'This Week' Transcript: Senate Majority Leader Harry Reid

STEPHANOPOULOS: Chuck Hagel had a pretty rough ride at his confirmation hearings.

(BEGIN VIDEO CLIP)

MCCAIN: Were you correct or incorrect, yes or no?

HAGEL: My reference to the surge being the most dangerous...

MCCAIN: Are you going to answer the question, Senator Hagel?

(END VIDEO CLIP)

STEPHANOPOULOS: He seemed to lose some of the Republican support he may have had. Are you still confident after that performance that the Democrats will stand behind him and he'll get confirmed?

REID: Sure. This is a short interview we have. But if you interviewed me for eight hours like they interviewed him in the Senate this week, we'd -- you and I would both flub up a little bit.

STEPHANOPOULOS: That's true, but...

REID: So, Chuck Hagel is a fine man. He was a good senator. I served with him. He's a Republican; that should be a plus. We need more -- and I think he will be an outstanding, terrific secretary of defense.

STEPHANOPOULOS: Some of your fellow Democrats seem concerned, though, by what they saw as a shaky performance.

REID: This was eight hours. Give the guy a break. I thought he did pretty good.

STEPHANOPOULOS: Your incoming chairman of the Senate Foreign Relations Committee, Senator Robert Menendez, the Ethics Committee is now reviewing his relationship with a major contributor out of Florida. It appears the FBI is investigating that relationship, as well. Are you comfortable with him serving as chairman of the Senate Foreign Relations Committee as these investigations continue?

REID: He was a leader in the House. He's been a leader in the Senate. He's chairman of that committee. He'll do a wonderful job. And he's also an integral part of what we do with immigration reform. So I have the utmost confidence in him. As to the rest of the investigation, that will have to be handled the way they're all handled around here, in-depth, and the Ethics Committee are in the paper today. They're taking a look at it. So that's -- that'll have to work...

(CROSSTALK)

STEPHANOPOULOS: There are some relatively allegations here. Are you confident he did nothing wrong?

REID: Oh, I have confidence he did nothing wrong, but that's what investigations are all about.

STEPHANOPOULOS: But you're fine with him serving while the investigation goes forward?

REID: Oh, sure. He's -- he will -- he has been and will be a great member of that committee.

STEPHANOPOULOS: Final question. How is this Congress going to be remembered?

REID: Well, we'll have to wait and see. It's really early. One way it will be remembered, we changed rules here in the Senate that are going to make the Senate a better place. And I think there's a better feeling that we can get some things done under what we call regular order, that is, stop the procedural gimmicks and to start legislating, voting on things we may not want to vote on, but that's what we're here for.

STEPHANOPOULOS: Thanks for your time today.

(END VIDEOTAPE)

STEPHANOPOULOS: And when we come back, our powerhouse roundtable weighs in on immigration, guns, and that shaky performance from Chuck Hagel at his confirmation hearings. Plus, Nobel Prize-winner Paul Krugman on the Dow's sizzling January and our Super Bowl picks. That's all coming right up.

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OBAMA: What we could not get was a single Republican, including the 20 who had previously voted for comprehensive immigration reform, to step up and say, "We will work with you to make this happen."

RAMOS: You promised that, sir, and a promise is a promise. And with all due respect, but you didn't keep that promise.

OBAMA: I am happy to take responsibility for the fact that we didn't get it done, but I did not make a promise that I would get everything done 100 percent when I was elected as president.

(END VIDEO CLIP)

STEPHANOPOULOS: Univision anchor Jorge Ramos pressing the president during the campaign on immigration reform. He joins our roundtable right now, along with Republican Congressman Lou Barletta, our own Matthew Dowd, Paul Krugman of the New York Times and Princeton, and Carly Fiorina, former CEO of Hewlett-Packard.

Let's begin with immigration, Jorge. You were very tough on the president during the campaign. He laid out his principles this week in Nevada. We also saw a bipartisan group of senators do the same thing, and Harry Reid optimistic. Are you?

RAMOS: I am. It's the first time -- I don't remember ever seeing the president and members of both parties rushing to beat the other to present an immigration proposal. I haven't seen that. It's the most important immigration news in the last 30 years, and especially because it is includes a path to citizenship. And it is no amnesty...

STEPHANOPOULOS: On both sides so far.

RAMOS: On both sides, yes, so there is no amnesty. They'll pay penalties. They'll pay taxes back. They'll go back to the end of the line, and it might take up to 10 to 15 years to become U.S. citizens, so it is definitely -- it fulfilled the promise of the Declaration of Independence...

STEPHANOPOULOS: A man not joining the bandwagon sitting right next to you, Congressman Baretta.

RAMOS: But we're equal, either citizens or non-citizens. That's the promise of the Declaration of Independence. This is what it's going to achieve.

