'This Week' Transcript: NEC Director Larry Summers

PHOTO Larry Summers, left, and Alan Greenspan are shown in these file photos.

TAPPER: Good morning, everyone, and happy Easter and Passover. You have to go back three years -- to March 2007 -- to find the last time the U.S. economy created as many jobs as were created last month, three years. And yet the 162,000 new jobs did not put a dent in the unemployment rate, which remains at 9.7 percent.

Fifteen million Americans were still looking for work in March, and of those, 6.5 million have been unemployed for more than 27 weeks. And the broadest measure of unemployment, those who have given up looking for a job or cannot find a full-time job, bumped up to 16.9 percent.

Joining me now, the president's top economic adviser, Dr. Larry Summers.

Dr. Summers, thanks so much for joining us.

SUMMERS: Good to be with you, Jake.

TAPPER: Now, if you remove the temporary census worker jobs, 48,000, you're left with 114,000 new jobs. Big businesses have retained earnings. They are not spending that -- that money on creating new jobs. They're investing abroad. They're buying their own stock. They're buying other companies. Why are they not creating new jobs?

SUMMERS: They're starting to. We're in a very different place than we were a year ago. A year ago, we were losing 600,000 jobs a month. Now the process of job creation has started. We expect that it will accelerate.

But we've got to do more to make sure that there's demand in this economy that will create more jobs. We are in no position to rest or to be complacent just because of this jobs report.

That's why the president thought it was so important to sign into law the incentive program two weeks ago that allows the waiver of payroll taxes for companies that hire an unemployed person. That's why the president is pushing for spending on new construction projects, new infrastructure projects. That's why we've got to focus particularly on small business at this point.

You know, if you look at the data, the situation with large businesses is serious, but the situation in small business is devastating. That's why the president put forth proposals in December and wants to see Congress act on his measures to increase the flow of credit to small business. That's why it's so important that we're seeing a big increase -- more than 10 percent -- in the tax refunds that Americans are getting this April, which will put them in a position to spend -- to spend more and start that process of job creation.

That's why it's so important to have passed health insurance, which is going to give a tax credit that's actually retroactive to January to small -- to small businesses. We've got to do everything we can to provide the incentives, to create the framework for more job creation in this economy. We cannot rest where we are.

TAPPER: Now, you said that you think it's going to accelerate. You guys have been touting a bar graph showing job losses during the previous administration, job gains since the stimulus passed. Do you see that progress continuing? Or can we expect that there might be some dips even into negative job growth in the coming months?

SUMMERS: Jake, the numbers fluctuate from month to month, and no good business runs itself based on every weekly or monthly fluctuation. And the president's focus is on building a stronger economy so we don't have debacles like the last couple of years again.

TAPPER: So there might be some dips?

SUMMERS: But I think -- but my expectation would be that the trend is going to be upwards. We talk a great deal to businesses. We monitor all the statistics. And the steps that the president is taking should bring about an increased level of employment.

But, look, we don't have enough in place. That's why the president has put forward measures to the Congress for the credit for small businesses, for incentives that will let people spend money and put people to work retrofitting their homes to make them more energy efficient, to preserve jobs on the front lines for teachers and for policemen.

What happens will depend on choices we make, and there is much more that we can do, and the president is pushing for the adoption of those measures, even as we focus on implementing and continuing to implement the strong set of measures in the president's Recovery Act.

TAPPER: Where do you think we're going to be in September? Are we going -- are we going to still be at 9.7 percent unemployment or is it going to go down a little?

SUMMERS: You know, the -- the good news is that, if you look at what's happened in the first quarter of this year, it's hardly satisfactory, but it is running somewhat ahead of what the administration was forecasting, because our forecasts were conservative. And I'd expect continued progress in job creation.

As you see progress in job creation, you tend to see unemployment go down. It's not quite as simple as some people think, Jake, because as conditions get better, more people decide to look for work and are counted as in the labor force. So sometimes it's frustrating and the progress doesn't show up immediately in the unemployment rate, but it's progress nonetheless in giving jobs to people who need them.

That is what is the president's top economic priority for this year. You know, all of us -- I mean, the president talks about this with us each week. The letters that he receives from the families where kids are worried about whether their parents are going to be able to hold onto their job...

TAPPER: Well, if I could...

SUMMERS: And that's why we're so focused on this jobs issue.

