gwen: glasses half full and half empty. mixed signals on both the economic climate and on the presidential campaign trail. we'll get to the bottom of the glass tonight on "washington week." europe is reeling. tax hikes are looming. and washington can't seem to agree what to do about it. >> on this vote, the yays are 51, the nays are 49. the motion is not agreed to. >> congress may not be leaving and we can all spend christmas here together. >> gwen: even today's good news about the declining jobless rate is open to interpretation. >> today's unemployment numbers certainly look good on the surface. however, if you look at the number of new jobs created, there's just not enough new jobs being created in america. gwen: meanwhile, the always

fascinating republican presidential contest continues to captivate. herman cain on the defensive. >> it wasn't complicated. i was aware that he was married. >> we are re-assessing and re-evaluating. gwen: but the spotlight shines more brightly on newt gingrich. >> it's very hard not to look at the recent polls and think that the odds are very high i'm going to be the nominee. >> as mitt romney keeps his eye trained on the white house. >> it shows that they're afraid of facing me in the general election. gwen: covering the week, greg ip of "the economist," jim tankersley, karen tumulty of "the washington post" and jeff zeleny of the washington "times." >> covering history as it happens, live from our nation's

capitol, this is "washington week" with gwen ifill, produced in no, with "national journal." corporate funding for "washington week" is provided by -- >> we know why we're here. to connect our forces to what they need, when they need it. >> to help truth and see danger before it sees them. -- troops see danger before it sees them. >> to answer the call of the brave and bring them safely home. >> around the globe, the people of boeing are working together to support and protect all who serve. >> that's why we're here. >> additional funding for "washington week" is provided by prudential financial, the aenberg foundation, the corporation for public broadcasting and by contributions to your pbs station from viewers like you. thank you. once again, live from

washington, moderator gwen ifill. gwen: good evening. so pick your poison. for today's jobless numbers, are they good news or not good enough? will congress agree on extend the tax cut holiday or fail to agree on how to pay for it? and do the world's central banks come to the rescue of the struggling euro this week or was it a mere band-aid? greg ip headlines, a very good week. jim tankersley reads, was con tabling yug catastrophe? greg, why do you say that this was a good week? >> maybe i wanted to be positive for a change, penguin. if you look at the job numbers we had, they are positive numbers. 120,000 new jobs created. three months in a row now north of the 100,000 mark. this is the best train of job creation we've had since the string time. we should see sustained declines in the unemployment rate. is it a barnburner? no. considering five months ago there was a debate about whether we were going back into recession, i'd say pretty good.

the decline in the unemployment rate, 8.6% from 9%, a very big drop. not all that meets the eye, though. part of that drop was because some people stopped looking for work. but it shouldn't overshadow the good news. black friday sales apparently were very good. factory activity is pretty good. most importantly, on the policy front we're seeing movement on some of the riskiest areas. here in the united states, talk about extending the payroll tax cut. in china, there using banking -- easing banking requirements. and in europe, finally glimmers of light that pleaders are coming to grips with the debt problem. gwen: jim, you kind of sketched out the worst-case scenario when it comes to europe and the debt problem. >> right. and i would agree with almost everything greg has just said. these are all positive signs. the problem is, they all pale in comparison to the threat being posed to the united states and the global recovery right now by europe. it's a scary possibility, but it could happen. if italy defaults and a bunch of italian banks fail and that

spreads, american banks are exposed, credit drives up around the world. suddenly we're not just looking at a global recession, we're looking at a global great depression again. and this is going to be a conceivable and quite possible outcome so long as european leaders have not actually come together and done the hard work of rescuing the eurozone. >> gwen: can i ask you about this payroll tax debate we're having, both of you? i don't know what to believe anymore. it sounds like if they just ran into each other at loggerheads last night on the floor of the senate, and some people are saying there's going to be a deal by the end of the year. what's true? >> i'm inclined to believe that what we saw this week pushes us towards having a deal. it started on monday when mitch mcconnell republicans would support it in some form. john boehner said yes to the payroll tax extension and to extended unemployment insurance benefits. the thing now is how to pay for it. they had eye like to pay not just for this one, but an