STEPHANOPOULOS: Let me explain to the audience where you come from, Congressman. You're from Pennsylvania, former mayor of Hazelton. When you were mayor there, you passed ordinances that would punish landlords who rented to illegal immigrants, punished employers who hired them. And you intend to fight this effort for immigration reform in the House.

BARLETTA: Yeah, this is 1986 all over again. And that was -- at the time, they told the American people this is one time only, 1.5 million illegal aliens would get amnesty, and it ended up being 3 million. The same thing will happen today, George, when we're offering a pathway to citizenship without knowing that we could secure our borders.

To put it in simple terms, you wouldn't replace your carpet at home if you still had a hole in the roof. And that's what we're talking about. Any time you start waving a carrot, such as American citizenship, without securing the borders, that number that we have today, I believe, will double or even triple.

STEPHANOPOULOS: But how do you answer that argument that deportations have gone up, the number of people crossing our borders illegally has gone down?

BARLETTA: Well, you know, that's -- you know, we can argue about that all day long on whether or not this administration -- I don't know how anyone could argue that this administration is serious about enforcing our laws when they're suing the state of Arizona because the federal government has caused the problem and Arizona wants to defend itself, as well as another example is the president's prosecutorial discretion, where he is prohibiting law enforcement agents from enforcing the law. In fact, there are ICE agents who are suing the administration.

STEPHANOPOULOS: Matthew Dowd, the congressman brings up 1986. Also in President George W. Bush's second term, he tried immigration reform, didn't get very far.

DOWD: Well, I don't think the president -- obviously, I worked for him then -- that President Bush tried really that hard. He actually put much of his political weight behind Social Security reform, which turned out to be a disaster in the midst of that, and he didn't really push that, but he had a problem with his own party in that. President Bush had a problem with the Republican Party in that.

The problem, I think, for Republicans is -- and here's -- I'm an Irish immigrant whose great-great grandfather came over here, whether he was legal or not, when he was 17 years old, in the midst of a society that said "No Irish Need Apply," is that America's always benefited economically and spiritually and morally from immigrants in this country.

And we have a situation now, there's 52 million Latinos that live in this country. More than 40 million of them are here legally. Something has to be done. Republicans know this. Republicans know that if you put together a package of border control, of controlling the border, and a path to citizenship, it's going to happen. If Republicans don't do this, it's not as if Latinos say, "Immigration is my top issue." The economy is their top issue. If they don't do this, Republicans could make themselves the minority party for the next generation.

KRUGMAN: Two things to say. One is that this is not -- bear in mind what we're not going to do. We're not going to deport the people who are already here. We're not actually going to reverse this. The fact of immigration is going to happen. The question about what we're going to do about border control, is there some of that in these proposals, but in any case, that's almost a separate issue.

The question is one of regularizing the status of people here, basically making them legal, bringing them under labor law, all of that. How could you really be against that? It's -- you know, it's got to be good for everybody to do that.

The Republican Party has a problem. The leadership understands that they cannot -- they're doomed if they are only the party of old white people, to put it bluntly. The problem is their base is old white people. And so the rank-and-file, which answers to the base, which doesn't fear Democrats, but does fear Tea Party challengers, may not go along. But this is clearly -- there's no possible reason not to do this.

STEPHANOPOULOS: And the business community getting behind it, as well.

FIORINA: Yes, and it's important to remember some facts about the attempted immigration reform in 2007. The guest-worker program amendment, which failed and which killed immigration reform, was voted down by Democrats, Barack Obama among them, Barbara Boxer of California, a state that desperately needs a guest-worker program. Why? Because organized labor was against it.

I also am very optimistic about this bill. It is carefully crafted to acknowledge that we have to deal with the people who are here today, but also that we have to actually reform our legal immigration system so that we have a guest-worker program that works, so that we have border security, so that we don't have 16 different visa programs, and many of the people who are here illegally actually have overstayed their visas.

In other words, we have a host of problems that have to be solved. This Gang of Eight bill, I think, is a first step towards solving them. What I hope -- what I hope is that, while it's easy to always blame the Republicans, I hope that the Democrats and organized labor will not push their opposition to a guest-worker program so far that they kill the whole deal, because they did it last time.

RAMOS: Let me say something: It is a myth that the border is not secure. I mean, President Barack Obama has deported more than 1.5 million undocumented immigrants. There are more agents than ever before. Apprehensions have gone down, the number of undocumented immigrants has gone from 12 million to 11 million. And the citizens along the border with Mexico are among the safest. So if you wait to do something until the border is completely secure, I don't know exactly what are you talking about.

STEPHANOPOULOS: You get the last word.

BARLETTA: Yeah, well, actually, we have a couple of problems here. Number one, 40 percent of all the people who are in this country illegally didn't cross the border. They came here on a visa that expired and disappeared into our system, and we can't track them.

