'This Week' Transcript: Economic Roundtable

ABC'S "THIS WEEK WITH GEORGE STEPHANOPOULOS" FEBRUARY 1, 2009

GEORGE STEPHANOPOULOS, HOST ERIC SCHMIDT, CEO, GOOGLE FRED SMITH, CEO, FEDEX REP. BARNEY FRANK, D-MASS. SEN. JIM DEMINT, R-S.C.

STEPHANOPOULOS: Good morning, and welcome to "This Week."

The economy dives.

OBAMA: This is a continuing disaster for America's working families.

(ABCNEWS.com)

STEPHANOPOULOS: In the headlines this week, 5 million jobless claims, more than 100,000 jobs lost, the weakest economy since 1982. But does President Obama have the right fix?

(UNKNOWN): A trillion dollars is a terrible thing to waste.

STEPHANOPOULOS: That debate this morning on a special economic roundtable, with two of the country's leading CEOs and two members of Congress at the center of the action.

Then, will a faltering economy weaken us abroad? An in-depth look at that challenge and all the week's politics with George Will, Martha Raddatz, David Sanger of the New York Times, and Bob Woodward of the Washington Post.

And, as always, the Sunday funnies.

JAY LENO, TALK SHOW HOST: Starbucks announced today they're laying off 1,000 workers and could close more stores. Yes, they say, by the year end, experts predict we could be down to just two Starbucks on every corner.

ANNOUNCER: From the heart of the nation's capital, "This Week" with ABC News chief Washington correspondent George Stephanopoulos, live from the Newseum on Pennsylvania Avenue.

(END VIDEO CLIP)

STEPHANOPOULOS: Hello again.

The lead story in today's New York Times magazine says that, for the first time in more than 70 years, the epicenter of the American economy is not Wall Street, not Silicon Valley, not the industrial Midwest, but right here in Washington.

No doubt that's a debatable proposition, but there's also no question that the decisions made by President Obama and Congress in these next few days and weeks will determine how and when the country recovers from our worst recession in memory.

We've assembled a plugged-in and opinionated panel this morning to debate those decisions. I'm joined by Republican Senator Jim DeMint of South Carolina, Fred Smith, the chairman and CEO of Federal Express, Congressman Barney Frank, the chairman of the House Financial Services Committee, and Eric Schmidt, the CEO of Google.

Welcome to all of you. And we do have a lot to cover this week.

And, Senator DeMint, let me begin with the stimulus package, because I think you've called the president's plan the worst plan since the 16th Amendment paved the way for the income tax. But polls show that a majority of Americans actually support what the president's trying to do. What are they missing?

DEMINT: Well, I think all of us support the fact that we need to do something. And all of us believe that the way to move our economy forward and protect jobs is to infuse more money so that consumers have more to spend, businesses have more to invest, buy capital equipment.

But there are two ways to do that, George. One is for the government to take it out of the private sector through taxes and then decide where it's going to go through political manipulation, as they've done in the House. The other is just to leave more money in the private sector for consumers to spend and businesses to invest.

And that's the American way. And that's -- that's the approach we're pushing. Unemployment is...

STEPHANOPOULOS: All tax cuts? No increases of spending of any kind? Yet more economists say that investments -- the right kind of investments create more jobs than tax cuts.

DEMINT: Well, I'm not sure what economists you're talking to, but we've met with a lot of them over the last week. You can look back in history, and leaving more money in the economy through tax cuts is the way that works. And government spending is -- you can see little bumps.

But this plan is a spending plan. It's not a stimulus plan. It's temporary, and it's wasteful. And a lot of the spending is going to end up being permanent, George.

So we have to decide if we want to be a free-market economy and let -- and let the money stay there or if we want to be a government- directed economy, which is where we're headed with this plan.

STEPHANOPOULOS: You voted for the package?

FRANK: I did. And the -- I regret Senator DeMint saying that this is the American way. Let's -- let's just agree that we're all Americans here, Jim, and that nobody's got the American way versus presumably the non-American way.

And as far as spending versus tax cuts, I think we need to fix some highways and bridges. I never saw a tax cut fix a bridge. I never saw a tax cut give us more public transportation. The fact is, we need a mix.

We need -- and I think we've suffered from an extremism in this country in the past of relying only on private-sector activity and having too little government. It's possible to have too much government, no question. But it's possible to have too little. And some parts of this stimulus -- extending unemployment benefits, helping with food stamps -- you know, we have two purposes here. One is to stimulate the overall economy. The other is to go to the aid of some people who, through no fault of their own, have been damaged. You can't just look at the aggregates.

I think we've gotten in trouble by looking only at the aggregates. If the GDP goes up but income inequality greatly increases and a lot of average workers are feeling put upon, it's a problem.

But I want to see some improvement in our transportation structure. I'd like to see some improvement in education. We have state governments laying people off, cities being told they're going to have to lay off firefighters. A tax cut isn't going to keep the city of New Bedford...

STEPHANOPOULOS: Those are all the broad...

FRANK: ... from laying off firefighters.

STEPHANOPOULOS: You mentioned a lot of the programs, yet one of the criticisms the House plan has gotten is it also includes a lot of spending for things that don't seem to be stimulative, contraception, things like that.

FRANK: Well, you have some -- well, one, I thought, contraception was out of the bill. I guess the people resented the fact that it was out of the bill.

There is some money now I guess to fight sexually transmitted diseases. Those are jobs. By the way, very few people volunteer to fight sexually transmitted diseases. They get paid to do it.

FRANK: And if all you do is construction, you're providing employment to one sector of the economy, but not others. But, yes, we are telling the city of New Bedford, which I represent, that if we give them money, if we pick up a bigger share of Medicaid through government spending, then we'll lay off firefighters, then we'll lay off police officers and health workers. And I don't see how a tax cut is going to keep firefighters at work in New Bedford.

STEPHANOPOULOS: Mr. Smith, your company depends a lot on -- on a healthy infrastructure in this country. And it does -- we -- estimates I've seen are about a $2.2 trillion gap between what we have and what we need.

SMITH: No question about it. The -- the infrastructure of the country has been underfunded for a long time. It certainly would be a wise thing to -- to invest in all kinds of infrastructure, including advanced electrical grids, or I.T., and electrify the short-haul personal transportation system.

But in -- in our view, after you take care of the folks who have been adversely affected by the economy -- I agree with Chairman Franks on that -- you've got to understand that the reason we've gotten into this problem is because for years the tax code has favored the financial sector to the detriment of the industrial sector. And by industrial sector, I'm talking about big service companies like FedEx, manufacturers, I.T. companies, agriculture, mining.

When interest is deductible, the government is subsidizing speculation and debt, where capital investment is taxed cumulatively -- and if there were one thing that in the tax code that could be changed that I'd recommend to Senator DeMint and Chairman Franks, it would be to allow industrial companies to write off or expense capital investment and software when the investment is made.