expanded one by a surtax on millionaires. some say they want spending cuts. so we're going through that rhetorical dance that's a mandatory part of this process. but by christmas there will be a deal. gwen: i think the republicans are in more disagreement with each other than they are with the president. >> there's disagreement between house republicans about whether or not they actually want to do this. many don't believe it's effective and they don't like the idea of paying for a temporary tax cut with tax increases over a long period of time. so i think the bigger debate, though, is going to come down to, does the economy need this? and the president knows that it does. he knows this is his best chance to get some sort of stimulative measure and that's why i think in the end, this gets done. >> war the consequences that this deal doesn't get done, other than the democrats think they've got themselves a nice little issue here? >> necessary do have a political issue, because this is a tax cut for working people. anyone who gets a paycheck gets payroll taxes. the consequences for growth, though, are large. probably up to a point of g.d.p.

growth next year that we lose, if this tax cut goes away. on the other hand, if the tax cut is extended and increased, when you could have even more of a boost, a tail wind, to the economy. so a really big swing one way or the other. >> in terms of all the positive news here, at least, this week, so much of what is happening here is not here at all. it's in europe. exactly what's going on next week with the european summit, an how important is that? secretary geithner is going over, i believe. what are the stakes here? >> when you ask folks in the administration what worries them most, it always starts and ends with europe. there's a sort of a helplessness, a sense that what the europeans do is the single most important factor about the u.s. economy and president obama's re-election chances next weir. what we saw last week was the fundamental problem is europeans can't agree on how much they should guarantee each other's debts. we saw movement towards the sense that bilateral treesies could do it. but there needs to be a

political bye inn. the other thing you need is for the european central bank, their version of the federal reserve, to step up and do a bit more of its backstopping of debts. but that won't happen until that will power is shown. tim geithner, i believe, is going there to try and buck up his spirits and try to put more pressure on them to come to an agreement. and also, neither the united states nor the i.m.f. is going to come in and make it easy for them and take the hard decisions away from them. gwen: you talk about tim geithner, but how big a role about ben bernanke's fed being the -- goofing the agreement? >> what the fed did was take coordinated action with other central banks across the world, the beaning of japan, the european central bank, to make it easy yes for european banks to borrow in dollars. stocks liked that, and the market wept up because of it. don't expect this to be a be-all, end-all solution or anything close to it. this is not a redress for the

problems, it's a way to make things easier and buy more time while the europeans try to figure this out. >> what kind of movement are we seeing? is there a scenario in which everything begins to move in the same direction, or does the gridlock that we see afflicting washington begin its slow movement down on all of these fronts? >> it's an excellent question. if you left the politics out of it, the scenario would be for a decent economy, 2 1/2 to 3% growth. jim and i would agree on that. gwen: what, you two agree? >> we do. >> that's crazy. >> the big question mark is, how much do the politicianings shoot the economy in the foot, like they did this year? >> at 2% to 3% growth, what does this mean for jobs? is this escape philosophy? >> it would be nice. 2% to 3% is right around escape philosophy. you probably need about 2.5% growth to get to sustained job creation. but we're not there right now. it would be great if we were up 3 1/2, 4%, then you're starting

to chip away at the unemployment rate. 13 million americans are still out of work. in is going to take a long time to come down and to get the economy back where it needs to be. roaring growth would be great. 2.5% would be better than we have now. gwen: i have to ask a political question in all of this, because we're laying out a senator why in which none of this is going to change any of this between now and the election. so is this something where everybody, including our international partners, are keeping an eye on the political consequences of the action or inaction? >> well, absolutely. but frankly, everybody is so consumed with their own political problems, they're not worrying about anybody else's political problems. but one of the issues about the payroll tax debate right now is both the republicans and the democrats are trying to figure out how far they can push the other, depending on who wins. the democrats now think they have a winning argument. we want to cut taxes for the middle class and the republicans don't want to do it our way because they want to protect millionaires. although it's in the interest of both sides to come to a solution.