Number two, one thing that we're missing in this whole debate about illegal immigration is the cost. Heritage Foundation did a study that, after the taxes are realized by our country by those who are here illegally, it will cost us $2.6 trillion in Medicare, Social Security...

(CROSSTALK)

KRUGMAN: It's pocket -- the net cost of all of this is pocket change. It's really a very small number.

(CROSSTALK)

BARLETTA: Not when there's programs...

FIORINA: This is going to be politics at its best if people can't forge a compromise that will keep Democrats on board and Republicans on board. This will get done. But if President Barack Obama pushes too hard to win and cause the other party to lose, this thing is going to come apart...

(CROSSTALK)

RAMOS: ... much more to the economy than when they take...

(CROSSTALK)

RAMOS: The Congressional Budget Office is saying that...

(CROSSTALK)

KRUGMAN: CBO...

(CROSSTALK)

KRUGMAN: ... net positive.

BARLETTA: They only go out 10 years. CBO only goes out 10 years. The Heritage Foundation...

(CROSSTALK)

RAMOS: ... dollars in 10 years.

(CROSSTALK)

KRUGMAN: Because -- and it's all very small numbers

BARLETTA: Because here's the thing. Here's the thing. Because so many will be at the lower end of the economic ladder, what they will be paying in taxes because they will be earning less and what they'll be taking out in programs that are already going broke, we're not going to be able to afford it. Number two, the people who are hurting the most...

(CROSSTALK)

RAMOS: ... always saying that they're going to contribute much more.

(CROSSTALK)

KRUGMAN: But remember what we're doing, is we're taking people who are here and we're going to be bringing them into the system, which mostly means that they will be paying taxes...

(CROSSTALK)

BARLETTA: How about the legal immigrants? How about the legal Hispanic immigrants? Do you think it's good for them to have 20 million or 15 million people compete for their jobs when they came to America for an opportunity?

(CROSSTALK)

KRUGMAN: But that's not on the table. That's not on the table.

(CROSSTALK)

FIORINA: Reforming the legal -- reforming the legal immigration system is on the table in the Gang of Eight bill. It has to be on the table. Business support requires -- just common sense requires that we not simply say, the 11 million people who are here illegal, OK, we'll deal with your status, and we're not going to fix any of these other problems. We have to fix those problems.

STEPHANOPOULOS: And that's going to be the last word right now. We do have to take a break. We'll be back. More roundtable ahead, including the president's latest move in the debate over guns. What does this picture prove exactly?

Plus all the early buzz over tonight's super-expensive Super Bowl ads. All that, plus education activist Michelle Rhee in our Sunday spotlight.

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STEPHANOPOULOS: ... but first, the "Sunday Funnies."

(BEGIN VIDEO CLIP)

KIMMEL: Last week, the Iranian government successfully launched a live monkey into space. This is the alleged Iranian space monkey. Based on the photograph, I'm guessing he didn't volunteer for the mission.

(LAUGHTER)

LETTERMAN: Four years Hillary Clinton served as -- former senator from New York, served as the secretary of state. Four years. Had a moving ceremony today, where Hillary officially turned over the pantsuit and...

(LAUGHTER)

"It's all yours, John."

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BRADY: I had no choice but to be here today because two many members of Congress have been gutless on this issue.

GIFFORDS: The time is now. You must act. Be bold. Be courageous. Americans are counting on you. Thank you.

(END VIDEO CLIP)

STEPHANOPOULOS: Echoes of Jim Brady from Gabby Giffords more than 20 years later in that hearing before the Senate Judiciary Committee this week.

We're back with our roundtable right now. And, Matthew Dowd, I want to come to you, but as I come to you, I also want to put up the new salvo in the debate yesterday from President Obama. You saw that picture they released of the president skeet-shooting at Camp David back it August, after he said it was something he does all the time up in Camp David. And David Plouffe, his former senior adviser, puts out a tweet saying, "Attention skeet-birthers, make our day. Let the Photoshop conspiracies begin."

Of course, they were answering the skepticism about whether President Obama was really a shooter. But was it smart to put out that photo?

DOWD: Well, I think they had to put out the photo. I think if you go back a few days, I don't think it was very smart for him to make that statement in the New Republic when he said, "I shoot skeet all the time up there," because, first of all, it wasn't going to change anybody's mind that's against him. It wasn't going to make anybody think, "Oh, wow, Barack Obama is this."

It reminds me of what -- to paraphrase Margaret Thatcher, which is being a skeet-shooter, being a hunter is a lot like being a lady. If you have to tell people you are, you're probably not. Nobody is going to believe him because of that picture, and that picture I think just makes him look like he's pandering. And as Carly said on the break, he is pandering in that. And I think that's the problem with it, that it's sort of a distraction from the debate. I don't think they should have ever said it. Nobody believes that about the president.