TAPPER: There are a lot of members of Congress who are concerned about jobs because of China, because of what they see -- the manipulation of currency by China. The Obama administration had scheduled a semi-annual report to Congress on currency, in which it was going to state whether or not the Obama administration believes the currency is being manipulated. That report, we learned this weekend, is going to be delayed.

Is it going to be delayed because the Obama administration needs China's cooperation on other things, such as sanctions against Iran?

SUMMERS: No.

TAPPER: That's not the reason?

SUMMERS: No, it's being delayed because that's part of our international economic dialogue, which is directed at supporting a crucial issue for jobs creation, doubling our level of exports, and that depends on what other countries do.

We've got three major meetings, a meeting of the G-20 finance ministers, our strategic dialogue that takes place every year with China, and then the president's meeting, building on the forum he created in London and Pittsburgh last year of the G-20 countries.

Those are opportunities to engage with China, to engage with other countries that have large trade surpluses, other countries who think they can continue to rely on the United States as an importer of last resort. And Secretary Geithner's judgment -- and I think it was the right one -- was that we could report and recommend to Congress, you know, a much more effective way after we had had those meetings and taken stock of what kind of measurable progress we were able to generate out of those dialogues.

But, look, at this point, given the seriousness of the recession that we have been through, given the number of Americans who are out of work, the economic issues have to be at the center and will be at the center of our diplomacy.

TAPPER: OK. The president has said he wants -- in the next few weeks, he wants the Senate to pass financial regulatory reform. First of all, just quickly, do you guys have the 60 votes to pass Senator Chris Dodd's bill on financial regulatory reform?

SUMMERS: I expect that reform is going to pass. It's not easy. You've got $1 million being spent per congressman in lobbying expenses on this issue. Industry has four lobbyists per member of the House and Senate working on this.

But the case for basic consumer protection, the case for regulating institutions that are able to bring the economy down and not leaving them completely unregulated, the case that we've got to be able to handle the failure of an institution without a major bailout through so-called resolution authority, the case that we can't let institutions choose their own regulator -- play one regulator off -- against another to reduce standards -- that case is so compelling that we are confident that a sufficient majority will see that case and will vote to support financial reform.

We've come a -- we've come a -- come a long way on this issue. We're now in the final stages. Our expectation is that we will get there, and there's no question, I mean, how can anyone take a position after what has happened, after -- I mean, it's not the first thing that's happened...

TAPPER: Well, some -- some -- some Democrats... SUMMERS: ... that we don't need -- that we don't need comprehensive financial reform.

TAPPER: Well, some...

SUMMERS: Probably (ph) work on the details, but not compromise on the principles.

TAPPER: Some Democrats say it doesn't go far enough. Here's Delaware Democrat Ted Kaufman talking about the Dodd bill.

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KAUFMAN: Unless Congress breaks up the mega-banks that are too big to fail, the American taxpayer will remain the ultimate guarantor of an almost certain to repeat itself cycle of boom, bust and bailout.

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TAPPER: Senator Kaufman is saying that there isn't being -- enough being done about too big to fail. In 2000, you said, quote, "It is certain that a healthy financial system cannot be built on the expectation of bailouts." Can you honestly say that the Dodd bill changes that?

SUMMERS: Yes, I can. It changes -- it reduces the expectation of bailouts by insisting that institutions have much more capital so they won't need to be bailed out. It eliminates the prospect of bailout by creating a framework in which a failure can be managed with creditors taking responsibility.

It restricts -- and this was the important point that former Fed Chairman Paul Volcker has stressed -- it restricts the so-called proprietary trading activities, some of the most risky activities of these institutions. So, yes, this bill is a direct attack on too large to fail by making failure a possibility, as it has to be in a market system, and by making these institutions much safer and much sounder. Senator Kaufman is exactly right.

TAPPER: Lastly -- we only have a minute left -- but there have been reports lately that you're -- you're thinking of leaving. Are -- I know you've -- you've said that the reports are not true, but are you committed to staying in your current position throughout at least November 2012?

SUMMERS: Jake, you know that in this town, when it comes to personality stories, usually it's the case that those who talk don't know and those who know don't talk.

TAPPER: Well, you know...

SUMMERS: I am very -- I am having an enormously satisfying experience working with this president, and that's what I'm committed to doing and serve at his pleasure.

TAPPER: Until November 2012? SUMMERS: Serve at his -- serve at his -- I serve at his...

TAPPER: Assuming that he would like you to serve until...

