Face the Nation transcripts October 20, 2013: McConnell, Graham, Warner

(CBS News) Below is a transcript of "Face the Nation" on October 20, 2013, hosted by CBS News' Bob Schieffer. Guests include: Sens. Mitch McConnell, R-Ky., Lindsey Graham, R-S.C., and Mark Warner, D-Va., plus a panel featuring Gerald Seib, Rana Foroohar, Stuart Rothenberg, and Michael Gerson.

SCHIEFFER: And good morning again. We welcome to the broadcast the Senate Republican Leader Mitch McConnell.

Senator McConnell, Jim Baker, the former secretary of state who led five Republican presidential campaigns, described this recent brawl over trying to tie the defunding of Obamacare to shutting down the U.S. government -- he described it by recalling the words of a long-ago candidate who lost a Senate race in Texas who said, "We shot ourselves in the foot and then reloaded."

Will you ever let something like this happen again?

MCCONNELL: You know, one of my favorite old Kentucky sayings is there's no education in the second kick of a mule. The first kick of the mule occurred back in 1995 when we were -- the Republican House shut down the government.

Look, shutting down the government, in my view, is not conservative policy. I don't think a two-week paid vacation for federal employees is conservative policy. A number of us were saying back in July that this strategy could not and would not work, and of course it didn't. So there will not be another government shutdown. You can count on that.

SCHIEFFER: Well, how badly do you think the country was hurt by all of this?

MCCONNELL: Well, it certainly didn't do the country any good to have, you know, both a government shutdown and a pending fiscal crisis right on top of it. But, look, we're a big, resilient country. You just pointed out how the stock market bounced back immediately. I was pleased to play a role in keeping us from going to the brink. I think it was important to do the right thing for the country. And we did it.

SCHIEFFER: You know, while people here were giving you credit for being the one who was able to get together with the Democrats and broker this deal, back in your home state of Kentucky, the Tea Party folks went nuts.

I mean, you are going to have a Tea Party candidate opposing you in the Republican primary. They are -- say they are now more determined than ever to beat you. They even accused you of taking a kickback. They said that...

(LAUGHTER)

... in this legislation, there is a provision that provides a way to get $2 billion to fund a dam project in Kentucky. What -- what is that all about?

MCCONNELL: Well, as has been widely reported, it was a provision requested by the president and the Corps of Engineers and suggested by a senator from Tennessee and a senator from California that actually saves the taxpayers $160 million. Rarely, in a spending bill, do you have a provision that saves $160 million for the taxpayers.

SCHIEFFER: But did you have anything to do with putting that into this legislation? MCCONNELL: It was put in by Senator Alexander and Senator Feinstein, senators from Tennessee and California, because it saved $160 million for the taxpayers.

SCHIEFFER: And -- though you have lobbied for that project before. I mean, it is a Kentucky project.

MCCONNELL: In past years -- yeah, in past years. It's a dam that sits in the -- an important inland waterway passage between the Mississippi and the Ohio. It's been a longstanding project. It doesn't just benefit Kentucky. It benefits the whole inland waterway system. It is extremely important to the commerce that flows down the central part of the United States, yes.

SCHIEFFER: Let me ask you about Senator Ted Cruz. He led this effort to tie the defunding of Obamacare to shutting down the government. He said he is not backing away. He says he will continue to do -- and these are his words -- "anything he can" to stop what he calls "the train wreck that is Obamacare."

How are you going to deal with that?

MCCONNELL: Well, I certainly agree with Senator Cruz that Obamacare is indeed a train wreck. I mean, a visit to the website is kind of like a trip to the Department of Motor Vehicles in your state. People can't -- even if they can access the website, there's no way to -- to get quotes.

Even those who may be fortunate enough to sign up are going to find that the premiums are hiring and the choices are fewer.

One thing that all Republicans agreed on back in 2009 is that we thought Obamacare was a terrible mistake for the country. We still think that, and we're going to do everything we can in the future to try to repeal it. But that requires a Republican Senate and a different president.

We have a math problem in the Senate in getting rid of Obamacare. It's that -- it's the following math problem, 55 Democrats and 45 Republicans. We only control a portion of the government, and so that limits our ability to get rid of this horrible law.

SCHIEFFER: But let me get back to what do you do about Senator Cruz? How do you deal with him?

Trent Lott, your predecessor, the very conservative Republican from Mississippi, was asked by The Washington Post, and he said, "You gotta roll him." He said "We've got to have more pushback against these people who come to Washington and suddenly announce they have all the answers."

What do you -- when Senator Cruz tries this again, how will you respond to that?

MCCONNELL: Look, we've got a big conference with 45. I'd like to have 51. That would make me the majority leader instead of the minority leader. We have a lot of people with different points of view.

We had some tactical differences about how to get at the repeal of Obamacare. But the fact that we have some tactical differences doesn't mean we don't all share the same goal. Obamacare is the worst piece of legislation that's been passed in the last half century, the single biggest step in the direction of Europeanizing our country. We need to get rid of it. And if the American people will give us a majority in the Senate and a new president, that's exactly what we're going to do.

