MR. DAVID GREGORY: Our issues this Sunday: the economy's mixed signals. A Wall Street winning streak, banks making money again and signs a bottom may be in sight; but with job losses mounting and home foreclosures rising, the president walks a fine line.
(Videotape)
PRES. BARACK OBAMA: By no means are we out of the woods just yet. But from where we stand, for the very first time we're beginning to see glimmers of hope.
(End videotape)
MR. GREGORY: At the same time, TEA party protests over taxes this week highlighting the political divide as conservatives rail against the administration's big government answers to the financial crisis. With us exclusively from the president's trip to the Summit of the Americas in Trinidad, his top economic adviser, Larry Summers.
Then, how has the recession changed the way Americans spend and save? What is the potential for a new era in U.S.-Cuba relations? And reaction to the release of controversial memos about how U.S. interrogators treated terror suspects. Insights and analysis from our roundtable: former House majority leader, Republican Dick Armey; former Democratic congressman Harold Ford Jr.; Washington editor of Fortune magazine, Nina Easton; business columnist for The Washington Post Steven Pearlstein; and managing editor of Time magazine, Rick Stengel.
But first the president's point man on the economy, Larry Summers. We spoke to him last night from the site of the Summit of the Americas in Trinidad.
Dr. Summers, welcome back to MEET THE PRESS.
DR. LARRY SUMMERS: Glad to be with you, David.
MR. GREGORY: Cuba and a potential thaw between U.S. and Cuba relations has really dominated the summit business there, even though it hasn't officially been on the agenda. This week the administration eased up some of the restrictions on travel between Cuban-Americans going back to see relatives and also the flow of money, sending money back to relatives back in Cuba. Cuba has also signaled that it's willing to have a more open dialogue with the Obama administration, and increased calls for the U.S. to lift the embargo against Cuba. This is where the politics meets the economic. Under what circumstances would President Obama lift the 47-year-old embargo?
DR. SUMMERS: That's way down the road, and it's going to depend on what Cuba did--Cuba does going forward. You know, what the president announced this week is what he's been talking about for two years. It's a set of measures that are grounded in American interests, that are grounded in morality, letting families get back together, together again. Cuba's known what it needs to do for a very long time and it's up to them in terms of their policies, their democratization, all of the steps that they can take. And we'll have to see what happens down the road.
MR. GREGORY: What is the economic case for lifting the embargo?
DR. SUMMERS: Obviously it's, it's desirable to be able to trade in as many directions as possible. But fundamentally, David, this is an issue that's going to get decided on the basis of Cuba's behavior, on the basis of the steps that they, that they choose to take or that they choose not to take in terms of their policies in this hemisphere. And it's about really whether they want to rejoin the community of nations in Latin America or not. And we'll have to see, we'll have to see what they're prepared to do. The president's decisions are really going to be grounded in what's best for the United States.
MR. GREGORY: Also down at the summit a rather striking scene, Venezuela's Hugo Chavez warmly greeting President Obama, even giving him a book about the exploitation of South America. This is a man, as you well know, who called President Bush the devil, who has referred to the United States as a collapsed empire, as the world's principal terrorist state. I wonder what the president made--or what impressions he took away from that short encounter?
DR. SUMMERS: Well, I'm not able to speak for the president on, on that, David, but I will say this. You know, if you look at the data on many of these countries in many parts of the world, and certainly in Latin America as well, the president is the most popular political leader in the world. He's more popular in many countries than their own head of government. And so it's perhaps understandable that political figures want to bond with him, want to connect with him. And he has a message, and there's something universal about his message of economic renewal, his message of getting the economy growing again, his message of wanting to have a, a different kind of economic expansion, one whose benefits are more widely shared, one that's less based on bubbles in financial markets. There's something almost universal about that message, and that's why it seems to have such a resonance around the world. That's what we saw at the G-20 meeting the president attended in London a couple weeks ago and I think that's what many people are seeing here in Latin America, where the kinds of things the president's talking about are seen as very important for the Americas.
MR. GREGORY: Let me turn to the U.S. economy. The big economic news this week had to do with leading U.S. banks. These are banks who have accepted or been given hundreds of billions of dollars in bailout money, and now they're making billions of dollars after reporting their first quarter earnings. At the same time, as you well know, home foreclosures are up 24 percent, the economy is losing 650,000 jobs a month. Are you worried that all of these recovery efforts on the part of the administration are helping Wall Street and not Main Street?
DR. SUMMERS: No, not really, David. You know, if you look, what's most important to the president is what's most important, I think, for all your viewers, is that we should get this economy going again. It's going to be a long road. We've seen some more mixed statistics after a period when there were no positive statistics to be found. But it's a, it's a long, it's a long road and it's going to take time. It's going to take creating jobs again. That's why the recovery bill was so important. It's going to take supporting the financial system, because without a flow of credit you really can't even begin to get the economy going again. That's where our main focus is.
As for the financial markets, I can tell you that the president is pushing very hard for a very strong program of regulation that is going to correct many of the mistakes that were made last time around. He's going to be very focused in the very near term on a whole set of issues having to do with credit card abuses, having to do with the way people have been deceived into paying extraordinarily high rates that they wouldn't have paid if they knew they were getting themselves into. He's going to be pushing on issues relating to what's known as systemic risk, the, the concern that an institution gets itself into a situation where it becomes itself a source of risk to the whole, to the whole financial system. We'll have to see where things, where things go. And obviously, nobody's rooting for unhealthy banks. But I can assure you that the focus of everything this administration is doing is on the needs of the overall economy, is on the needs of getting a recovery well established.
