Watch this broadcast on Video: Part 1, Green Room (not transcribed)

SYNOPSIS:

SENATOR ARLEN SPECTER (DEMOCRAT): I have found myself increasingly at odds with the Republican philosophy and more in line with the philosophy of the Democratic Party.

SENATOR HARRY REID (MAJORITY LEADER): I welcome Senator Specter and his moderate voice to our very diverse caucus.

SENATOR MITCH MCCONNELL (MINORITY LEADER): Obviously we are not happy that Senator Specter has decided to become a Democrat.

PRESIDENT BARACK OBAMA (UNITED STATES): Let me tell you, Arlen Specter is one tough hombre.

MICHAEL STEELE (CHAIR): This has nothing to do with philosophy and principle and all of those wonderful sounding words. It's cold, crass, political calculation.

GEORGE STEPHANOPOULOS (ABC NEWS): Michael Steele saying good riddance to Arlen Specter, Republican senator, became a Democrat this week bringing the Democrats one step closer to 60 in the Senate. Lots of different implications to that switch. We're gonna talk about it on the roundtable today. Let me bring in George Will, Gerry Seib of "The Wall Street Journal", Paul Krugman of "The New York Times" and Princeton and Gwen Ifill of PBS. And I want to get to the Republican Party later, George, but let's begin with the implications of this for the Supreme Court. Of course, Arlen Specter was the ranking Republican on the Judiciary Committee. He's out right now. And as this goes forward we're going to learn a lot about President Obama, his party and the Republican Party.

GEORGE WILL (ABC NEWS): We are. This will not change the balance on the court because this is a liberal being - will be replaced by presumably a liberal. You may be admiring my necktie.

GEORGE STEPHANOPOULOS (ABC NEWS): I love your tie, George.

GEORGE WILL (ABC NEWS): That is the silhouette...

GEORGE STEPHANOPOULOS (ABC NEWS): Before you tell me what it's about.

GEORGE WILL (ABC NEWS): The silhouette of James M Madison. This is the tie of the federalist society and when I wear it on television, sleeper cells all over the country will go to war but there will be no war over this. He has a majority. He's no fool. Whoever he nominates will be confirmed and then he may be disappointed. Because just as Souter disappointed George Herbert Walker Bush just as Felix Frankfurter disappointed Franklin Roosevelt. These people take on lives of their own when they get on the Supreme Court.

GEORGE STEPHANOPOULOS (ABC NEWS): You know, George, you say there will be no war. So let me bring in Gwen Ifill right here. I think George is probably right on that everything we know about President Obama shows a temperate nature, yet, he is getting a lot of pressure already from liberals who say, you know what, you've got - you'll have 60 votes this summer. Go pick someone, even if it means getting 30 Republican no votes.

GWEN IFILL (MODERATOR): Because that's the way it works in Washington. There's always a war even if the outcome is predetermined about something like this. By the way, Justices Alito and Justice Roberts did not disappoint President George H - George W Bush so there's a lot to be said for - and probably a longer track record of Supreme Court nominees who do do what is expected of them. And that's why...

GEORGE STEPHANOPOULOS (ABC NEWS): Breyer and Ginsburg got overwhelming votes, and they turned out to be steadfast liberals over there.

GWEN IFILL (MODERATOR): Exactly. Well and I don't think anybody was confused that they were going to be pretty steadfast liberals. That was at a time when people thought it was the thing to do, that unless this person, this nominee really was horrible and in some way was not worthy of the seat, you gave the President his choice. That clearly is not what happens anymore, and what really has to happen for these - for anybody that a president nominates not to be confirmed is, you know, especially with 60 votes now, it looks like maybe perhaps in the Senate, it would take a lot more, but...

GEORGE STEPHANOPOULOS (ABC NEWS): A personal problem.

GWEN IFILL (MODERATOR): A personal problem. Something - even - there are people on the court who had personal problems who still managed to get confirmed so it would take a lot. But I think there's still going to be a fight because there's always a fight.

GEORGE STEPHANOPOULOS (ABC NEWS): Are you one of the liberals that would wants a big fight?

