>> "inside washington" is brought you in part by the american federation of government employees, proud to make america work. for more information about afge and membership, visit afge.org. >> 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. >> the country is facing a cliff, and we are all concerned and we do not want to fall off the edge. >> this week on "inside washington," ununfinished business of the 112th congress. as the jobless rate bounces up. more on mitt romney's trip abroad. >> a nation has the capacity to choose its own capital city, and jerusalem is israel's's capital. >> in poland, a big boost from a legendary labor leader. what does the gay marriage have to do with fried chicken? >> chick-fil-a's values are not chicago values. >> the churchill bust caper. charles wins an apology from the white house. captioned by the national captioning institute --www.ncicap.org--

it is a happy time in washington in august, as the heat index avers around 100 degrees. our pedestrians looked like boiled hams. the unemployment rate jumped to 8.3% last month, even though the country added 163,000 jobs. as they before a five-week summer vacation, members of congress pledged to resolve differences for the good of the country. >> americans want us to focus on jobs, not raise taxes. >> you have to give the republicans credit. they are clear about their agenda. >> take a look at this headline -- "congress takes a five-week summer break as members try to run from the 2011 budget control act." if the bush tax cuts expire, economists believe it could take

a the economy back into reception -- recession, i should say. but in military spending -- increased taxes, huge cuts in military spending. defense contractors are nervous. democrats and republicans are actually thinking the unthinkable -- it may be preferable to allow the bush tax cuts to expire for the shock value, thereby forcing concessions from both sides. where are these people headed, evan? >> over the cliff. i don't think they have it in them. it does not mean that the country will be thrown into a recession right away. they will use the time in january, february, and much to get some kind of deal. >> mark, 820% unemployment. >> -- 8.3% unemployment. >> it is the best jobs report since february. but the reality is that the only

place that anybody is looking for help or action right now is the federal reserve. it is not the congress, because there is just loggerheads. colby? >> they have to go back and campaign and get ready for the elections in november. that is not a disaster. they also plan to come back after the election to address the problems that they are kicking and down the road before january. i don't think we will go over a cliff, because they know the consequence of that. >> businesses hate uncertainty, charles. >> uncertainty and terrible numbers. unemployment rising again. "the new york times" quoted the chief economist at credit suisse as a response to the unemployment, is, saying this is the worst recovery ever, including the recovery in the

great depression. if that does not scare you, you are not paying attention. i think we have compounded the problem by the gridlock in washington and the fact that until election day, we are not going to know which way we are headed. the underlying economy is terribly weak, the recovery has stalled, and the administration has zero ideas what to do about it. even if the fed acted, it is pushing on a string. interest rates are essentially zero. where do you go when you are already in zero? >> they it cannot even pass the farm bill, the most pork-laden thing. the idea that they will deal with defense cuts and taxes in a lame duck -- they are going over the cliff. the issue is how quickly they can climb back. bad news does not start right away. it takes some time for the effects of going over the cliff to be felt. >> you have two, three months in

the winter to solve the problem. >> the congressional budget office projects that if congress does not come up with a solution to the problem, growth could fall to 0.5% next year. but he has a tepid 2% this year. >> that suggests it they do not do anything for a month. >> that is my point. they are going to avoid going over the cliff. the smart money is that they will come back after the election and address the critical problems. >> wait a minute, there is the outline of the six-month agreement to extend this so that we avoid it 8. let's be very blunt about eighi. the majority of both party leaderships voted for this sequestered, so neither party gets a partisan advantage in

that sense. i don't think there's any question that what we're looking at is an election that is going to determine where we are headed in this country. if the tax cuts expire, that enables republicans to vote for a tax increase without alienating grover norquist. that is the cute little postscript. >> let's go back to the economy quickly to 8.3% unemployment. that is not surprising. it reflects things happening in the labor market. those who were on strike were not counted. job growth is important. it is very significant, and economists are saying this a sign of something good. >> but it is is not really, because it is only a rate of job increase, 163,000, which is less than the rate you need to get a

decrease in unemployment. you need about 250,000. the real problem is th the flood -- is not the fluctuations in the hiring, firing month to month. it is the fact that you have 1.5% growth of gdp, the most anemic trade with that, you cannot possibly have a decrease in unemployment. the economy is stuck. >> 163,000 ain't chopped liver. charles, cheer up. eventually things will get bad again. >> mitt romney on the road. >> what about your gaffes? >> show some respect. >> we have not had another chance to ask a question. >> kiss my [bleep] >> that is one way to deal with

the press. i am sure many of our viewers think i test the best way. -- it is the best way. romney was endorsed by lech walesa, but the dustup between record and the press, captured the headlines. romney offended palestinians by saying that culture makes a difference in that part of the world, but on a scale of one to 10 -- i read your column -- how do you think it went? >> he blundered i'm delighted with the unforced error on the olympics, but -- in lond wouldon to the unforced error on the lead, but in israel he did well, and the idea that the thing about culture is racist -- the man who attacked him as racist is saeb erekat, last known for spreading the blood libel of the massacre which never happened and still lives in infamy.

