WASHINGTON--Keeping to the cheer up things will get better Obama White House economic theme, White House chief economist Christina Romer urges Americans to spend. Go out and buy that car, she told David Gregory, host of NBC's "Meet the Press."
GREGORY: Final point here. What is the responsible thing for consumers to do at the height of this global crisis?
ROMER: That, that's an excellent question. I think we know that consumers have lost a lot of wealth and that normally what you'd say is they should be saving more. I think the truth is consumers have also not done a lot of spending for the last 14 months. So what I would predict and I think would be a perfectly reasonable thing is you go out and you buy that car that you've been thinking about for 14 months and you do some of the spending. And then over the long haul I'm hoping we'll come back to probably a higher savings rate, because we know we were at kind of a historic low before this all happened. I just said, one of the things that the president is very interested in is when we get through this, coming back to a healthier economy. Not an economy fed by bubble and then where we have the bust. And that's part of the whole program of dealing with health care, dealing with energy, dealing with education, so that the economy we have three or four years from now is a much more stable, much able to have a, a sound expansion.
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MEET THE PRESS
Sunday, March 15, 2009
GUESTS: Dr. CHRISTINA ROMER
Chair, White House Council of Economic
Representative ERIC CANTOR (R-VA)
Mr. DAVID FRUM
Columnist, The Week
Ms. KATTY KAY
Washington Correspondent, BBC World
Mr. STEVE LIESMAN
Senior Economics Reporter, CNBC
Mr. TAVIS SMILEY
Author, ?Accountable: Making America as Good
as Its Promise?
MODERATOR/PANELIST: Mr. David Gregory ? NBC News
This is a rush transcript provided
for the information and convenience of
the press. Accuracy is not guaranteed.
In case of doubt, please check with
MEET THE PRESS - NBC NEWS
MR. DAVID GREGORY: Our issues this Sunday: Mixed signals for the economy. Stocks rally but wealth sharply declines, jobless claims reach another high, home foreclosures jump 30 percent in February. Despite that, the White House is determined to sound optimistic.
PRES. BARACK OBAMA: If we are keeping focused on all the fundamentally sound aspects of our economy, then we're going to get through this. And I'm very confident about that.
MR. GREGORY: But is the White House doing enough to win what has been called an economic war? We'll hear from both sides of the debate. Chair of the president's Council of Economic Advisers, Dr. Christina Romer; and the man charged with mobilizing his party's votes in the House, Republican Whip Eric Cantor.
Then, halfway through his first 100 days in office, has the president's economic team lived up to expectations? Has the White House tried to take on too many problems at once? And on the Republican side of the aisle, more controversy over comments from the newly installed RNC chairman, Michael Steele. Our economic and political roundtable weighs in: columnist for The Week and a speechwriter for President George W. Bush from 2001 to 2002, David Frum; Washington correspondent for BBC World News America, Katty Kay; senior economics reporter for CNBC, Steve Liesman; and host of PBS' "Tavis Smiley" and author of the new book "Accountable: Making America as Good as Its Promise," Tavis Smiley.
But first, Dr. Christina Romer, welcome to MEET THE PRESS.
DR. CHRISTINA ROMER: Great to be here.
MR. GREGORY: Nice, nice to have you here. Billionaire investor Warren Buffett described the economy and the crisis that the economy is in as an economic war. If that's the case, are we winning?
DR. ROMER: I think he's absolutely right, it is an economic war. We have inherited a crisis like none since we've--since we had the Great Depression. So absolutely, it is something we need to deal with. I think we are. We haven't won yet. We have staged a wonderful battle. So we have put in place just a host of programs: the stimulus package, the financial rescue plan, the housing plan. We think it's the right medicine and we think it will work.
MR. GREGORY: There's an effort across the administration to sound more confident about the economy. The president, speaking on Friday, said this:
PRES. OBAMA: If we are keeping focused on all the fundamentally sound aspects of our economy, then we're going to get through this. And I'm very confident about that.
MR. GREGORY: And yet last year during the campaign, Senator John McCain said something similar. This is what he said back then.
(Videotape, September 15, 2008)
SEN. JOHN McCAIN (R-AZ): You know that there's been tremendous turmoil in our financial markets and Wall Street, and it is--it's--people are frightened by these events. Our economy, I think--still, the fundamentals our--of our economy are strong, but these are very, very difficult time.
MR. GREGORY: So back then during the campaign when Senator McCain talked about the strong fundamentals of the economy, it was then-candidate Obama and his team that roundly criticized McCain, saying he was out of touch, he didn't get it, he didn't understand how bad the economy was. And yet now the president's talking about the strong fundamentals of the economy. So what's different between then, the campaign, and now, except for the fact that the economy's gotten dramatically worse?
DR. ROMER: I think when the president says he's focusing on fundamentals, what he means is, is we're focusing on, on fixing the fundamentals; that we've always said we're not looking at the ups and downs of the stock market, we're looking for those crucial indicators: when are jobs turning around, when are sales turning around, when do we see consumers coming to life? That's the kind of thing that--certainly that I'm looking at in terms of when's the economy going to be doing better and, and when can we see some hope.
MR. GREGORY: Are the fundamentals of this economy sound?
DR. ROMER: Well, of course the fundamentals are sound in the sense that the American workers are sound, we have a good capital stock, we have good technology. We know that, that temporarily we're in a mess, right? We've seen huge job loss, we've seen very large falls in GDP. So certainly in the short run we're in a, in a bad situation.
MR. GREGORY: All right, but then what's different between now and then, when the economy was in even better shape than it, it is now, when McCain was saying the fundamentals were strong and then-candidate Obama criticized him?
DR. ROMER: I think--again, I think what, what we're saying is that the, you know, where we are today is obviously not good. We have a plan in place to get to a good place. I think that's the crucial--a fundamentally crucial difference, is to make sure that you have put in place all of the comprehensive programs that'll get us back to those fundamentals.
The other thing I think is so important, the president has actually said in terms of fundamentals, we need to make changes. That's why he's focusing on energy, education, getting the budget deficit under control, precisely because he said...
MR. GREGORY: Right.
DR. ROMER: ...when we get through this thing, we want to be in a better place.