STEPHANOPOULOS: And you heard, Carly Fiorina, from Harry Reid right there that the president is going to have a fairly tough time with his own Democrats in getting what he wants through the Senate.

FIORINA: Yeah, well, I think that's clearly true. This is a very emotional issue. I honestly think both sides have overplayed it. I think -- personally, I think the NRA has overplayed it. We're gun-owners at home. But...

STEPHANOPOULOS: By coming out against background checks?

FIORINA: Yes. I mean, I think there's widespread support for universal background checks. However, universal background checks won't work unless we deal with our mental health system and actually untie the Gordian knot of privacy rules so that the right information can be given to people.

But universal background checks, let's deal with the mental health system. Personally, I would even support banning high-capacity magazines. I think banning assault weapons we've proved doesn't work. So instead of just doing something for show, let's actually focus on solving the problem.

KRUGMAN: But what really strikes me -- I don't know how this plays, you know, what will happen. What strikes me is we've actually gotten a glimpse into the mindset, though, of the pro-gun people and we've seen certainly Wayne LaPierre and some of these others. It's bizarre. They have this vision that we're living in a "Mad Max" movie and that nothing can be done about it, that America cannot manage unless everybody's prepared to shoot intruders, that -- the idea that we have a police forces that provides public safety is somehow totally impractical, despite the fact that, you know, that is, in fact, the way we live.

So I think that the terms of the debate have shifted. Now the craziness of the extreme pro-gun lobby has been revealed, and that has got to move the debate and got to move the legislation at least to some degree.

STEPHANOPOULOS: Are you comfortable with where the NRA has been on this?

BARLETTA: Yeah. I am. I mean, this is a perfect example why people believe Washington is broke. This horrific incident in Newtown, and here, what is our debate? It's focusing on guns, when there is not one person at this table who really believes that that's the root of what happened there. And when we have people that get into the mindset that they want to harm people, as a former mayor, I know people will get guns no matter what laws we pass, just like the illegal drug...

(CROSSTALK)

KRUGMAN: ... just caught you on a false statement there, because at least I do believe that guns are the root. There are crazy people everywhere, but mass murders are a lot more common here than in countries with effective gun control.

BARLETTA: If you believe guns are more important than -- than dealing with mental health and our culture -- is our culture lending itself that we're raising children that are desensitized to -- to murder, to killing people?

(CROSSTALK)

KRUGMAN: I love that the international differences -- countries that have effective gun control have a lot fewer incidents.

BARLETTA: We're banning spoons stop obesity? Of course not.

KRUGMAN: Banning the large soda drinks...

(CROSSTALK)

RAMOS: There's high tolerance for -- for violence in this country. I mean, after Columbine, after Virginia Tech, after Aurora, we should have done something, and we haven't. Sometimes it seems that it's only minor changes that we're talking about, even ban on assault weapons or background checks, or we're talking about high-capacity magazines. I mean, we know what works. I mean, in Japan, it works. But as a country, I don't think we are willing to even revisit the Second Amendment.

(CROSSTALK)

STEPHANOPOULOS: And then...

(CROSSTALK)

FIORINA: But Paul said something that...

(CROSSTALK)

RAMOS: We know exactly what works, but we don't want to do it. We have to recognize that.

FIORINA: Paul said something that's illustrative of what I meant when I said people overplay their hands. What Paul just did was lump everybody together as a crazy radical gun-owner.

KRUGMAN: Not true.

FIORINA: Yes. So you're condemning people...

KRUGMAN: No, there are plenty of gun-owners who are fine. But the lobbying groups, the NRA is now revealed as an insane organization, and that matters quite a lot.

FIORINA: I said at the outset, I think the NRA overplayed its hand a bit.

KRUGMAN: More than that.

FIORINA: I think...

KRUGMAN: More than just overplaying its hand.

FIORINA: ... we should support universal background checks. On the other hand, we need to say that if -- let's just say Dianne Feinstein's bill passed banning assault weapons. It won't do anything to solve the problem.

(CROSSTALK)

STEPHANOPOULOS: ... but after the last assault weapons ban -- and I'll bring this to Matthew Dowd -- there was some evidence by independent experts who looked at it and said, listen, it didn't solve the problem completely, but when the ban was in place, fewer people were killed by assault weapons, and when it was lifted, more people were killed by assault weapons.

(CROSSTALK)

DOWD: George...

FIORINA: But people also said more people bought assault weapons right before that ban went into place, and as soon as it was lifted, they bought more, and we now have 300 million of them in the country.

(CROSSTALK)

DOWD: I think part of the problem is -- and I think the congressman said this -- but part of the problem is, is all the facts on both sides get left on the table and we get into this thing where everybody says this is what we need to do and many of the facts get left on the table.

FIORINA: That's right.