SCHIEFFER: I have to tell you that the White House, as late as last night, was telling me that one of the reasons for all these problems with this website is that it has been overwhelmed with people that want this insurance. And they're saying that they are enrolling people into this program and that, like all new programs, the glitches will have to be worked out.

MCCONNELL: Well, let me quote Robert Gibbs, the president's former press secretary, who said it's "excruciatingly embarrassing for the administration."

In Oregon, no one has signed up; in Alaska, seven. It's -- they've had three or four years here to get this ready. God only knows how much money they've spent. And it's a failure. You know, the government simply isn't going to be able to get this job done correctly. And even if you were lucky enough, Bob, to get on to sign up, you're going to find you've got fewer choices and higher premiums. This is a very bad deal for the American people.

SCHIEFFER: You have primary opposition. You have Tea Party people who now say you are public enemy number one. It seems to me, though, this is -- this is something that goes beyond Mitch McConnell and the right side of the Republican party in Kentucky. Are we seeing a war now for the soul of the Republican party?

(LAUGHTER)

MCCONNELL: Well, just let me say this about the primary in Kentucky. I've -- I've endured millions of dollars of attack ads that have been calling me a right-wing fanatic over the years. I think my opponents in the primary are going to have a hard time convincing Kentucky primary voters that I'm some kind of liberal.

You know, I enjoy the support of the most famous Tea Party senator in America, Rand Paul. I'm supported by Marco Rubio, Pat Toomey, two other Tea Party favorites who were elected in 2010. I have the support of Mike Huckabee and Bill Bennett. I think they're going to have a hard time convincing Kentucky primary voters that Mitch McConnell is some kind of liberal.

In fact, we took a poll last month to check that out, and only 2 percent of Kentuckians thought I was a liberal. So I think that's a pretty hard sell. And it's almost certainly going to fail.

SCHIEFFER: What do you want now from President Obama? What do you want him to do now? You -- you're facing the same problems that caused this government shutdown. What would you like the president to do now, Senator?

MCCONNELL: Well, my first choice would be to take advantage of the opportunity presented by a divided government. You know, divided government has frequently done very, very important things.

I think of Ronald Reagan and Tip O'Neill raising the age for Social Security, which saved Social Security for a generation.

I think of Ronald Reagan and Tip O'Neill doing the last comprehensive tax reform.

I think of Bill Clinton and a Republican Congress doing welfare reform and actually balancing the budget multiple years in the late 90s. Divided government is actually an opportunity to tackle tough stuff. And we all know that the unsustainable growth rate of entitlements is the single biggest challenge confronting America's future. If we don't fix that, we're not going to leave behind for our children the same kind of country our parents left behind for us. I wish President Obama would lead and take advantage of the opportunities presented by divided government.

SCHIEFFER: How are the first --

(CROSSTALK)

MCCONNELL: -- Obama don't expect --

SCHIEFFER: what are the first steps --

MCCONNELL: -- honestly, I --

SCHIEFFER: -- in doing that?

Do you want him to call you on the phone?

Do you want him to set up some kind of a meeting?

Do you want to let it be settled up there on the Hill?

Because some-- even some Democrats say the president has not been active enough in this fight.

Would you like more contact with him, or is that a waste of time?

MCCONNELL: Well, we've talked about this. What I'd like for him is to step up to the plate and do it.

Unfortunately, every discussion we've had about this in the past has had what I would call a ransom attached to it-- $1 trillion in new tax revenues.

Look, we don't have this problem because we tax too little this country. We have it because we spend too much.

We currently have a $17 trillion national debt, and that pales in comparison to what's coming our way if we don't make the eligibility for entitlements fit the demographics of America today and tomorrow. Do I expect this kind of presidential leadership in the near future? Honestly, no.

But let me say what I do expect to come out of the next episode that we'll have in January and February. We have, as a result of the Budget Control Act, which was passed in 2011, which the president signed and was supported on a bipartisan basis, actually reduce government spending for two years in a row for the first time since right after the Korean War.

It is reducing government spending. Our Democratic friends want to bust the caps-- in other words, spend more-- and they want to raise taxes. For me, the bottom line, when we reengage early next year, is I don't want to bust the caps. And I don't want to raise spending because we are, in fact, reducing government spending -- not as much as we need to, but it is a success.

SCHIEFFER: But wouldn't it be a good idea, maybe, to start reengaging before early next year to try to lay some groundwork for that?

I mean, have you given any thought to calling the president or if he called you, would you take the call?

I mean, what happens right now?

MCCONNELL: Oh, yes.

SCHIEFFER: What ought to happen right now?

MCCONNELL: Well, what's happening right now is there is a budget conference with Paul Ryan and Patty Murray. And they're going to see if they can come up with a proposal.

Look, we interact with the White House whenever they would like to. My preference would still be a big deal.