MR. GREGORY: But perhaps Senator McCain was right when he said the fundamentals of the economy were strong, because you have President Obama saying roughly the same thing now?
DR. ROMER: I really think you're misinterpreting the president. I think the key thing that the president was saying is we have our eyes on the fundamentals, that is why we're concerned about.
MR. GREGORY: Hm.
DR. ROMER: And he was--I think very much has been drawing this distinction between the day-to-day ups and downs in the stock market, because that, we know, is a, a bad way to gauge policy.
MR. GREGORY: I want to talk about projections for the economy, where you see it going. You were asked on March 6th that very question, and this is how you responded.
(Videotape, March 6, 2009)
DR. ROMER: Most people are predicting some time in the second half of the year, and, and I expect that's when we'll start to see positive GDP growth again. And a little after that we'll start to see employment going up rather than going down.
MR. GREGORY: Pretty strong prediction. What if you're wrong? What's plan B?
DR. ROMER: Well, so one thing--I mean, I should say my prediction is very much what most private forecasters are saying. We know that this last week the blue chip economic indicators came out that surveys lots of private forecasters. Almost all of them are predicting a turnaround in the third quarter and, and positive growth in the fourth quarter. Obviously I'm not a fortune teller and, you know, we're going to be watching this thing like a hawk. We've--we think we've put in place the right programs that will bring this kind of a change about, but the president has always said we'll do whatever it takes if it doesn't work.
MR. GREGORY: Well, would you disagree with the notion that government has fundamentally underestimated the scale of this problem going back to the previous administration?
DR. ROMER: I think, I think everybody underestimated the scale of this problem. I think inherently it, it surprised us.
MR. GREGORY: Right.
DR. ROMER: That's why...
MR. GREGORY: So if that's the case, there's pretty high probability that even your own prediction will fall short. Which leads to the question then, what's plan B? Don't Americans deserve to know what the administration is thinking about doing if those projects don't, don't bear out?
DR. ROMER: Well, there are a couple of things. One is that as--you know, as this has gone on, we're getting lots more information. So the chances that we're going to be surprised, I think, are going down. You know, I think the, the crucial thing, you know, we have put in place what is, is just simply the biggest, boldest recovery package in history, right; the stimulus package, biggest ever; the financial rescue, absolutely comprehensive; a housing plan--that is incredible medicine for the economy. And we fully expect it to work. That's why we put those, those policies in place.
MR. GREGORY: Do, do you see a need, though, as Speaker Pelosi indicated this week, the potential for additional stimulus, for a second stimulus package?
DR. ROMER: I think it, I think it's premature to be talking about that just simply because this one's just barely, barely been passed. I think it was passed three weeks ago. We've had the first checks go out to the state. We know people won't see any change in their withholding until April 1st. So we certainly have to give this one a chance to work before we start talking about anything else.
MR. GREGORY: But there are, there are economists, like liberal economist and columnist Paul Krugman, who say it's not premature at all if you look at the facts. This is what he wrote on Monday: "Many economists, myself included, actually argued that the [stimulus] plan was too small and too cautious. The latest data confirm these worries--and suggest that the Obama administration's economic policies are already falling behind the curve. To see how bad the numbers are, consider this: The administration's budget proposals, released less than two weeks ago, assumed an average unemployment rate of 8.1 percent for the whole of this year. In reality, unemployment hit that level in February--and it's rising fast. ... As a result, Mr. Obama's promise that his plan will create or save 3.5 million jobs by the end of 2010 looks underwhelming, to say the least. ... Three point five million jobs almost two years from now isn't enough in the face of an economy that has already lost 4.4 million jobs, and is losing 600,000 more each month."
DR. ROMER: I think the crucial thing to realize is that the fiscal stimulus that we've done is not the only thing that we've done. I love one of Secretary's Geithner's comments, is there's more fiscal stimulus in economic rescue than in stimulus, right? That we now that if we get, for example, our banks lending again, that's very good for spending. People can do investment, people can buy cars. And so it's not as though the stimulus package has to carry the whole weight. Likewise, our housing plan. One of the things that that does is allow a lot of people who hadn't been able to refinance to get the lower mortgage rates that have come about, and that's like a tax cut for them. Mark Zandi has estimated something like $30 billion of extra spending coming out of that. So I think if, if stimulus were the only thing carrying the lift...
MR. GREGORY: Mm-hmm.
DR. ROMER: ...Paul Krugman might be right. But to realize we've got a much more comprehensive plan.
MR. GREGORY: But is the figure of 3.5 to four million jobs being saved or created, is that unrealistic at this point?
DR. ROMER: I think it's not. I, you know, I'm, I'm the one that did those estimates.
MR. GREGORY: Right.
DR. ROMER: I certainly stand by the numbers. I think they are correct and we will certainly be monitoring to make sure.
MR. GREGORY: You just mentioned Mark Zandi. He thinks it's more like 2.5 million jobs at best.
DR. ROMER: So there is some, some range of differences. I think one of the things you have to realize is that we've always stated our goal as being at a point in time, as of 2010, quarter four, as sort of the timing of the spending changes. For example, you know, some of it, you know, comes earlier because we worked so hard to get it out. One of the things that that does is to create more jobs earlier, and that certainly would be very good for the economy.
MR. GREGORY: I want to ask you about a few items in the news. One is health care, the administration signaling that the president is now open to taxing employer health benefits for employees. This was something that John McCain proposed in the election and President, then-candidate Obama was opposed to it. Is he changing his view?
DR. ROMER: He is still opposed to it. He certainly was very critical and very skeptical of it. It is certainly not in our proposal. And we have proposed other ways to, to deal with health care and to fund it. And so no, it is not something that he supports.
MR. GREGORY: So the reports about him now considering this being open to it are wrong?
DR. ROMER: He--his, his, his skepticism from the campaign absolutely is, is still there.
MR. GREGORY: So he's opposed to it. It's off the table.
DR. ROMER: He is absolutely opposed to it and skeptical and...
MR. GREGORY: You're not saying it's off the table.
DR. ROMER: I, I'm not going to say one way or the other that...
MR. GREGORY: But he, he might consider it, in other words?
DR. ROMER: I think what he has said from the beginning is there are no such thing as Democratic and Republican ideas, there are just good ideas. He will listen to good ideas. This is not one that he has, has ever supported.