DOWD: We all know that if you only do something on assault weapons, it's not going to solve the problem that happened. If you only do something on high-capacity, it's not going to solve the problem. If you only do something on this -- and the other facts that get left -- and the idea that a gun in the home or people have a gun is going to make somebody safer, all the facts say that's just not true.

The likelihood of somebody that's in a domestic violence case where there's a gun available is eight times more likely -- a woman is eight times more likely to get killed. The likelihood that if a woman has a -- so if there's a gun in a home, there's three times more likely that she's going to get murdered.

Everybody leaves the facts. I don't think it would be a bad thing. Most people that own guns -- I'm a gun-owner, like Carly is -- thinks many of the things are going on, there's people are unwilling to say let's get rid of the Second Amendment. Maybe we should have a debate about that.

(CROSSTALK)

STEPHANOPOULOS: That is a huge debate. I want to move on to the economy, because we have a lot to cover today. And, Paul Krugman, I want to come to you with this. We saw the Dow hit 14,000...

KRUGMAN: Right.

STEPHANOPOULOS: ... on Friday, capping just a torrid January, five straight weeks of gains. This comes on top of some encouraging news on jobs...

KRUGMAN: Right.

STEPHANOPOULOS: ... some encouraging news on housing and manufacturing, and I was struck by a line in the Washington Post that said the biggest threat now to the recovery may be Washington, D.C.

KRUGMAN: Well, that's been true all along. I mean, what we've actually been seeing is -- let's put it this way. We've seen falling government spending, particularly spending -- purchases of goods and services, actually government buying stuff, an unprecedented decline in that. And that's the biggest threat to the recovery.

STEPHANOPOULOS: And cause GDP slippage in the fourth quarter.

KRUGMAN: That's right, the GDP slippage in the fourth quarter was partly just statistical illusion, but partly defense spending, which for some reason had a big negative blip. But, you know, I've actually been doing some numbers on this. If spending had grown in this business cycle the way it did in the last one, under Bush, or under Reagan, we would probably have an unemployment rate that was not much above 6 percent right now.

So it's this Washington craziness, the -- and, of course, the threat of the sequester that is the biggest threat. This recovery is actually -- you know, it should be much, much faster. We still have more than 3 million people who've been out of work for more than a year. That's terrible. But we are, in fact, gaining momentum. Housing is recovering. The labor market is slowly recovering. Yeah, Washington may mess it up.

STEPHANOPOULOS: Do you agree?

FIORINA: I think it's important to remember when we talk about the economy that a private-sector job and a public-sector job are not the same things. They're not equivalent. I'm not saying public-sector jobs aren't important, but a private sector job pays for itself. A private-sector job creates other jobs. A public-sector job is paid for by taxpayers.

The government does not spend and invest money as efficiently as the private sector. There's all kinds of data to support that. So it isn't simply a matter of saying, well, whatever job is created out there, if it's a bureaucrat in Washington, D.C., or a small-business owner hiring another employer, those are not equivalent thing.

(CROSSTALK)

KRUGMAN: ... when you say public-sector jobs, it is not a bureaucrat in Washington, D.C.

FIORINA: Oh, it is, actually.

KRUGMAN: When we talk about public-sector jobs, we look at the public-sector jobs that have been lost in large numbers in this, it's basically school teachers. Don't think about bureaucrats. It's school teachers. What we've laid off is hundreds of thousands of school teachers.

And we talk about the cuts in public spending that have happened, they are not, you know, some god-awful who-knows-what. It's actually public investment. It's largely fixing potholes and repairing bridges. So, you know, you have this image of these wasteful bureaucrats doing god knows what. What we've actually seen is an incredible drought of basic infrastructure...

FIORINA: And it is a fact...

KRUGMAN: ... and -- and laying off hundreds of thousands of school teachers.

FIORINA: It is a fact that virtually every department in every organization in Washington, D.C., has seen its budget increase for the last 40 years. That money is being paid to hire people. The number of people who are -- of course there are some teachers...

KRUGMAN: Almost -- almost no...

FIORINA: Of course there are some police officers. I'm not saying that.

KRUGMAN: ... the vast bulk of -- the vast bulk of public-sector employees are at the state and local level. They are largely school teachers, plus police officers, plus firefighters.

(CROSSTALK)

KRUGMAN: And your notion that it's all these bureaucrats, that's a myth that is used to...

(CROSSTALK)

FIORINA: It's a fact. It's not a myth. It's a fact.

(CROSSTALK)

STEPHANOPOULOS: ... clearly going to happen on March 1st now is this sequester.

FIORINA: It's not a myth. It's a fact. We don't have enough private-sector job creation.

STEPHANOPOULOS: We heard from Harry Reid that he's hoping the sequester doesn't kick in, but, Congressman, I've noticed some top Republican leaders seem to be accepting the fact that we're going to have these across-the-board budget cuts on March 1st. Talking to White House officials, you get the sense that they are prepared to go through with it, as well, and that could be a big hit on the economy.