PAUL KRUGMAN (ABC NEWS): I'm not sure I would make the fight over this, but there are people certainly who do. I mean, you know, Obama is having some problems with people, progressives who expected him to be more dramatically different than, than he is. You know, in some sense, people are disappointed over Tim Geithner, are going to be depending on a more liberal justice appointment. Because Obama has not - you can say lots of good things, even progressives will, but he has not been quite the crusader for liberal causes that a lot of people had hoped he'd be.

GEORGE STEPHANOPOULOS (ABC NEWS): And Gerry, I was talking to a White House official over the weekend who said the President is not looking to throw a grenade into the middle of this process, but he did lay out an interesting series of criteria, very deliberate on Friday afternoon. Everyone is focusing on the empathy, but he also talked about integrity, excellence and respecting the rule of law.

GERRY SEIB (WALL STREET JOURNAL): Right. And he used the term independence of thought as well. And you're right, everybody is focusing on empathy because nobody is quite sure what that means. It may be a code word for liberal activists which I think Senator Hatch told you just a few minutes ago. It may mean, other people think a sign that he wants somebody not out of the judicial system now. Somebody with more real world experience, a governor perhaps, or somebody who's got sort of a nitty-gritty feel for what's happening in America today and not a judicial feel for it.

GEORGE WILL (ABC NEWS): What is a liberal activist these days? Because until January 20th at noon liberals wanted someone who would reign in presidential power. I'm not sure that's what this president wants anymore so liberals can be situational constitutionalists too.

GERRY SEIB (WALL STREET JOURNAL): Yeah.

GEORGE STEPHANOPOULOS (ABC NEWS): And the President has said in the past, if you look back at his service in the Senate, also during the campaign that he does value people who come from outside the judiciary on the one hand but also that he wants someone especially who will stand up against overreaching executive power. So it's going to be a fascinating series of hearings, but, Gwen, it also will, will, I think, set up a series of possible traps for both Democrats and Republicans. For Democrats, the risk is overreach. Trying to do too much, trying to go too far with the pick. For the Republicans, it could be put in a real box especially if President Obama picks as some people think he will the first Latino for the Supreme Court who happens to also be a woman. Sonia Sotomayor only one possibility.

GWEN IFILL (MODERATOR): And actually that would be very tempting for the President to do that, just to put them in that box. I mean I find it kind of - the whole situation to be kind of nice. It's nice to have a different litmus - a code word, empathy instead of litmus test which has always been our code word before, and we never really knew what that meant either. That was also one of those words or terms that was used depending on where you came from. So yeah, they're both in the box. I do agree with Paul that the liberals really would like an opportunity to push this president a little bit more because they don't think he has been sufficiently liberal to suit their tastes but I don't think they'll object to anything that he comes up with.

GEORGE STEPHANOPOULOS (ABC NEWS): And in the short run, Paul, whoever he picks is not gonna - as George suggested at the top, going to change the nature of the court dramatically unless the person has a special ability to get Justice Kennedy to switch sides on most big issues.

PAUL KRUGMAN (ABC NEWS): Yeah, but, but think about the time line here. You know, just four years ago we were looking at, everyone was saying we have a permanent Republican majority. We're going to have a definitively conservative Supreme Court. It's really all going to change. And that changed now so, yes, the person may not be more liberal than Souter but the person will be younger than Souter and so we're going to end up with - and Obama will probably get other appointments. So we're gonna be looking at a court that is in fact not going to be that right leaning court that almost everybody thought was inevitable.

GEORGE STEPHANOPOULOS (ABC NEWS): And Gerry, let me pick up on that because I know that the thinking in a lot of the circles around the administration is that this is the first of three picks for the President. There's actually been a very elaborate sequencing worked out. Souter decided to retire only after he checked with Ginsburg and Stevens. Next year either Ginsburg or Stevens will retire. The year after that the last one will go and the President is expecting, no guarantee but expecting three picks.

