>> what do you think of when you see a tree? a treatment for cancer? alternative fuel for our cars? do you think of hope for the environment, or food, clothing, shelter? we do. weyerhaeuser, growing ideas. >> production assistance for "inside washington" was provided by allbritton communications and "politico.com" reporting on the legislative, executive, and political arena. >> we simply cannot continue to spend as it deficits don't have consequences, as of waste as a matter, as it harder tax dollars

of the american people can be treated like monopoly money. >> this week on "inside washington," the $3.80 trillion obama budget. that is a lot of zeros. the senate's newest republican member weighs in on the economy. >> i don't consider tax cuts being a problem for stimulating the economy. >> the chairman of the joint chiefs on don't ask don't tell. >> speaking for myself and myself only, it is my personal belief that allowing gays and lesbians to serve openly would be the right thing to do. >> and a look at the first national tea party convention. will this citizens' movement have legs? >> what you think happens to the tea party? >> i don't think the tea party knows what will happen to the tea party. captioned by the national captioning institute --www.ncicap.org-- >> for the record, unemployment dropped to below 10% last month

to 9.7%. the nation still lost 20,000 jobs, however. i hate to talk about numbers, but how do you talk about the budget without talking about numbers? the gap between what the government will take in in revenue and what it will spend will reach $1.56 trillion, a lot of red ink. next year's deficit will force the federal government to borrow 33 cents of every dollar it spends. in time-honored fashion, as ronald reagan did before him, the president is blaming the previous administration. >> 10 years ago we had a budget surplus of more than $200 billion, with projected surpluses stretching towards the horizon. over the course of the past 10 years, the previous administration and previous congresses created an expensive new drug program, passed a massive tax cuts for the wealthy, and funded two wars without paying for any of it. >> what is he going to do about it, evan? >> not much, that is the

problem. one of these days, some leader is going to get honest about the truth, which is that you must raise taxes, you must cut social security, and he must cut medicare, and that is the only way they will ever on a sweet deal with deficits. if they ever get to that day, it will be meaningful. now it is talk. >> quite an explosion. jeanne? >> i don't expect the day to arrive any time soon. they are nibbling around the edges. evan is right, there e structural problems that need to be addressed. health care reform, if they pass it, is intended to deal with health care costs. but even doing that, they cannot get it done. i don't know how they dig their way out of this. >> colby? >> they hope they can grow their way out by getting the economy growing. if the economy grows, it will have some impact on the deficit. the problem is reform,

entitlement reform. that is what they cannot manage to get their arms are rounded they tried last week with the commission that had the job of coming up with recommendations which would be binding. they cannot get it passed through the senate. there is a lack of political will to deal with this crucial problem. >> any light at end of this tunnel, mark? >> you talk about the president blaming the previous administration. the only president that did not do that was george washington. [laughter] note, there is a light at the end of the tunnel, but there is a light coming through that tunnel, and that is china. we cannot go on indefinitely borrowing without some imposition of policy from china. we have a double in the past eight years for and borrowers. the past eight years, and president obama is right on this, we spent on average 20% of the gross domestic product annually of the federal

government, and collected 17%. that is over eight years. that is going to lead to where we are right now but we have a $1.60 trillion -- trillion -- federal deficit this year, bigger than the budgets of all the countries of the world except germany and japan. >> but here is the thing -- we sit and talk about the deficit, and this is deficit week, we get into the stands before. everybody knows the truth, that you have to do the basic things -- >> two parts -- entitlements and taxes. >> yes, and yet the political rhetoric is that that is impossible, no politician can say that, you will lose. one day, somebody has got to cut this not, because everybody knows what it takes is but no one wants to do it. >> i have been doing this show for 20 years and we have been talking about entitlements for 20 years. economist paul krugman, no

conservative, to be sure, says that deficit fear-mongering is republican strategy. but he says that running up deficits in the worst economic slump since the 1930's is the right thing to do, and to be bigger since it would create jobs. >> he has been saying that for some time and he is not alone among economists who say that it at some point there has to be a reckoning. you have to during a recession prime the pump, but at some point you have to come to grips with the fact that deficits cannot be sustained over a long period of time. >> even at he says that if you look into this article, he acknowledges that you cannot continue that indefinitely. >> many economists say that you can reach a certain point with deficits and it is not a big deal. part of the problem also is what are we going to look like when we get out of two wars? we are in the process of leaving one and ratcheting up the other. we have no normal period in any