But let me say at a minimum, at a minimum, we ought not to bust the caps that are actually reducing government spending and we ought not to raise taxes. At a bare minimum, it seems to me, that's the best way to go forward as we go into the discussions that we will have in January and February.

SCHIEFFER: All right, well, Senator, I want to thank you very much for coming out and talking to us this morning. We appreciate it.

We're going to turn now to two key senators, Republican Lindsey Graham; he is joining us from his home state in South Carolina. And Democrat Mark Warner of Virginia, he'll be a key player and he is with us here in the studio.

Senator Warner, let me just start with you. You heard what Senator McConnell said.

Where do you think this is headed?

WARNER: Well, Bob, I think we need to step back a moment and say we just went through an awful period for our country.

SCHIEFFER: He basically agrees with that.

WARNER: Listen, the numbers are coming in,$24 billion hit to the economy. We actually increased the deficit. You can't start and stop the largest enterprise in the world, the federal government, without adding costs.

We've actually built in higher interest rates because any time we get close to a potential default, we're going to have higher T-bill pricing. That's been built in. That passes through to mortgage costs, car loans, student loans.

So what we need to do now is-- I'm an advocate of a big deal, but we ought to at least first start and make sure that we actually operate the government for a year going forward with a solid budget and find ways to alleviate some of the damage also being done by sequestration, which is this automatic spending cuts which Lindsey and I and a whole group of others say was the stupidest way possible to go about cutting government.

SCHIEFFER: Senator Graham, you heard your leader.

Where do you think this is going now?

GRAHAM: Well, I think what would be good for the country is if the Budget Committee reported out a bill by the December 13th that did three things-- fund some infrastructure. There's a lot of bipartisan support for infrastructure funding for our roads, our bridges and our ports.

And the president should give Democrats some political cover to reform entitled, and Republicans need to be courageous enough to flatten out the tax code. If we did those three things and replaced sequestration we could end this year on a very positive note.

SCHIEFFER: Do you think there's any chance something like that could happen?

(CROSSTALK)

GRAHAM: With presidential leadership -- well, I think it would take leadership. The public is ready for the Congress to behave better. This is a second chance. It would help us all. Sixty percent of the people in the United States want to fire every one of us. I understand that.

But if we could come together and pay for an infrastructure bill-- Mark is working on an infrastructure system of funding. If the president would give cover to Democrats to enact CPI changes that he's already embraced, and people like me would agree to bring in revenue, not by raising taxes, by flattening out the tax code and bring in some repatriated corporate earnings at a lower rate, apply that money to the -- to infrastructure, we could replace sequestration in whole or in part and it would help us all. It would help the country. (Inaudible) with some leadership. SCHIEFFER: Senator Graham, what do you think the impact of all this has been on the Republican Party, your party?

GRAHAM: It's a wake-up call. Conservatism is an asset to the Republican Party. We're a right of center nation. We're not a right ditch nation. I think we've learned that this was a political gift to the president by the Republican Party at a time he needed it the most. The tactic of defunding the government, unless he repealed his signature issue, was as poorly designed as ObamaCare itself, almost.

I can't imagine President Bush agreeing to repeal the Bush tax cuts if the Democrats had challenged him with the following proposition -- we will fund all the government, Mr. President, if you, President Bush, would give up on your tax cuts.

President Obama was never going to give up on his signature issue. But as a party we have got to do soul-searching and I hope our House colleagues will follow Speaker Boehner. The only way the government can shut down is not what Senator Cruz says but what the House does. So President Obama, work with John Boehner. Work with Harry Reid, Senator Reid.

Senator Reid, stop moving the goalposts on Speaker Boehner. To my House Republican colleagues, follow Speaker Boehner. He's a good man.

If we'll do all this, we won't shut the government down again.

SCHIEFFER: All right. Well, we're going to come back to both and you Senator Warner and talk some more about this in one minute.

(COMMERCIAL BREAK)

SCHIEFFER: Back now with Senators Graham and Warner.

Senator Warner, you heard Senator Graham lay out what he thinks the path is here. He also talks about how badly Republicans were hurt.

Was your party hurt by this?

And where do you think this all goes now?

WARNER: Bob, there were really no winners. I mean, our country took an economic hit. We also took, I think, a confidence hit in terms of the American public. I understand why people are madder than heck at all of us.

And we took a hit on the world stage. Look when you see China and Russia saying let's de-dollarize the world. Let's move away from an American-driven economy. So I think-- and Lindsey and I, we found that we have a lot of common ground agreement. We're working on infrastructure together. We ought to put this in an order of three things.

First, we've got to show we can govern. Basic governance means we've got to put a budget in place where we go at least for a year without any threat of a fiscal crisis.

Then on top of that, we ought to find common agreement where we can make these investments in infrastructure and replace some of the damage being done that I think on the defense side and on the discretionary side around sequestration.

There are smarter ways to cut government than sequestration. And then I believe that the single biggest thing we could do for our economy, single biggest job creator, would be to put together a bigger bargain that includes revenues, that includes entitlement reform.

