gwen: two big items checked off the president's to do list. signing financial reform into law, and extending unemployment benefits. but it was a sloppy firing of an unknown government employee that forced the white house off message this week. i'm gloria borger sitting in for gwen ifill. tonight. on "washington week." >> we finally overcame the procedural blockade of a partisan minority in the senate to restore unemployment insurance to about 2.5 million americans who are out of work and looking for a job. >> he went out of his way to misrepresent the position of senate republicans. of course we ought to extend unemployment. but we ought to pay for it. >> the economic outlook remains unusually uncertain. gloria: so who should we believe and what's the best way to help those hit by the recession? the video clip that caused an uproar.

followed by the firing and then the backpedaling. >> a disservice was done for which we apologize. >> i started off by extending to her my personal and profound apologies. >> the president expressed to ms. sherrod his apologies for the events of the last several days. gloria: inside the firestorm that put the media, the white house and the issue of race front and center. or was it just a bungled personnel matter? and in the post 9-11 era, has america's intelligence community gotten too big and unmanageable? covering these stories this week, john harwood of cnbc and "the new york times." naftali bendavid of "the wall street journal." michael duffy of "time" magazine. and dana priest of "the washington post."

live from our nation's capital, this is "washington week with gwen ifill." produced in shorks with national -- in association with national journal. funding for "washington week" is provided by -- boeing. exxonmobil. the ethics in excellence in journalism foundation. the annenberg foundation. the corporation for public broadcasting and by contributions to your pbs station from viewers like you. thank you. once again, live from washington, sitting in for gwen ifill this week, gloria borger of cnn. gloria: good evening. if you follow the economic news here in washington this week, then you would know that president obama signed one of his most far-reaching accomplishments. the financial reform bill. and it's designed to prevent another economic meltdown. meanwhile, democrats in

congress and a largely partisan vote finally passed an extension of unemployment benefits for nearly 2.5 million people. and the chairman of the federal reserve, ben bernanke, was quite cautious when describing the state of the economy calling it "unusually uncertain." needless to say, republicans and democrats were not silent about their philosophical differences on how to handle this uncertain economy. >> after years of championing policies that turned a record surplus into a massive deficit, the same people who didn't have any problems spending hundreds of billions of dollars on tax breaks for the wealthiest americans are now saying we shouldn't offer relief to middle class americans. >> for 18 months, we've had a government that believes that change is only possible by passing 2,000 page, trillion dollar monstrosities one after another. americans are still asking the question, where are the jobs? and all president obama has to offer them is more stimulus

spending, more debt, higher taxes, and more job-killing regulations. gloria: knows are pretty tough words. so big win for the president this week. the democrats had to fight tooth and nail. had to go it alone. why is extending employment benefits so controversial? >> the reason is that cutting the deficit and reducing big government has become a central pillar, mashe the central pillar in the -- maybe the central pillar in the republican message. they said it was fine to extend unemployment benefits but needed to be paid for. you have this perfect political fault line almost where the democrats are talking about compassion and helping those who are struggling in a difficult economy. the republicans were talking about big government and deficit. neither side thought it was in their interest to back down. and that's why it took so long. gloria: john, this week, the president also had another big signing ceremony. and that was signing financial reform. yeltsin when you look at the polls, -- yet when you look at the polls, the american public is not giving the president any credit for passing this legislation that most of the public actually sporgs.