GERRY SEIB (WALL STREET JOURNAL): I think that's right. And you would just look at the actuarial tables going into the administration and I think that's a likely way to look at it. And it actually enables President Obama to kind of strategize how he picks, what kinds of people he picks knowing that the one pick isn't the last one it's the first of several. But it's also worth remembering I think that there's still going to be a fairly young conservative bloc on this court. You know, the Roberts/Alito alignment, they're not going away any time soon either. So this is gonna be an interesting, an interesting time to remake the court or not remake the court as you suggest. There's one other thing I would mention here that I think has gotten relatively little attention. You cannot have this hearing at this time and not have the abortion issue come up. And it's really the first time in the Obama presidency when that has - is going to be raised. And I'm not sure that's really what the White House wants to engage in a debate about right now but you can't really avoid it. I was talking with a Republican, a conservative Republican senator earlier in the week and I asked him, I said, when does abortion arise as an issue in this administration? He said not until there is a Supreme Court vacancy and then two days later there was a Supreme Court vacancy.

GEORGE STEPHANOPOULOS (ABC NEWS): Well the President was pretty clear Wednesday night at his press conference when this question of the Freedom of Choice Act which would codify Roe v Wade - he said listen, I'm for it but it's just not my priority. I just don't want to push it right now.

GWEN IFILL (MODERATOR): Not his priority.

GERRY SEIB (WALL STREET JOURNAL): Well now, we'll see.

GEORGE WILL (ABC NEWS): Well, one thing the President could do here is to do something that would break the streak now. We have nine justices who are former appellate judges, and he could go for the Earl Warren model. Someone from politics. Earl Warren famously would have a law come before him and its constitutionality would be challenged, and he'd say, well, is the law right? Is it nice? Is it good? Interesting questions but not judicial questions. The question is, is it constitutional? There are lots of things that aren't right that are constitutional.

GEORGE STEPHANOPOULOS (ABC NEWS): He may do that. And I have to say as someone who has been in the middle of some of these meetings to pick a justice that is always the first inclination at the first meeting. Do you want something way outside of the box, something - someone in the Earl Warren model and the longer the process goes on, boy, you go back to that appeals court just about every time. It happened as you say nine times in a row.

GEORGE WILL (ABC NEWS): One cautionary word, Harriet Miers was outside the box, as well.

GEORGE STEPHANOPOULOS (ABC NEWS): Outside the box as well. Let's switch subjects. Another fallout from the Specter switch, obviously the question of what does this mean for the Republican Party? There's been a lot of soul searching even though Michael Steele and others, Gwen, saying that this says a lot more about Arlen Specter than it does about the Republican Party, yet it comes at a time according to our "Washington Post"/ABC News poll says the Republican Party is at its lowest point in more than 25 years.

GWEN IFILL (MODERATOR): I think 21% of people identify as Republican anymore, which may have something to do with sinking party identification all around. But what's interesting about, about this is the refreshing nature of Arlen Specter's admission.

GEORGE STEPHANOPOULOS (ABC NEWS): Straight out there.

GWEN IFILL (MODERATOR): He did say at some point well, you know, the party left me. I didn't leave the party. But then he went on to say, I looked at my polls. A politician who admits that he reads the polls - even the President won't do that and we know that's not true. He's admitting that he can't win. Now, what it also raises the question of whether it's more important that he be re-elected than that the Republican Party of Pennsylvania, however it's composed, be represented. It's been a very interesting thing because I think the real thing you can tell about how concerned Republicans are, are people like Kay Bailey Hutchison, who is not a raving liberal...

GEORGE STEPHANOPOULOS (ABC NEWS): Senator from Texas.

GWEN IFILL (MODERATOR): ...who says that she's worried about it. People like Lindsey Graham, the senator from North Carolina who is not a raving liberal, who says he is worried about it, he is worried about the direction of the party and what this says about it.

GEORGE STEPHANOPOULOS (ABC NEWS): And you've got a whole bunch of top Republicans, including Mitt Romney, Jeb Bush, Eric Cantor of Virginia coming together, Haley Barbour of Mississippi coming together in a group yesterday to talk about outreach for the Republican Party, re-branding the Republican Party. Here is Jeb Bush in northern Virginia.

