We can and must safeguard the financial system. Gwen covering the week, Joan Biskupic of reuters. Greg ips of the economist. Alexis simendinger of realclearpolitics. And Jim Tankersley of the washington post. Awardwinning reporting and analysis, covering history as it happens. Live from our nations capital, this is Washington Week with gwen ifill. Corporate funding for Washington Week is provided by at northrop grumman, we know in the cyber world threats are always evolving. At first, we were protecting networks. Then we were protecting the transfer of data. And today, its evolved to infrastructure. Finance. And military missions. We are constantly oin reiterating to advance oin reiterating to advance the frontline of the cyber world wherever it takes us. Thats performance. Northrop grumman. Additional Corporate Funding for Washington Week is provided by prudential. Additional funding is provided by the annenberg foundation, the corporation for public broadcasting, and by contributions to pbs station from viewers like you. Thank you. Once again, live from washington, moderator gwen ifill. Gwen good evening. Two things you need to know as the Government Shutdown is poised to enter its third week. The political ground has collapsed under the Republican Party. And americans are now saying they are more worried about dysfunctional government than they are about the jobs, about jobs and the economy. Thats from two new polls out this week. My guess is this is why. Its very clear. One person has the key to open government and thats the speaker of the house. Im ready to head up to the hill and try. But im not going to do it extreme parts of the Republican Party stop forcing john boehner to issue threats about our economy. We cant make extortion routine as part of our democracy. Democracy doesnt function this way. The president said today was if theres Unconditional Surrender by republicans, hell sit down and talk to us. Thats not the way our government works. How is this going to end . We know how its going to end. We know how its going to end. Sooner or later, the government will resume its function. Sooner or later, we will raise the debt limit. The question is, is how do we get there . Gwen good question, senator mccain. Balks amid all the finger pointing and all the blame, there has been some movement tonight. Driven in part by evidence that voters are getting just a wee bit sick of all this. So is there movement at the white house, alexis . Theres movement on capitol hill and at the white house. And its shocking to say that the various parties talking is an enormous step forward. But in washington this week, that is actually where we are. So we have the president bringing lawmakers, both democrats and republicans, from the house and the senate to the white house. And we had an interesting we watched an interesting meeting, the speaker of the house brought around 20 folks from the House Republican conference to the white house to have a discussion with the president. Which had been absent for all this period of time. Senate republicans came to the white house today. And so what we saw, this is where we are right now. We dont have a deal. But where we are is yesterday, we were talking about just the idea of trying to tackle the debt ceiling limit. The Borrowing Authority. Then republicans overnight started to blend together the idea of dealing with the funding bills. Ending the shutdown. Those two things seemed to be blended together in the discussions along with this longer term like the sweetener part of it. Lets get to the bigger policy discussions of the budget and its happening on the senate side, too. Theres no legislation. Theres just ideas going back and forth. But in washington, thats a breakthrough. Gwen so jim, i wonder sometimes whether these breakthroughs, this movement is because reality is colliding with the politics here. And people are beginning to finally see the result of all of this squabbling. And all of this uncertainty on the economy. Yeah. The reality is that this is bad for the economy. If youre a government worker obviously youve been feeling it already. Paychecks went out this week that were half the size of normal paychecks for government workers. My sons school, the big question at dropoff the last couple of weeks has been are you essential . Are you essential . But gwen only in washington. Only in washington. Around the country there are effects, too. National parks are closed. People who depend on recreation for their livelihoods are struggling. And you have people who just people who sell things to government contractors, who are government contractors, regional newspaper front pages around the country are full of people who are fed up and who are struggling from the effects of this. And its only going to get worse and thats getting back to congress. Its interesting when you talk about the topics. Theyre being discussed this weekend. Whats missing, the obama sponsored health care program. That was part of what triggered this in the first place. Gwen not just part of it. The heart of the dispute. But where is it now . Where is it now . And is it part of any of this discussion . And