MR. GREGORY: Let me ask; the president has talked about glimmers of hope in the economy. And obviously what the government has done through a stimulus package, what the Fed has done through buying up debt is try to create demand in the economy. My question is, if you're seeing any easing in the economy or an easing of the recession, is that because the government is propping the economy up? Or do you see elements of recovery that are self-sustaining?
DR. SUMMERS: Well, I think you've got to give the government credit, some credit for what's happened, but these have the potential to build into something that's self-sustaining. That's certainly not something that's been established to this point, and that's why we're going to need to maintain strong policies for quite some time to come. But I think we can take some satisfaction that after a period when there was literally no positive indicator to be found, when it seemed like our economy was in a, a vertical, it's a more mixed picture today. And you've got to give public policies a significant part of the credit for that. But as the engine turns over, you know, at some point it will become something that's much more self, much more self-sustaining. But right now we've got a long way to go in terms of supporting this economy.
MR. GREGORY: Let me have you respond to some criticism. New York Times columnist and economist, and opponent on these matters of the administration, Paul Krugman wrote this week that the administration should be careful not to, to count a recovery a before it's hatched. He wrote this specifically about whether a full blown depression is still possible. This is what he said: "Can [a depression] happen again? Well, commercial real estate is coming apart at the seams, credit card losses are surging and nobody knows just how bad things will get in Japan or Eastern Europe. We probably won't repeat the disaster of 1931, but it's far from certain that the worst is over." What do you say?
DR. SUMMERS: You know, I disagree with Paul about a lot of things, but he is right to be raising cautions. That's why when I just spoke about the economy I said that after a period when it, when everything was negative, there were now some mixture in the indicators. We don't know what--we don't know, we can't know with certainty what's going to happen next, and there certainly are real risks ahead. That's why the president's approach to the banking system involves looking at a stress test that contemplates an adverse outcome and thinks about how the financial system will function in an adverse scenario. That's why we're very focused on maintaining the pressure. No one is in any position to declare any kind of victory here. But the fact that no one can declare victory doesn't mean that we shouldn't take note of developments as they unfold. And the developments, as I say, are more, are more mixed now. But cautions that we've got a long way to go, that there are still substantial risks, that there are downside contingencies that we've got to prepare for, that there are issues in the global economy, that there are issues in commercial real estate, that's right. It's why the president has such an ambitious program. With respect to commercial real estate he's expanded the so-called TALF facility to enable the government to contribute liquidity to that commercial real estate market. With respect Eastern Europe, a major focus of his agenda at the G-20 was on fortifying the IMF so that it can respond to those kinds of problems.
What we are doing, and it's really the central tone that the president has set, is trying to be proactive, anticipating problems, acting on them before they become a crises. And so whether it's commercial real estate, whether it's small business lending, whether it's the global finance, whether it's the question of trade finance, we're working very hard to be ahead of the curve. And I think this president, in less than 100 days, has done more to respond to an incipient economic crisis than, frankly, most countries or the United States at most times in its history has done in a year or a couple of years.
MR. GREGORY: Let me turn to the issue of the banks. You have referenced these stress tests that the administration is administering to banks, and the idea here is to try to find out how much more financial shock the banks would be able to absorb. The president has made it very clear that he would provide additional money to the banks if it were necessary for them to shore up their financial position. According to the Treasury secretary, you have roughly $100 billion left in the bailout fund. What if the banks need a lot more than that in terms of capital reserves? Where would the money come from?
DR. SUMMERS: Well, David, what the president and the Treasury secretary have actually been clear on is that the first choice, the first resort for more capital is going to the private markets, going to the private markets directly to raise equity, going and working with the private markets in a variety of kind of so-called asset liability swaps that would have the effect of perhaps diluting some shareholders but also fortifying the level of capital that those banks had. And so there's the capacity to turn to the private market. There's also the, there's also the possibility that over time some of the banks that are in the strongest position will find themselves in a position where they can repay a portion of those, a portion of the resources, which would then enable the government to make further, further contributions if necessary.
MR. GREGORY: That's become a controversial point. You have some banks who are saying, "Look, we're in pretty healthy shape here. We want to give back this bailout money. We don't want the taxpayers' money." And the administration has appeared to say, "Hey, not so fast." Wouldn't that be a good thing?
DR. SUMMERS: Well, the administration's been, I think, consistent and clear in taking what I would guess almost everybody would agree is the right position. We want, we want to be out of the financial system. We want people to be paying back the government. But we don't want people to be paying back the government in ways that will put themselves right back in trouble and leaving themselves with inadequate capital. And we certainly don't want people starving automobile loans or starving the mortgage market or starving the small business market in order to pay back the government. So what Secretary Geithner has made clear is that he's very open, and regulatory authorities are very open to being paid back, but it has to be done in a way that's consistent with the stability of the financial institution and has to be consistent with maintaining the, maintaining the flow of credit.