>> exactly. and the big part is part of the political problem. the president is pursuing things that he campaigned on. in 2008. financial regulation. he's been talking about that for some time. just like health care. and then economic stimulus which came late in the financial crisis. but what's happened is because it has been so difficult to get the economy back on its feet, to restore employment, to fill that hole of eight million jobs, it has become difficult for the obama administration to get credit for anything and republicans have done an excellent job of associating the president and the bad economy with these big wins that he's had legislatively. gloria: big government, right? big government. >> financial regulation, more big government. health care, more big government. they're even making the same argument on a small business lending bill that the administration is trying to push. they're making some progress on that. but it's not law yet and this is where the fault line is on that issue. >> john, how big of a problem are deficits for the democrats? >> well, deficits are some problem. because the public now, because

the deficit has ballooned since obama has been in office, and of course it ballooned before that, when president bush was in the latter part of his term, you have big deficits, at the same time, you have high unemployment, and today, in fact, the economic team for the administration came out with a mid session economic review. they said unemployment is going to be 9.7% this year, 9% in 2011 and still 8% in 2012. that's higher -- gloria: not where they want it to be. >> when he's running for re-election the rate is likely to be higher when he took office. when you have conditions like that, people are upset and they associate what's happened under your watch with the economic problems. >> you would think because of that, baugs there's so much joblessness, that unemployment benefits would be this huge beneficial issue for the democrats. but it's not clear that it is. and the republicans are making all kinds of arguments, for example, that giving these benefits to these people is actually a disincentive for them to go out and find jobs. and so that's an argument that infuriates democrats. they say it's an insult to

working americans and so forth. but that's the kind of debate that we're seeing right now. gloria: the democrats say it stimulates the economy, right? >> they do. gloria: that the unemployment benefits are spent immediately. >> they say it is one of the most stimulative things you can do because people who don't have much money get an infusion and spend it on things they need right away. >> to be fair to the republican argument, don't some democratic economists, larry somers in his past life, have said that there is some disincentive effect. they just think it's outweighed by the stimulative effect of this money. and the fact that the job market is so weak that that's more important than deterring some people -- >> it's this ongoing debate. to me it reminiscent of debates we've heard since the 1980's about welfare and does that encourage people to sit on thrire hands rather than do anything. it shows you how volatile these issues are. the debate on the senate floor was really pretty emotional about this. you had tomko burn who is an obstetrician saying how beautiful it is to deliver babies and doesn't want them saddled with debt. you had barbara boxer getting up and saying we should be worrying about kids and whose

parents don't have jobs and have to explain to their children about how they're suffering and that sort of thing. this is really reached a fever pitch as we head into election season. >> both of the sides have increased their i -- their volume as the comments about the economy and diagnosis of what's wrong have become less clear and bernanke as gloria noted was on the hill. last time he was up there he was a little more upbeat and what's changed? >> well, look, after a springtime of good economic news, where people thought perhaps we were going to get into a rhythm of monthly creation of 200,000, 300,000 jobs and bring that unemployment rate down a little more rapidly, we've seen that slow down. we had barely any praoist sector job creation in the last report that we gotten. so there's a sense that the recovery has lost some steam even though we're not likely to dip into a second recession. so then the question is, how aggressive does the fed get now? there are some tools, even though interest rates are very

low, there are some tools still at their disposal, things like buying -- adding to their balance sheet, buying some more long-term assets that would -- might get the economy going. but knows are controversial. -- but those are controversial. ben bernanke said small business lending has become important and that's a big theme for the administration but haven't been able to get it through yet. >> and can't do much on interest rates. >> they're hand custody on interest rates. they're quite low right now. some people want the fed to stop paying interest to banks to hold reserve money as a way of stimulating some lending and economic activity. >> how long do the unemployment benefits last? when will they expire? >> that's a good question. they were extended until the end of november. that creates an interesting scenario because congress is likely -- gloria: end of november. >> end of november. after the election. and congress is likely to be in a lame duck session at that point. so in other words, the republicans probably will have gained ground in congress. but those republicans won't have taken office yet. and that's going to create a very interesting political dynamic when the renewal comes