We all know at the end of the day, Republicans are going to have to give on revenues, Democrats are going to have to give on entitlement reform. We do, that, the confidence building that would take place I actually believe would do more for job creation than any other program we've talked about.

SCHIEFFER: Senator Graham, you talked about what is going on in the House of Representatives.

Do you think Speaker Boehner is going to survive all this?

GRAHAM: I hope so. I hope people rally around John and learn from this tactical mistake that they made regarding defunding ObamaCare. John is ready to do a big deal.

They were $150 billion a part, he and President Obama.

So as we go back into the budget negotiations, I hope that under Paul Ryan's leadership, and with some presidential leadership, we can do what Mark just talked about -- an infrastructure bill that would allow to us create jobs, entitlement reform and tax code reform.

And John Boehner is a willing participant, so is Mitch McConnell. We have got a unique opportunity here after this debacle called the shutdown to reenergize the congress and maybe get better standing.

But John Boehner, please, follow John.

SCHIEFFER: What about Senator Ted Cruz? I asked Senator McConnell six ways from Sunday about how he was going to handle that part of it on -- from here on in, and he didn't really give me any specifics. Has Ted Cruz hurt your party?

GRAHAM: I think the tactical choice that he embraced hurt our party. Ted is a smart guy, but Ted Cruz can't shut the government down. What shuts the government down is when the House and the Senate can't agree on a funding number. And our president has been virtually AWOL. This idea I won't negotiate, the president of the United States needs to get involved with Boehner and Senator Reid to try to bring us together.

The political marketplace will determine Ted Cruz's future. We helped President Obama when he needed our help the most. After this debacle called the shutdown, our party's been hurt. Our brand name is at its lowest ever. Obamacare actually got a bump in polling. And we got in the way of a disastrous I don't roll-out, so from my point of view, this was a tactical choice that hurt us, but the good news for the Republican Party is that of the debacle is over, if we don't do it again and Obamacare is a continuing debacle.

One quick story, a friend of mine owns 52 Wendys. He's put pen to paper. He has 40 percent of his workforce ensured today. Under Obamacare, if 20 percent choose insurance his insurance costs will double. That story is repeating itself throughout the economy.

Obamacare is a debacle that will go into 2014. The shutdown should be in our rearview mirror as Republicans.

SCHIEFFER: I will just respond that the White House says it won't happen that way. I'm sorry, we're out of time. But I want to thank both Senators for being here this morning. Back in a minute with some more...

(COMMERCIAL BREAK)

SCHIEFFER: It'll be awhile before we know for sure how much the shutdown cost. Best estimates so far it took about $24 billion out of the economy. The furloughed government workers will get their backpay, and they should. But how does my friend who owns the carry- out around the corner from our office get back what it cost him? His business is next door to a federal agency that employs about 700 people. Only 28 were declared essential, the rest stayed home.

During the shutdown, he had more people behind the counter than in front of it ordering sandwiches. And guess what? He's not too interested in whether Democrats or Republicans won the partisan showdown. But he knows who got the short end -- him.

There is another part of the cost that won't show up on the accounting books. A big story like the shutdown tends to push things that often matter off the front pages and TV. Here's just one that got almost no attention -- a survey out last week showed nearly half the students in our public schools, 48 percent, come from families so poor they qualify for free or reduced-price meals. Even more disgraceful, a majority of student now qualify for food subsidies in 17 states across the south and west. I'd like to see our elected officials begin to focus on how we fix things like that.

Like my friend at the carry-out, I'm losing interest in who wins the partisan games.

Back in a minute.

(COMMERCIAL BREAK)

SCHIEFFER: Welcome back to "Face the Nation."

Well, after congress reached the last-minute deal to raise the debt ceiling and avoid defaulting on the nation's debt, the stock market took off. The S&P 500 finished with a record high Thursday, that was beaten again on Friday. But the deal only lasts a few months, and we could find ourselves right back on the brink early next year.

So to talk about what that all means we're joined by Mark Zandi, the chief economist of Moody's Analytics.

Mark, let me just ask you the basic question -- how much was the economy hurt by this shutdown?

MARK ZANDI, MOODY'S: It was hurt. By my calculation, it cost us about $24 billion in GDP, that's the value of all the things we produce. So just to put that into context, that shaves about a half a percentage point from growth in the fourth quarter.

And I had expected the economy to pick up pace by the end of the year going into next, but now I think that's very unlikely. I think we're stuck in this very slow-growth, lackluster kind of environment.

SCHIEFFER: Well, I guess that lead to my second question, does the reopening now -- is that going to bring money back in somehow? Could it be recovered during the holidays?

ZANDI: We'll get a lot of it back. You know, the shutdown was disruptive to lots of different parts of the economy, to trade, to mortgage lending, to small-business lending, obviously to tourist destinations. But a lot of that will -- will come back.