but in the case of the crapts, it's in their interest to push the republicans harder, because they think they have the winning argument. gwen: great. we have five weeks before voting begins in new hampshire and iowa. that takes us to our next segment. much of this week's political news came down to reading the tea leaves. herman cain admitted an entanglement with a woman his wife knew nothing about. the woman claims more than that happened. will he stay or will he go? >> we got to re-evaluate the whole strategy. tomorrow in atlanta i will be making an announcement. but nobody's going to get me to make that prematurely. gwen: nobody could do it. and newt gingrich, who's rising in the polls, is beginning to talk about what he with do as president. >> i have to confess that while i was hoping for a way, we've had sort of a tsunami. >> rick perry had another brain freeze. >> those of you who will be 21

by november 12, i ask for your support and your vote. those of you who won't be, work hard. gwen: neither of them seem to quite work. and the president launched a bit of a stealth campaign with this low-profile video. >> tt 2012 campaign is underway and the outcome will depend not on what i do, but on what you do. >> but the cain roller coaster is where the story is tonight. big announcement tomorrow, karen. do we know what it is? >> no, we don't. and in fact, this evening, believe it or not, it's taken this many days for herman cain to go back to atlanta and actually sit down and talk to his wife face-to-face about this. he says if she does not want him to continue running, he will not. on top of that, in my reporting today, i discovered that cain has summoned a lot of his big donors and a lot of his closest advisors to a meeting tomorrow morning in atlanta, where presumably he's going to tell

them his decision before he announces it publicly, at what was supposed to be the grand opening of his big national headquarters in georgia. gwen: to tea leaf reading, this could be cutting either way. any of these details, which karen just laid out, could be leading to him staying i'm staying in the race, my wife has said don't let the bad guys get you down, or it could mean my wife has given me cover and i'm out of this. >> some of his supporters believe he will stay in. of course, they want him to stay in. but they think he may try and build himself up a little bit more, because he is almost certain to not be the republican nominee. i think everyone can agree on that. and he'll have to have a life after this, which will include speeches and other things. so he wants to leave on a high note, and some of his supporters don't believe this is the high note he wants to leave on. he has nothing else to do. he can keep running for president. there are no rules here. he can keep going to debates. at the other point, it all boils down to what happens in the house. but the bigger story here is what happens to his supporters.

in iowa ont a month ago he had 23% of supporters likely. that's down to 8% according to the new des moines register poll. >> like in the last week it's dropped. >> where are these people going? it certainly speaks to the rise of speaker gingrich. but it's a very fluid five weeks ahead. 4 1/2 weeks ahead. >> but who's counting, right? >> to me that's the most important question. his supporters, where are they going? >> jeff, can you tell me a little bit about, what's different in iowa this time around? it certainly seems like a different kind of campaign than i remember covering or having seen before. >> well, one thing, the whole campaign has been fueled by debates. it's almost a national primary, if you will, in terms of everyone has more equal access to the candidates. so voters are not seeing the candidates as much in iowa or new hampshire. it's sort of the fox news

effect. it really is an efficient way to see a lot of republican voters by going on television again and again and again. it also speaks to the rise of newt gingrich. but some republicans, though, are like, hold on a second. there's actually a reason they're going out doing these visits. it's to build organization and ground game and also for the general election. iowa and new hampshire are very important states in the general, and by building this enthusiasm and the ground game that we call it, it's not happening as much this year, except mitt romney's probably doing as much of it as anyone. gwen: isn't there a little dying by the sword or living by the sword, you win by the fox effect but you lose if everyone starts paying minute attention on all of the shortcomings? >> that's one of the major reasons that this primary season has had almost a sort of clown car effect to it, because, you know, you could make a mistake. iowa and new hampshire were also

like off-broadway tryouts and you could make a mistake and it wouldn't go viral or it wouldn't immediate plea be on the late-night talk shows. you could get your talking points together, your message together, you could test it out, see what was resonating. and all of these candidates, you know, only mitt romney among them, has ever done this before, are having to sort of get up to national campaigns immediately. >> it leaves an interesting question. a lot of people have anticipated that after iowa and new hampshire, in the first early voting states, the race quickly gels. it clear. do you think that pattern repeats, or do you think it becomes much like what we've seen so far, a long, drawn-out fight? >> if romney wins the iowa caucuses, it could be a shorter primary cycle. if not, it could go on for a long time. the republican party has changed its rules this year. it used to be winner take all.