up again. gloria: there's another political dynamic. you talk about big government and government spending. $787 billion stimulus program. the administration is out there. and some experts are also saying that yes, in fact, as a result of the stimulus program, you've saved or created 2.5 million jobs. but how can you sell that politically because it's very hard to tell people you know what? we've saved this job that would have otherwise been fired. but people don't really get that. >> i think you can. they're in a very difficult -- the democrats are in a very difficult situation for that reason. to go out there and have your slogan be it would have been a whole lot worse if not for what we had done, that's not a winning political slogan. >> even if it's true, an outside analyst says it is true, they would have been worse without the stimulus, hard to sell. gloria: the or big issue coming up is tax cuts. and we all know that tax cuts are wonderful things for politicians. but the bush tax cuts are set to expire on the wealthy. and there's a little bit of

confusion about what's going to happen on the hill on that. >> i think this is one of the most fascinating crosscurrents that we're seeing begin to play out right now. the more you have this weakness that we're seeing in the summertime, that leads people to think, wow, maybe we better do more to stimulate the economy, the stronger the republican argument gets you don't raise taxes on anybody in the middle of a recession. the administration says -- the president, tim geithner, and larry summers, say this is very inefficient way to stimulate the economy. because the people who would get these top end tax cuts wouldn't really spend the money and it wouldn't have the same effect. and we need the money to reduce the deficit in the long term. but you're seeing more pressure, mark zandi, the independent economist who democrats cite in support of their spending programs and doesn't make sense to raise them on anybody until the economy is in stronger shape. gloria: so what happens politically? >> the interesting thing is the democrats are split. the republicans are pretty unified. they want to renew the bush era tax cuts. the democrats are a little bit split.

because some of them feel as john was saying, you don't let tax cuts expire on anybody in the middle of a recession. but most of them, and certainly nancy pelosi and some people in the administration, are saying emphatically that while we should continue the middle class tax cuts we need to let the ones on the wealthy expire. a little bit of an internal democratic fight and the fight between democrats. >> there's a report this morning that said at the moment there aren't 60 votes for either, just the middle class tax cuts continue or for the ones on the wealthy. is it possible we could get to the end of the year where they all expire for lack of 60 votes? >> that's possible. but my guess is what they'll do is they'll extend them -- extend the whole thing for a couple months. so it goes beyond the election and goes beyond the beginning of the year. there's a more republican congress in town. and they deal with it then and a slightly -- slightly less volatile time i guess you would say. >> unemployment, they'll kick the can down the road. >> that's what's going to happen. >> the scenario that you raise is the nightmare scenario for all incumbents. that they be responsible for taxes going up on everybody.

that's why i think it's not going to happen. gloria: that's not exactly what they had in mind. all right. now we're going to switch some topics because we've been talking about how the president's not getting any credit for his legislative successes. we did not talk about what exactly happened this week. and there's another reason that this president's accomplishments were overshadowed, and that was a controversy over the almost instantaneous firing of an agriculture department official due to outrage over something she said. now, as it turns out, mike schneider -- mike duffy, there is much more to the story than that. so who is shirley sherrod and why is she so suddenly famous? >> she's a lifelong rural development expert from southwest georgia. who gave a very remarkable speech to an naacp group in march in which she argued that it's poverty, not skin color, that divides americans. which was also then twisted by a conservative website. into making her seem like a racist. and when word of that doctored video reached the white house earlier this week, someone

there, we're not sure her, who, seemed to move with unusual dispatch to make sure that people at the usda fired her that day. later that night as she drove home from work she pulled over to the side of the road and resigned by email. the next morning, it's only tuesday, when the full context of that speech to the naacp became known it was clear that she was anything but a racist. and the apologies began. and until yesterday, they were still continuing. it was a ghastly 48 to 72 hours in which no one looked good and proved that an environment that's already pretty toxic politically and an attitude to shoot first and ask questions later can take the career of someone who has spent her life helping people who need it upside down. gloria: so the question is, what did everybody learn here? we heard robert gibbs say this week, you know, we learned we live in a 24-7 news cycle. and we have to kind of sit back and think more and we reacted too quickly.

