other republicans who don't have that luxly back home. theatre ones i think who need to be worried. >> i think there are deep policy issues at stake. there is the politics of all this, but i think economically in particular republicans need new answers, fresh answers. supply side, i think is broken. we have a growing inequality air, long-term slow-growth economy. we need new answers and fresh thinking that people can buy into. >> i strongly agree with that. after this last election, there was self-reflection. the r.n.c. issued a report, how do we appeal to young people and minorities? all of that washed away. the real cost for the venezuela the opportunity cost. they have their problems to solve in their appeal to the american people which they're not solved in this internal debate. >> schieffer: you worked for george w. bush, do you think he would be acceptable to the tea party? >> no. ( laughter ). but the problem here is you have people like senator jeff flake.

people like toam coburn, these are some of the most conservative members of the senate. they're not acceptable to the tea party. >> schieffer: thad corcoran from mississippi. >> this is largely an awmplet about strategies and tactics, but it's a bitter argument about strategies and tactics because the critique is these people are compromised. georgetown cocktail parties. they're part of the problem. that is a bit bitter debate going forward. the tea party itself lives increasingly in an ideological bubble with conservative media, with the support of conservative organizations. they don't view it the same way as the party does. >> bob, i was reflecting on my interviews with candidates over the last two sieblgs. i interview house and senate candidates, about 150, 200 a cycle and interviewed a lot of tea party, libertarian candidates, and they would come in and we'd talk about their strategy and what they want to accomplish and i'd ask them why are you running? we want to do away with obamaed care.

i'd say you understand that. but understand the president is not going to allow that. the senate will not allow that. what do you really hope to accomplish? we want to do away with obamacare. now reflecting it says something about their understand, of the legislative process and their role in washington. and they have such a different view. michael's exactly right. this is not about ideology. it's about strategy tactics and understanding the nation of the institution of which they're members. >> one of the things i think people don't sunday how much of the house is made up of members who have only been here a few years. about half of them have only been here since 20 10, the year of revolt against obamaed care and the president himself. that's increasingly true in the senate. i think lifetime folks in that group didn't come here intending to legislator and don't think that much about how does the legislative process work. they're here to run a kind of campaign against things they don't like. over time, people say, well, that sort of smooths out, people figure out how to do legislatively what they want to do. that's not where we're at right

now. the congress is not not hand of people who have that kind of experience. >> schieffer: let's talk about the country. ( laughter ). >> okay upon. >> schieffer: there's always the country. what's going to happen here? are they going to be able to come to some understanding? i think both parties understand they're in a different place than they were before all this happened. but will that be enough, rana, do you think to get people to seriously sit down and try to find a way out of this? >> i would like to think so. i mean, we're in for, as mark was saying earlier, another probably year of a 2% growth economy. people are really struggling. but i think one thing is that the markets have not sent a really strong signal yet. we haven't had a market crash, for example, around all this. and part of that is because the fed is always stepping in because of political dysfunction in washington and pouring more money into the marnghtz the fed is sort of the last man standing that can do something. there's a strange disconnect where you want to almost get a lot of pain-- not that i'm wishing for a market crash-- but you might need pain in order to

get people really respond and you have these two things going on at once that can offset each other. >> schieffer: will this be enough, do you think, gerry? >> i was interested that ?airt lindy graham seemed optimistic in a deal getting done. he is in the minority saying that. there is one thing driving the both parties together, the sequesters. republicans hate them because defense spending will take the entire next of cut next year, $20 billion straight out of defense. they don't like that. democrats don't like it because it's held down discretionary domestic spending so much. and so in that space, i think there's room to do a deal. >> it's what paul ryan in some ways has been proposing in the system, a reasonable voice, saying let's lessen or ease the sequester in exchange for some marginal changes in entitlements that will save money in the long term. that's a realistic deal. the question is what's the market for rationality right now in the congress? and it's pretty thin. >> i would say the shows still a problem, and for republicans, think about this-- after the

deal we heard some people say maybe this is the beginning of a period of compromise. we had this tough fight. now maybe everyone will work together. if you're a republican you've already david on a pretty big deal. are you ready to cave on immigration reform or a big budget deal? >> immigration is one we hadn't mentioned until stu just did. remember, that was going to be the big deal. republicans said we have to get in front of the immigration debate. that was the beginning of the year message from republicans. well, that's kind of been washed out. i personally find it very hard to imagine in this poise atmosphere the two parties doing an immigration deal. >> and that's something again business would like to see. >> schieffer: this is kind of interesting to hr of hear both you of, rana and gerry, and you're very close to the business community and their point of view. is business cooling on the republican party here? >> i think so. i think-- you know, the republican party used to be the party of optimism. you know, it used to be the bullish party.