MR. GREGORY: I want to spend a couple of minutes talking about the issue of spending and taxes. The administration is proposing--or projecting, rather, a budget deficit this year that approaches $2 trillion, four times the level as last year. This week when the president spoke about the economy, he talked about tackling that deficit. This is what he said:
(Videotape, Tuesday)
PRES. OBAMA: Already we've identified $2 trillion in deficit reductions over the next decade. We need to do more, but we've already done that.
(End videotape)
MR. GREGORY: But there are critics who say, in fact, that number has been debunked, that that's, that's fuzzy math. This is how Peter Baker reported it in The New York Times, that $2 trillion figure: "Three-quarters of those `reductions' reflect assumptions that the nation would have had as many troops in Iraq in 10 years as it does now, even though President Bush signed an agreement with Baghdad before leaving office that will result in the withdrawal of all American forces within three years." Why is the president still talking about that $2 trillion figure when it doesn't appear to be right?
DR. SUMMERS: What the president's made clear--and, you know, you could always argue, and it's a great Washington sport, but frankly not a sport that excites much of anybody else--what the right baseline is. But you can take away the whole question of the baseline and you can look at what the president's projecting, and the president's projecting that the budget'll be cut in--budget deficit'll be cut less than in half in--over the next four years. The president's projecting that domestic discretionary spending, the basic government bureaucracy, if you like, as a share of the economy's going to be smaller than anytime since the 1960s. President's going to be closing more than a hundred--closing down completely more than, more than a hundred programs or offices in his budget. The president's bringing an unparalleled level of transparency where you can watch every project that's under way under this stimulus bill. So that commitment to managing the country's finances responsibly is absolutely, is absolutely there. Yes, the deficit's big this year. That's a reflection of the economic crisis that we inherited, it's a reflection of the financial mess that needed to be bailed out and the outlays necessary for that. But the president is absolutely focused. And the steps, whether it's on the programs, whether it's by taking care of--by addressing health care spending with the most ambitious program of health care cost-cutting in a very long time, whether it's collecting taxes that are owed but not paid, that focus on taking the debt burden off of our children is very much there.
MR. GREGORY: All right, well, you talk about transparency, and you just brought up the issue of, of a health care program. What the president is proposing is a universal health care program that won't increase the deficit, and yet the projections are that this is a program that would cost at least a trillion dollars. Where will the money come from to fund such an ambitious program without impacting the deficit?
DR. SUMMERS: The president's laid out a number of measures on the tax side and in--and much more importantly, a number of measures that involve taking costs out of the Medicare, the Medicare budget. But the really important issue for the long run, David, is changing the way in which we deliver health care in this country. You know, there have been a whole set of studies done, they look at health care, the frequency of different procedures, whether it's tonsillectomies or hysterectomies in different parts of the country, and what you see is that in some parts of the country procedures are done three times as frequently and there's no benefit in terms of the health of the population. And by doing the right kind of cost-effectiveness, by making the right kinds of investments and protection, some experts that we--estimate that we could take as much as $700 billion a year out of our health care system. Now, we wouldn't have to do anything like that, we wouldn't have to do a third of that in order to pay for a very aggressive program of increased coverage. And so really the president and OMB director Orszag have identified a number of items that they call the game changers: prevention, cost-effectiveness, research, doing a better job on, on reimbursements. And as we put those into effect we can get this growth of health care costs under control. And it'll be a good thing for the federal budget and, frankly, a good thing for the national economy.
MR. GREGORY: Dr. Summers, Republican critics say--as they had these so-called TEA parties around the country this week to protest tax policy in this administration, Republican critics say they only way you're going to fund these priorities is by raising taxes. One of the organizers of these protests was former Texas congressman Dick Armey. He's going to be on our roundtable discussion coming up here. His views were described in The Washington Post this week, and I'll read it to you: "Armey said the real target of the protestors' ire is not the current tax rate but the much higher one that will be needed to pay for trillions of dollars in financial-sector bailouts; the stimulus package...and Obama's ambitious health-care and education initiatives, which are projected to raise the debt by trillions of dollars more. `There's no way he can do the spending he does and cut taxes for most people.'" Does he have that wrong?
DR. SUMMERS: I think he does. I think he does, David, and, you know, I think the record speaks for itself. What the president's proposed is a tax cut for 95 percent of all Americans. You know, I don't know that much about politics, but I've been surprised by these TEA parties a bit. The president is the one who's proposing cutting taxes on virtually all Americans, so I'm not sure who these TEA parties see as being King George.
MR. GREGORY: But he is raising taxes as well. He's allowing the Bush tax cuts to expire and he wants to increase the marginal rates on, on upper-income Americans.
DR. SUMMERS: Well, let--I think, I think one, I think one wants to distinguish--respectfully, David--very sharply between a new piece of legislation that raises taxes and simply allowing the laws that were signed into place when the Bush administration was in power and when there was a Republican majority in both houses, simply allowing those laws to play out. Yes, the president does believe that it's right to let those laws play out and when the tax cuts expire to allow them to expire, given the magnitude of the debt burdens that, that we face. That seems to him and I think to most Americans to be the right judgment, rather than enabling a benefit that only goes to about 1 percent of the population to leave the children of 100 percent of Americans facing a much larger debt burden.
MR. GREGORY: But, but just to be clear, if there's a tax cut that expires, taxes go up. Might--you know, a lot of Americans' taxes will go up.