if you win florida, you win all the del greats. until the ends of march now, it's pro morguesal. second place is a big deal. coming in third place is not bad either. it could go on for a long time. one other thing is a lot of states move back their primaries because it's so expensive to hold separate presidential primaries. so if this goes on for a long time, the delegates you need to win are going to come in april, may and june, which could keep this thing going. but one thing about newt gingrich, though, i want to ask you, karen, since you spent so much time with him for so long, are we seeing a new newt gingrich, an old newt gingrich hybrid? >> i've actually asked him about that, and he says that he is more mature, and he says hopefully he hopes that he is more disciplined than he has been in the past. he put out the word to his staff this week that nobody is to be quoted, even off the record, criticizing mitt romney.

let's face it. this is a guy who made most of his political career going for the jugular, from practically the minutes he got to congress. he has decided that he needs to be upbeat, that he needs to stay focused on policy and on big questions. when he goes into debates, he scribbles a little smiley face on his notes, to remind him to smile more often. >> has he been smiling? did i miss that? >> he says his granddaughter sits there and counts the number of smiles. so the question is, can he maintain this discipline? as some of his friends will tell you, gingrich has often been at his worst when things are going well for him. >> well, and as candidates have discovered, whether it's rick perry having these moments where he doesn't know what he's saying, or michele bachmann rising and falling or herman cain now, that white-hot spotlight that we're talking about can really challenge your own discipline. >> well, he's been in that spotlight, though, for a lot of years.

gwen: not this kind of spotlight, though. >> and he's also -- he is much more sure-footed, i think, than the other candidates on who he is and where he is on policy. that's why this kind of thing that he's said on immigration haven't hurt him the way they did on rick perry. even though for all the years he was in washington, people don't think of him as an insider, because most of the time he was here he was sort of fire-bombing the place. >> how he's viewed in washington is different than how he's viewed out on the campaign trail. but the voting record that he had from the early part of his time in congress, which is moderate by a lot of standards, we're going to see that revisited again and again and again. i think the romney campaign, if they make the decision to go after him, it's going to be on his voting record. >> speaking of the romney campaign, talking about where the white hot light is not, he seemed to -- if there's anything that's true about everything

who's risen to the top, they are the eants romney. this -- anti-romney. this has become a cliche. why is he not breaking through? >> it's been a slow and steady approach. he has sort of designed everything up until this point, except they were definitely not preparing for the newt gingrich thing of the right now the romney headquarters is -- all of his advisors are trying to figure out exactly how to react to this. is speaker gingrich going to go away on his own, is he going to fizzle or do they have to make it happen? but romney, you know, of his own, he's a better candidate than he was four years ago. no question. but he still is testier than he probably should be at this point. he's done very few interviews. the only candidate who has not done a sunday show interview and he's prickly. he definitely, though, still has so much going for him, because he has done this before. i don't think you can overstate that. >> karen, can you tell me, speaking of the candidate we

haven't talked about here, the president -- gwen: oh, him. >> who would he and his team rather face coming out of this, newt or mitt? >> judging from the number of have it cal videos we've seen coming out of the d.n.c. and out of the president's sort of outside allies, it's clear that they think mitt romney at this point would be the strongest candidate against him, and he is very much who they are preparing against. i don't know what to -- right now they seem to have their fire trained on mitt romney. gwen: so are they counting on newt gingrich to collapse of his own volition or for his opponents to take him out without -- because they haven't spoken at all about gingrich. >> i think they think that someone else will handle that. ron paul, we haven't mentioned him. he's going after gingrich very hard in a web video. he has money to do it.

and he is going to point out what he says are inconsistencies. but the white house is also trying to define governor romney -- i almost called him president romney. gwen: we'll get phone calls. >> so he sort of, you know, has a brand going into the republican primary that he does not want. gwen: ok. we should keep an eye on ron paul, because he apparently does have the organization and the money. and all across the country. thank you all very much. i know this was a quick show. we had to leave you a little early tonight. you can get the chance to support your local station, which, in turn, supports us. but the conversation continues online, on the "washington week" webcast "extra." also online, you can find my take on whether the payroll tax cut debate is destined to become washington's next train wreck. stay up with daily developments online and on the air at the pbs "newshour" at pbs.org and we will see you next week on "washington week." good night. captioned by the

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