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State of the Union

Interview With Senators Cornyn, Warner; Interview With Heath Shuler; Interview With James Clyburn

Aired November 14, 2010 - 09:00   ET


JOE JOHNS, GUEST HOST: There is a laundry list of legislation facing Congress when the lame duck session kicks off tomorrow, but there's one issue at the top of everyone's list.


JOHNS: These are a lot of solutions that are simply guaranteed to create strong reactions in Washington, D.C., with this Deficit Commission. We want to thank both of you, Senator John Cornyn and Senator Warner for coming in and talking to us a little bit this morning.

Really want to start out with the Deficit Commission and some of the recommendations. We realize this is just a draft, a "chairman's mark," as they call it. But I want your reactions and what the two of you might actually sign on to from among these issues.

Raising the age to receive Social Security, cutting benefits for higher income retirees. Any takers there? Reforming the tax code, including ending tax breaks for mortgages in the child tax credit. One hundred billion dollars in tax cuts on defense spending to senators from states with a lot of military. Freezing pay for non- combat pay for three years. Raising the gas tax.

Are any of these things that either of you can sign onto or can you reach some agreement somewhere, say today?

CORNYN: Well, we have to do this on a bipartisan basis because the American people have said that business as usual in Washington, D.C., is unacceptable, particularly when it comes to spending and debt and people worried about the high degree of joblessness.

But I think that start has to start not only with the recommendation of the Debt Commission, but also the president's budget, which under the law, Budget Act, he has to submit by the first Monday in February. That's the blueprint that should lay this out and we'll have to see what kind of commitment President Obama and his administration will make to cutting spending and dealing with this unsustainable debt.

WARNER: I actually give the budget commission a lot of credit for, you know, putting out some hard choices. It's kind of where the reality meets the campaign rhetoric about deficit reduction. And I think there's a lot in the plan that I could be supportive of. Listen, some of this stuff is not Democrat or Republican. Some of it's just math. For example, 50 years ago, eight retirees for every worker, now only two. Look, folks at 25 or 30 years old today aren't going to get Social Security at 65 or 67. We're going to have to raise the retirement age slowly, in a slow way that doesn't affect folks 50, 55. But this is just math. We've got to do some of these things.

JOHNS: Defense spending should stay on the table then?

WARNER: Listen, defense spending is going to have to stay on the table. Domestic spending, though, we need to take a big hit to as well.

JOHNS: All right. Now, Senator Cornyn, you actually have taken a pledge not to raise taxes. And if I can look at this American Tax Reform (sic) graphic we have, support for the commission chair plan would be a violation of the Taxpayer Protection Pledge which over 235 congressmen, 41 senators have made to their constituents.

So if you were, say, to sign on to the deficit reduction plan, then you would have to violate this pledge, wouldn't you? Could you do that?

CORNYN: Well, I don't think it's a question of, are the American people taxed enough or should they be taxed more? We ought to be looking at spending cuts. I mean, the problem that most families and businesses have when there's only so much revenue coming in the door, they have to trim their expenditures.

That's what the federal government ought to be doing, rather than looking for ways to grow the government and grow the tax burden and discourage job creation.

JOHNS: But could you support tax increases?

CORNYN: I certainly wouldn't start there. And I would say I would be disinclined to support any tax increases. I think we ought to look on the spending side.

WARNER: Joe, let me just add on this. We're not going to solve this problem on one side of the balance sheet alone. Yes, we're going to need to look at significant spending cuts, but at some point we're going to have to look at the revenue side as well.

I mean, I think one of the things the commission draft pointed out was that statistics that I don't think most Americans know. We collect $1 trillion a year in income taxes, yet we have $1.2 trillion in tax spending through tax loopholes or tax expenditures. Saying that we can't even look at that half of the ledger will never allow us to get the deficit reduction that we need.

CORNYN: No. We've seen an explosion in federal spending over the last two years through the stimulus plan and other huge growth in the federal spending. We have to go back to, I believe, 2008 levels and freeze the federal spending level at that level, and then look where the big money is, which is in entitlements.

Mark touched on Social Security. Medicare is out of control in terms of the spending there, and the debt burden on children -- our children and grandchildren. So we need to look at where the money is, and I think we ought to -- it ought to all be on the table.