SUMMERS: I serve at his pleasure. I don't get into hypothetical questions. I'm having an enormously satisfying experience.

TAPPER: All right, Dr. Larry Summers, thank you so much.

SUMMERS: Thank you.

TAPPER: And joining me now, the former chairman of the Federal Reserve, Dr. Alan Greenspan. Dr. Greenspan, thank you so much for joining us.

GREENSPAN: It's a pleasure being with you, Jake.

TAPPER: I know that you agree with Dr. Summers that jobs will continue to -- job growth will continue to accelerate. Do you think it will accelerate enough that it will make a dent in unemployment, that is, that we see the numbers of 300,000 jobs created a month, as opposed to just 100,000, which basically is treading water?

GREENSPAN: I'm not sure, but I don't think it's impossible by any means. There is a momentum building up which is really just beginning, and it's got a way to go.

There are certain critical issues here. First, we have to remember that the capital gains on 401(k)s are $600 billion. And as we saw when money was being evaporated in those particular accounts, people pulled back their consumption. They're now moving forward in a more positive direction.

Secondly, capital investment, which had been extremely depressed, is still depressed for real estate, but equipment is coming back in a fairly substantial way.

But most important of all is this incredible increase in the difficulties -- I should put it this way -- the increase in the lead times that it takes purchasing managers to get new materials for inventories. What that necessarily means is that they're going to have to build inventories to protect their production lines at an ever-increasing pace. And that is a self-reinforcing cycle.

So I think the particular area of the economy which people are not putting enough -- I should say -- enough focus on is how significant this rebound of inventories is going to be after such an extraordinarily dramatic decline that occurred through all of last year.

Remember, as of now, inventory change is zero, the level of inventories is at the absolutely low level, and all of the people who are in the business to see what the tightness of markets are, are saying effectively that there's a shortage of inventories out there and we're on the edge of a significant build-up.

TAPPER: As the -- you mentioned real estate. And I've heard a lot of economists talk about their fear of the -- the commercial real estate bubble popping. How concerned are you by that?

GREENSPAN: Well, I think it's already popped, in a sense. I mean, real estate prices generally are down almost 50 percent. And they've come back a little bit...

TAPPER: I mean the kind of crisis that we saw with the -- with the subprime housing and personal housing.

GREENSPAN: Yes. Yes, with prices already down and adjusted, if we were going to get severe secondary reactions, they would have likely -- would have occurred, and they would have occurred if it weren't for the fact that the rest of the economy is showing some degree of buoyancy.

TAPPER: Now, Dr. Summers didn't really answer the question, but -- but I was wondering your thoughts on whether or not we can expect, if there is accelerated job growth, whether or not you think there will be any dips in that, including into negative job growth, or if you think it's just going to be a straight line.

GREENSPAN: You mean month-by-month increases?

TAPPER: Yes, month-by-month.

GREENSPAN: I suspect it's month by month. I mean, it's -- I can -- you know, a statistical aberration possibly, but the momentum is very clearly there, and I doubt very much that we're going to run out of that momentum until very late in the year.

TAPPER: So no double-dip recession?

GREENSPAN: I think the odds of that have fallen very significantly in the last two months.

TAPPER: The president signed massive health care reform legislation into law a few weeks ago. You have expressed concern about the legislation, as it was making its way through the process, about whether or not it did enough to contain costs. What did you think about the final legislation? Does it contain costs enough?

GREENSPAN: Well, the CBO, incidentally, Congressional Budget Office, which is really a first-rate operation, says that it does. The problem is not their estimates, but the range of potential error in those estimates.

And when you're dealing with an economy in which debt is becoming -- federal debt is becoming ever increasingly a problem, it strikes me that when you're dealing with public policy and you're in a position where you have to ask yourself, "What happens if we are wrong?"

In other words, in the case now, where our buffer between our capacity to borrow and our actual debt is narrowing, for the first time, I think, in the American history, there's a question, supposing we are wrong on the cost estimates, and, indeed, they are actually much higher than the best estimates can generate, the consequences are very severe, whereas if they are too high, it's very easy to adjust.

So I think it's -- it's -- there's an issue over and above the question of what's the best cost estimate. There's a policy strategy here which I think requires us to lean in an ever more conservative area with respect to judging...

(CROSSTALK)

TAPPER: So it might have been too rosy, the projections, you're saying?