MR. GREGORY: OK, but he's not ruling it out.
Small business. There's a proposal that the administration is reportedly thinking about specifically targeted towards helping small businesses. Can you describe it?
DR. ROMER: Absolutely. We know that small businesses are the engine of growth in the economy, and we absolutely want to do things to help them. There are already a lot of things to help them in the recovery package, and some of what will be coming out are the things that were in the recovery package: increasing the SBA loan guarantees, lowering fees. But we also know that, that we've talked to a lot of small business owners, and one of the trouble they're having is just community banks don't want to lend to them because the secondary market in SBA loans has virtually disappeared. So one of the things we'll be...
MR. GREGORY: The secondary market, where most of the lending takes place, about 40 percent of lending takes place in the country.
DR. ROMER: Absolutely. And where, you know, banks go and they sell those SBA loans off their books, and then they can go back and make more of them.
MR. GREGORY: Mm-hmm.
DR. ROMER: And that market has just been frozen. And one of the things we'll be announcing is a program to get that market cleared and, and working again.
MR. GREGORY: And how will you do it?
DR. ROMER: Basically the government will go in and step up and, and buy those loans if, if there aren't private investors to do it, to get them...
MR. GREGORY: How much money? How much money will the government pump into the market?
DR. ROMER: I think that's all going to be announced tomorrow. I don't want to take all the thunder away. But it is a significant amount. It is--we want to, to, to demonstrate a genuine commitment.
MR. GREGORY: Right.
DR. ROMER: Because we know we're doing a lot of help for banks, we're doing a lot of help for homeowners. Small business people need it, too.
MR. GREGORY: What about AIG? The government has about an 80 percent stake in AIG. And on the papers, front pages of the papers this morning, the fact that they are now paying out hundreds of millions of dollars of bonuses. Treasury Secretary Geithner was opposed to it, talked to the CEO of AIG and said so. Nevertheless, these bonuses are going forward. A lot of people are going to be angry about that. Is there anything the administration can do to stop it?
DR. ROMER: Can I say, we're, we're, we're the first people to be angry. So absolutely Secretary Geithner has been furious and has been pushing back, urging them to renegotiate this. We're pursuing every legal means to deal with it. You know, I think the truth is AIG is just a problem. It's not a problem anyone wants to have to deal with, and it's unfortunately a problem we've inherited and are managing the best that we can with...
MR. GREGORY: What power does the administration have to stop AIG?
DR. ROMER: You know what, the, the administration certainly, as much as possible--I think, you know, there are, there are questions of contracts and what we're able to, to do with, with contracts that have been signed. But we will absolutely do everything possible to make sure that the money we put in there is spent in the way we think is appropriate.
MR. GREGORY: Does this make it more difficult for the administration to seek additional funds to help the banks and other companies like AIG down the road?
DR. ROMER: I mean, the administration very much knows that we've got to spend this money correctly, that, that there's an accountability on everything that we do. And we've, you know, when we did the recovery package, we, we have accepted that responsibility unbelievably to, to maintain good accounts, accountability, a Web site. And absolutely, we've got to watch everything that we do to, to make sure that, that we're spending the money responsibly for the American people.
MR. GREGORY: The president's economic team has come under some criticism, namely Treasury Secretary Geithner, for not install--instilling a great deal of confidence with regard to plans to shore up the financial system. And one of those areas focuses on something that you would think would be simple but apparently it's not, and that's staffing the Treasury Department. This is how the AP reports on it on March 5th: "Critics say part of the problem is that Geithner is flying solo: Not one of his top 17 deputies has been ... confirmed. And without senior leadership, lower-level Treasury employees can't make decisions or represent the government in crucial conversations with banks and others." If you go to Treasury's Web site, your own Web site, under the heading of "senior Treasury officials" there's one name on there, Tim Geithner, the Treasury secretary. If this is an economic war, isn't this akin to going to war without an army?
DR. ROMER: So I think we need to be clear that there are certainly people there, he has brought in people. They're obviously--not, not a large number of them are confirmed. I think I don't like the, the reference to the, the Fed--the, the Treasury staff unable to do anything. There is a huge professional career staff. And if you think of what most of the work we're having to do, or the, the nuts and bolts, getting all of these programs that we're putting into place right, it's that career staff that's absolutely crucial.
MR. GREGORY: Right. But Paul, Paul Volcker and other top economic advisers said it's shameful that these people are not in place, his top officials are not in place. You say the people--the career people--I've certainly talked to people who are in the Treasury Department who say the people responsible for communicating with Wall Street, for doing that nuts and bolts work are simply not there, it's all falling on the Treasury secretary. It's not as if this administration didn't see these problems coming back prior to taking office. Why wasn't this a priority, getting these people in place?
DR. ROMER: I mean, it absolutely is a priority. And then another thing, I do a little historical reference here, which is if you look at how many people we've gotten into senior positions in this administration, it's really very high in comparison, even at the Treasury.
MR. GREGORY: But we're talking...
DR. ROMER: I think that's the, the numbers I have...
MR. GREGORY: Really? What's the historical parallel when you don't have any of your top people that you've nominated in the Treasury Department serving during the biggest economic crisis since the Great Depression?
DR. ROMER: I mean, you're absolutely right that this, this is a very serious crisis and we certainly, you know, need all, all hands on deck. The Treasury secretary is working as hard as he can to get those people into place.
MR. GREGORY: Is part of the problem that the administration or, or the more political advisers in the administration don't want people from Wall Street, don't want people who are experienced, because they think they're tainted?
DR. ROMER: No, of course not. We want--right? We want the best people to be dealing with things, and...
MR. GREGORY: Right. So what's the problem? Where are they? You just had four people withdraw their nomination, including, including Rodge Cohen, who is one of the most senior people on Wall Street as a lawyer with Sullivan & Cromwell, who's advised all of these, all of these banks, and now he's pulled out.
DR. ROMER: I think one thing to realize, the--that the Obama administration is doing business in a different way. And we do have very strict rules on, you know, sort of the, the kinds of vetting requirements and whether you can have been a lobbyist and things like that. And it does tie your hands on some of the people you can hire. But we think the, the administration has made the decision it's worth it to have honesty and accountability and, and a sense of confidence for the American people.