JOHNS: The American deficit is one of the issues that probably caused problems for President Obama when he was on his Asian trip. And there are people who say he didn't come back with very much. He wasn't able to get South Korea, for example, to sign on to a free trade agreement. He wasn't able to really make any headway on the issue of American currency vis-a-vis the Chinese. I guess the question is, given America's financial situation, is this diminishing our place in the world, or is the president's trip simply a reflection of him being a weakened president, say, by the midterm elections?

CORNYN: I'm glad the president went to India, and these other places to talk about free trade. I wish we had passed the three pending free trade agreements that have been languishing in Congress because the administration hasn't gotten behind them yet.

I hope this represents a change in approach to recognizing that markets abroad create jobs at home. So I'm really glad to see that. Mark and I happen to be the chairs of the India Caucus in the United States Senate. Mark will be starting January the 1st, taking over from Chris Dodd.

So we -- I think we both applaud the president's travel there, his commitment to free trade, and making sure that India, the world's largest democracy, represents one of our strongest trading partners.

WARNER: Well, listen, I think it's good to see the president abroad standing up for America, and pushing back on folks like China, who I believe have been manipulating currency and putting American business at a disadvantage.

I want to see a free trade pact with Korea as well, but I think John and I would both probably agree that we want to make sure that those cattlemen in Texas get a chance to sell their beef into Korea and that American automakers ought to be able sell their cars into Korea as well.

We've got to recognize that the challenge we face in this global economy is in the past, the rest of the world had to wait for America to get its economy or its political act together, but right now there's a billion people in India and a billion people in China. They are rushing ahead. They've got a plan.

We ought to make sure part of that plan includes selling them our stuff so that we can grow our economy through exports.

JOHNS: One of the issues that has rippled the waters over there and here in the United States is the Fed essentially pumping $600 billion into the economy at a time when taxpayers seem to have said that they want less federal spending. Does the Fed have too much power? CORNYN: Well, I think we need to be concerned about the Federal Reserve diluting the value of the dollar. Look, I think we're seeing a competing vision in places like Germany and Great Britain, where they have signed on to austerity programs, not more spending of borrowed money.

And in essence that's what this represents more of. And so I think Congress needs to look at that, and to figure out, are there limits we need to place on the Federal Reserve's authority here? Fed independence from politics is important, but this is the American people's money, and this is our economy. And so we ought to be able to look at that as well.

WARNER: And I just believe that, you know, the Fed is basically using its last tool, a little bit of quantitative easing, and, again, if that's against China, which has been manipulating its own currency, I think it is a tool to be used.

But we have to acknowledge that government has used its tools. We've used monetary policy about as much as we can. We've used federal stimulus about as much as we can. Part of our challenge is, how do we get the positive part of America's economy, the fact that corporate America today is healthier financially today than they were before the recession, $2 trillion in cash sitting on their balance sheets? How do we get it off the balance sheets, back reinvested?

JOHNS: OK. Hold that thought and stand by. Coming up next, is a compromise on extending the Bush tax cuts on the horizon? I know we all want to talk about that. Stay with us.


JOHNS: There is a laundry list of legislation facing Congress when the lame duck session kicks off tomorrow, but there's one issue at the top of everyone's list.



SEN. JOHN MCCAIN, R-ARIZ.: Bush tax cuts.






JOHNS: In the spirit of post election bipartisanship both President Obama and Republican Senate leader Mitch McConnell seem open to compromise. In a press release Thursday McConnell said "I'm willing to listen to what the president has in mind for protecting Americans from tax increases."

There's only one problem, what to compromise on. Some moderate Democrats want to extend the Bush tax cuts for everyone temporarily, while the economy recovers, and only make the tax cuts for the middle class permanent.

So far that's been a non-starter with Republicans who don't want to take a tough vote on tax cuts for the wealthy two or three years from now. But our guest, Senator Mark Warner, proposed another potential compromise. "Extend the tax cuts just for 98%, allowing the cuts for top wage earners to expire as scheduled but instead of removing $65 billion from the economy; we should work with the business community to enact $65 billion in new, targeted business tax cuts and incentives to spur private-sector investment."

But will Republicans buy that plan? We'll ask Senator Cornyn next.


JOHNS: We're back with Republican Senator John Cornyn and Democratic Senator Mark Warner.