didnt all this obscure in some way the start of the Health Care Exchanges . Its a fascinating question. And it definitely something thats occurred to the white house. Because in any other context, if the government had not been shut down, we would have been talking about the part that was just ramping up, right . This enormous new marketplace for buying insurance. Which had the rockiest of rocky starts by anyones description or estimation. Including the health and Human Services department. Which is having to manage this new technological architecture. That didnt get got downplayed in the media attention. In the discussions that are happening, among the members of the house and the senate, and the white house now, health care has not left the table yet. Republicans are certainly in the house are walking further away from it. But you can tell senator cruz has not. And in the Senate Senator collins today was offering her version of a debt ceiling proposal to the president. Gwen sixmonth extension. Its actually to january. But it includes some tweaks, some fixes to the Affordable Care act. And presenting that to the president , would he be willing to take that whole thing as a package . The white house is trying to say that doesnt meet the president s template or what hes been saying. But were very willing to discuss you can tell that the language has really come down from arsonists and hostage takers. To were talking and were listening. When you look at the elements that seemed likely to end up in this package, does it strike that you there are vital things that are missing, especially advice vee the economy . Visavis the economy . One of the things we havent dealt with here is theres a sequester in place right now. That appears to be on track to be locked in. Theres some discussion of maybe relaxing it a little bit. But its had effects on the economy. Some of it has been offset by Monetary Policy as you know. But other parts of it havent. And thats been a drag on growth. And i think if we end up going another year with the full sequester in place, thats going to continue to hold back the economy. And thats something not talking about how to undo. Gwen one of the things they are talking about and got wrapped up together is this debt ceiling. That was the president s real platform of outrage. Which is you cant not pay your bills. But he was getting an interesting pushback this week from some of the same republicans, the obamacare argument, which is it wouldnt be that bad. It would be ok. We would survive it. Whos right . Yeah. Thats wrong. You think about it this way. If you are a Baseball Team with a payroll, and you suddenly tomorrow are told you have to get rid of 30 of it, you arent going to be nearly as good of a team. Same is true with our economy. If you take 30 of the spending power out of it right away, which is what would happen if we take 30 of the Government Spending power, which is like 4 of g. D. P. , out of the economy, right away, because we have to balance the budget because we cant borrow anymore, that means people dont get Social Security checks or get Veterans Benefits or something. That money has to come from somewhere. And thats money that creates jobs and fuels the real economy. And what we have more repercussions internationally also . Certainly the states are going to feel more than they already feel with what weve had. So far. But talk a little bit about repercussions globally from that. Yeah. I sat down with the head of the oecd. Gwen the office of organization for Economic Cooperation and development. Gwen not that we all didnt know that. But im just saying. Sure. Anyway, theyre a Big International organization focused on the economy. And they are very aware that this could trigger a global recession, not just an american one. Gwen heres the other thing im curious about, too. Which is people think that the president basically cried wolf on sequester. That it took effect. And now theyre basically letting it stay in effect and we seem to be doing fine. Why how does the president deal with the idea or the democrats deal with the idea that maybe theres a sense that theres crying wolf about the potential Economic Impact of the Government Shutdown or of the debt limit not being raised . You know, its an interesting question. Because it is true that a lot of the polling suggests that a lot of americans havent been touched by the Government Shutdown. In parts of the country that we dont live in. Gwen except for the idea that the government would shut down. Theyre very aware of it. And on the debt ceiling element of it, the Borrowing Authority part of it, really smart people are saying that the american people, this is showing up in the polling, that these things are blended together in their idea of washington dysfunction. And it does constrain their consumption, their buying. And were seeing that level. You can see in some of the michigan study that just came out today. That confidence in the economy has gone to a ninemonth low. So it has its a psychological element as well as the economic or the prediction element. And i think the president did suffer from that trust deficit. After the