MR. GREGORY: Most economists believe that until the financial system is shored up, until these distressed assets are removed from these banks' balance sheets, stimulus won't work and the economy won't recover. And yet the administration has yet to provide a detailed blueprint about how they're going to remove these assets. What's taking so long and what is the plan?
DR. ROMER: All right, so there are two things to say. One is I don't agree with the idea that you--that, that stimulus can't do anything until the financial rescue is done. I think in truth, those things go parallel. And if you think back to the Great Depression, it's actually--getting the real economy going was the main thing that, that helped to make--bring the banks around.
MR. GREGORY: But didn't FDR first shore up confidence? The bank holiday was what he did first before he got to fiscal stimulus.
DR. ROMER: Actually, you know, a crucial thing--when he did the bank holiday, it took the next two years to actually clean up the banks, that we actually did not get the things really cleaned up until 1935. And that a big part of that cleanup was he managed to turn around the real economy. We saw employment growing again, GDP growing again, and that inherently helps your financial system. On the financial rescue, again I got to say we've already done a tremendous amount, right? Just last week the, the consumer and business loan initiative got into place, that's going to be crucial for getting, again, those secondary credit markets going. We're in the middle of the stress test, right?
MR. GREGORY: Right.
DR. ROMER: We're doing, we're doing almost the equivalent of what Roosevelt did with the bank holiday, right. He shut it down, he checked all the books. Well, we didn't shut the banking system down, but we're checking all the books.
MR. GREGORY: But the hardest thing, but the hardest thing is valuing these assets on the banks' balance sheets. You know that's the hardest thing, that's what the previous administration knew was the hardest thing. They abandoned buying the assets because they couldn't figure out a price. That is the most difficult thing, and they have still not been a blueprint for how you're going to do it.
DR. ROMER: I can tell you that that kind of a blueprint is top on our agenda, and I expect it to come out very soon.
MR. GREGORY: Will confidence not--will there not be confidence in this administration's economic plan until we get that detail?
DR. ROMER: I, I actually think we're, we're already generating confidence. And I think, obviously, the more we get out, the faster we're doing things...
MR. GREGORY: That's right.
DR. ROMER: ...the more confidence we'll have.
MR. GREGORY: But what is the key to it? The government's going to provide the financing for private equity to come in and buy these assets, is that the plan?
DR. ROMER: That certainly is, is part of the plan. It's actually more than that. And so I will, again, I'll let the president and the secretary of the Treasury tell you all about it.
MR. GREGORY: Final point here. What is the responsible thing for consumers to do at the height of this global crisis?
DR. ROMER: That, that's an excellent question. I think we know that consumers have lost a lot of wealth and that normally what you'd say is they should be saving more. I think the truth is consumers have also not done a lot of spending for the last 14 months. So what I would predict and I think would be a perfectly reasonable thing is you go out and you buy that car that you've been thinking about for 14 months and you do some of the spending. And then over the long haul I'm hoping we'll come back to probably a higher savings rate, because we know we were at kind of a historic low before this all happened. I just said, one of the things that the president is very interested in is when we get through this, coming back to a healthier economy. Not an economy fed by bubble and then where we have the bust. And that's part of the whole program of dealing with health care, dealing with energy, dealing with education, so that the economy we have three or four years from now is a much more stable, much able to have a, a sound expansion.
MR. GREGORY: Dr. Romer, thank you very much for your views. Good luck with your work.
DR. ROMER: Great. Thanks.
MR. GREGORY: And coming next, the other side of this debate, House Republican Whip Eric Cantor. Plus, our economic and political roundtable, only on MEET THE PRESS.
MR. GREGORY: House Republican Whip Eric Cantor, after this brief station break.
MR. GREGORY: Congressman Eric Cantor, welcome.
REP. ERIC CANTOR (R-VA): Good to be here.
MR. GREGORY: You heard Dr. Romer express confidence in the economy and certainly confidence in what they're doing, saying that they're, they're using the right medicine to win this economic war. Vice President Biden said this Saturday to the Associated Press. He called it the Obama factor. He said he believed that there were signs that the public's confidence is growing in the administration's ability to tackle the financial crisis, and he credited the "Obama factor." He said, "There is no doubt in our minds and there is no doubt in the presidents' mind that in fact we will overcome this. We will climb out of this hole. ... Consumer confidence is slightly up. The market is slightly up. ... The people are beginning to figure out that the president's got a plan and he believes we can work our way through this." Do you believe in the Obama factor?
REP. CANTOR: Listen, David, I want to believe that we're going to get out of this mess. I think all Americans do. But I'll tell you, on Friday I met with 25 small business people in my district, and times our tough. I mean, we know that 650,000 people lost their job last month. If my math is correct, that works out to be about 15 jobs a minute that people are losing. We've got to do something to help these small business people. We know that they're the job creators in this economy. And the problem with--I think we're seeing out of the Obama administration is a lack of focus on how to get things going again. If we're going, if we're going to get things going again, how can we have a budget that doubles the debt on, on our children? How can we say that we're going to raise taxes on the job creators? How can we see our way forward? And the way to do that is to try and address the problems here and now. As you have been saying with Dr. Romer, the real problem is the banking system. These small businesses that I spoke to, they can't get any credit lines. They, they're having difficulty in keeping the doors open.
MR. GREGORY: It sounds like the administration is going to announce tomorrow that they'll provide at, at least $10 billion to try to unfreeze the credit market for--specifically for small business. Are you aware of the, of their plan, and do you support it?
REP. CANTOR: Well, you know, David, I've read the same reports that many people are reading about the announcement tomorrow. I think the, the crux of the issue is the only credit markets that are working, by and large, are the credit markets where the government has stepped in to guarantee the issuance of the debt. We've got to get credit markets flowing again, get private capital into the system. And the problem has been there's a lack of confidence, because this administration has not come forward with a plan on how to take these impaired assets out of the markets.
MR. GREGORY: OK. Well, let's talk about that. Because on the one hand, you're, you're really concerned about how much spending is in this budget, how much spending was in the stimulus. And you were opposed to the stimulus and you sound like you're opposed to this budget, as well. What would you do to get these impaired assets off the books? You know that the budget calls for $750 billion of additional spending to help recapitalize the banks, to absorb some of the losses if they're going to provide financing to private equity to come in and buy those assets. What would you do?