it's really not anymore. and i think that getting mamo-jo back is going to be very, very important to regain confidence of business and coming up with a real agenda that works for all business in america pup know, you need infrastructure spending. you need a rethinking of education. and that's real hard policy work. and that's hard politics. >> i don't think they're breaking from the republican party. i think they're breaking from what they see as a tea party domination or potential tea party domination of the republican party. they're not running toward president obama and the democrats by any means. but you saw the chamber of commerce say in the end, republicans should vote for the deal that ended the shutdown. meanwhile, the conservative tea party groups were saying the opposite. theil straights the split. it's which kind of republican party. >> schieffer: could there abe third party come out of this, stu? is there some sense maybe the tea party people will just say there's noct here for us in the republican party? >> well, i never say never anymore. ( laughter ) i've seen it all, and there's something else will come around the corner. having said that--

institutionally, it's very difficult to get a third party, just the name of our winner-take-all districts and the fund-raising and personal loiment of loyalty. i think it's possible we might have a kind of brief fracture in the republican party. i can see a cycle where we have a number of independents who are-- or conservative independents running. something more dramatic would have to happen in terms of legislation and how we run elections before-- >> schieffer: do the think the republicans might lose the house next time? could they? >> let's do numbers again. we have 24 republican districts at significant risk-- 24 districts at risk. 12 significant, 12 marginal. some of those marginal races could move into real risk, and some races that are off the board could move. what i've said six months ago was not plausible to say the house is at risk. now it might be. give me two or three months and i'll tell you whether i think it is at risk. >> i think getting 17 seats is

an uphill battle for democrats in the way our districts are die jerry mannederd and our current system. i don't see the signs right now of a wave election. you know, what you might see. but, you know, it's early. we'll see how this works out. and of course it will unfold early next year again. if republicans repeat silly tactics like this, they're on a downward path. if they take a different path, i think they'll have a different outcome. >> schieffer: and thi this is being said by someone who worked for george bush, not part of the barack obama team that's here. thank you all very much for being with us this morning. very interesting. i learned a lot. and we'll be right back with our "face the nation" flashed back.

>> schieffer: as washington recovers from a crisis of its own making, it is worth remembering the 51st anniversary of the very real cuban missile crise. our "face the nation" flashback. >> a cbs news special report--

anatomy of a crisis. >> schieffer: it was october 1962, the height of the cold war, and a u.s. spy plane discovered russian nuclear missiles on the iestled cuba. >> the purpose of these bases can be noon other than to provide a nuclear strike capability against the western hemisphere. >> schieffer: in a televised address, president kennedy announced a naval blockade on all shipments to the island and demanded the soviet union withdraw the missiles. >> this she's offensive military preparations continue, thus increasing the threat to the hemisphere, further action will be justified. >> schieffer: americans prepared for nuclear war, and the american military went to the highest alert. >> 90 miles away on public beaches in key west, a startling reminder that we meant what we said-- rockets, where days before there had been nothing but sun and sand. this is just part of the florida

build-up that must have appeared so menacing to chiewsh chef and fidel castro. >> schieffer: the u.s. stood its ground working through back channels to facilitate an end to the standoff. on october 27, soa soviet premie sent word to the white house russia would remove the missiles if the united states agreed not to invade cuba. the crisis was averted. it was unimaginable that just a year later, president kennedy would be gunned down during the campaign trip to dallas. back in a minute. i know what you're thinking... transit fares! as in the 37 billion transit fares we help collect each year. no? oh, right. you're thinking of the 1.6 million daily customer care interactions xerox handles. or the 900 million health insurance claims we process.

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for us. we want to thank you for being with us this morning. we hope you will stay with cbs. we hope you will catch "cbs this morning" tomorrow morning with charlie exproaz norah o'donnell and gail king. they'll have the very latest. that's it for us. see you later. captioning sponsored by cbs captioned by media access group at wgbh access.wgbh.org

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