DR. SUMMERS: Well, not a lot of Americans. No Americans whose incomes are under $250,000, actually, David. And way under 5 percent of Americans will actually see their tax, will see their taxes go up. And when they go up, they'll still be taxed at lower rates than they were taxed during the 1990s when our economy did, did extraordinarily well. So I find this argument that somehow some huge burden is going to be placed on the economy from carrying through on the Republican Congress' law that leaves taxes where they were in our most prosperous period in history, seems to me to be an argument that isn't the strongest argument in light of the magnitude of the problems we face.
MR. GREGORY: Is the president pledging that he will not raise taxes on anybody paying less than $250,000? I'm sorry, less than--earning less than $250,000?
DR. SUMMERS: President's made, president's made clear what his policy is, and the, and the budget is an articulation of the president's policy, and what it actually does is reduce tax burdens for those making $250,000. And it has contained--the stimulus bill contains a tax cut for 95, 95 percent of all Americans.
MR. GREGORY: And he won't reverse that at any point to fund these priorities?
DR. SUMMERS: I think I've made very clear where the, where the president is and where the president is going. I mean, he's made it completely evident during the presidential campaign and since he took office that the focus is going to be right there on raising the incomes of middle income families.
MR. GREGORY: The CBO, the Congressional Budget Office, says the nation's debt is expected to surge over the next 10 years from nearly $6 trillion to $15 trillion. Last September when you testified before Congress, you spoke about the perils of the long-term debt situation, and I'm going to play now what you said then.
(Videotape, September 9, 2008)
DR. SUMMERS: Excessive accumulation of federal debt over the next decade threatens to reduce investments and slow growth, compromise financial stability, and increase America's vulnerability and reduce its influence in the world.
(End videotape)
MR. GREGORY: Given the current debt picture, is that outcome that you described inevitable?
DR. SUMMERS: I don't think so. And I'm confident that if we had not moved to support this economy right now, we'd allowed a full-scale collapse with the loss of tax base that you would've seen, the vulnerability of the American people would have been much, much greater. But I said it in September and I will say it now: We need to make sure this economy recovers. But as soon as this economy recovers we need to be very focused on reducing that deficit, bringing down the debt burden, bringing down the ratio of the debt to the GDP, living more sustainably if we're going to have a healthier expansion than the ones that we did. But unfortunately, in a way that goes beyond what one would have expected when I gave that testimony in September, before Lehman was allowed to collapse, you've seen a huge deterioration in the economy that makes the kind of stimulus, the kind of recovery and reinvestment measure that the president has supported and pushed through, makes that absolutely essential. Without it the future would be much, much bleaker.
MR. GREGORY: Before you go, Dr. Summers, I would like to ask you a broader question about the U.S. economy. There's a lot of focus right now on getting credit flowing again in this financial crisis; and yet that was one of the problems, the easy availability of credit, that got us into this mess in, in the first place. You've now got a situation where individuals are maxed out with their debt, the government is indeed maxed out with debt. I wonder if you would describe your goals for the capitalist system that emerges out of this financial crisis, out of this recession. How do things change? Do individuals spend less and save more? Do governments--do--does this government act differently?
DR. SUMMERS: We're going to need a less leveraged economy. That means three things. Means a much better regulated financial system, and that's what the president is already hard at work on with Chairman Frank in the House, with Chairman Dodd in the Senate. Means that individuals are going to have to save more. That's why savings incentives are so important, that's why we need to do things to stop the marketing of credit in ways that addicts people to it and so that our households are again savings, and families are again preparing to send their kids to college, for their retirement and so forth. And third, we're going to need a government that ultimately gets back to the kind of place we had in the 1990s, where it's a contributor of savings to the economy rather than a drain. And those are all objectives we're working towards in, in the long run. But, David, if we don't firmly establish recovery we're not going to be able to get to any of those things, and that's why the first focus has to be on making sure that we get an expansion going. And that's what all of us in the administration are working so hard to implement that Recovery and Reinvestment Act, to put in place a financial stability program, to contain the damage in the housing, in the housing markets.
MR. GREGORY: Dr. Summers, safe travels home and continued good luck with your very important work.
DR. SUMMERS: Thank you very much, David.
MR. GREGORY: And coming next, the looming budget battles and the divide over taxes and spending; plus, those newly-released terror suspect interrogation memos, all in our roundtable: Dick Armey, Harold Ford Jr., Nina Easton, Steven Pearlstein and Rick Stengel here, only on MEET THE PRESS.
(Announcements)
MR. GREGORY: Our roundtable weighs in on a busy political week after this brief station break.
(Announcements)
MR. GREGORY: We're back and joined now by Steven Pearlstein, Nina Easton, Rick Stengel, Dick Armey and Harold Ford Jr.
Welcome to all of you.
All right, let's get right into it, because this tax and spending debate that I talked to Dr. Summers about has been very intense this week. FreedomWorks, your, your organization, Congressman Armey, organizing a lot of the so-called TEA parties around the countries. These were protests about tax policy in the administration. Big placards and not a lot of love for President Obama around the country as people are concerned about taxes and spending. But look at this. This is the new Gallup poll that came out this week. "Views of income taxes among the most positive since 1956." The new poll "finds 48 percent of Americans saying the amount of federal income taxes they pay is `about right,' with 46 percent saying they're too high--one of the most positive assessments Gallup has measured since 1956." As Dr. Summers says, the president is cutting taxes for 95 percent of Americans. What's everybody so upset about?