So, Senator Warner I guess the question for you is, the White House does know about this plan. Have they signed onto it?

WARNER: I don't think anybody's signed on to it. But let me tell you the basis for it. First of all I think we all agree our middle class, the 98% of Americans, their tax cuts ought to be extended. Then I start with the premise that actually both the Democrats and the Republicans have a point on the top 2%. Democrats are right that permanent extension adds $700 billion to the deficit. Republicans are right, we shouldn't take the money out of the economy right now.

The problem with the two-year extension is -- I'm new in the Senate but most of these contrary extensions have a tendency to end up becoming permanent and most economists would say given folks like me an additional tax cut might not be the best value. So I say how can we use dollar for dollar the revenue we take for a two-year extension on the top 2% and use it for targeted business tax cuts to get parts of the literally $2 trillion in cash sitting on the side lines on the business balance sheets back investing in the economy.

It would be a great way to engage with the business community.

JOHNS: So, Senator Cornyn is this something you could sign on to, basically tailor it toward credit toward business?

CORNYN: The most important thing the economy needs now is certainty. The reason why we have so much money sitting on the sidelines waiting to be invested in the private sector is because of the turmoil and churning they've seen coming out of Washington with the power grabs, whether it's spending money we don't have on the stimulus bill, the health care bill that cost $2.6 trillion or $7 trillion. The financial regulatory reform bill punts the ball to the regulators to write the rules that haven't been written yet and people wonder what are the rules of the game.

So I think, we don't need to raise taxes on anyone during a fragile economic recovery including the people who report their business income on small individual tax return, small businesses.

JOHNS: Let me move on right now, because I have got a three or four other places. One of the things I found was on Twitter this week, you put up a tweet, one of the most controversial issues in the congress right now, "I support earmark moratorium. We hear you America!"

So is it pretty clear that the Congress, Republicans in both the House and the Senate are signing on to an earmark moratorium?

CORNYN: Well, I heard the president say he's in favor of that, while we reform the system. And certainly we know House Republicans - or I hope our friends on the Democratic side will join us in changing the way we do business in Washington. That's the reason I thought the message was so important.

We need to listen to what the American people told us in this election, they don't want business as usual. They want us to change on spending and debt and that's part of the solution I think.

JOHNS: But don't you give the president of the United States, in this case Barack Obama, the power to decide what Texas gets in terms of federal money?

CORNYN: I think what we do, if we eliminate earmarks, is we control the purse strings in Congress. We cut that and put that money that would otherwise go to earmarks toward deficit reduction.

JOHNS: Where are the Democrats on this?

WARNER: My view, I'm a new guy in the Senate, in the two years I've been here, if there's anything I've fought for, I put my name on it, full transparency. But I agree with John, if we're going to get rid of earmarks and everything is done with it, so be it.

JOHNS: In this lame duck congress another thing that could, might not come up is highly likely to be talked about again is "Don't Ask, Don't Tell." Do you see the congress during the lame duck session repealing "Don't Ask, Don't Tell?"

CORNYN: Joe, there are two things we have to do in the lame duck session, one is to pass a continuing resolution to keep the federal government operating until January when we come back into session with the new people who have just been elected on November the 2nd. The second is to deal with this tax increase issue, which would result in a $3 trillion tax increase unless we continue current policy.

Now, we can debate how long that will be. I would love to make it permanent myself.

JOHNS: It sounds like a no on "Don't Ask, Don't Tell." CORNYN: Well, I just think -- I don't think there's a lot of time. And I don't think there's a lot of appetite to try to jam stuff through. The president said he wants to pass a new S.T.A.R.T. treaty in a lame duck session. I just don't see that happening.

JOHNS: Senator Warner?

WARNER: Who knows what's going to happen in the lame duck. I am glad to see that the Pentagon has finished its study and it looks like they're going to come out and say that we can change this policy, which I support changing the policy and changing the policy will not affect military readiness. I think that Pentagon study and report is very important.

JOHNS: Will it take down, say, the defense authorization bill, which is the real question, or do you have to pull it out in order to get it through in some type of an omnibus legislation?

Is it -- I mean, is it just a simple question of logistics -- quick answer, if you will?

CORNYN: Well, "Don't ask, Don't tell" is not -- not military policy. It's congressional policy. It's the law of the land. So I expect we're going to have a continued debate about this when we see the full report from the Department of Defense on how this impacts military readiness.