But I think pervading the entire economy is this uncertainty, which I think is -- the effects of that are corrosive, have been accumulating over the last several years. And obviously, given the deal, the nature of the deal, that we're going to take this into next year, it will continue.

SCHIEFFER: And what about the, just, sort of, how this is perceived in other countries around the world? Does that have an impact on -- on the economy itself and our credibility?

ZANDI: Yeah, you know, it does. I think global investors forgive us a lot because it's not clear to them where else they'd put their money. I mean, you know, you look across the world; would you put your money in Europe, China? I mean, where would you go?

So we're the beneficiary of that. But that only takes us so far, and I think global investors are starting to really doubt -- when senators and congressmen actually openly question, you know, whether it's OK to default on the debt or our other obligations, I think that makes people not only nervous here but across the globe. And ultimately, that's going to cost us in the form of a higher interest rate.

SCHIEFFER: But do you think -- do you see anything changing since Standard & Poor's downgraded the nation's credit after the last one of these messes that we went through?

ZANDI: In terms of the political brinkmanship? No. I mean, and this last round of brinkmanship, from my perspective, was particularly debilitating and disconcerting, particularly because we had people who are lawmakers actually openly debating whether we could, if not pay on the debt of the -- of our Treasury, you know, pay Social Security recipients. You know, was this an OK thing?

I don't think that kind of conversation is particularly useful, and it makes me more nervous.

SCHIEFFER: Well, you know, when this was happening -- and I am asked some of the questions that people answered by saying, "Oh, they're just trying to scare the markets" and so forth, when I would ask people, "Do you really want to let the country go into default?"

What do you think would have happened? I mean, can anybody know? Because this is stepping into the unknown here.

ZANDI: You know, Bob, I -- my job is to opine about a lot of different things, and some things I say with less conviction than others. I can say with a high degree of conviction that, if we go down that path, it's going to be cataclysmic for our economy, and not just for a month or two or a year or two. This is going to extend out for decades.

So we just can't even contemplate going down that path. And in my mind, the most important thing that could come out of this process is to all of us decide that we're just not going to do this again.

SCHIEFFER: Well, I think the Senate Republican leader has convinced himself of that.

ZANDI: Yeah, he sounded pretty convincing. So I think, if we get a group of folks like that in the room and they're all coming to even a reasonable -- we -- in my view, a grand bargain would be great. It would be nice if we got that, but it's not necessary. All that's necessary is we have to decide that we're not going to shut the government down and we're not going to default on our obligations. And if we do that, the underlying economy is in pretty good shape, and that will shine through, and we will be in a pretty good place.

SCHIEFFER: OK. Mark, I want to thank you for coming by this morning.

ZANDI: Thank you.

SCHIEFFER: We'll be back with our panel of astute analysis, just in a minute.

(COMMERCIAL BREAK)

SCHIEFFER: And now for a little perspective on all of this, we turn to our panel. Rana Faroohar is a managing editor for Time magazine. Jerry Seib is the Washington bureau chief for the Wall Street Journal. Michael Gerson, columnist for The Washington Post. And Stu Rothenberg is the brains behind the Rothenberg Political Report.

You're also the body behind the Rothenberg Political Report.

(LAUGHTER)

ROTHENBERG: I am the Rothenberg Political Report. (LAUGHTER)

SCHIEFFER: OK. Rana, you just heard what Mark Zandi just said. What's your take on that?

FAROOHAR: You know, I -- my opinion is very similar to his. I think that this round of fighting has been particularly debilitating. I think what was really interesting is, right after we got a deal, the price of gold actually rose. Now, gold is a safety asset. That's what people go into when they're worried. And that, to me, was the markets telling us we don't want another kicking of the can down the road. We don't want to be here again in a few weeks. We want some certainty about the future and about what our economy is going to be like.

And I think business CEOs in particular want that. You know, they've cut off spending. They're not investing right now. They're waiting to see what's going to happen. And now that's going to continue for another quarter or two.

SCHIEFFER: Jerry?

SEIB: Well, one of things you saw in this crisis is consumer confidence took a plunge, and that has significance in the real economy, not just in the Washington economy. And I think it's not because people are waiting for Washington to settle the budget, per se. I think they're acting on a sense of insecurity because they think things are, sort of, vaguely out of control.

And I think that's one of the prices that's going to be paid here. One of the problems you have to think about is that is true heading into the holiday buying season.

Now, I don't know if there's a direct correlation between what am I going to buy at Wal-Mart at Christmas for my kids and how are things going in Washington, but there's some relationship, and I think, to the extent there's insecurity in the land already, Washington keeps, sort of, reinforcing the insecurity, the economic insecurity, and that can't be good.

SCHIEFFER: Michael, you're now hearing some in the business community say that they may back candidates in Republican primaries against some of these Tea Party people who have been, you know, holding out the big club over the so-called establishment Republicans.

Where do you see this going politically?

GERSON: Well, I think that you've seen an epic disaster on the Republican side -- self-inflicted. Most Republicans realize that, except for the group that was decisive in the crisis itself.