FMR. REP. DICK ARMEY (R-TX): Well, first of all, I, I want to correct the record. While FreedomWorks did participate and help with the organizing, we had over 800 TEA parties. Now, this is very important. Over 800 TEA parties around the country, with attendance in the hundreds. And Atlanta was 15,000. These were almost exclusively organized by volunteer people. I say they were. And where FreedomWorks helped with technical assistance, in every TEA party that I was aware of a real person in their real community put it together. Now, what they're concerned about is where it's going to go. Quite frankly, the--most of the people that I talked to at the TEA parties and, and who had that sentiment frankly just simply do not believe that the president is either going to hold the line on spending. Look, he's, he's taken the, the deficit up to $2 trillion and promising to halve it. That still makes it, what, a--twice as big as it was when he started. So the fact of the matter is there's real doubts about him, and taxes must inevitably go up if he's going to grow big government.
FMR. REP. HAROLD FORD JR. (D-TN): There was not--but, but, but, Leader, there was not one TEA party in the eight years that President Bush was in office. And this is not meant to litigate the last eight years. But let's be honest, there was a $5 trillion increase in the amount of the, the nation's debt under President Bush. Normally when you use a credit card and you go out and charge things, you're able to show something you got in return. For the last eight years there are no more kids with health care, there are fewer kids who are able to afford college, we have not found new energy sources, and we can make a pretty credible argument that the Middle East is less stable and more dangerous than it was before. I give the president great credit for another attack not occurring on our soil. When we look at the long-term investments and the foundational platform that this president, President Obama is trying to create, one could make a legitimate and I think a compelling argument that in the long run this will produce the new--new investments in energy will produce not only alternatives but less reliance overseas, cheaper energy here at home, a smarter electricity grid, more kids going to college, more people with access to health care, which will lower business costs and allow the economy, for that matter...
MR. GREGORY: Right.
REP. FORD: ...the kind of prosperity that we want to come back.
MR. GREGORY: But let's just talk about, Steven Pearlstein, the fact of the matter is that Americans are satisfied, according to the polling, with where their tax burden is right now. There may be doubts about President Obama, but he is cutting taxes.
MR. STEVEN PEARLSTEIN: That's right. And the level of taxation, overall tax, the federal taxation, which includes the income tax, but also the corporate tax and the excise tax and things like that, it's, it's at one of the lower points it's been in the last 30 years. And one of the things that everyone has to get sort of comfortable with is it's going up. And Dick is right about that, it's going up. It has to go up. We need to get the deficit down and we need to live within our means in--as households and as governments. So one of the things I, I think I'm a little disappointed in is that Obama has got himself locked into nobody under $250,000 income is going to get a tax increase. I think he's going to find that that's very limiting in terms of putting us on that stable foundation, the rock that he talked about in his speech this week.
MR. GREGORY: Right.
MR. PEARLSTEIN: Putting us back on a, on a stable foundation.
MR. GREGORY: Nina, you talk about the, the way the debate is being framed and the tone of this debate. Paul Begala, former adviser to President Clinton, was on the "Imus in the Morning" program this week, and he really took on those protestors out at TEA parties, and this is what he said.
(Audiotape, Wednesday)
MR. DON IMUS: Just...
MR. PAUL BEGALA: Why are they out there whining with this TEA party thing?
MR. IMUS: I don't--because we're...
MR. BEGALA: Just a bunch of wimpy...
MR. IMUS: No, no.
MR. BEGALA: ...whining weasels...
MR. IMUS: Now you're making me feel bad, because...
MR. BEGALA: ...who don't love their country and don't want to support...
MR. IMUS: Oh.
MR. BEGALA: There are guys at Walter Reed who gave their legs for my country, and they're whining because they're going to have to write a check?
(End audiotape)
MR. GREGORY: Is the broader argument here, as Steven suggests, there has to be a burden because of where the country is; that, that individuals have to pay more?
MS. NINA EASTON: Well, I, I would--first of all, I, I think the media underestimated this as an animating force, a tax--the potential of tax increasing. I think, I think that there is--it's an animating political issue. It's something that the Republicans can hang their hats on. I would recall 1993 Contract with America, when Democrats didn't take that seriously, either. I think tax and spend issues are a real, are a real animating issue for Republicans. I think there's also been a little mini TEA party on the Hill, in that we saw moderate Democrats have already declared, basically, dead on arrival the, the Obama proposal to limit deductions for wealthy households giving charitable contributions. There's concern about the cap and trade, which is the energy plan that's, that a lot of Republicans are countering as a--they're calling a tax increase.
MR. GREGORY: Right.
MS. EASTON: And some moderate Democrats are agreeing. So I think that--I, I do think the tax thing, I think the Democrats underestimated at their own peril.
MR. GREGORY: Congressman Armey, is Paul Begala another Democrat saying that this is a patriotism issue?
REP. ARMEY: No.
MR. GREGORY: Like Vice President Biden said, it's patriotic to pay more in taxes?
REP. ARMEY: Well, you know, Paul is a very colorful guy. But the fact of the matter is--and let me talk about the vice president's comment. The president's goal is to have 50 percent of adult Americans not on--not paying taxes. If it's so patriotic to pay taxes, why not include everybody? Why shouldn't every American who's working, making--an adult American share in the tax burden, distribute it more evenly? You can get rates down and it can encourage growth. And by the way, I must mention that the TEA party movement started in response to TARP by Rick Santelli...