>> i think the issue of the white house, to order your steps more carefully. do your homework. this is a white house like all presidents who learned during the campaign that speed skills and to honor every threat. and especially ones in a come from the right wing blogosphere which in the past has tripped up this white house a couple of times. they learn to be fast during the campaign and their first year in office they slowed down a bit. there were a couple of things that came along that they did not summoned to quickly enough. they were on the hair trigger for this one and this is a case where ned an opportunity to think it over and didn't. and now i think they regret it. >> wasn't it also an indictment of the media? it wasn't doctored. it was heavily edited, right? so everybody just replayed it and didn't bother to look at the entire thing. >> a 43 minute speech which is remarkable in a lot of ways because it's so heartfelt and her story is so amazing. and you could blame it on the media and there is a lot of blame to go around here. but i think it's mostly on -- people were not careful enough. they moved too quickly. gloria: the story was that she

didn't help this white farmer who in fact went on television and said she did help me. >> the truth was precisely the opposite. gloria: exactly. >> and the story is quite amazing. her job was to basically help people who need assistance from the government. the usda. getting it. she spent her life doing this. she helped this one white couple who somehow had been -- in the video of being the victims of reverse racism and they at 82 are alive and had a great story to tell about her. the speed with which it turned around equaled the speed it had gotten screwed up in the first place. >> part question, part vent. this episode seems to embody everything that is stupid and sick about our political and media culture. >> exactly. >> all hormones, no brains, no particular integrity in the telling of the story and reaction to the story. all of us live in this world and are part of the world. do you have any optimism that

anything good is going to come from this? that there will be any level of reflection that might alleviate the mistakes the next time it happens? >> i think the only thing that comes out of this that is good is actually shirley sherrod's story. she grew up in this tiny county in southwest georgia where her father was killed at the age of 17. murdered by a white man who was never even charged. they burned crosses on her front lawn. the night he dies, she dedicas her life to staying in georgia and working on the problem of race. she does that. and the next 40 years. her mother is the first black official elected in baker county. she's the first statewide official in the usda who's black. in an office that she says still only has one fifth -- this is still a fairly segregated little agency. and yet you watch this video. and hear the story about how she had this raise self-consciousness as a result of dealing with this white couple after this anger she

had. that's one you show your kids. that's a video for the ages. >> has there been any sort of sense of regret or anything along those lines from conservative organizations that are responsible for this? this grew out of the spat between the naacp and the tea party about who is racist and not racist. >> it's an important point. the video was posted on a website, by andrew breibart who accused the tea party of being racist and informs the tempest in the teapot and this was the answer. not a lot of remorse. but some of the -- the fox network had actually amped up some of the stuff on monday night and did walk back and said -- they deserve credit for that. and the other thing, at the united states department of agriculture which has a long history of short shriveting and shortchanging minorities, blacks, women, in agriculture, tom sill vack, the man who -- tom vilsack, the monday who apologized profusely, -- the man who apologized profusely,

cast light on how far that department has come in the last few years. gloria: and although this isn't a question, it's a question in a could take a -- a question that could take a whole show. this is a white house, the first after can american president that goes out of its way to not be defined by race, yet things like this always occur. seem to occur. and so what are the risks here really for this first african-american president? >> when you take up race on your own terms, at your on time, say the 150th anniversary of the emancipation proclamation you can have an inclufsive conversation about it. when you find yourself talking about it because someone else raised it it's very hard to get past the division. gloria: and very difficult for this white house. and now for something completely different, we're going to turn to the topic of national intelligence. in the wake of the attacks of 9-11, the intelligence community has grown by leaps and bounds. but the question is, has that all been for the better? and an investigative series by dana priest and her colleague at the "washington post," william marken, there you see