REP. CANTOR: David, the, the, the difficulty is, as you have suggested, is trying to evaluate these assets and put a value on the assets underlying these toxic securities. That has always been the problem. This administration has, has had since November, after they were elected into office, to come up with a plan.
MR. GREGORY: Right. Well, it was the Bush administration that started it and couldn't figure out how to evaluate the assets, either.
REP. CANTOR: That, that is correct. But the difficulty is that we don't see Treasury Department now going in and doing the difficult work. If they were to come out and announce that blueprint to say, "Hey, we are going to divide the banks up into three: those that are healthy, those that are impaired and those that, frankly, cannot survive." And then they--if they would announce that there would be some type of RTC-like plan to take these assets off the books and off--and out of the market, you would, I think, begin to see some confidence come back on, on Wall Street.
MR. GREGORY: All right, but you just said that you want private equity to come back into the credit market, and private equity might do that if there's incentive to do that, if the government provides the financing for them to buy some of these distressed assets. My question to you: You're complaining about too much spending, how much are you willing to spend to buy these assets? Because they may be impaired at a level of at least $2 trillion.
REP. CANTOR: Right. Well, there, there's no question. Once you take these assets off the books, then you're going to have a hole on the balance sheets of the financial institutions that you're going to have to address. But if you recall back when the bailout was passed initially, House Republicans had a plan. What we did is said we need to have more protection for taxpayers, we've got to have the investors that hold these assets play a part and put some more skin in the game. And so we came up with an insurance guarantee plan which essentially allowed you to leverage the ability to have a government guarantee, have the investor pay for that guarantee and not have all the taxpayer dollars flow out. And what we're seeing now is what's working in the credit markets is exactly that. The FDIC and others has guaranteed the issuance of debt for some of these institutions, and that's how the commercial paper market has come back a little bit.
MR. GREGORY: Are you willing to vote for more money to capitalize the banks and to, in, in essence, absorb the losses if these assets continue to go down? How much are you willing to vote for?
REP. CANTOR: David, if you're talking about a TARP 3, we've got a long way to go. I think it goes back to the fact that this administration has not put out its plan as to how we're going to be accountable for those dollars spent.
MR. GREGORY: Mm-hmm.
REP. CANTOR: You just heard Dr. Romer, you know, have some difficulty explaining how some of the dollars are spent. You've not seen them come out with a blueprint on what to do with these toxic assets and what the structure is going to be so investors can know their exposure. Again, at the end of the day we want the debt markets to work again because the only way that the financial institution in the, in this country will survive is to get private capital back into the game.
MR. GREGORY: Are you going to vote for the president's budget?
REP. CANTOR: Listen, the budget process, as you know, David, is one that has just begun on Capitol Hill. There is a lot of, I think, reticence to embrace his budget on both sides of the aisle. This budget, frankly, doesn't have the focus that we need right now in this economy. The focus should be, job one, fixing this banking system and trying to get jobs created again.
MR. GREGORY: Right. But the, but the budget says there's $750 billion to help capitalize the banks. You, you have not offered a figure on what you think is necessary to do that, other than saying you got to do something to get private capital in.
REP. CANTOR: David, David, the Republicans will have a plan. We had a stimulus plan. You know, part of the problem with being in the minority is, David, that sometimes your colleagues in the press don't want to cover the ideas that the minority has. We had a plan on the stimulus. It was, it was tailored to small business tax relief. It was focused on what a stimulus plan should be, which is the preservation, protection and creation of jobs. And what we see in this president's budget is, is a lack of that kind of focus. I mean, what we're talking about with him is, is trying to address the energy situation, the health care situation. And you heard Dr. Romer here just today say if we can look long term, these short-term problems will just fix themselves. Well, that's not true. When you sit here and advocate long term, an energy tax and a tax that some have some have said will amount to about $3,000 per household of four, that means everybody that pays an electric bill will have an additional tax, everybody that pays a gas bill will have a tax, everybody that buys anything manufactured in this country will essentially have an $800 per man, woman and child tax. How is that something that will help create jobs in this economy? Again, they're trying to do entirely too much and not focus on the job at hand, which is to get these credit markets working again and have small business create jobs again.
MR. GREGORY: There's a concern about spending in this budget that you and other Republicans have talked about. And yet this was John McCain, the--obviously the standard-bearer of the party, the presidential candidate in 2008. Back in 2007, this is what he said about the Republicans.
(Videotape, May 15, 2007)
SEN. McCAIN: We didn't lose the 2006 election because of the war in Iraq. We lost it because we in Republican Party came to Washington to change government and government changed us. We let spending go out of control. We spent money like a drunken sailor.
MR. GREGORY: Where was all the concern about fiscal conservatism and reining in spending from you and your Republican colleagues during the Bush years?
REP. CANTOR: Well, well, listen, David, if you're asking could we have done better, absolutely. If you're asking us did we blow it in terms of restoring fiscal sanity into this system, absolutely. But that doesn't give now the Democrats in power in this town to go in and repeat the mistakes that perhaps we may have committed in the past. You know, you look at this budget, how can it be that they claim that they're balancing the budget when they are doubling the debt, when they are increasing the deficit to record levels of a trillion, seven hundred billion dollars this year? How is it that, that that is a fiscally sane plan? We've got to remember...
MR. GREGORY: Did you oppose President Bush's budgets that increased the deficit or the debt?
REP. CANTOR: Well, David, we were in a time where I think the priority then was to make sure that we could deliver the money for our troops. And I joined along with Democrats on, on the other side of the aisle as well as my colleagues on mine to say the most important thing we needed to do at the time was to support the efforts of our military to insure our national security.
MR. GREGORY: So it was OK to, to support deficit spending at wartime, but it's not OK now during an economic crisis, when Warren Buffett calls that the equivalent of Pearl Harbor?
REP. CANTOR: Listen, I, I, I--there is no question that priority one has to be to restore the confidence in this economy, and, and we must do that which we have to do. But when you're talking about the type of budget--and look, look, over the last 50 days we have passed the stimulus bill, we have passed the omnibus spending bill. And it is striking to see the lack of change in that bill, the type of waste and pork barrel spending, the earmarks that exist in that bill. You've got that train from Disneyland to Las Vegas, you have, you know, you have other things like the, the money that goes to remove pig, pig odor.