GRAPHICS: THIS WEEK WITH GEORGE STEPHANOPOULOS

JEB BUSH (FORMER GOVERNOR): Our ideas need to be forward looking and relevant. I just - I felt like there was a lot of nostalgia for the good old days in, in, in the messaging and, you know, it's great but it doesn't, it doesn't draw people towards your cause.

GEORGE STEPHANOPOULOS (ABC NEWS): The party clearly seems to be concerned at the top level, George, as being branded as the party of no in, in, in the wake of President Obama's election but also having a hard time. It feels like when you talk about re-branding and outreach, you're avoiding the core question. Is this a problem that Republican ideas are out of favor or is it just a communications problem?

GEORGE WILL (ABC NEWS): Well, the scale of the problem can be measured this way. It is estimated that there are 10 states with only 93 electoral votes in which the Republican Party is sort of durably strong. Now, that's, that's a regional party is what they're becoming. I happen to believe that no is a pretty good word in politics. The most beautiful five words in the English language are the first five words of the First Amendment. "Congress shall make no law" period. But beyond that, in fact, Mr Obama by the clarity of his program and the energy of his program is going to help the Republicans redefine themselves. They are going to be in opposition to this, they're going to be again a party of more limited government, and if Mr Obama's program works, he wins, if not, the Republican revival is assured.

PAUL KRUGMAN (ABC NEWS): But you know, just think about re-branding. So who do they get together to re-brand the Republican Party? The brother of a much disliked ex-president whose popularity is falling since he left office. The guy who didn't get the Republican nomination. You know, it's not a - they don't have any very new faces to do this re-branding, and they are becoming a party that is shrinking in on itself. It's this kind of death spiral in which the moderates got driven out of the party, lost and what's left is a more conservative party which is getting further and further away from the mainstream. If Obama fails big time, maybe that works but if not they really have marginalized themselves.

GEORGE WILL (ABC NEWS): But the last time, Paul, the last time they talked about the Republicans in a death spiral is after the '64 election when Goldwater carried six states. Four years later the Republicans began the string of winning ten - seven out of ten elections. So these death spirals can be reversed in a hurry.

GEORGE STEPHANOPOULOS (ABC NEWS): That's true, but I mean if you look at the example of the Democrats in the 1980s, during the age of Reagan, they had to go through a similar experience to this, Gerry Seib, and that's where you saw the Democratic Leadership Council coming up with reform ideas. But it wasn't until - and this picks up on Paul's point - it wasn't until there was a candidate Bill Clinton to carry those reform ideas forward that you actually saw the success.

GERRY SEIB (WALL STREET JOURNAL): Right, and there's no obvious candidate for that spot in the Republican Party right now but there wouldn't be at this stage of the cycle. I think what's interesting about this particular fork in the road is that it's produced this debate among Republicans about whether the path back to health comes from having a more ideologically coherent, conservative voice that implies a narrower base or to spread out the party and have a bigger tent. Which is the best way back to power? Is it having clarity of ideas or a broader outreach? And I don't think that issue was resolved and I think until it is, you're not gonna know what the Republican Party that we're talking about really is going to be in the next two or three years.

GEORGE STEPHANOPOULOS (ABC NEWS): And what that comes back to, Gwen, are the social issues. The Republicans can unify around a lot of economic issues, around the principle of liberty but when you bring to the social issues to the table, gay marriage, abortion, the environment to some extent, that's where a lot of the young Republicans are saying we have to have more moderation here.

GWEN IFILL (MODERATOR): Well, and that's where the danger of those five words that George was talking about comes because it doesn't - there's not a period after Congress shall make no law. It continues, and there - I spent the past week in St Louis talking to people who kind of aren't in our bubble and are watching this very carefully and who didn't necessarily vote for Barack Obama. I mean Missouri is the one battleground state he didn't win and they seem to be really patient with the possibility of government's role. Now, they're a little nervous about the deficits, a lot of folks, they're a little nervous about the spending but also saying completely in sync with the polls we've been reading that they think maybe this might work. Or they don't know where else to go. But I don't think telling these people that we're going to say no to everything, to every possible solution is the message that Republicans need to...