it, even defense secretary robert gates says "there has been so much growth since 9-11 that getting your arms around that, not just for the c.i.a., for the secretary of defense, is a challenge." dana, you spent two years looking into this. is this growth better or just bigger? >> well, people inside don't actually know. and that's the most frustrating thing i heard. is that it's gotten so big that they can't tell whether it's making us safer anymore. but just some of the parameters, we've started out looking at the secret level. and it was so big, there are so many things to count, we can't do this even in two years. so we're going to go to the top secret level and fewer people that work on top secret programs. that's what we did and we still found 1,300 government organizations that were -- that work, half of them -- a quarter of them were re-created or new after 9-11 and nearly 2,000 companies that help those

agencies work at the top secret level and of course contracting and how big that has gotten was a big part of the story. all of the intelligence agencies are really dependent now on contractors. it's not just to fill a surge after 9-11. it's really dependent to do their core mission. and lee on panetta -- leon panetta, the c.i.a. director, said as much. we have people doing our operations and doesn't feel comfortable that he has enough control over them and wants to rein that in. but as defense secretary gates said, i can't even get a head count in my own office about how many contractors there are. and that's the other thing we found in the series. that they don't know how much this costs, how many employees, how many different agencies are working on the same thing. which is another problem that we found. is 41 agencies working on following the flow of money to and from terrorist networks. so really they don't have a lot of the basic information that you would want them to have to make smart decisions.

so some of the progress, information sharing, has definitely gotten better. relations between the top level of these agencies has definitely gotten better. but i had the sense at the end that the largeness of it has overwhelmed some of those -- some of those good points, some of the progress that's been made. >> one of the things that's so interesting about this is we've been talking earlier about big government and president obama. but this is big government that grew up not by anybody's ideological inclination but by the shock and fear and survival instinct as a country that was generated by 9-11. what did you find in the reaction to the series from conservatives who are pro security, from liberals who may be skeptical about spending so much on defense, and the intrusiveness of this apparatus? >> it didn't fall at all like that. i found on all sides people were worried about big government. and not because they thought in the hawkish or dovish sort of way but really they seem to

ressnaflte in this large -- to resonate in in larger theme that government doesn't function like it should anymore. and went on a lot of fox news and other republican type programs, and there, the real issue still is government so big, and can't they do anything right? and that sort of thing. it resonated. >> i'm wondering about something different. you implied that all the secrecy has one tactical or terrorist level made us safer probably. i guess the question i'm curious about, is big government itself, 1,500 secret agencies, itself going to be a bigger threat? i mean, even paranoids have enemies as the joke goes. at some point, is big government just a danger in and of itself? and do the people you talk to actually raise that question? >> you know -- >> some of them do. but the question there that gets raised is the domestic issue. whether this government apparatus has started to cross

line into domestic surveillance. and knowing everything about you which by the way they do. in terms of all of your records and things like that, they're stored in big vats, big data centers, so there is a lot of that worry, too. that just goes against the grain of addition trustful americans. >> and why we have secrecy. >> yes. >> so 1.7 billion intercepts you wrote about every day by the national security agency, it reminds me of raiders of the lost arc that in the end it gets stored in some room. what do they do with all of that information? >> well, very small number of -- amount of it gets actually analyzed. because it's so big. the n.s.a. has turned into a megacontributor in this. but they now can scoop up so much that they don't know -- they don't have enough people to analyze it so it goes into these acre nooble sized data centers where -- acre

football-sized data centers where it gets analyzed. >> not very comforting. gloria: thank you very much to everyone. and before we go tonight, we want to note the passing of long-time journalist daniel shore. he died today at the age of 93. he worked as a print reporter for "the christian science monitor." he went to cbs news in the 1950's. and in the time of watergate found up on president nixon's enfamous enany list and helped launch cnn in 1980 and did an occasional special right here on pbs and continued his career with national public radio. we send our condolences to his family. that's going to wind things up for us tonight i'm gloria borger. gwen will be back around the table next week on "washington week." good night. >> corporate funding for "washington week" is provided by -- >> we know why we're here. >> to give our war fighters every advantage. >> to deliver technologies that

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