GREENSPAN: Possibly. I don't know that. But I do know that the probability that it might be is much higher than we would like.

TAPPER: You have said recently that if institutions are too big to fail, they're too big. Do you support the Volcker rule, which would limit some of the transactions that commercial banks can do?

GREENSPAN: Well, I think the point that he is making, that deposit funds which are subsidized should not be employed for speculative purposes, I would agree with. The problem basically with the Volcker rule is it's very difficult to apply in a general way, and I think that's why there's been considerable resistance to it, not the principle, but the issue of being able to segregate the types of transactions which are helping customers and those which are strictly proprietary. Until they do that, I think it's very difficult to implement.

TAPPER: You'll be testifying about the financial crisis on Wednesday before the Financial Crisis Inquiry Commission. When you testified before Congress in October, you said that you finally saw a flaw in -- in the way that you looked at markets, that markets cannot necessarily be trusted to completely police themselves.

But isn't it -- isn't it more than a flaw? Isn't it an indictment of Ayn Rand and the view that laissez-faire capitalism can be expected to function properly, that markets can be trusted to police themselves?

GREENSPAN: Not at all. I think that there is no alternative, if you want to have economic growth and higher standards of living, in a democratic society, to have competitive markets. And, indeed, if you merely look at the history since the Enlightenment of the 18th century, when all of those ideas surfaced and became applicable in public policy, we've had an explosion of economic growth, and especially in the developing countries, where hundreds of millions of people have been pulled out of poverty, of extreme poverty and starvation, basically because we have competitive markets.

So it's not the principle of competitive markets which really has no alternative which works. It is a strict application -- as I presented in a Brookings paper fairly recently on a somewhat technical area, the major mistake was assuming what the nature of risk would be. And the reason it was missed is we have had no experience of the type of risks that arose following the default of Lehman Brothers in September 2008.

That's the critical mistake. And I made it. Everybody that I know who works in this business made it. And it means that basically we have to work our way back to understanding what went on. And as I argue, what we need is far more required capital for financial institutions than we've had.

TAPPER: There's -- as you know, Michael Bury (ph), who is a hedge fund manager in California, who made a lot of money looking at the subprime mortgage situation in the previous years and -- and saying to himself, "This is crazy. It can't continue," and he bet against it and made a lot of money, you were asked about it last month, and you referred to him as a statistical illusion.

He -- he has an op-ed in today's New York Times in -- in which he questions whether or not you should be taking him more seriously. And he says, "Mr. Greenspan should use his substantial intellect and unsurpassed knowledge of government to ascertain and explain exactly how he and other officials missed the boat. If the mistakes were properly outlined, that might both inform Congress's efforts to improve financial regulation and help keep future Fed chairmen from making the same errors again."

Why are you not more interested in hearing what he has to say?

GREENSPAN: Well, on the contrary -- first of all, I was not referring to him specifically. There are three -- three -- three (ph) groups of people, those who got -- those who got it wrong about what the complexity was about to emerge in the -- that's the vast majority of people, myself included.

TAPPER: Right.

GREENSPAN: Then there's a group -- a relatively small, but not negligible group, who got it surely by luck. And then there's a very small group -- most of whom are my friends -- who got it right for the right reasons and that have done it time and time again.

I don't know Mr. Bury (ph). But he basically may very well be in that third group. I don't know that.

But the problem is, he in that article, which I read quickly this morning, is actually making the case that it's a very small group, because he says effectively that no one agreed with him. Well, he made his money -- properly, in my judgment, and I think very successfully -- by effectively selling subprimes short. Now, if nobody...

TAPPER: He was betting against subprime mortgages working.

GREENSPAN: Exactly. And if everybody agreed with him or a large proportion of people agreed with him, he wouldn't have been able to sell those contracts, the short contracts, so to speak, which worked their way through credit default swaps and technical jargon. There would be nobody to buy it, because they would agree with him.

So it required a very large proportion of the investing public, sophisticated investing public, to disagree with him. And I think -- I don't know whether or not he is in that extremely small group, which may -- may, in fact, be really exceptionally adroit at these things.

As I said a minute ago, I know four or five people who are really good. I don't know six, seven, eight or nine.

TAPPER: All right. Dr. Alan Greenspan, we'll have to leave it there. Thank you so much for coming...

GREENSPAN: My pleasure.

TAPPER: ... and talking to us today. The roundtable is next with George Will, Matthew Dowd, Karen Finney, and Robert Reich. And later, the Sunday funnies.