BARLETTA: I do believe that my sense is the sequester is going to go through. It was put in place to -- so we didn't get to this point, but it is, it's a law, and I believe we understand, it's not what we want on our side. I know the defense cuts are very hard for many of us to swallow. But at the end of the day, Washington needs to do something about its spending. We are spiraling out of control. This country can't survive. We can't sustain the spending that's going on.

STEPHANOPOULOS: Matthew, what's your sense of what the public reaction is going to be? Because it does appear that the sequester is going to hit for at least a period of time, these across-the-board budget cuts, maybe even a government shutdown the end of March.

DOWD: Well, I think the fundamental problem, I think, that exists today is long before all this is -- the public looks at Washington as completely out of sync with where they are in their life. They think Washington's totally dysfunctional. They don't trust anything that comes out of Washington.

Wherever they -- whether they're progressive or whether they're conservative, they do not trust Washington. And until that trust is rebuilt, part of it has to do with the fiscal mess, part of it has to do with the lack of leadership, but as they watch Washington, day in and day out, you look at the number of trust in Washington. FDR understood this. If you go back and look at FDR and you look at John F. Kennedy and all the folks -- John F. Kennedy, all the folks that basically said we want government to be even more involved, they understood that the people have to trust government before you get government more involved. And that's a huge part of the problem.

(CROSSTALK)

RAMOS: ... might lead to -- to another recession. I don't know. You know much more about that, but that's a problem.

KRUGMAN: There is an important thing to say here, though, that the sequester is not nearly as scary as the debt ceiling debate was.

FIORINA: Clearly.

KRUGMAN: If we fail to make payments on debt, even for a day, nobody knew what would happen. We thought the whole world financial system might collapse. If we go a month into the sequester, it's not a big deal. It's going to be painful; it's going to be a big debate; it'll slow growth in that quarter. But this is something where actually -- my understanding is the White House thinks that this -- they will win this, that if it happens, that, you know, everybody will look bad, but the Republicans will look worse, and in the end, they will fold.

STEPHANOPOULOS: I'm hearing the same things, Carly. They believe that in the end you'll see the same thing happen that happened on the debt limit, that the Republicans are going to have to accept some new revenues, even though they say they're not going to do it now.

FIORINA: Well, you know, first of all, I think this White House spends way too much time thinking about political wins and not enough time thinking about actually solving the problem. Tax reform is a way to get more revenues. If we would close loopholes, lower rates, simplify the tax code, there is broad bipartisan support for that. It would increase revenues. It would help small-business owners.

STEPHANOPOULOS: But you're -- you're for tax reform that increases revenues. A lot of Republican leaders are saying they would only do revenue-neutral tax reform.

FIORINA: Well, in my particular opinion, what we need to be competitive, what we need to help small-business owners is to lower all the rates, close all the loopholes -- which, frankly, benefit big business, not small business -- vastly simplify the code.

But going back to Matthew's point, it was an interesting poll in the Washington Post. Fifty-three percent of the American people believe the federal government is a threat in their lives. That's an incredible figure. And what it says is that people truly believe that they can't trust the federal government.

DOWD: And, George, part of that...

FIORINA: It's something people have to deal with.

DOWD: A big part of the problem is, is that leaders are now left with this pie, so what you basically have is Republicans say don't touch defense, we don't want to cut defense, not all of them, but so many of them say don't touch defense. Democrats say do not touch entitlement programs, do not touch the entitlement programs.

In a year, that will be -- those two things will be 85 percent -- add interest on the debt -- will be 85 percent of the total budget, which leaves only 15 percent of looking forward, what are we going to do, how do we want to create an economy, what's going to happen, and neither side is willing to have that debate. Both sides, in my view, are willing to basically deficit-spend and run us into a fiscal problem. Republicans are unwilling to touch revenue, so they say let's deficit spend in order to keep taxes low. Democrats are unwilling to address government spending, so they deficit spend, both sides, which is why the country does not trust Washington.

STEPHANOPOULOS: I want to get quickly to another issue, Chuck Hagel's confirmation hearing this week. Not even the White House would defend his performance. Here was a piece of it.

(BEGIN VIDEO CLIP)

HAGEL: I support the president's strong position on containment, as I've said. If I said that, meant to say that I -- obviously, his position on containment -- we don't have a position on containment.

LEVIN: We do have a position on containment, which is that we do not favor containment.

(END VIDEO CLIP)

STEPHANOPOULOS: He was kind of a surprise there from Chuck Hagel, probably not going to hurt his chances of confirmation. He's even getting some Republican support.