JOHNS: December 1st.

All right. We're out of time on this. Thank you so much, the both of you, for coming in.


WARNER: Thank you.

JOHNS: And we'll watch the lame duck session.

When we come back, an identity crisis among House Democrats: Should they follow Speaker Pelosi or chart another course?


JOHNS: The shellacking that President Obama said he and his party took in the midterm elections came largely at the expense of conservative and moderate House Democrats known as the Blue Dog coalition. Of the 48 Blue Dogs who sought re-election, 22 lost their seats to Republican challengers.

So when Speaker Nancy Pelosi announced she would run for minority leader in the new Congress, the news received an icy response from surviving blue dogs. Congressman Jim Matheson of Utah said, "There's a growing number of people in the caucus who say, why's she running for minority leader in the first place? We just got thumped in this election in a major way. It just seems like a very obvious situation when change is called for." And there's evidence of that in a poll released this week. A majority of Democratic voters, 54 percent, say their party leaders should move in a more moderate direction. Our next guest, North Carolina Congressman Heath Shuler, who promised he would challenge Pelosi for the top leadership post if no one else did. He told a newspaper in the state this week that it will be very tough, but we need a moderate voice in the Democratic Party. Congressman Shuler joins us when we come back.


JOHNS: Joining me now from North Carolina, Democratic Congressman Heath Shuler.

And, Congressman, thanks so much for coming in and talking to us. I understand you're in Asheville.

A simple question here, right off the top, is you've said that you would step up and challenge Nancy Pelosi if no one else will. Are you prepared to say today that you're going to do that?

SHULER: We've just come off the largest -- a devastating loss for the Democratic Party in almost a century. And to be able to put Speaker Pelosi as minority leader is truly -- it's unacceptable for our party, to move our party forward in a moderate direction. To be able to get some of those members of Congress who lost in this 2010 election -- to get them back available for the 2012 election, we're going to have to go more of a moderate direction. And, you know, to be able to take the same approach that we have during these last two years is not going to get us where we need to go as a party.

JOHNS: So you're throwing your hat in the ring?

SHULER: Well, I mean, I've said all along I'm hoping that Nancy Pelosi will step aside and will allow the leaders that are available, who are ready to go, but because of her being at the very top right now, no one's willing to throw their hat in the ring. And if it comes down to this coming week and she doesn't step aside, then I will challenge her.

JOHNS: Right, so you've only got until Wednesday. Are you in or out? Can you say yes or no or not prepared to say yes or no right now?

SHULER: Well, I'm really hoping that, when we get back to Washington tomorrow night, that the speaker will realize, with so many of the members of Congress knowing that we need to go in a different direction -- you just saw the latest polls based upon Democrats wanting to go in a different direction.

We've got to be able to recruit. We have to go into those moderate areas, those swing districts, and be able to get great recruits or get back those members of Congress that we lost, be able to have them on the ticket in 2012 to be able to win back the House. And I just don't see that path happening if we have her at the top of the leadership. JOHNS: She has given every indication that she's in, in the race for minority leader, so given that fact, it's much more likely that you're going to be in; it's much more likely that you're going to be running, and do you have or see any chances of winning?

SHULER: Well, I mean, Joe, let's be realistic about it. I mean, there's a reason why -- I mean, over 60 moderates lost in this 2010 election, so I mean, the moderates lost. There's very few numbers of us left. The entire House has been pushed further and further apart in their different viewpoints. The moderates have to bring the Congress back together to move our country forward.

SHULER: And you know, I would really hope that she would step aside to allow Steny Hoyer, James Clyburn, those gentlemen to step forward in the leadership positions that they held in the majority to be leader and to be the whip and to be able to move our Democratic Party in a direction which we can gain back seats in 2012.

JOHNS: All right, so some House Democrats of course are justifying, saying that Pelosi should be in, simply because she'll be able to keep the president from moving, they say, too far toward the middle, back toward being moderate, as opposed to staying out on the wings where a lot of people say he should be, given the fact that he pushed things like the health care bill and other bills.

What's your view of that argument?