MR. GREGORY: All right.
REP. CANTOR: I mean, come on.
MR. GREGORY: How many earmarks have you supported...
REP. CANTOR: Well...
MR. GREGORY: ...in the time in Congress?
REP. CANTOR: Well, I mean, I...
MR. GREGORY: Because Democrats provide data saying that you voted for more than 46,000 earmarks. Is that wrong?
REP. CANTOR: Well, in terms of the votes and the budgets in the past, clearly. But I for one, along with our leader, John Boehner, have said we ought to all embrace a moratorium on earmarks so we can get the process working again.
MR. GREGORY: Mm-hmm.
REP. CANTOR: And we're looking to President Obama. You know, he did promise, he said he'd come to Washington to get rid of the pork barrel spending. We saw him sign the omnibus spending bill without doing anything of the sort. And what I would say to him is we will work hard to sustain his veto if he will, you know, keep--deliver on his promise that he made. We'll work to help sustain his veto on these pork barrel spending bills. And frankly, if he wants to look at some of the things that he's already signed into law, we'll work as well with him to try and rescind some of those expenditures.
MR. GREGORY: But, but isn't the problem in the, in the public's mind, Republicans are calling for things now that they didn't actually do during the Bush years? And you look at some of the polling, here's our recent NBC News/Wall Street Journal poll: Which party would do a better job of getting the U.S. out of a recession? It's the Democrats that have, by a 48 to 20 percent margin, the advantage in terms of people's confidence. What do you do to change that as the minority party?
REP. CANTOR: Well, I mean, listen, as the minority party, I think part of our job is to be the honest opposition. And we also, I think, are charged with the task of bringing President Obama back to the center. That's what bipartisanship is about and, frankly, that's what the solutions are going to be about going forward. And what we see is very troubling given the last 50 days and the direction of the ideology of this administration and, frankly, of Speaker Pelosi and others in Congress. We've seen the failure of that ideology in the '70s in Great Britain, in the '80s in France. We, we understand in this country, I believe, that we're about free markets, we're about individual freedoms, and that is what our goal is. And when you apply that to the budget that we're going to be discussing over the next couple weeks, we've got a job to do. I mean, because I don't think that the American people are going to embrace this budget. I think you've seen the news reports that the administration now is on an all-out campaign to beef up the support for their budget. If it was a sane budget, I don't think you'd have to have some kind of multitiered campaign plan to get people behind it. It'd sell itself.
MR. GREGORY: Final point. You, you've mentioned that priority one needs to be fixing the financial system in this country. There's been a debate touched off this week about whether the financial press has done enough to sound the alarm prior to this bubble bursting, about how dangerous the financial system was. As a member of Congress, do you think you did something adequate to raise the alarm about what was happening on Wall Street in the financial system?
REP. CANTOR: David, I think there's a lot of blame to go around everywhere: regulators, members of Congress, the administration, the prior administration. All of us, I think, can, can take some of that blame. The press, always. But you know, at, at the end of the day it's about going forward. And I think what we're going to have to do is understand that there was so much risk out there in our system, and the old regulatory structure that we have in place just did not provide the transparency of that risk to the investors. And that's what we're going to have to improve and act quickly on, because part of this is about making sure this doesn't happen again.
MR. GREGORY: To be continued. We will leave it there. Congressman Cantor, thank you very much for your views.
REP. CANTOR: Thank you, David.
MR. GREGORY: We're going to continue our discussion online and ask Congressman Cantor some questions that our viewers have submitted via e-mail and Twitter. Watch our MEET THE PRESS Take Two Web extra, it's up this afternoon on our Web site. Plus, look for updates from me throughout the week as well there. It's all at mtp.msnbc.com.
And coming next, is the president's economic team living up to expectations? And more controversy for RNC Chair Michael Steele. Our roundtable weighs in on all the week's political and economic news: David Frum, Katty Kay, Steve Liesman and Tavis Smiley, only on MEET THE PRESS.
MR. GREGORY: We're back. We're joined now by David Frum, Tavis Smiley, Steve Liesman and Katty Kay.
Welcome to all of you. A lot to go over.
Steve Liesman, let me start with you. You heard Christina Romer on the program this morning talking about a level of confidence in the economy and their policy prescriptions to make the economy better. Certainly a shift this week in the administration trying to sound more confident, sounding a little bit like the very figures that they, that they criticized John McCain back in the campaign.
MR. STEVE LIESMAN: Well, we have a little bit of good economic news this week. We had the retail sales did a little bit better. Even the consumer confidence numbers, even though they're at really historically low levels, came back just a little bit. So they have a little bit of a leg to stand on. I guess I would say that relative to the amount of bad news out there, this--the amount of bad news is like this and the good news is like that. And look, they have put a bunch of programs in place. The Street hasn't really glommed on to them, doesn't really think that they're, they're, they're going to increase the, the economy too much. But they're in place now and we'll see if they work.
MR. GREGORY: Tavis Smiley, the news about AIG, hundreds of million dollars in new bonuses. The administration's angry about it. This is, you know, taxpayer funds. How much more difficult does it make their job as they go out to the public and say, "Hey, we need billions more to help keep these companies, banks and insurance companies like AIG, to keep them afloat"?
MR. TAVIS SMILEY: I think it doesn't make it easy. We are in the mess that we are in now, David, for eight years because we had no accountability. The rich kept getting richer, the poor kept getting poorer, the middle class stagnates. It would be one thing if everybody were getting rich and the richest were getting richer at a faster clip. But that's not the case. And so I think the American public has a difficult time trying to abide these companies being given more money for bailouts. Particularly, to your earlier conversation, when we know, one, that they're giving out these bonuses today, tomorrow, the next couple of days at AIG; when we know, secondly, that the partners, who some of this money went to through AIG, we still don't know from the Obama administration who these persons are. I think it's a hard sell.