GEORGE STEPHANOPOULOS (ABC NEWS): But one of the President's solutions that's not so popular is one that he had to deal with this week. And it was the bankruptcy of Chrysler and the President seemed quite defensive about the fact that the government was taking so many - such a large stake in so many private businesses at his press conference on Wednesday and he was actually asked about what kind of a shareholder he would be.

GRAPHICS: THIS WEEK WITH GEORGE STEPHANOPOULOS

PRESIDENT BARACK OBAMA (UNITED STATES): I don't want to run auto companies. I don't want to run banks. I've got two wars I've got to run already, but I know that if the Japanese can design an affordable well-designed hybrid, then doggone it, the American people should be able to do the same. So my job is to ask the auto industry, why is it you guys can't do this?

GEORGE WILL (ABC NEWS): I assume the President is talking about the Prius. It's affordable because Toyota sells it at a loss, and it can afford to sell it at a loss because it is selling twice as many gas-guzzling pickup trucks of the sort our president detests so as an auto executive he's off to a rocky start. Now let me ask the people around this table a question. If the UAW is going to own 39% of General Motors and the government is going to own 50%, how do you negotiate? You've got a government in part elected by the UAW negotiating with the UAW. And then there's Chrysler. If Chrysler is going to be owned 55% by the UAW, is the UAW on both sides of the table when they negotiate a contract?

PAUL KRUGMAN (ABC NEWS): Well, you know, this is - ultimately all of this is going to depend on a continuing inflow of money from Washington. So ultimately, you know, the government is the shareholder. And that's the point in a way. Now, in a way that's probably going to ensure tougher bargains because this is tremendously unpopular.

GEORGE STEPHANOPOULOS (ABC NEWS): The President will drive a hard bargain. The UAW had to give a lot of concessions.

PAUL KRUGMAN (ABC NEWS): We've gotten significant wage cuts here. Now it may not be enough. This is a problem. And this is certainly not a problem - this is not something Obama wanted to do, but it was not conceivable to just let the thing collapse without, without doing something, without at least delaying the process. This is I think mostly about making things move enough in slow enough motion that we might have an economic recovery before everything goes.

GEORGE STEPHANOPOULOS (ABC NEWS): And Gerry, the administration considers it I think a major victory that Chrysler, they believe, will be a viable company they hope when it comes out of bankruptcy. But I the difficult question I think on both Chrysler and GM is, okay, the government is in there now, but what everyone has to figure out is the exit strategy and no one knows what that is.

GERRY SEIB (WALL STREET JOURNAL): No, and John Dingell, the congressman from Michigan, been around forever told me when this all came up, he said, you know, I was a bankruptcy lawyer once. People forget how hard it is to get out of bankruptcy. It is much easier to go in than it is to get out regardless of what people say at the moment when like this when it all starts. So I think the exit strategy is the question here. I don't know what it is. I'm not sure anybody knows what it is but I agree with Paul. I don't think Barack Obama wants to run auto companies but that doesn't mean he's not going to be stuck doing it for awhile. And I don't think he wants to tell the auto companies how to run their business, per se, but it's pretty clear he does want to use his influence to convince them they ought to be making a different kind of car.

GEORGE STEPHANOPOULOS (ABC NEWS): And in fact, it was only - he probably only got a deal, Gwen, because he was willing to put bankruptcy on the table in a real way. And I was struck by how much leeway Michigan politicians who supported him were giving him on this.

GWEN IFILL (MODERATOR): Well, and also I was struck by his decision to really lash out against hedge funds which standing front of a microphone with all of your economic team behind you that's not a hard thing to do, I suppose. No one knows what hedge funds are, and it sounds like an evil thing so let's say it's a bad thing.

GEORGE STEPHANOPOULOS (ABC NEWS): About four times "I'm not on their side."

GWEN IFILL (MODERATOR): But because he wasn't on - they weren't on his side, he had no choice but to put bankruptcy on the table. It's not like the President has had a wide array of choices here in trying to stop this. Their way of looking at it is that there was not an option for failure for these auto companies and so then if you assume there's no option, that you're not going to let them collapse, then what do you do?