SHULER: Well, the first and foremost, I mean it's time for us to start looking, are we push legislation to the left or to the right and start pushing legislation based on what the American people want. And if you look at it, I mean, the diversity within the Democratic Party, we want to be able to keep the big tent and not just be able to get under one umbrella. And so I really think it's very important for us to be a very moderate caucus, but realize that we have to push legislation that's going to be voted on and that we can have compromise with our colleagues across the aisle, and to be able to work with the entire caucus within the Democratic Party.

And I mean, if we can't do that, then it's very difficult for us to legislate and it's very difficult for the president to be successful.

JOHNS: I know that Nancy Pelosi has been held out as the big problem on Capitol Hill by Republicans, but there are a lot of Democrats privately who say it was the president's policies and the president's positions that led to the demise, if you will, of so many blue dogs, in the House of Representatives.

What's your view? Is Nancy Pelosi or President Barack Obama more to blame for what happened to Democrats in the midterms?

SHULER: Well, I'm not here to cast stones or putting -- placing blame on everyone. I think the most important thing is when we look at legislation, far too often in the House the legislation was so far to the left it took so long to move legislation back to the center, it had been demonized by everyone involved and made it very difficult to be able to get a real message out clearly to the American people about what legislation should be passed in the U.S. House, and then in effect what ultimately happened they become demonized and obviously publicized and it was very difficult to get Democrat moderates to weigh in on the legislation, and at the very end to vote on it.

JOHNS: So safe to say right now you're neither in nor out of the race for the Democratic leadership.

SHULER: Well, obviously if she doesn't step aside then I'm fully aware, I'm going to press forward. You know, I can add and subtract pretty well. I don't have the numbers to be able to win, but I think it's a proven point for moderates and the Democrat Party that we have to be a big tent. We have to be all inclusive. We have to invite everyone into the party.

JOHN: All right.

SHULER: And I don't like the direction in which we're going. So I want us to be a big tent party.

SHULER: Thank you so much, Congressman Shuler, joining us from North Carolina.

Now joining me, the majority whip in the House of Representatives, Congressman James Clyburn of South Carolina.

You've heard what Mr. Shuler has to say. What do you think of it, Congressman Clyburn?

CLYBURN: Joe, thank you so much for having me this morning. I agree with my good friend Heath Shuler that we have to have a big tent, and that's exactly what we have in our party. And I would hope our party would be going forward with this big tent. I don't want us shrinking the tent in as far as our various caucuses are concerned.

We're dealing with less numbers among the blue dog coalition, a growing numbers in the Congressional Black Caucus about the same and the Congressional Hispanic Caucus. But we're dealing with issues now where our new Dems are very concerned about what kind of trade policy we're going to have going forward, and there are others who would not like to see any trade policies. And so all of these issues must be discussed under this big tent, and I do believe that there's much too much noise is being made about the leadership team.

We all know what happened this past year. We had an economy...

JOHNS: Congressman?


JOHNS: Yeah, I just wanted to jump in here and say, for clarification sake, there's pretty much no chance in your view that Nancy Pelosi is going to get out of the leadership race?

CLYBURN: Oh, I don't think so. She's made the declaration. I've read two or three letters within the last week or so. I think that we all know that she will be a candidate.


CLYBURN: And as Heath Shuler just said, if he were to get into the race, he would not have the votes to be successful.

JOHNS: Now you've put out a letter of your own, just over the past 24 hours or so.


JOHNS: Talking about the deal, if you will, that's been arranged so that you remain in the House leadership. Tell us about that deal, and how you reached the conclusion that you did.

CLYBURN: Well, because our members were very strong in the discussions with me that they did not want to vote on this issue. Some members told me they would not come to the meeting if this issue were not resolved. Some told me if a vote came up and they were in the room, they would leave the room.

And so what we did was look at this issue and see how we could best keep our caucus together, and not having them choosing between me and Steny Hoyer for whip or me and John Lawson for chair of the caucus.

JOHNS: And so you may be third in charge, right? That's what the deal is?


JOHNS: You end up third in charge. And are you satisfied with that?

CLYBURN: Yes. That's what I am now.

JOHNS: OK. Right.

CLYBURN: That's where I am right now.

JOHNS: So there's no change but you're not the whip any longer.

CLYBURN: No, I am not. Because in the minority, whip is number two. It's number three when you're in the majority. So since we're in the minority then we have pulled another seat up at the table. And I will be offering for assistant leader.