short time frame here. >> look at the polls. the american people think that this are a big deal. -- deficits are a big deal. >> you have to go back to 1993 before the congress of the united states voted for an across-the-board tax increase. we now have in the congress, a grand total of 27 people in the senate and 81 in the house who have never voted for a tax increase. it is republican dogma that you don't vote for tax increases. >> the country it sees how dysfunctional they become, that nothing gets done. i think obama really does have an opening here. he starts to be honest and then he shies away. he just begins to be honest -- why not be honest and say here is the problem and we have got to deal with it? >> colby v, what you say

to the new senator scott brown who says that the answer to the problem is more tax cuts? >> politely? >> please. >> that it varies with the facts. that is as polite as i can get. at this point you don't add to the deficit -- which is what he wants to do -- you don't do that. >> quote to him a george bush's chairman of economic advisers, who says you cannot argue that tax revenues pay for them -- tax cuts paid for themselves. but the commission is the answer, because obama said he would never raise taxes for people under 23,000, and it lets republicans off the hook for and obtaining tax increases, which is dogma in the party that you do not. they would rather have the country default on debt. >> they were the ones who pushed

the commission last year, but now they are the ones running away from it. >> let's talk about the did you of the 41st republican senator, and tea party news. >> people back home are upset not only about the amount of spending but the amount tax dollars that are being spent and sometimes wasted. people are fed up. >> we want to let all the political class in washington and the states know that we're coming after you read if you have been there for two terms in the senate, four terms and the house, go home, take your staff with you. >> the first was the new republican senator scott brown, who came to town ahead of schedule. the second was from the first national tea party convention in nashville. scott brown scratched some panic in massachusetts, otherwise would not be here. you and charles krauthammer, who normally sits in that position, disagree about the long-term significance of this. >> in massachusetts, voters for

whom health care was the primary issue voted for martha coakley, not scott brown. charles and others -- i don't want to attack him in his absence, but they want is to be some great ideological -- there is dissatisfaction -- >> new jersey -- this guy -- >> no question of all. in all three cases, the democrats lost the middle, lost independents, who obama kerri, and in all three cases, the republican candidate was more likable and appealing than the democratic candidate. >> that is what the tea party stuff is all about. >> i don't know if the tea party people than ever smashed into a real movement way they can deliver on the kinds of threats that they are making. they are very fractured. but also, if you look carefully at what is going on even in the republican party, they are not having the kind of impact that people may believe. you look at scott brown.

he is basically a fairly moderate republican. he is a pro-choice republican, but he's a fiscal conservative. if you look at massachusetts, that tea party presence there is not like a huge presence. he was elected b independent, rank-and-file voters who are really put out with what is happening with the economy and washington, and they are not being driven by a tea party movement. the are being driven by their own frustration and anger. that is true also of new jersey and it is true of virginia. the threat to the democrats is much bigger than just this idea the tea party people are out there. this much, much bigger. it is the independents, and the republicans are starting to figure out how to take that tea party energy and work it to their behalf, in their behalf, and we saw that in illinois and we are seeing that in florida, where, again, really mainstream candidates are running on the

republican ticket, but they are harnessing the energy of the tea party. it is smart. >> it is built on a fundamental contradiction, which is that the energy of the tea party is that the government out of my life, but do not touch my medicare, do not touch my benefits. that basic contradiction is in the end going to take the tea party down, but that is what politicians are stuck on and somebody needs to be honest about it. >> we have seen this before, maybe not of this magnitude, but remember ross perot came around and he was talking about spending and the deficit as well. when you are on the outcome is easy to criticize the people who are on the the ins, especially when things are going badly. this is what is happening to the democrats now. the tea party people are able to muscle the kind of dissatisfaction that is out there now to their side. but the question now for the democrats is -- this is not an insoluble problem.