GEORGE WILL (ABC NEWS): It seems to me the bankruptcy that we've sort of tried to prepackage in the administration before it goes to court is in the subjunctive mood. It will not be final until a judge speaks. And the President's proposing overturning certain premises of bankruptcy law. Second, we talk about an exit strategy. 30 years ago today, Margaret Thatcher won the election that made her prime minister and we had the retreat of the state continue for almost 30 years. Now it's been reversed in a big way, and I'm not convinced that once the political class comes to relish the pleasures of having this enormous slush fund to intervene in the economy, turning bank loans into shares in the bank, et cetera, I'm not sure they're going to want to exit at all.

PAUL KRUGMAN (ABC NEWS): I can't predict but right now let me tell you they really don't want to run banks. They so badly don't want to run banks I think it's actually kind of hamstering their ability to deal with them. Because they don't want to go where they just went with Chrysler on the banks. And this is, this is, you know, this is definitely not a socialist-minded administration.

GEORGE STEPHANOPOULOS (ABC NEWS): So how do you get out, though?

PAUL KRUGMAN (ABC NEWS): You Know, the only thing you can say is auto sales right now are so low that looking at the current situation is not a good guide. Right? At current rates of sales, it would take 27 years to replace the existing stock of automobiles so we know that automobiles - cars don't last that long. So automobile sales are gonna go up. So things are going to look better even if they do nothing, even if they just hold the fort, not enough to make these growing concerns as currently structured but maybe it's gonna be easier. You know, what looks impossible now may look doable in a year.

GERRY SEIB (WALL STREET JOURNAL): You know, there's an interesting political effect that you referred to briefly, George. Which is that in the White House, people are sort of likening the President's willingness to use the bankruptcy threat and follow through on it here to Ronald Reagan's firing of the air traffic controllers to say that you show toughness, it has an effect on the immediate situation and has a ripple effect down the line. That it makes people realize, you're willing to do tough things. Now, it may or may not turn out that way, but there's the potential here, as messy as this current situation is, to have a sort of broader impact.

GEORGE STEPHANOPOULOS (ABC NEWS): And the hedge funds may be even less popular than the air traffic controllers were...

GERRY SEIB (WALL STREET JOURNAL): That's almost certainly true.

GWEN IFILL (MODERATOR): That's what they're counting on.

GEORGE STEPHANOPOULOS (ABC NEWS): ... on 1981. You know, George, we only have about a minute left. But the political world lost - the Republican Party lost one of its stars overnight.

GRAPHICS: THIS WEEK WITH GEORGE STEPHANOPOULOS

GEORGE STEPHANOPOULOS (ABC NEWS): Jack Kemp, of course, former congressman, former vice presidential candidate. A HUD secretary under Ronald Reagan succumbed to cancer last night. He was a good friend of yours.

GEORGE WILL (ABC NEWS): He was a good friend. He was a good friend to all people who encountered him. He was a big-hearted man, very strong convictions but didn't know how to make an enemy and didn't know how to hold a grudge. He was just a terrific fellow.

GERRY SEIB (WALL STREET JOURNAL): And always an optimist and Gwen and I were talking before, didn't seem possible he could be 73 because he was such a, such a youthful guy and had that sort of youthful energy start to finish of his political career.

GWEN IFILL (MODERATOR): I covered Jack Kemp when he was Secretary of HUD and also when he ran for vice president and he was the original happy warrior for the Republicans as opposed to the Hubert Humphrey mold. He was kind of that way. He really thought he could be elected vice president in 1996 when nobody else thought so and he also thought he could expand the Republican Party and make a broader umbrella, something which is proven not to be so.

GEORGE STEPHANOPOULOS (ABC NEWS): And one of the nicest men you'll ever meet in politics. This roundtable is gonna continue in the green room on ABCNews.com. When we come back, more of remembering Jack Kemp.

JACK KEMP (POLITICIAN): Literally people are drowning out there from excessive taxes...

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Originally broadcast, 5.3.09