RAMOS: The votes are there, definitely. I think he's going to make it. But if you have to clarify your clarification, you're in trouble, no? Obviously, I mean, if we compare, for instance, what he went through with what Hillary Clinton did with the Benghazi hearings, it's like completely two different perspectives. Now Hillary Clinton was strong and solid and getting ready for 2016. At the same time, Chuck Hagel, he seemed timid, tentative, and -- you don't want -- you don't want that.

(CROSSTALK)

STEPHANOPOULOS: You're in the house. Some Republican senators considering whether to filibuster or not. Do you think that would be wise?

BARLETTA: I'm not certain if it will be wise or not. I know there are some concerns with his positions with Israel and whether or not that will carry water at the end of the day. But, you know, again, it will be a decision that the Senate is going to make and really not in the House.

DOWD: George, I mean, I think obviously he could have done better, but to me, there's a couple of things about that. First, it'd be unfortunate that the first time we'd have an enlisted person -- somebody that was an enlisted man, just average military guy, to run the Department of Defense that's going to make decisions on war, the first time that's going to ever happen in our history, I think, is an important thing for many soldiers out there who feel disconnected from the process because somebody's never really understood that.

The other thing, you watch that hearing. And I've watched most of the hearing. What you come away with is nobody is willing to ask questions in any of these to actually elicit information that might be helpful. All people are doing is...

STEPHANOPOULOS: Theater.

DOWD: It's all theater, and it's all, how do I put points on the board? John McCain or Senator Graham is, how do I put a point against him? The Democrats get up there and make a long speech and say, how do I put a point for him? And nobody -- these hearings used to be -- a long time ago, used to be like let's find out how he would manage the Defense Department. Let's find out what his values are that we might be important for us to know. None of that happens. It's all just about making points.

FIORINA: I think what's clear is that President Obama miscalculated a bit thinking, if I put forward someone with an R next to their name, I'm going to have an easier time here. Clearly, that's not the case.

But I also think that, you know, John McCain certainly did his bit for his country and languished in a prisoner of war camp for five-and-a-half years. I think John McCain and Lindsey Graham's concerns are real. In the end, they probably will not carry the day, but in a critical time, with the threats we face, it's totally legitimate, whoever the nominee was, to be grilled on what their point of view is.

STEPHANOPOULOS: I want to get to one final issue before we go. Big night tonight, the Super Bowl. The ads are already being sold, $3.8 million to $4 million for a 30-second ad. But this year, something a little bit different. We've seen so many of the ads before the game, getting a lot of commentary. My favorite is going to nominate it first, that Volkswagen "Come On, Be Happy" ad.

(LAUGHTER)

I like that one, as well. Jorge, your pick.

RAMOS: It was GoDaddy.com, that kiss between the model and the nerd, went on and on and on. I think it was really raw, and I think it's going to be very controversial.

STEPHANOPOULOS: Yeah, we're going to see it right here. There's Bar Refaeli right there, and she's going to lip-lock with that young man, that lucky young man right there.

(LAUGHTER)

KRUGMAN: All right. Well, the Mercedes ad with the devil, Willem Dafoe as the devil, caught my attention mostly because of the background music, because I remember when the Rolling Stones sang about, you know, making fun of ads which say you can't be a mimic, don't smoke the cigarettes as me, and now we've got "Sympathy for the Devil" in a Mercedes ad. The age of Aquarius is really over.

DOWD: Mine is one we haven't seen yet, which I'm hoping to see, which is a Chrysler ad. They bought an ad in this. I thought last year's Chrysler ad was one of the best ads done. It was the Clint Eastwood-narrated "Halftime in America" ad. They've done some great ads. The whole idea of "Import it from Detroit." So Paul and I have a difference. He's got the imported car, I have the Chrysler car, but I'm looking forward to the Chrysler ad.

BARLETTA: I like the Allstate man ad. And it's probably based on some of their ads before. It just strikes me as...

STEPHANOPOULOS: Goes all the way back to the Garden of Eden.

KRUGMAN: I like that one, too.

STEPHANOPOULOS: That's a pretty great ad, it really was. And Carly and I agree on the Clydesdale. We didn't get to see the VW, too bad for that. But thank you all for your contributions today. Jorge Ramos is going to stick around to answer your Facebook questions for our web extra.

And coming up, our Sunday spotlight shines on controversial education activist Michelle Rhee. She just did a report card for schools in every state, and we've got the grades.

(COMMERCIAL BREAK)

STEPHANOPOULOS: Time now for our Sunday spotlight, this week on Michelle Rhee, an education activist with a knack for drawing attention and controversy. She made the cover of Time back in 2008, when heading the D.C. public schools and left that job under a bit of fire after dismissing 36 principals and ending teacher tenure.

Now head of a nationwide organization, Students First, Michelle has a new book out tomorrow called "Radical," and she joins us now.

Good morning, Michelle.

RHEE: Morning.

STEPHANOPOULOS: So you also had this report card on every state in the nation and how they're doing on education. And you were a tough grader. No A's. A couple of B-minuses. More than two-thirds received a D or an F overall. That is a pretty dismal assessment of where things stand.