REP. FORD: In fairness, you're right.
REP. ARMEY: ...a commentator on early morning TV.
MR. GREGORY: The bailout funds for the banks. Right.
REP. ARMEY: And that's where it started. So President Bush isn't off the hook on this.
MR. GREGORY: Right.
REP. ARMEY: President Obama just wants to take a bad thing and make it bigger.
MR. GREGORY: Rick Stengel, I want you to react to something. The president in his economic speech on Tuesday was very candid about one thing, and that is that people have to pay more for this economy, in this economy, in this crisis. This is that he said.
(Videotape, Tuesday)
PRES. OBAMA: If we don't invest now in renewable energy, if we don't invest now in a skilled work force, if we don't invest now in a more affordable health care system, this economy simply won't grow at the pace it needs to in two or five or 10 years down the road.
(End videotape)
MR. GREGORY: Is that right?
MR. RICK STENGEL: Well, he has a kind of unified field theory of the economy that you just can't fix it by either raising taxes, by recapitalizing the banks. You've got to fix the health care system, you've got to fix so many things, you have to fix education. So he really sees the way that America is going to get better is by changing the nature of the way we are as consumers. He wants us to build things. He doesn't want us to make money off of money, the way the banks were doing. So I think they have a, a, an agenda that they're not quite talking about, but it's a traditional agenda about America getting back to an era of thrift, an era of making things, not buying things that we don't need and then throwing them away.
MR. GREGORY: But, Steven, there's still this fundamental question: Where does the money come from? This is an administration that prides itself on transparency. Where's the money coming from? On tax policy you wrote this this week in your Friday column: "The old Republican fantasy was that tax cuts were the magic elixir that would solve every problem. Now that the public has finally rejected it, it's disappointing to see Democrats offering up the equally fantastic notion that Americans can have all the government they want while getting someone else to pay for it."
MR. PEARLSTEIN: Well, you know, I think the president was--in this speech was trying to get us off of the idea that all of this is just spending. Some of it is investment, and it's investment that will pay dividends down the road. And if he can redirect the conversation and say, yeah, this--some of the stuff that government does that we consume every year--we send people checks, that's consumption. But if we're investing in these things, it's good for the public--for the private sector, people in the private sector to invest, but it's also good for the public sector. But what he's got to say is in order to invest, you've got to stop consuming certain things.
MR. GREGORY: Mm-hmm.
MR. PEARLSTEIN: That is, allow yourself to be taxed so that we can make these investments.
MR. STENGEL: But we used to consume our way out of problems.
REP. ARMEY: Right.
MR. PEARLSTEIN: He's saying we can't do that anymore. So consumption is something like 65 or 68 percent of GDP, it's got to go down. And that, that is a big change for Americans.
MR. PEARLSTEIN: It certainly is.
REP. ARMEY: Let me make a couple points. As Milton Friedman said, "The real rate of taxation is the rate of spending." It's going to be pay me now or pay me later, but eventually every dime's worth of government spending is going to be taxation. But I think there's a fundamental question here that Hubert Humphrey would appreciate. The fact is, even by Hubert Humphey's standards, Humphrey-Hawkins, this government is too big. It's too much of a burden on the economy. And people sense that this president wants to take an already existing burden on the American economy and make it even bigger with a questionable ability...
MR. STENGEL: Well, I...(unintelligible).
REP. FORD: All right.
REP. ARMEY: ...to do any good. Has the government actually made health care better in America? I would argue probably not.
MR. GREGORY: All right.
Comment, Harold?
REP. FORD: Two things. We use the term "bailout" when we talk about the help on the financial side. It's important to note that the TARP is designed to actually be paid back. If the banks perform at the rate that some have suggested they performed this quarter and across the year, you're looking at a dividend payment from the banks back to the taxpayer, rightly so, between $12 to $15 billion this year, number one. Number two...
MR. GREGORY: Right.
REP. FORD: ...I would agree with you, Leader, in this regard. Spending is large, but what is the alternative? Government's playing the role of the, the, the, the, the financial investor of last resort, the spender of last resort. We, we fought this, we fought this battle for many years in this country. Think if we'd decided not to pass the Servicemen Readjustment Act back in 1944 called the GI Bill. It was an enormous expenditure. You sent eight million veterans to college, you provided one year of unemployment compensation and you ensured they could buy a home. The impact that had on the nation's economy going forward, educating that greatest generation, has been enormous. Think if Eisenhower's national interstate, the highway system would not have passed. It cost $425 billion in real day terms. The impact it's had on commerce, prosperity and growth has been immeasurable. We face one of those moments. This is one of those 100-year flood moments. And as much as I'd like to see government not engage and involve itself in so many enterprises, I don't know the alternative. And as much as I like and respect you, I've not heard from Republicans or conservatives or the TEA party attenders, what is the alternative? If the alternative, alternative is to sit back and do nothing, the majority of Americans, evidenced by poll after poll, say, "Do something. Be active and get us out of this mess."
MR. GREGORY: I, I want to get in here. We're going to take a break here. We're going to come back and talk more about the economy and specifically the effects of this recession on people's lives. We're going to take a break. We'll come back with our roundtable discussion right after this brief station break.