JOHNS: Right, before all of this you had said every time there's a deal, the short end of the stick ends up with the Congressional Black Caucus. What did you mean by that, while all this friction was going on?

CLYBURN: I don't think I ever said that. I think that was said, and maybe somebody attributed that to me, but I never said that.

I think all my caucus members will tell you that I did not speak in those terms. I may have said that the last time we had a serious situation like this, I stepped off of the appropriations committee so that my party would be saved from an embarrassing situation and I did do that. So I was talking about myself and what I have done in the past in order to maintain the integrity of the decisions made by the leadership in my caucus. And I'm doing the same thing in this instance.

JOHNS: Okay. One of the big questions I think that's out there, particularly among the moderates, the Blue Dogs if you will, can Democrats regain the majority with Nancy Pelosi in charge, you and Steny Hoyer, basically the same leadership that was there before this midterm election that was so devastating to Democrats?

CLYBURN: Well, I will remind them how did we get the majority? We spent 12 years in the wilderness, four years ago we came into the majority. Who was leading the team then? Nancy Pelosi. Steny Hoyer was in second place, I was in third place.

This is the team that brought us out of the wilderness and since it's Sunday morning, let me use a biblical stuff, "into the land of milk and honey."

Now all of the sudden, we saw a collapse of the economy. We saw people losing their homes. We saw a global threat, and everybody knows that that is what turned this country sour. That is the headwind that we were all sailing against, and it had nothing to do with the leadership, in my opinion. It had everything to do with the economic conditions of the country that turned things sour for everybody.

JOHNS: It's also been said...

CLYBURN: ...and people always -- I'm sorry?

JOHNS: It's also been said collective decisions among the congressional Democrats as well as the White House sort of led to the perfect storm if you will that ended up the midterm elections. How much responsibility do you think the president of the United States needs to take? And who's talking to him to try to sort of turn this thing around for Democrats, as he goes forward toward the reelect?

CLYBURN: Well, I would hope they will all be talking to each other. I was out there this past year, and I can tell you, there are some things I learned that I really believe we need to take a hard look at. And that's one of the reasons Nancy Pelosi made this situation so that I would be there at the table and in these discussions going forward, because I do have some things to say to my caucus about what we need to do going forward.

JOHNS: All right, thank you so much, Mr. Clyburn. And we will be watching the leadership races next week.

Coming up next... CLYBURN: Thank you so much for having me.

JOHNS: ...we'll preview the big political battles coming up in Washington with a former Obama White House insider and a retired Republican congressman.


JOHNS: Joining me now here in Washington, Anita Dunn, former White House communications director for President Obama; and Tom Davis, former Republican congressman in Virginia.

Thank you both so much for coming in. One of the things we haven't talked too much about today, and it is kind of interesting, the president is coming back from his Asia trip, and a lot of questions out there as to whether he accomplished much or that he was able to do what he set out to do.

What's your view? If the president wasn't able to get a free trade agreement with South Korea, if he wasn't able to get any concessions on the issue of currency with the Chinese, what did he get besides really nice photo ops?

DUNN: Well, you know, Joe, I think that one of the things that's striking about the trip is that it's the first time that you've had exchange rates on the agenda, for anybody to talk about. It's the first time that people have had open discussions about this.

And it's symbolic of how the world economy has changed and where our economic growth is going to come from. It's why it was a very important trip for the president to do right now as we move from the economic crisis to a period where we're going to be looking at growth and where we want to figure out, how do we grow with the economy, how do we grow those jobs?

The thing about the South Korea free trade agreement, which I think the White House has said, and which is obviously true, is that there will be one negotiated. But the president didn't go there to cut a bad deal for the United States. He went there to get the best deal possible so that we can have jobs and trade in the future.

And the fact of the matter is that, you know, taking a hard line to protect the interests of the United States is what the job is about.

JOHNS: So, Tom Davis, what does it say, though, if the...

DAVIS: Well, first of all, let me just say, our markets have been open to Koreans. We want to open up the Korean markets. He inherited a treaty negotiated by Bush that was sitting on the shelf and the Democratic Congress wouldn't move it because their labor base basically didn't want a free trade agreement. And not doing Columbia and Panama, I don't understand why they haven't moved ahead on trade.

But the irony here is that the president was going to be inclusive and be part of the rest of the world. And said the Bush administration was isolated. Looks now the rest of the world is zigging and we're zagging.