he is not exactly a great source. secondly, what romney said about culture is a direct echo of what was in the un human development report, written by arab scholars, published in the un, which says that the culture is the soul of development. nothing new, not a gaffe. >> the whole idea of a gaffe -- as michael kinsley said, a gaffe is when a politician tells the truth. it is obviously call for problems that affect the palestinians. obviously, london was not ready for the lead picks. this is a confected thing that the press gets excited about, but i don't think voters give a damn. >> scale of 1 to 10, how did he do, mark? >> 4, and that is from talking to romney people, who said that but for the 0.5% economic

growth, the whole thing was a disaster. sheldon adelson, his billionaire contributor, on an ego trip to jerusalem, wanted to have a fundraiser there. he never mentioned the peace process or the two states. always good to hear charles approvingly quoting a u.n. document, rare as that might be. the reality is that palestinians are among the best educated and most entrepreneurial of the people in entire region. mitt romney -- the reason the press was upset was that during the entire trip, he had taken three questions from the press. barack obama, a rookie when he made the trip in 2008, at a press conference at every stop he made. >> the press hates to be ignored, colby. >> i am not going to grade his

trip. he went to israel and said that jerusalem should be the capital. it is the question that the u.s. has always sort of fudged on. the use of the word "culture" -- good to hear people after the fact revise his remarks and explain what he meant, but the word is loaded. i have heard it before to explain differences between african-americans and whites. it can have a very nasty implications. let me finish, please. that is not what the romney apologists say he meant, and i know the explanation, i read the un document as well. what did he mean at the time he said it? i don't know. it can be a loaded term. some people took it that way. >> the worst thing for romney was having sheldon adelson at his side. a huge donor who is buying all these ads -- that is unseemly.

>> when romney talked about culture, he was not and it was. he cited a book by an economic historian at harvard who said -- he wrote a book in which he talked about culture as the ultimate element. nothing new. the reason i quoted the un document is because that is the last place that you would have expected a discussion -- a big report chiding the arabs for the corruption, the lack of women's rights as the ultimate -- >> he also cited a book by dan senor as the basis for the statement, talking about why israel was a big success. he did not cite culture as the reason. he cited conscription and immigration. by doing those two things, israel gained the advantage. >> what about the tax cuts? the brookings tax policy center

said that those cuts would increase government revenue and put the burden on middle and lower classes. >> here is a totally bogus issue. obama is attacking romney basically for being for tax reform, because if you are going to lower tax rates, you have to close loopholes. if you close loopholes, obviously, taxes are going to go on other people. for obama to turn around and make this an attack on romney for raising taxes on the middle class is outrageous. >> obama is quoting the brookings report, which is a respected -- an organization, the tax policy center, which was praised by mitt romney as recently as last fall. the point is that mitt romney has pledged for general tax reform, ok? everybody is for general tax reform, but against specific closing of tax loopholes. the reality is that he has pledged further to lower the tax rates on the richest people

in the country, the top 5%, and to keep capital gains and dividend taxes on honored in, lower. where are you going to get the money after to have cut all the appropriations and all the programs? that is the question. where is it going to come from? he won't take any more out of the wealthy. >> mark, obama is at least initially for tax reform. it seems to me a cheap shot to be saying, oh, look at romney, he is raising taxes on the middle class. all he is referring to is that romney is saying that if you lower tax rates in the open, of course you have to close loopholes, and that will raise taxes. stop the presses, it will raise taxes on everybody. >> but romney did not say we would do something in a little bit. he promised to lower marginal tax rates by 20%, eliminate the estate tax, capital gains tax. all the while not affecting

revenue at all. what is going to happen? >> every economist who has looked at this says that what you do is lower tax rates a little bit but close loopholes -- >> he does not say how. >> the romney campaign says that at brookings study is just a liberal study and dismisses it out of hand. >> missing the point here. it just shows yield level to which all of this has sunk. do one thing that would help the economy right now -- people talk about what we could do to give the economy a boost -- if the politicians did a real tax reform. it would allow them to lower the rates. i still think the rates ought to be high on rich people. but they could come down for just about everybody else if you did genuine tax reform. the economy would love it. instead, what is the president of the united states do? he basically attacks his opponent for being in favor of tax reform.

what he is referring to is the middle class and the lower class having to pay a little bit more -- >> the mortgage interest deduction and the deduction you get for health care, if your employer gives it to you, that is where the money is. if you eliminate or if you reduce -- canada does not have a mortgage interest deduction. it is rather have the country any way. -- happy country anyway. all he is proposing is, like 1986, one of the great successes of tax reform, reagan and tip o'neill -- if you do that, that would allow you to lower rates and boost the economy. everybody knows that. >> if you take away the mortgage interest rate deduction, what happens to struggling -- >> you can do it slowly, there are ways to do it. the one thing that would give the economy a boost and would help our country turned around -- if you do tax reform, its