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MR. GREGORY: And we're back now with our roundtable.
Rick Stengel, I, I talked to Dr. Summers about where does capitalism go from here once this recession is over? And it's something you're thinking about on the cover of Time magazine this week, and here it is. The title is "The New Frugality. The recession has changed more than just how we live. It's changed what we value, what we expect even after the economy recovers." That's a special report in the magazine. What has your reporting revealed about how it's changing people's lives?
MR. STENGEL: People are recalibrating their lives. They're--it's a reset that's going on. They're thinking about how they consume, they're thinking about how they live. They're thinking that those endless horizons that we were always told we'd have are not there anymore. And so this is really going to affect the Obama policy. They're cutting back on things like bottled water. They're growing their own gardens. They're not--they're exercising more but going to health clubs less. So they're resetting their lives. At the same time there is this odd, curious, wonderful spirit of optimism. You know, 57 percent of people say the American dream is harder to get to, but that same number say America's best days are ahead of us.
MR. GREGORY: Mm-hmm.
MR. STENGEL: That combination of realism and idealism is quintessential in the American character, and that will help us get out of it.
MR. GREGORY: You did a poll for this report, and we can reveal another aspect of it this morning. And this was the question about spending for Americans going through this recession. Once the economy does recovery, what will you do? Twenty-five percent say go back to spending the way they did before. Sixty-one percent say they will continue to spend less.
And, Nina Easton, what's, what's interesting here is that there seems to be a recognition that even if credit does start flowing again...
MS. EASTON: Right.
MR. GREGORY: ...even if there is some return to profitability, the economy's not coming back to where we were before, because where we were before was simply not sustainable.
MS. EASTON: Or it's not coming back certainly in the short term. I mean, just to give you some perspective on how bad things were, we released this morning, actually, our Fortune 500 issue. We've been doing this for 55 years. The earnings drop among the Fortune 500 was 85 percent last year.
MR. STENGEL: Wow.
MS. EASTON: That is the largest drop, the steepest drop in the history since we've been releasing this issue.
MR. GREGORY: Let's actually refer to that more specifically. This is from the, the cover piece...
MS. EASTON: Yeah.
MR. GREGORY: ...out of Fortune magazine that talks about economic performers of the, of the Fortune 500. Last year the worst economic performance in the 55-year history of, of the Fortune 500 list, biggest 500 companies, earnings dropped 84.7 percent, as you just said, from the previous year, from $645 billion to $98.9 billion. It's the largest ever one-year decline.
MS. EASTON: So while things are--there are signs, and as, as President Obama says in our issue, you know, there are signs of some stabilizing, but there are a lot of risks to this economy still. And it's--I think people have to understand that this is a long haul, and the, the key to this long haul is the banking system...
MR. GREGORY: Mm-hmm.
MS. EASTON: ...and the recovery of the banking system. And I find--and what's happening is that Barack Obama has--is facing a very difficult political issue on that. And we saw that in his Georgetown speech. He needs banks to come back. He needs their profitability.
MR. GREGORY: Right.
MS. EASTON: He needs them to lend. But he's also got the liberal wing of his party saying, "Oh, you know, we--they're too profitable now." So you saw him spend a lot of time in this speech dwelling on...
MR. GREGORY: But it's not just the left. It is the--populism on the left and the right...
MS. EASTON: Right. That's--yes.
MR. GREGORY: ...Steven Pearlstein, that says, "Hey, wait a minute. I'm still losing jobs, I'm worried about my job. And wait a minute, the bankers, we've given them hundreds of billions of dollars, they're profitable again in the first quarter?" How does that compute? Is that not a political risk for their recovery effort?
MR. PEARLSTEIN: It is. And it's, it's always been the hard thing about this financial rescue thing. You know, we can't, we can't rescue the economy without rescuing the banking system, and you can't rescue the banking system without rescuing banks. And people got to get over it, you know. First of all, we didn't give them the money, as Harold points out, we lent them the money. And some of them want to pay it back. And in the meantime we're earning interest. So we didn't give it to them. But we ought to really--you know, if the banks are getting healthy, we should--that's a good thing for us. And we've got to get over this thing, "Well, if it's good for them, it's, it's bad for us." We are all in this together. We own the--part of the banks now, so as shareholders maybe we would be...
MR. GREGORY: Can I...
MR. PEARLSTEIN: ...be cheering the fact that they made a profit.
MR. GREGORY: I want to follow up on one point, this question of recovery. We know that unemployment is something that lags. So if the recession were to end, say this fall, as some forecasters think it will, when do you think unemployment would actually peak?
MR. PEARLSTEIN: Not till the end of next year at the earliest.
MR. GREGORY: So it could take an additional year...
MR. PEARLSTEIN: Yes, sir.
MR. GREGORY: ...of job losses. That's pretty frightening.
MR. STENGEL: And then people--by the way, we call it a lagging indicator. You lose your job, you're not a lagging indicator. You are in serious trouble.
MR. GREGORY: Sure.
MR. STENGEL: And the thing is...
MR. PEARLSTEIN: You're a present indicator.
MS. EASTON: Right.
MR. STENGEL: Well, that's right, you're a present indicator. And the point is, is we're, we're thinking, "Oh, the economy will be healthy but unemployment will go up to 10 percent." I mean, does anybody here at this table think it's not going to go up to 10 percent?