RHEE: Well, I think it shows how far we have yet to go. We at Students First very, very strongly believe that there are no shortage of educators out there who are innovative and wanting to do the right thing. We also know that all of our kids can learn at the highest levels when they're in the right school environment. The problem is that these educators and kids are trapped in a school system that -- and a bureaucracy that is really driven by antiquated rules and policies. And so we seek to change those policies and the environment they operate it.

STEPHANOPOULOS: But we've seen two presidents in a row now who fancy themselves and push education reform, so what's the single most important thing that can be done right now on a national level to fix our schools?

RHEE: Well, I think it is focusing on changing those laws and policies. And we think that three different areas are critical, first, making sure that there's a highly effective teacher in front of every single child every single day. The second is informing parents and giving them options so that no family ever feels like they're trapped in a failing school. And third is making sure that we're using taxpayer dollars wisely and we're governing school systems well.

STEPHANOPOULOS: We've also seen that there's been a backlash, though, against how we assess how schools and teachers are doing. Just this week, a teachers in Seattle saying we're not going to go forward with these standardized tests anymore. A lot of parents resisting it, as well.

RHEE: Yeah. Well, I think we've got to strike a balance. You don't want a situation where there's an overemphasis on testing, but at the same time, we had decades where there was no accountability whatsoever and our school system was graduating kids who didn't have basic skills and knowledge. They couldn't read and do math appropriately and at grade level, and that means they couldn't find appropriate jobs.

So we have to strike the balance between making sure that we're not overemphasizing the test, but yet making also sure that we're holding kids and schools accountable for what kids know and are able to do.

STEPHANOPOULOS: Education reform is such a complicated, tough slog. And you tell a pretty revealing story in your book about trying to enlist President Clinton in your cause.

RHEE: Well, you know, one of the things, as a Democrat, that I've tried to do is really make sure that this is a bipartisan issue, that Republicans and Democrats are coming together. And one of the things that I learned in trying to bring on board people like President Clinton and other Democrats is we really have to articulate a path forward, a path to success, why -- why Democrats and Republicans alike should take this issue on, because it is the most important issue facing our nation.

STEPHANOPOULOS: But he was reluctant.

RHEE: Well, his staff was reluctant only because they said, look, it is -- it's important for the president's legacy that we're able to say, if we take these steps, then this is the progress that we're going to see, and that I think is up to us as educators to be able to lay that out for folks.

STEPHANOPOULOS: I love the title of your book, "Radical." And you certainly charged hard in Washington, D.C., made a lot of enemies pretty quickly, and some thought you seemed to enjoy the rough-and-tumble a little bit too much. There was even that camera crew that followed you as you actually fired a principal. So do you have any second thoughts about the style that you -- that you showed in D.C.?

RHEE: Yeah, well, my style is -- is very deliberative and very focused on doing what's right for kids. And so I wouldn't change that so much. But what I did learn about my experiences in D.C. is that what we were doing, I think, were absolutely the right things. I needed to focus a little bit more on how we were communicating those things and how we were doing things. So should I have fired ineffective principals? Absolutely. Should I have done so on national TV? Probably not.

STEPHANOPOULOS: Bill Turque, the education writer for the Washington Post who covered you, reviewed your book, and summed it up saying you come off as a radical humbled by a dose of realism. Is that fair?

RHEE: I think that is fair. I mean, you know, it's interesting, because when I first got to D.C., people, they said, well, gosh, she's so radical, she's a lightning rod, and in my mind, you know, I was doing the things that seemed to obvious to me, you know, closing failing schools, removing ineffective people, cutting a central office bureaucracy. And finally, I came to the conclusion that if bringing some commonsense solutions to a dysfunctional system makes me a radical, then so be it.

STEPHANOPOULOS: OK, Michelle Rhee, thanks very much. The book is called "Radical." It is out tomorrow.

RHEE: Thanks.

STEPHANOPOULOS: And now a milestone. Each week at this time, we honor American servicemembers killed in action, but this week, the Pentagon did not release any names of U.S. servicemembers killed in Afghanistan or Iraq. That's the first time that's happened since July 2011.

Overnight, however, there was a tragic reminder that the horrors of war echo far beyond the battlefield. Navy SEAL Chris Kyle, whose bestselling book, "American Sniper," details four tours in Iraq, is the most lethal sniper in U.S. military history, was killed yesterday at a gun range in Texas. The shooter believed to be a former Marine whom Kyle was counseling through a struggle with PTSD. In Iraq, Kyle was awarded two Silver Stars and five Bronze Stars for bravery. We honor his service.

And that is all for us today. Thanks for sharing part of your Sunday with us. Check out "World News" with David Muir tonight, and I'll see you tomorrow on "GMA."

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