This was a significant escalation of Tea Party strategy. It was not just directed against the leaders, McConnell and Boehner. It was directed against conservatives who disagreed with their strategy, who were attacked in radio ads. That is a level of bitterness we haven't seen. The reason it's a long-term problem as well, though, is because Boehner really is not in control of an effective majority on some issues in the House of Representatives.

You know, Gingrich in '96, at least he could have a strategy. He could pursue tactics. Boehner, because a significant portion of his conference is not on board, is limited in his ability to pursue strategy.

SCHIEFFER: Well, Stu...

ROTHENBERG: Bob, the problem with this is that that strategy by Karl Rove and others in the business community only gives ammunition to the folks at the grassroots. Sure, there's the Tea Party in Washington. There are a few dozen of them. But the problem for the Republicans right now are Republican grassroots voters. They're angry. They don't accept the institution, the legitimacy of the leaders.

And so anything that looks like an organized effort by the, quote/unquote, "establishment" to defeat the grassroots conservatives is going to be a problem.

SCHIEFFER: But, you know, you have an organized thing going against people like Mitch McConnell. These PACs, Tea Party-supported PACs have run about $400,000 worth of ads already against Mitch McConnell, who is the Republican leader in the Senate. They've run about the same number of ads against Lindsey Graham. You just saw...

(CROSSTALK)

ROTHENBERG: But sentiment at the grassroots is a little different than sentiment in Washington, D.C. And at the grassroots, the Republicans, the conservatives, are angry -- at least the people who vote in primaries are really angry.

So it's -- it's hard to motivate establishment support at the grassroots. There is some of that, particularly in the business community. But the Republicans face a problem at the grassroots.

(CROSSTALK)

SCHIEFFER: Go ahead.

FAROOHAR: Well, one thing I think is interesting, too, though, in the business community, a lot of things that business wants these days are actually, sort of, left-leaning, infrastructure spending, investment in K-12 education, which poses another sort of interesting challenge for the right.

SCHIEFFER: Jerry?

SEIB: I was going to say, I think Stu is right in the sense that people in the Tea Party movement are not mad at Obamacare because the exchanges don't work. That's not the point. They're mad at it because they think it's a metaphor for everything that scares them about government intrusion in their lives. It's -- it is almost a symbol of what they fear most, which is that Washington is going to come get me. And that's very basic and it's very Tea Party, and it's got nothing to do with, sort of, the debate about how well it works here.

SCHIEFFER: But let me just add one thing about Obamacare, which Senator Warner, as he was leaving, what he wanted to say and we just wanted -- we ran out of time -- he says, and the White House is saying the same thing -- that, despite all the glitches, despite all the bad publicity about this start, that when you look at what's happening at the state exchanges and you look across the country, that about a half million people have begun the process to enroll.

Now, mind you, this thing is not very pretty, the way it's unfurled. But they are really wanting everybody behind that.

GERSON: Well, I would say, though, that, when you look at the economics of this, the worst outcome is a partially working system. Because if you persevere and you really need health care and you go on and on and get to the site, you're getting people who need health care in the system.

The goal of a health system is to get millions of people who don't need health care in a system.

(LAUGHTER)

That's the way insurance works. That's called adverse selection. That's the real fear here is, a year from now, if the system's not working properly, how will the economics of that system work?

SCHIEFFER: Well, I want to go back to this situation in the Republican party. is there a war now? Is this a war for the soul of the Republican party?

ROTHENBERG: Absolutely, unquestionably. It's impossible to argue against that. At the grassroots level in Senate races, a number of incumbent senators have primaries, McConnell, Lindsey Graham, Lamar Alexander, now Thad Cochran of Mississippi. There's some House primaries. There will be more.

No, there's no doubt. And it's going to be a civil war that continues past 2014, probably all the way through 2016.

SCHIEFFER: So where does this go? I mean...

SEIB: Well, if I were a Republican, this is what I would be worried about. This is the number out of the shutdown that would worry me the most. In our polling, between September and October, the number of independents who said they wanted Republicans to control Congress after the 2014 elections dropped 20 percentage points, in one month.

So that's the problem. There's a civil war under way. Republicans are fighting it out. But what do those independents, who really tip the balance -- what do they think?

Now, in the Tea Party districts, these Tea Party representatives, they don't have to worry about that. They are solid. And the calls they got from back home said, "Hang in there. Hang tough." But there are a lot of other Republicans who don't have that luxury back home. They're the ones who I think need to be worried.

FAROOHAR: You know, I think that there are also deep policy issues at stake here. I mean, there are the politics of all this, but I think, economically in particular, Republicans need new answers; they need fresh answers. Supply side, I think, is broken. We've got growing inequality. We've got a pretty long-term slow-growth economy. We need some new answers and some fresh thinking that people can really buy into.

GERSON: I strongly agree with that. After this last election, there was some reflection, self-reflection. The RNC issued a big report, how do we appeal to young people; how do we appeal to minorities?