MR. PEARLSTEIN: No.
MR. STENGEL: Everybody does.
MR. GREGORY: Right.
REP. FORD: You know, the interesting thing about your numbers as you, as you showed, from $650 to $84 billion, $85, I can't remember the exact numbers, that was not a function of taxes being too high. That was a function of revenue going down and incomes being too low. So as much as this conversation about taxes is relevant, what is more relevant is how do we drive incomes up? How do we create more jobs? And I think a legitimate argument--and I hope that people stop questioning President Obama's intentions here in calling him a socialist and suggesting he's making the nation unsafe--I think Bobby Jindal, the governor of Louisiana, said it best. His intention shouldn't be a question. I never questioned President Bush's intentions. We can debate the policy. And his policies, I think there's a legitimate debate that's under way. I happen to think the investments in these places will drive incomes up...
MR. GREGORY: Right.
REP. FORD: ...and make the Fortune 500 list more attractive next year than it was this year.
MR. GREGORY: I just--we've only got a couple minutes left, and I want to move from the economy to another big issue this week, Congressman Armey, and that was the release by the administration of these so-called torture memos. These were memos that were produced by the Justice Department giving a legal opinion about how terrorism suspects could be interrogated; the use of techniques like waterboarding, which the Obama administration says is torture, stress positions, slaps, the discussion of, of the use of insects, etc. A lot of controversy, Congressman Armey, about the release of these memos by the administration. Former CIA director Michael Hayden wrote this in an op-ed in The Wall Street Journal: "The release of these opinions was unnecessary as a legal matter, and is unsound as a matter of policy. Its effect will be to invite the kind of institutional timidity and fear of recrimination that weakened intelligence gathering in the past, and that we came sorely to regret on September 11th, 2001." Do you agree?
REP. ARMEY: Yeah. It--clearly it was a political act, and I think one thing I would hope that President Obama could finally get to the point where he can put George Bush away. He's retired, his time is over. Forget about--why are you taking smacking George Bush around now? Look for the future. But as a strategic decision with respect to the security of the United States it was, frankly, a grotesquely irresponsible move and it's going to diminish our ability to maintain better security.
MR. GREGORY: Rick Stengel:
MR. STENGEL: Congressman, you--but you--he's basically saying let bygones be bygones. He's not prosecuting anybody. He could prosecute people. He could prosecute the former CIA director. I mean, he's very Mandelalike in the sense that he's saying let the past be the past and let us move into the future.
MR. GREGORY: Right.
MS. EASTON: But there's still...
REP. ARMEY: So then why release the report, if not to take a shot at President Bush, former President Bush?
MS. EASTON: And it...
MR. GREGORY: But isn't it bigger than taking a shot at President Bush?
REP. ARMEY: That's...
MR. GREGORY: I mean, you've got--Harold, you've got the fact that Pat Leahy in the Senate is saying we need some kind of truth commission here to find out exactly what it was done and why it was done. I mean, look, this is a bigger debate about how we treat America's enemies. Is that a debate worth having, or is it just looking back?
REP. FORD: Look, I think the president said it best at the, at the summit with some of the Latin American and South American leaders. He said look, the past is the past, let's move forward. He's talked about moving along the, the--with Cuba. It's important to note, as much as we want to do that, if this debate took place in Cuba right now half of us would be arrested if we disagreed with the government. So dissent is still not encouraged. I'd say this. After September the 11th we asked men and women in this country serving in our military and our intelligence agencies to go out and find bad guys. I'm always a little hesitant afterwards when we try to judge the kinds of things they did. That being said, we are America and we got to live up to a certain standard, and I think what the president did was strike the right balance in how they went about dealing with this.
MR. GREGORY: Nina, you were going to make a point.
MS. EASTON: I was just going to say that he clearly wanted to put this behind him, or behind the country, by releasing them. And the question is, did he, or are there more reverberations? Is it going to harm the CIA? Is the Hill going to investigate the authors of those legal memos, which is the next shoe to drop in this?
MR. GREGORY: Right.
MS. EASTON: And so while he says there aren't going to be prosecutions, there could very well be John Conyer's investigating the authors of these legal memos on, on these--and I just wanted to point out one thing. Dennis Blair, the director of National Intelligence, said in, in one very telling quote, "It's very easy to look back on this safe, warm April 2009 day and second guess a lot of these decisions."
MR. GREGORY: Mm-hmm.
Fifteen seconds, Congressman. Would Democrats in power have treated terrorism suspects differently?
REP. ARMEY: I don't know. I mean, quite frankly, it's a technical question. It's a question of very desperate circumstances and high anxiety. It's very difficult to tell who would've done what.
MR. GREGORY: OK.
REP. ARMEY: But I do think forget about it. But again, this was, in my estimation, strictly a political action and it was irresponsible.
MR. GREGORY: We're going to leave it there. Thank you all very much. We're going to continue our discussion with Congressman Armey and Harold Ford Jr. online, ask them some questions 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 all on mtp.msnbc.com.
And we'll be right back with an important program note about next week's guest.
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MR. GREGORY: That's all for today. Next week, an exclusive interview with King Abdullah of Jordan just days after his first White House meeting with the president. That's right here next week. If it's Sunday, it's MEET THE PRESS.