sequestration. But i think that in this particular case, were starting to see more and more of a pickup that this is a bad thing. You mentioned the polls. And i really have to ask because weve seen this movement in the republican side toward compromise. At the same time theyve gotten some pretty bad polling numbers. Gwen you think theres a connection . I guess im a conspiracy minded person. Greg, greg, im worried about you. There is in every estimation and admitted from members of the republican conference on the house, an understanding that the polling did not show up well for them. Whether its Gallup Survey or nbc wall street journal poll that came out on thursday night. Only senator cruz seems to be so sanguine about saying the polling itself is an error. And it doesnt happen to the sentiment of most americans. Gwen he bases this on his own polling . Yes. His own his finger on the pulse of america. Gwen ok. In this particular case, on capitol hill theyre very aware of it and their own pollsters are telling them that this is what theyre picking up, too. So theyre persuaded that there is a connection. And i think that this is something that the white house strategically was thinking we would get to. And who else is really worried about this and putting a lot of pressure on republicans and democrats is the Business Community. We saw a lot of advertisements this week from retailers, from manufacturers. Gwen chamber of commerce. And when youre out talking to small businesses, i was in ohio last week. Same thing. People are saying we cant invest. We have no idea whats going to happen with the government. Whether theyre going to make good on their debts. So theres worry among the Business Community and that is ramping up pressure. The president talked to governors and governors, bipartisan groups of governors, and you can see in the states that theyre feeling it, too. Gwen and i my favorite quote this week came from the governor of new jersey. The ever quoteable Chris Christie who told the philadelphia inquirer, if i was in the senate right now, i would kill myself. Not to put too fine of point on it. You can always count on governor christie. The Supreme Court dipped its toe into politics this week. As well. Revisiting one of the most contentious issues. It will decide this year. Limiting campaign contributions. This is not Citizens United but it could change the way individuals support candidates. How is that . Yes, this is about limits on the aggregate or total cap that an individual can give to candidates and Political Party committee or a p. A. C. And its been challenged by a man by the name of sean mccutchen. Businessman near birmingham, alabama. Who says im not going to challenge the individual base limits, 2,600 you can give to an individual candidate in a twoyear election cycle but challenge the aggregate totals that are limiting me. Because i want to give to more candidates and more political committees. And he backed by senator commonly and backed by the Republican National committee before the Supreme Court on tuesday said these violate our First Amendment speech rights. Now, the Supreme Court in the past has said that government has more leeway to regulate contributions because contributions raise the specter of possible quid pro quo. As opposed to what was at issue in Citizens United which was independent spending by corporations and labor unions. So this is a more direct way that contributor can try to win favor with an office holder. Gwen im curious about the way these cases get to the court and so many of these strongly ideological cases they find a plaintiff who will then take it and challenge the issue until it gets to the court. Is this what happened with this guy . Yes. Because we had these things have been slowly coming up from various quarters. Primarily from republicans. This does break down both politically and idea logically. With a lot of republicans seeing their eye on a Supreme Court thats been looking much more skeptically at federal regulation of Campaign Financing and look at the speech. The court has said in the pastness a First Amendment speech right. But where this case is different that its not about spending. Its about a more direct element that in the past, the Supreme Court has said, requires a little bit more latitude on the part of government because it could give either the appearance of corruption or actual corruption. One of the things that i understand is that Citizens United in a way came up as maybe some secondguessing about it or maybe some hints about what might go forward. Can you explain what they were talking about . A dichotomy. And this all traces back to a 1976 ruling called buckley versus valeo. The Supreme Courts look at the postwatergate reforms. In that ruling the court drew the distinction between governments ability to regulate independent expenditures versus contributions. And a couple of the justices said, you know, why do we still have that . Do we have should government have that kind of latitude for contributions . And at one point, they were talking about whether actually make it harder for government to restrict contributions. And elena kagan who was the