FAROOHAR: Yeah.

GERSON: All of that has washed away in this populist revolt. The real cost here for Republicans is the opportunity cost. They've got problems to solve in their appeal to the American people, which they're not solved in this internal debate.

SCHIEFFER: What -- you worked for George W. Bush. Do you think he would be acceptable to the Tea Party?

GERSON: No.

(LAUGHTER)

They would certainly agree with that.

(LAUGHTER)

But the problem here is you have people like Senator Jeff Flake, people like Tom Coburn, Senator Tom Coburn. These are some of the most conservative members of the Senate. They're not acceptable to the Tea Party. SCHIEFFER: Well, Thad Cochran of Mississippi.

GERSON: Right. And this is largely an argument about strategy and tactics, but it's a bitter argument about strategies and tactics because the critique here is that these people are compromised. They're at, you know, Georgetown cocktail parties. They're part of the problem. That is a bitter debate going forward.

And the Tea Party itself lives increasingly in an ideological bubble, with conservative media, with the support of conservative organizations. They don't view it the same way as the -- as the party does.

ROTHENBERG: Bob, I was reflecting on my interviews with candidates over the last two cycles. I interviewed House and Senate candidates, about 150, 200, a cycle, and interviewed a lot of Tea Party, Libertarian candidates. And they would come in and we'd talk about their strategy and what they want to accomplish. and I'd ask them, "Why are you running?"

They said, "We want to do away with Obamacare."

And I'd say, "I understand that. but you understand that the president is not going to allow that; the Senate's not going to allow that. What do you really -- what do you hope to accomplish?"

"We want to do away with Obamacare."

And I didn't -- now, reflecting, it says something about their understanding of the legislative process and their role in Washington. And they have such a different view. Michael's exactly right. This is not about ideology. It's about strategy, tactics and understanding the nature of the institution of which they're members.

SEIB: One of the things I think people don't understand is how much of the House is made up of members who have only been here a few years. You know, about half of them have only been here since 2010, which was the year of revolt against Obamacare and revolt against the president himself. And that's increasingly true in the Senate.

So I think a lot of -- a lot of the folks in that group didn't come here intending to legislate and don't really think that much about how does the legislative process work. They're here to run a kind of a campaign against things they don't like. Over time, people say, well, you know, that, sort of, smooths out; people figure out how to do legislatively what they want to do. But that's not where we're at right now. The Congress is not in the hands of people who have that kind of experience.

SCHIEFFER: Well, let's talk about the country.

(LAUGHTER)

OK? There's always the country. What's going to happen here? Are they going to be able to come to some understanding?

I think both parties understand they're in a different place than they were before all this happened. But will that be enough, Rana, do you think, to get people to seriously sit down and try to find a way out of this?

FAROOHAR: You know, I -- I would like to think so. I mean, we're in for, as Mark was saying earlier, another probably year of a 2 percent growth economy. People are really struggling. But I think one thing is that the markets have not sent a really strong signal yet. We haven't had a market crash, for example, around all this. And part of that is because the Fed is always stepping in because of political dysfunction in Washington and pouring more money into the markets. And, you know, the Fed is, sort of, the last man standing that can do something.

So there's a strange disconnect where you want to almost get a lot of pain -- not that I'm wishing for a market crash -- but you might need pain in order to get people to really respond. And you have these two things going on at once that can offset each other. SCHIEFFER: Will this be enough, do you think, Jerry?

SEIB: Well, I was interested that Senator Lindsey Graham seemed so optimistic there's a deal to be done. I have to say he's in the minority in saying that. On the other hand, there is one thing that drives the two parties together, and it's the sequester, these across- the-board automatic spending cuts. Both parties hate them, for different reasons.

Republicans hate them because defense spending will take the entire next cut early next year; $20 billion comes straight out of defense. They don't like that. Democrats don't like it because it's held down discretionary domestic spending so much. And so in that space, I think there's room to do a deal.

GERSON: And that's essentially what Paul Ryan, in some ways, has been proposing in this system, a reasonable voice, saying let's lessen or ease the sequester in exchange for some marginal changes in entitlements that will save money in the long term. That's a realistic deal. The question is just what's the market for rationality right now in the...

(LAUGHTER)

... in the Congress? And it's pretty thin.

ROTHENBERG: Yeah, I would say the House is still a problem, and for Republicans, think about this. After the deal, we heard some people say, well, maybe this is the beginning of a period of compromise. We had this tough fight. Now maybe everyone will work together.

If you're a Republican, you've already caved on a pretty big deal. Are you willing to cave again on immigration reform or a big budget deal? I'm not sure why.

SEIB: Yeah.

I'm sorry. I was just going to say, immigration is the one we hadn't mentioned until Stu just did. But you remember, that was going to be the big deal this year. That's what Republicans said we've to get around and in front of the immigration debate. That was the beginning of the year message from Republicans. Well, that's kind of been washed out. And I personally find it very hard to imagine, in this poisonous atmosphere, the two parties coming together and doing a big immigration deal.