MR. GREGORY: David Frum:
MR. DAVID FRUM: I think you, your question indicates the administration knows this week that it lost a little bit of control over the story. Christina Romer, your first guest, was at Brookings on Monday and she delivered a speech based on her deep expertise in the history of the Depression in which she said here are the lessons of the Depression. And everyone who read that speech reacted, the administration hasn't learned any of these things. You are not doing the things that Christina Romer, in her own research, said you need to do. And the administration was so conscious that she had delivered this warning that they sent Larry Summers on Friday back to Brookings. Brookings had to cancel an event. They got the call I think on Thursday that Larry Summers wants to come Friday. They had to cancel an event to empty the auditorium so that Larry Summers could...
MR. GREGORY: Well, what are the lessons that they're not learning?
MR. FRUM: Here, here are Christina Romer's lesson that they're not learning.
MR. GREGORY: Mm-hmm.
MR. FRUM: The stimulus needs to be big. Well, the administration's stimulus in 2009 is small. It's big in 2010 and 2011, but small in 2009. It has to be global. The administration is emitting protectionist noises. President Obama, in the $410 billion catch-up spending bill, signed new restrictions on Mexican trucking that violate NAFTA. The, the, the lesson is that the administration--that monetary policy remains tremendously important. The administration is saying, "We have no idea of what to do about monetary policy." Three others, as well. And...
MR. LIESMAN: Well, David, I, I think I'll stop you right there. The administration doesn't control monetary policy, and monetary policy has basically the pedal of the accelerator all the way down. Interest rates are at zero, the Fed is launching a trillion-dollar...
MR. FRUM: That, that's what, that's what they...
MR. LIESMAN: ...TALF program.
MR. FRUM: That's what they...
MR. LIESMAN: That is not...
MR. FRUM: That's what they're saying. But they have--they could actually print money, they can do quantitive easing. And I know that it's the Federal Reserve's job...
MR. LIESMAN: They're doing, they're doing it.
MS. KATTY KAY: But I would say it's an issue more of...
MR. FRUM: But to say, but to say we're hands off...
MR. GREGORY: All right.
MR. FRUM: ...it's nothing we can control...
MR. GREGORY: I...
MR. FRUM: ...Christina Romer is the one who says it's more important than anything.
MR. GREGORY: There's another element of this. The talk about stimulus and the size of the stimulus.
MS. KAY: Right.
MR. GREGORY: You're just back from Europe, Katty, and one of the big debates this week with the administration and Europe is that Europe does not want to do larger stimulus. And we know that some of the problems in Europe and around the globe with this recession are quite acute.
MS. KAY: You know, it's really interesting traveling through Europe this week, and two things really struck me. One is that there is less public concern about the nature of this crisis, and part of that is that Europeans have a broader social safety net. I was speaking to a journalist in Sweden who said to me, "You know, if I lose my job, I lose some of my income. But I still have very good health care and my children have very good state education." So people aren't as panicked by this recession as they are here. That means that there is less political pressure on European leaders to spend their way out of this and to act some kind of stimulus package, a global stimulus package, what the administration's been calling for. There is also a feeling in Europe that they don't want to have to submit to an American made solution to what is seen by many, by many Europeans as an American made problem. There is a real resistance here...
MR. FRUM: Right.
MS. KAY: ...to Washington coming over to Europe and saying, "You have to enact 2 percent of your GDP in stimulus packages," when you made this problem.
MR. GREGORY: Another--Tavis, one of, one of the things you get to in your book, of course, a key theme, is accountability.
And, Steve, I want to first pose this question to you. A nerve was touched this week. Jon Stewart on the "The Daily Show" raised some really tough questions for CNBC and other financial journalists about who was out there before this crisis came upon us to, to sound the alarm and say what was happening in our financial industry was fundamentally unsound? And so it goes to a question, I guess, Steve, of who can you point to in financial journalism who, you know, would get the award for sounding the alarm and saying, "Hey, wait a minute, guys, there's something we really ought to be paying attention to here"?
MR. LIESMAN: Well, first of all, that nerve was right back here, right in the back of my neck.
MR. GREGORY: Yeah.
MR. LIESMAN: Which is the one that was touched. Look, I, I can't--see, there's a spokesman for a CNBC. That's not my job. I'm not management, I'm a reporter on the staff.
MR. GREGORY: And this is broader--this is not just about CNBC.
MR. LIESMAN: And it's...
MR. GREGORY: It's about financial journalism.
MR. LIESMAN: I've been reporting on the subprime crisis since 2006. I was--I did investigative work in 2007 that said the subprime crisis, despite what the Treasury secretary and the Federal Reserve chairman were saying, was going to spread beyond that. I think there's a lot of reporters at CNBC who've done a lot of work on that. I was a finalist for the Emmys when it came to that and my reporting in 2006, 2007. There are reporters at the Wall Street Journal, The New York Times all who have done great work on the subprime crisis.
Could we have screamed louder? Almost certainly. Were--did we explain enough what was going on? Probably not. But we were out there, we were doing it. The fact that they didn't notice is not my problem.
MR. FRUM: It was...
MS. KAY: I think part of the reason this is being--caught such fire in the American public this week is that we saw this in 2003 with the run-up to the war in Iraq.
MR. GREGORY: Mm-hmm.
MS. KAY: Where there was a failure of political journalists to ask the tough questions of the administration, as we went into Iraq, about weapons of mass destruction. President Bush was not hauled over the coals in the way that, for example, Tony Blair was back in Britain. But in this case it's even more complicated, because we rely on financial journalists. Most of us, and the American public in general, this is very complicated stuff. We don't have the jargon, we don't have the technical expertise, so we have to have the financial journalists acting as the people that...(unintelligible)...power.
MR. GREGORY: But here--but there's a fundamental question, Tavis, which is what is it that should have been said or exposed prior to everything going south? Because it gets to the larger question of precisely what caused this.
MR. SMILEY: Pardon my English, you ain't got enough time for that answer, David, because there's a whole lot that should have been exposed. Let's be honest about it. The bottom line is, one word, greed. Wall Street got greedy. And when they got greedy, it, it caused this entire economy to crash. And since they were greedy and have crashed the economy, we get a little talk about Wall Street, a little talk about Main Street. As I said last time on this program, still, David, not enough talk about the side Street.