We're trying to do a huge shot to our economy, the rest of the world is on an austere diet at this point. We're here floating more currency and Japan's biggest rating agency just downgraded our bonds to A-minus.

And so as you take a look at it, it's kind of opposite of what he campaigned on. I mean, it was tough trip for him. Plenty of time to recover. Two years is an eternity. But he didn't come back with what he wanted.

JOHNS: So is the whole world turning isolationist? Is this...

DAVIS: Well, we are. I mean, look at it. We haven't done any trade agreements, nothing in the last two years has come forward. We had three on the shelf and they've both been discarded.

The rest of the world, there are trade agreements, hundreds of trade agreements being negotiated around the world. And as these foreign markets are opened up to the European Union, to China, to India, and we're not part of it.

JOHNS: Now, OK, so let me move on to this article op-ed, if you will, that I just you found fascinating today. It's the question of whether we ought to have a one-term Obama presidency. This is an op- ed by Doug Schoen and Patrick Caddell.

And the quote we pulled out says: "By explicitly saying he will be a one-term president, Obama can deliver on his central campaign promise of 2008, draining the poison from our culture of polarization and ending the resentment and division that have eroded our national identity and common purpose."

What do you think of that? I mean, it seems on its face kind of completely against the grain, if you will, of Democratic politics.

DUNN: Well, I think that, you know, Pat Caddell and Doug Schoen, who wrote the piece...

JOHNS: Two Democrats.

DUNN: Well, you know, Pat Caddell was President Carter's pollster, and then he brought us new Coke. And obviously -- so I wouldn't say that -- they are Democrats and obviously everybody's voice needs to be heard. I wouldn't say that they are people who have really been driving Democratic strategy or a Democratic kind of conversation.

But it's an interesting question. Given the fact that the Republican nomination process has already begun, that people are saying we only have a few months until -- you know, to get things done before the campaign begins.

Why would it help to automatically make yourself a lame duck? I think that the thinking here is to get on the front page of The Washington Post Outlook section. But it doesn't feel like it really makes a lot of sense for a president to go out there and basically say, I'm going to be a lame duck from here on in.

JOHNS: Well, members of Congress -- but members of Congress have actually talked about the same idea, come to Congress for a short term, make some of the very tough decisions, realize you won't get reelected if you do that, and then go on back to the private sector.

DAVIS: Well, Lyndon Johnson said he wouldn't seek re-election because he was going to seek peace in Vietnam. Nothing came of that. You really marginalize yourself if you're not a candidate for re- election in this very polarized environment.

JOHNS: All right. The tax cuts, realistically, what do we think this lame duck Congress can do, or is it more likely -- maybe I should start with you, Mr. Davis, is it more likely for Republicans to simply push this until January, where they have more clout in the House?

DAVIS: Well, if they don't get what they want, which is an extension of everything, they'll kick it over until January. And that's what I think they'll end up putting on the president's desk. But it's not just the task cuts.

JOHNS: But what realistically do you think they want? I mean, are they going to ask for just a two-year extension or do you think they're going to push for permanent tax cuts?

DAVIS: They're going to push for permanent. I don't think they get permanent. So I think they'll kick -- like they always do, kick it down the road. But it's not just tax cuts. Listen to this, AMT relief, $70 billion for one year. Unemployment insurance, you have the "doc fix," which is $300 billion over 10 years. You have a number of other tax extenders.

So they're talking about deficit reduction but they're ready to go to the buffet table before they start their diet.

DUNN: You know, Joe, these tax cuts were originally put in as a temporary measure, which is why they're expiring as stimulus for the economy during the first --during former President Bush's administration. And, you know, one is tempted to say, well, where are the jobs? As they'd like to say on the other side.

These were stimulus, and I think that what Senator Warner said makes a lot of sense, which is if we need to stimulate the business part of the economy, why don't we look and see, you know, what makes sense for business.

But what is also clear is that with the Deficit Commission coming out last week with a series of first looks and recommendations, that, you know, members of Congress who have been sent here to get things done to work together, to reduce the deficit and reduce spending, have to look carefully at whether the first thing they want to do is basically, you know, do almost a trillion dollars of unpaid for spending here.