former solicitor general for president obama said wait a minute. What about going the other way . Making it harder, you know, making it easier frankly for government to then come in and regulate expenditures. In effect reversing Citizens United. And solicitor general don vereli who succeeded her was at the lecturn saying far be from me to go backward which was a nice moment in the courtroom. Joan, what was the atmosphere like in the courtroom and did you get a sense that any particular justice dominated the questions or really aroused peoples interests with this . Justice elena kagan, flashback to september of 2009, when the court heard Citizens United, she was actually at the lecturn. Arguing on behalf of the Obama Administration to reject gwen was very active in these arguments. Completely active. And up on the bench having been appointed by president obama in 2010. And she was there right out of the box. Trying to defend the obama the governments regulation here. So she was quite active. The person who i was looking for was chief justice john roberts. As we know he has taken so much criticism for the Citizens United ruling. Which just a reminder everyone, 54 along ideological lines. Allowed more corporate and Labor Union Money into elections. And i wondered if he would tip his hand a little bit. And what we saw with him, more muted in this argument. Looking as if he would not like caps on how much an individual could give to a candidate. But maybe allowing caps to political parties. Interesting. New term, but my favorite classic question of the court, did Justice Thomas ask a question . No. Not since february of 2006, jim. Gwen why he did not ask a question. So were going for i think hes going to go for a personal best. Gwen and in the end, is it possible at all that we could see a reversal of Citizens United . Surely thats the fondest wish of many of the conservatives on the court. Not on this case but what it could take if we have our 77yearold justices Antonin Scalia or Anthony Kennedy decide to step down in the near future, and have a new democratic appointee, then you wouldnt gwen conservatives. I meant liberals on the court. They got four of them. And theyre on the younger side now. Our two newest justices happen to be democratic. So rulings have been reversed before. It would be a very big deal. But its not like democrats dont have their fingers crossed for possibly another nominee. Gwen we love that first monday in october. Some things at least still open this week in washington. I cant recall a time when there has been so much suspense about who would become chairman of the federal reserve. Well, the president ended that suspense this week by picking outgoing chair Ben Bernankes deputy to succeed him. If confirmed, janet yellen would be the first woman to run the fed. This is how the president described her. Janet is renowned for her good judgment and sounded the alarm early about how the housing bubble. About excesses in the financial sector. And about the risks of a major recession. Shy doesnt have a crystal ball but a key understanding of how markets and the economy work. Not just in theory but also in the real world. Gwen what does he mean she doesnt have a crystal ball . I thought after the buildup to this appointment. Why didnt she have a lock on this job from the beginning if he was praising her so much so this week . Thats an interesting question. If you go back five or six months when this was still a big question of who the choice would be, a variety of leaks from the white house that suggested they were looking at a couple of people and perhaps the president would have preferred Larry Summers. Larry summers was his chief economic advisor, the first two years of his first term and treasury secretary back in the 1990s. If you look at Larry Summers and janet yellin, not how different they are but how similar they are. They started life as academic economists and made contributions to macro and labor markets and spent all this time in public life. Janet yellin in the Clinton Administration was chairman of the council of economic advisors. But what what the word was from the white house was that obama wanted somebody who was a really steady hand in a crisis. And yellin was not part of his tight inner circle. The financial crisis. Summers was. Correct. And also we have seen from this president that he does tend to like to appoint people that he knows and hes comfortable with. A lot of people are not comfortable with Larry Summers but barack obama is not one of them. And you had the sense that he had a very high degree of comfort having he would have had a high degree of comfort. The problem was there were a lot of people that Larry Summers rubbed the wrong way over the years. Who would not have been comfortable with that job. And it was democrats not republicans and many had h raised the fact that larry on the wrong side of the debate of regulation when we had less of it and should have had more of it and his personality can be alienating. This is everybody talking about firsts here. Im not going to ask you about the first woman. Ill ask you about the first democrat since the 1970s. Since paul