Here's the problem. The American public, I think, could handle this crisis much better if, along with all of the bailouts, there was a poverty agenda in this country. With all due respect to President Obama and Mr. McCain, three presidential debates between McCain and Obama, the word poverty never came up. There is no poverty agenda in this country. There is no talk about the weak working class. That's the problem here. There's got to be some accountability here. The Obama administration, I think, is out front being aggressive on some of these issues. But still, as your conversation earlier pointed out, not enough details, not enough people looking out for the weak working class.
MR. GREGORY: All right.
But, David Frum, I want to stay on this question of accountability with regard to the financial press generally and what could have been done. Because what's left out of this conversation is average Americans who were taking the money, who thought, you know, on a salary of $40,000, $50,000...
MR. FRUM: Yeah. Right.
MR. GREGORY: ...they could afford a $400,000 mortgage. So it was all around. What should have been done or said, and at what point?
MR. FRUM: The administration that was in power at the time, Bush administration, which I served, had a problem through those years, which was there was not a lot of good economic news that affected the ordinary person. Incomes were flat, you could see the debt levels rising. There was one, there was one story, however, that you could tell that was a positive story, and that was the increase in the assets held by the average family because of the housing bubble. And nobody wanted to get in the way of that. Not, not the administration, not Congress. Because if, if they did, what other good news would there be?
And it's true that the financial press has tabloidized itself. And the multiplication of cable channels has meant that we, we talk about the news in a less serious way in all kinds of ways.
MR. GREGORY: And we have The Washington Post now folding its business section into the front page, so we have less financial journalism.
MR. FRUM: Right.
MR. SMILEY: But, but why, but why...
MR. FRUM: But we, we--but we had primarily a political failure...
MR. SMILEY: But why, David...
MR. FRUM: ...which was...
MR. SMILEY: Why couldn't somebody have said, why couldn't somebody have said very simply, to David's question, tax cuts for the rich and lucky are not the answer? That's what needed to be said, that's what was not said and that's why we're in this mess now.
MS. KAY: (Unintelligible)
MR. FRUM: That, that, that's, that's a political point.
MR. GREGORY: Right.
MS. KAY: Isn't it, isn't it a question of what, you know, what journalists are here for, is to just...
MR. GREGORY: Right. That's, that is more of a political point. It doesn't go--doesn't speak to some of the main issues in, in the financial system.
MS. KAY: But the main issues are, are...
MR. GREGORY: Quickly here, and then I want to get into something else.
MS. KAY: ...that journalists are there to ask tough questions, whether is it...
MR. SMILEY: Exactly.
MS. KAY: ...the president who's in office or whether it's the businesses that they're talking to everyday who are their sources. And I think that's what happened. We--what are we here for? What are we paid for as journalists? We're paid to ask the tough question and then to ask the follow-up question if we don't feel we got the answer.
MR. GREGORY: Steve, final question of the--was what was wrong in the financial system, was it knowable, was it discoverable?
MR. LIESMAN: Yes, it was. It was way too much excess. Here's, here's the, here's the easy thing you could have known: Any time capital chases investments, you know you're in for a hard fall. It should be investment ideas that are looking for money. That's the normal way of the world. This was all backwards, it was the other way around, and that was how you could have known we were headed for a hard fall.
MR. GREGORY: I want to talk some Republican politics here in our remaining moments. Michael Steele, head of the RNC, he got in more hot water this week. Gave an interview with GQ and talked about abortion, and his is how the conversation went. He was asked, "Are you saying you think women have the right to choose an abortion?" Steele says, "Yeah. I mean, again, I think that's an individual choice." "You do?" Steele, "Yeah. Absolutely."
David Frum, does that represent the Republican Party?
MR. FRUM: It should represent a view within the Republican Party. It should be permissible to say such a thing. Look, we need--I, I speak as a Republican. We need Michael Steele. He is exciting, he is warm, he has a marvelous TV presence. It--that's, that's the face that our party should be presenting to the country, and we need to support him. And the very fact that he is opening up the debate, talking with the constituencies that need to, need to be reached, these are valuable and fresh things. And I, I am just sick about the kind of level of, of attack he has taken, because we need him.
MR. SMILEY: I'm glad--I'm, I'm glad, David, that Michael Steele is there. I could never imagine 10 years ago that we'd have two parties, both headed by black men. But it's important to understand two things, very quickly. Number one, it's about the policy, not the personality. You can't put a colored face out and think that black people and brown people and women are coming just because you got a colored face out front. Number one, it's about the policy. And number two, all this infighting I think still underscores this party doesn't know who they are, where they're going or how they're going to get there.
MR. FRUM: Well, but both of those are positive things. He's not a black face, he's just a different face. We need different kinds of people. And it isn't that you think you put a black face on the party and you'll get black voters. You put a different face on the party and you'll get different voters.
MR. SMILEY: But the policy, but the policies have to change, too. That's my point.
MS. KAY: But...
MR. FRUM: And--but the first step to making the policies change is saying it's possible, there's room. And his kind of knocking down the walls is saying we can have a wider discussion in the Republican Party than we've allowed ourselves.
MS. KAY: Isn't...
MR. GREGORY: Katty:
MS. KAY: Isn't it even a bigger problem, the question of leadership within the Republican Party, is that I haven't heard a sensible Republican idea on this economic crisis, apart from reducing taxes, over the last four months.
MR. FRUM: The payroll tax holiday is a great idea.
MS. KAY: You--they have to come up with...
MR. GREGORY: Right.
MS. KAY: They have to start coming up with ideas that the American public is interested in. You've got some younger Republicans saying, "We need to get back to talking about health care, we need to get back to talking about education, the kinds of things that the American public are talking about, and not just talking about cutting taxes."
MR. LIESMAN: That's the parody of the Republican Party that goes around in economic circles. "Well, you have cancer, cut taxes." You know, that's the, the, the solution of the Republican Party to everything.
MR. GREGORY: But the payroll tax idea, Republican idea was also shared by some Democrats, as well.
MS. KAY: Right.
MR. LIESMAN: It's a big danger, though, David, which is that if you watch the savings rate go up, the fear is that people will get this money from the government and they will save it instead of spend it, which is the argument for government spending at this moment.
MR. GREGORY: All right, lot, lots more to talk about. Unfortunately, we're out of time. Thank you very much. We'll be right back.
MR. GREGORY: That's all for today. We'll be back next week. If it's Sunday, it's MEET THE PRESS.