JOHNS: So should the Democrats compromise on this thing? I mean, do they get anything out of saying, OK, we'll give you a couple more years, because the economy is in such bad shape right now?

DUNN: Well, you know, there's certainly a lot of people who say they should take a hard line next week, and have the fight. And obviously the Republicans don't want to have a fight on a free- standing bill about 2 percent, which is why some people earlier were talking about decoupling them.

Because they know at the end of the day if they go out there and say, we want to do a tax cut right now for the wealthiest people in this society that's going to add nearly $1 trillion to the deficit, they're going to lose.

Should the Democrats compromise? They may want to compromise into next year so they can have the fight with the new members. But the reality is that this is really a core, core argument between the two parties, and one that I think both parties welcome.

DAVIS: But the Democrats, had they been smart, could have framed this 2 percent issue prior to the election. They weren't able to get their act together on that. They won't during this session. And I will guarantee the Republicans are going to send and frame the issue that way to the president.

DAVIS: I think they extend them all at this point. Nobody wants to be held accountable, if the economy doesn't recover, for raising taxes.

JOHNS: Now, one real wild-card question I want to throw out before too late.

Very quickly, Khalid Shaikh Mohammed -- the question of whether his trial should be in New York -- it still seems out there. Will we figure this out over the next week or two? Any idea?

DAVIS: I don't think so. I think it gets kicked down the road, as well, as they're trying to figure out where they can try him or hold him indefinitely.

JOHNS: What about -- yes or no?

DUNN: I agree with...

JOHNS: You agree?

DUNN: Yes.

JOHNS: All right. Thank you so much for coming in. We appreciate it -- jumping around here.

DUNN: Jumping around.

JOHNS: Absolutely.


Up next, a check of the top stories. Then, the presidential candidates for 2012 are already lining up, as we said. Sarah Palin will not be left out in the cold.

(COMMERCIAL BREAK) JOHNS: Now it's time for a check of top stories.

President Obama is heading back to the United States after a 10- day trip to Asia. His final stop was Japan, where he met with Russian President Dmitry Medvedev at the Asia Pacific Economic Conference. President Obama says getting ratification of a new nuclear arms agreement, the START Treaty with Russia, in the lame duck Congress, is a top priority. Myanmar's newly freed democracy activist Aung San Suu Kyi addressed supporters today. The Nobel Prize winners said she is for national reconciliation and the rule of law. Myanmar's military junta freed her after 15 years of house arrest yesterday.

Israeli Prime Minister Benjamin Netanyahu met with Cabinet members today about a U.S. proposal to free settlement construction in the West Bank for 90 days. The proposal could be a difficult sell for conservative members of Israel's coalition government.

And there is a new super welter-weight champion. Manny Pacquiao won the World Boxing Council's title with a punishing 12-round decision over Antonio Margarito last night in Dallas, despite being 17 pounds lighter than his opponent. It was Pacquiao's 13th straight ring win.

Those are the top stories here on "State of the Union."

Up next, what you may learn from Sarah Palin's new reality show.


JOHNS: We close today with a question it seems everybody wants to know: Will Sarah Palin run for president in 2012?

The search for clues has hit a new low. Her new reality show, "Sarah Palin's Alaska," which premieres tonight -- will she give the political pundits any hints?


(UNKNOWN): Just use your legs. Look for foot holds. You've always wanted to be a rock climber, Sarah.

FORMER GOV. SARAH PALIN, R-ALASKA: Was it a rock climber or a rock star? Hmm.



PALIN: I'd rather be doing this than in some stuffy old political office. I'd rather be out here being free.


JOHNS: Unless that stuffy office is the Oval Office -- we're stretching, we know -- that's because, at least from the clips released so far, the only clues we're getting are her parenting skills.


PALIN: If you're planning on visiting her, she can visit you for, like, 20 minutes.

Willow? Come here.

No boys go upstairs.

Willow? Willow?

JOHNS: But before you rule her out, consider this. Palin just announced a 13-state tour to promote her new book "America by Heart." And she's stopping in Iowa and South Carolina, two states critical to picking up her party's nomination and where, according to our CNN exit polls, her presidential prospects are already very high. Maybe, maybe, that means more than this.


PALIN: And on a really clear day, you can see Russia from here -- almost.


JOHNS: Thanks for watching "State of the Union." I'm Joe Johns in Washington.