political corruption, because you are going after special interests, it would give people faith in washington that people can do something and stand up to interest groups. it is fair for everybody. it does not give one group this advantage and one group that advantage. it gives the economy a boost because of the clarity, simplicity, and the worst tax rates for most people. it is win -win, and yet nobody talks about it during this election. >> we are talking about. >> we are talking about it, dammit! how much more can you lower rates for mitt romney? we're talking about tax scandal of rich people -- >> but that is because of all the deductions and loopholes. -- 1986 -- itunt is one thing to say about ronald butan and speaker o'neill,

bob packwood and dan rostenkowski with the architect -- >> i will add them to the list. >> since then, we've done nothing to the tax code but at credits for socially worthy, whether it is insulation, giving to diabetes, what ever else -- >> nascar -- all sorts of stuff. >> we have a member with a history in the banking industry. >> don't remind me. >> that excludes him from the discussion. >> i want to say one thing about the tax policy center, because we hear it dismissed as a liberal organization -- >> that was the romney campaign. >> one of the authors was an economic adviser to who? president george h.w. bush. this is not some liberal organization, this is not a pro-

obama study. this was done for the brookings institution. the analysis of the ronny text plan justice not add up. -- the analysis of the romney tax plan just does not add up. >> obama is attacking the only good part of it! >> it does not have to do with what obama add to it say. getting rid of the loopholes, and he does not say which -- >> to be continued. do you believe that marriage should be between a man and a woman to enjoy a nice piece of fried chicken? >> i am supporting mr. cathy in his views, his biblical views, and it is not necessarily his views, it is go'ds views. >> wednesday, august 1, was the first annual chick-fil-a appreciation day. mike huckabee started it, and

thousands responded in support of the president's stance against same-sex marriage. by the way, democrats are putting gay marriage in their platform. what is chick-fil-a appreciation of date tell us about the current state of our political conversation, evan? >> how silly we can get, obviously. but it does touch on something deep in america, which is that you may have moral values, but if people perceive that people are telling them how to live their life, they resent it. i support the marriage, but i can understand how people feel that if washington or the elites are telling them how to live, they presented that. >> you mean, when big city mayors say we do not have chick- fil-a in our city, they resent that, for some reason? >> a movement led by the mayor of boston, it picked up by mr.

emanuel, mayor of chicago, who else? >> san francisco, district of columbia -- "hate chicken." >> it is one thing to see consumers boycott an institution at they don't like, but to see the officially sanctioned a boycott is a different breed the last thing i remember was tom -- what is the fellow's name, who owned it domino's pizza? not tom donahue. oh, sure. he was active in the pro-life movement. there was a boycott of that company -- >> what about the gay marriage plank in the democratic platform? is that a good idea? where are they gave voters going to go? -- the gay border is going to go? >> that is to the decision of the president and vice president -- >> tom monaghan is the name you

are looking for. >> when i go to get something from the store, i do not think about the owner's views on the health care act or drilling in the arctic. all i want to do is go to starbucks and get a cup of coffee. if i hear that the owner of starbucks has a different view, what, do i not go there anymore? i understand the pain that has caused people who believe in scene 6 marriage to have the owner of chick-fil-a say what he said, but i also understand the limits that we have as far as going after individuals because of their views, when all you want to do is get a chicken sandwich. >> we had one woman say that i do not agree with him and all on gay marriage, but i really like the chicken. >> i think the neglected victims here are the fried chicken.

what is so hypocritical is that all of a sudden it is the crime of the century, a sort of thought crime of the century, and a demonstration of bigotry if you oppose gay marriage. six months ago, barack obama opposed gay marriage. does that mean he was a bit until three months ago? -- bigot until three months ago? does that mean that rahm emanuel, who says that it is against chicago values if you are against gay marriage -- he was the chief of staff to barack obama opposing gay marriage. does that mean he was a bigot? ridiculous and incredibly hypocritical. >> where is the bust of winston churchill in the oval office? if you check the block of the white house this tuesday, you would have seen dan pfeiffer's apology to charles krauthammer on the matter of the churchill bust. is this your first history of th -- first apology from the

white house, charles? >> first in the history of the world, unless you or a rogue state. i wrote something rather in act was last week, that the bust of winston churchill was removed when obama took office. within hours, there was an attack by dan pfeiffer saying that i was peddling a vicious rumors and it essentially vehemently calling me a liar. he says i am a liar because the boss is in the white house residence. i call that the british embassy, and it they said that i was right, that the bust is in the residence of the british ambassador, and the one that pfeifer showed on the blog to convince people that i was a liar was something that had been in the white house for 50 years, a gift to lyndon johnson. >> what do you think of that? >> dan pfeiffer is a big person, one of the rare people in washington who is capable of a public apology.

i want to know what happened to the lincoln boss at 10 downing. >> what does this tell you about the organization at the white house, colby? >> they are scared of charles stree. >> rapid response, we have to slam them right away. >> evan is absolutely right. >> ihavea bust of charles in my office and nobody is getting fat. >> oh, you guys. >> last word. see you next week. >> "inside washington" is brought you in part by the american federation of government employees, proud to make america work. for more information about afge and membership, visit afge.org. for more information about afge and membership, visit afge.org.

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