>> politico published the results of a daily kos poll -- 63% of republicans think obama is a socialist, 33% to not think he was born in the united states, 23% think that their state should secede from the union. this is hardly mainstream. >> you will never get those percentages. they are gone. obama will never get them. it is the people in the middle. the first step is coming clean with people about what is involved. obama at his best can be somebody who levels with you. >> ok, walter mondale tried that. he said, i am not much to raise taxes -- i'm telling you, i am going to do that. >> he ran against an enormously popular incumbent at the time and he lost three he will forever be remembered for the pledge at the convention, the

convention speech. the results you read, from an independent pollster, not a left-wing pollster at all, the 33% who think obama was born outside the country -- i asked mike huckabee, the former arkansas governor, how you handle people who think president obama was born elsewhere, and he said, " i say to them, and you don't think hillary would have found that out?" [laughter] >> look, you have a taliban faction of the republican party , the conservative movement. they are getting the play right now. the game is still light in the center. that is up to the democrats to figure out how to play the game and not seated at ground as they have to the republicans. >> while they are getting the attention right now, they have yet to have real impact, and that was evident at the rnc meeting out there in hawaii where there was a push for a

purity test of candidates. not only did they not bring it up for a vote, passed resolutions saying that they were opposed to such a to -- they passed a resolution saying that they were opposed to such a thing. the republican party is well in control of itself, despite pressures from the outside. >> the problem is that ronald reagan, the icon to whom they differ, passed in 1982 the biggest tax increase in the nation's history up until then, as opposed the rerendum question in california that would have prohibited gays from teaching in public schools in california. ronald reagan turns out to be a closet liberal, and that is a problem. >> as he said about people on the right who were upset with him, where are they going to go? let me ask you about something in "the wall street journal," about the president's tax on big banks, executive pay, risky

practices on wall street but republicans have been talking to wall street executives, according to "the journal," to convince them that they are the bank's best hope to keep the democrats and the president from putting the hammer down. how do we feel about that? >> reporting -- republican leader john boehner had drinks with jamie dimon of jpmorgan, saying "we stood up for you against obama, on the pay bonuses, and yet you are giving the money to the democrats --" almost 2-1 to obama over mccain. but that is switching. wall street is wonderful. deep conviction, the principal. who is ahead? he was in power? that is what -- who is in power? that is where the bucks go.

>> this is a win-win for republicans, because they will vote against everything democrats want to do on financial regulation, so why not get paid for it? as you say, wall street, being a bastion of purity that is, is writing the checks. but i still think it is a little dangerous for the republicans. if it -- if a deal that was cut becomes public, not good. and i also think that the populist anger could turn on some republicans as well. >> it is all legal, though, isn't it? >> he is legal, and it is perfectly legal for president obama and the democrats to stick it to them. it is political, and they should come back at them. they have the power to make wall reet pay attention. >> although i would love to stick it to them, like most

people, because wall street is so arrogant, that may get in the way of real reforms we need to do. we have this big show on the hill, but in the end, the lobbyists are laughing all the way to the bank nothing happens. >> the way you stick it to them is the reforms on the hill, passing that through. you put into place effective policies that bring them to heel. >> but the more you go after i the pay, the harder it gets to get real reform done. >> evan has a good point, and they do have to calibrate the conversation, because dodd is working out hill here and they cannot pass it on breed they have to have a bill that will attract some republicans. -- they cannot pass it alone. they have to have a bill that will attract some republicans agree that to think about what is doable and rational.