FAROOHAR: And that's something that business, again, would really like to see.

SEIB: Yeah. Absolutely.

SCHIEFFER: But this is kind of interesting, to hear both you of, Rana and Jerry, and you're very close to the business community and their points of view. Is business cooling on the Republican party here? FAROOHAR: I think so. I think -- you know, the Republican party used to be the party of optimism. You know, it used to be the bullish party. It's really not anymore. And I think that getting that mojo back is going to be very, very important to regaining the confidence of business and also coming up with a real agenda that works for actual businesses in America.

You know, you need infrastructure spending. You need a rethinking of education. And that's real hard policy work. And that's hard politics.

SEIB: I don't think they're breaking from the Republican party. I think they're breaking from what they see as a Tea Party domination or potential Tea Party domination of the Republican party. They're not running toward President Obama and the Democrats by any means. But you saw the Chamber of Commerce say, in the end, Republicans should vote for the deal that ended the shutdown. Meanwhile, the conservative Tea Party groups were saying the opposite. That, I think, illustrates the split. It's which kind of Republican party.

SCHIEFFER: Could there be a third party come out of this, Stu? Is there some way -- some sense that maybe the Tea Party people will just say there's nothing here for us in the Republican party?

ROTHENBERG: Well, I never say never anymore.

(LAUGHTER)

I've seen it all, and there's something else that will come around the corner.

(CROSSTALK)

(LAUGHTER)

Having said that, institutionally, it's very difficult to get a third party, just the nature of our winner-take-all districts and the fund-raising and personal loyalty. I think it's possible we might have a kind of brief fracture in the Republican party. I can see a -- a cycle where we have a number of independents who are -- or conservative independents running. But something -- something more dramatic would have to happen in terms of legislation and how we run elections before...

(CROSSTALK)

SCHIEFFER: Do you think that the Republicans might lose the House next time? Could they, or...

ROTHENBERG: Let's do numbers again. We have 24 Republican districts at significant risk -- 24 districts at risk, 12 significant, 12 marginal. Some of those marginal races could move into real risk, and some races that are off the board could move.

What I've said is, six months ago, it was not plausible to say the House is at risk. Now it might be. Give me two or three months and I'll tell you whether I think it is at risk.

GERSON: Yeah, I think getting 17 seats is an uphill battle for Democrats in the way our districts are gerrymandered in our current system. I don't see the signs right now of a wave election, you know, what you might see. But, you know, it is -- it's early. We'll see how this works out. And of course it will unfold early next year again. If Republicans repeat silly tactics like this, they're on a downward path. If they take a different path, I think they'll have a different outcome.

SCHIEFFER: And this is being said by someone who worked for George Bush.

(LAUGHTER)

This is not part of the Barack Obama team that's here.

Very -- thank you all very much for being with us this morning. Very interesting. I learned a lot. And we'll be right back with our "Face the Nation" flashback.

(COMMERCIAL BREAK)

SCHIEFFER: And finally today, as Washington recovers from a crisis of its own making, it is worth remembering the 51st anniversary of the very real Cuban Missile Crisis, our "Face the Nation" flashback.

(BEGIN VIDEOTAPE)

ANNOUNCER: A CBS News special report, "Anatomy of a Crisis."

SCHIEFFER (voice over): It was October 1962, the height of the Cold War, and a U.S. spy plane discovered Russian nuclear missiles on the island of Cuba.

FORMER PRESIDENT JOHN F. KENNEDY: The purpose of these bases can be none other than to provide a nuclear strike capability against the Western Hemisphere.

SCHIEFFER: In a televised address, President Kennedy announced a naval blockade on all shipments to the island and demanded the Soviet Union withdraw the missiles.

KENNEDY: Should these offensive military preparations continue, thus increasing the threat to the hemisphere, further action will be justified.

SCHIEFFER: Americans prepared for nuclear war, and the American military went to the highest alert.

(UNKNOWN): Ninety miles away on public beaches in Key West, a startling reminder that we meant what we said, rockets, where days before there had been nothing but sun and sand, this just part of the Florida build-up that must have appeared so menacing to Khrushchev and Fidel Castro. SCHIEFFER: For 13 long days, the U.S. stood its ground, working through back channels to facilitate an end to the standoff. On October 27, Soviet Premier Nikita Khrushchev sent word to the White House that Russia would remove the missiles if the United States agreed not to invade Cuba. The crisis was averted.

It was unimaginable that, just a year later, President Kennedy would be gunned down during the campaign trip to Dallas. Back in a minute.

(COMMERCIAL BREAK)

SCHIEFFER: And that's it for us. We want to thank you for being with us this morning. We hope you will stay with CBS. We hope you will catch "CBS This Morning" tomorrow morning with Charlie Rose and Norah O'Donnell and Gayle King. They'll have the very latest. That's it for us. See you later.