volcker, right . So how will gwen very good, joan. Supreme Court Justices and federal reserve. And how will americans experience . Will we see anything different . How will that if youre talking about a democratic appointee in terms of Monetary Policy, it cant be that radical, right . Especially if you look at the economy right now. Not many people who would dispute that. Unemployment is a bigger problem than inflation. So its not going to produce an immediate change in Monetary Policy. Moreover, for the last few years, janet yellen has been the vice chairman of the fed. And she has had a big role in the decision that Ben Bernankes outgoing charpe has taken. Particularly that traits will stay near zero for several more years and go forward with in socalled quantitative easing program. Thats the way economists refer to printing money. They buy bonds in an effort to stimulate growth and get longterm traits down. And the president made it clear in his remarks this week and through the whole vetting process that it was important to him that he have a candidate who cares much about unemployment as about inflation. And more likely to find that with a democratic than a republican candidate. Greg, i have heard from plenty of folks this week as im sure you have about janet yellen and the issue of inflation. Is that going to be the big conservative knock on her . Folks who oppose her confirmation . Thats a very good question. Because she doesnt have a job yet. She has to go through confirmation and youre saying you can remember a time when there was so much about the fed chairmanship. I cant, either. These jobs used to like sail through. The ultimate nonpartisan vote and sail through the senate with almost no opposition. But in the last five years, the fed has done a lot of controversial things from bailing out bear stearns and a. I. G. To pumping all this money into the economy through quantitative easing and many uncomfortable with that and most of the republicans in the senate are very uncomfortable with that. Bob corker who voted against her to be vice chairman. And he said this week, she did not seem very modest about what Monetary Policy can achieve. I havent seen any changes. I predict that she will have as many if not more no votes than ben bernamping d and doesnt really have to do with her resume which is frankly irreproachable in terms of qualifications. But the fact that it has a much more controversial issue than it used to be. I think about the president s deliberation about whom this should be. There was so much of all this prevetting on capitol hill. In the confirmation, what will they want to know from her about regulation or we think of the fed as independence. But how much are they going to pull out of her about where she would go and where she would take things and what does she have to commit to . There are so many things that the fed chairman has to nowadays especially in the highly regulated world were in has to keep her eye on. She will get a lot of questions about regulation. Not as many as Larry Summers would have. I might add. But she will get a lot of questions. But i predict that most of the questions, especially from the republican side will be about Monetary Policy and how much more are you going to continue with this money printing. Gwen how does she play this . It seemed Larry Summers was campaigning for the job and didnt get it and she didnt campaign at all. Quite the opposite. Let the word out that she would not campaign for the job and didnt want anybody campaigning for the job on her behalf. Its because unlike Larry Summers she is a sitting central banker. And that would would have not not looked good from the independent point of view. Gwen so much for leaning in. Leaned back and got the job. Thank you, everybody. We have to go now. But the conversation continues online. And on the Washington Week webcast extra. Where well delve a little more deeply into the personalities driving this weeks washington politics. That streams live at 8 30 p. M. Eastern and all weekend long on show so our website. Keep one daily developments on the shutdown showdown and other news on the pbs newshour seven days a week and well see you right again here next week on Washington Week. Good night. Corporate funding for Washington Week is provided by we went out and asked people a simple question. How old is the oldest person youve known . We gave people a sticker and had them show us. We learned a lot of us have known someone whos lived well into their 90s. And thats a great thing. But even though were living longer, one thing that hasnt changed, the official retirement age. The question is, how do you make sure you have the money you need to enjoy all of these years . Additional Corporate Funding for Washington Week is provided by northrop grumman. Additional funding is provided by the annenberg foundation, the corporation for public broadcasting and by contributions to pbs stations from viewers like you. Thank you. Be more. Announcer a kqed television production. s like sort of old fishermens wharf. Like family discount. A little like jeangignon the calories its like an investment. Oatmeal with a touch of wet