>> this cannot happen again. we cannot turn to the people of western, massachusetts, a fresno, california, and say you bail out wall street again, and we will put in place regulations that prevent that, and you are either for it or against that. >> if they have any sense at all, the people on wall street would realize that they still have to work with both sides of the aisle. that is the key. forget the pictures with the republicans but if they are stupid enough to start shifting money to republicans, they will pay a price. >> wall street does play it smart. the art largely effective rate is about 50-53 -- they are largely effective date is about 50-50. >> i was a banker for 10 years. don't use the word smart in connection with bankers. crafty, maybe, but not smart. [laughter]

>> anxiety on capitol hill on the issue of terrorism and national security. >> al qaeda's radical ideology seems to appeal to disaffected young muslims, and this is a pool for potential suicide bombers, and this pool unfortunately includes americans. >> it is unlikely for another power to come as head on. they will come at us asymmetrically, coming at us where we are vulnerable, not where we are strong. >> that is robert gates, preceded by dennis blair, director of national intelligence. they and others testified this week that the possibility of an attempted attack on the united states and the next six months is virtually certain. any additional insight on that, evan? >> i think it is more logic and intelligence. -- logic than intelligence. and this new twist that there are americans fighting for the

other side. "the new york times" at a fascinating story about this kid from alabama, very bright kid, and a very scary guy. >> we could spend all my on what motivates people to do that. on the other hand, the question about the threat. you hear that kind of testimony and it makes people anxious. >> you had the leadership of the intelligence community saying that is concerned, but you also ought is a phenomenon we are coming to grips with, the notion of homegrown terrorists. that is where i think the real concern is, that is going to come from within. it is going to come at us in an area where he might be most -- you might be most vulnerable, like the metro center, or tradition, or airport before you get inside building. >> robert gates was interesting -- coming at us where we are vulnerable, not where we are strong, and yet we have tens of thousands of conventional troops

deployed in afghanistan and iraq going at these insurgents head- to-head. >> i think that gates sees that we will have to fight our fights on many fronts. part of the argument he is making is that this is budget season and he wants a fundamental changes in the defense budget. he wants to move away from the big, and hardware of conventional war and moved to a more mobile, more electronic, unmanned type of weaponry and systems that could make us more nimble and more able to fight the fights that he thinks and he's coming. -- sees coming. >> use that we have troops on the ground in afghanistan. and where bomber came from yemen. and this kid from alabama is in sudan. who knows where they will come from? >> we are also talking about different kinds of threats but what they doing in afghanistan has nothing to do with the

suicide bomber. it has everything to do with the threat that the taliban poses to pakistan as well as afghanistan al qaeda is closest to those two areas and is in the u.s. interest to defeat them there. >> one interesting development in the whole terror scene is that the fbi has indicated that after bringing the christmas bomber's mother and uncle over for 10 days from nigeria to spend with him, he has now opened up and turned tables and provided information -- >> despite the miranda warning. >> and contrary to the approved approach of removing his fingernails or attracting -- attaching electrodes to his private parts or whatever else was being urged by my friends on the far, far side. >> they are still talking about moving the terror trial out of new york, ksm. what is the logic of that? >> political. it is as political as anything

else. you have the male line up against you -- and they are lined up against you -- mayor lined up against you, senators as well. the key is the process and the beginning. it seems to me that you pin that down before you go ahead with that. >> gays get shot at regardless of sexual orientation. >> at this time of immense hardship, we should not seek to overturn the don't ask don't tell policy. >> i was in the closet, and then i realize that this is a violation of the honor code, which on the first at west point we learned that you do not lie or tolerate those who lie. i believe in that. >> how does overturning don't ask don't tell imposed for the arch it on our troops in the field, colby? >> it does not treat it does not

affect unit cohesion or morale. gays have served in the military since -- >> george washington's time. >> i served with gays in the military and we survived the issue will rid john mccain was for overturning don't ask don't tell when he said the generals were against it, and now he is against it. it is all politics. >> the overwhelming evidence is that it does not affect unit cohesion, but many in the military believes it dies. -- it does. that is why admiral mullen is a stand-up guy for this bid is hard to do what he has done. >> there are a lot of conservatives who avoided this issue by saying, "i will follow the military wants to do."

now the military wants to overturn it, and that could run counter to wear their constituencies are, and where they may actually be. >> the two architects of the don't ask don't tell policy in 1990, general colin powell and senator sam nunn have a both a revamped their own positions. it has to go through congress, and they want to build up the evidence and the case in behalf of repealing the policy, because there is resistance, in the military and also in the congress as well. >> that is the last word. thanks for being with us. see you next week. for a transcript of this broadcast, log on to insidewashington.tv. to providing service to

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