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FALLON: Hey, guys, baseball season starts next week, and President Obama is going to throw out the first pitch at the Nationals game. Meanwhile, Joe Biden will be on hand to make the first error.

(LAUGHTER)

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

(UNKNOWN): The Republican National Committee approved nearly $2,000 in expenses at this West Hollywood sex-themed nightclub...

(UNKNOWN): The one person who was not there was Michael Steele.

(UNKNOWN): There's people involved with really bad judgment. It's something that should not have happened. It's on Michael's watch.

ROVE: Somebody ought to lose their credit card, their RNC credit card. Pull that. Find that pervert and get his card.

(END VIDEO CLIP)

TAPPER: "Find that pervert and get his card," says Karl Rove. And we'll get to Michael Steele and the RNC in a second.

But first, we're going to start with jobs. We're going to talk to our roundtable, George Will, as always, Matthew Dowd, former Bush strategist, Robert Reich from the University of California, Berkeley -- that's a mouthful. I'm just going to say "Berkeley" from now on -- and former Democratic strategist -- or current Democratic strategist, former Democratic National Committee spokeswoman Karen Finney.

Thanks so much for joining us.

George, the president says he's encouraged by the job numbers. Are you?

WILL: He's easily encouraged. The economy began to grow nine months ago. The usual pattern since the Second World War is that a sharp downturn is followed by a sharp upturn, including a sharp upturn in hiring. It takes more than 100,000 jobs just to stay even in this country because of immigration and natural growth of the workforce.

So of the 162,000, subtract maybe 110,000 just to cover natural growth, then subtract 48,000 temporary census workers, and what you get is, nine months into a recovery, essentially no meaningful job creation. Furthermore, the average unemployment today is 31 weeks, much the highest since that record began to be kept in 1948. TAPPER: Matt, this is a -- it was positive news. It might not have been as positive as some would like or all of us would like, but it was positive news. Is it good politics for Democrats?

DOWD: Well, it was positive news. Obviously, job gains -- no matter how small or better job loses -- the problem is, the country doesn't believe that there's good news right now, that they have a total disapproval of the president on the economy, which is a really big problem he has going into the midterm elections, let alone going into 2012. They don't believe their own finances have recovered.

They don't see any private-sector jobs having gotten created, even though this was the first time that some private-sector jobs have gotten created. And the other political problem he has is, of all the 51 jurisdictions in the United States, the only jurisdiction that has actually gained jobs in a year is the District of Columbia. And in the public mind, that is not necessarily a good thing.

And so I think it's still a huge political problem for the Democrats. I don't think they have time for any real, meaningful economic growth to happen to change the public's view on confidence in the economy before the midterms. So I think it's still a huge albatross around the Democrats' neck.

TAPPER: Bob, Summers and Greenspan seemed to be rather bullish, but there are economists who feel like we still might be headed towards a double-dip recession, especially as stimulus money runs out. Are you concerned at all about that?

REICH: There is reason to be concerned, Jake, that as stimulus money runs out and also as the Fed naturally begins to tighten, because the Fed has got to reduce the money supply and raise interest rates at some point -- otherwise, there is going to be a fear of inflation out there -- that you don't have enough demand in the system to keep any kind of a recovery going.

And I agree with George on this. This is not a recovery yet. People are right now very scared, understandably, of getting their jobs back. And even when you have a full-fledged recovery of 2 million a year, think about how far behind we are. That's five years before we even get back to where we were before the Great Recession started.

TAPPER: And yet, Karen, you -- you feel like this is good news for Democrats as the midterm elections approach?

FINNEY: Well, I think it gives Democrats at least the starting point for a narrative that they can go to the American people and talk about job creation, the president can talk about tax cuts for small businesses towards hiring. We talk about the Hire America Act.

And I think one of the problems that the Republicans have had is they don't have a consistent narrative that they can talk about beyond the policies of George Bush as to what they want to do for the economy, moving it forward. So at least Democrats have something to hang their hat on. I agree that these numbers are, you know, cautiously optimistic and we need to see better growth, but at least -- it gives Democrats something to talk about heading into 2010 and some accomplishments to tout, whereas, again, I think all you're hearing from the GOP, it sounds a lot like what we already tried that didn't work.

TAPPER: But take a look at this number. We have these polls from Gallup that indicates that, for the first time in several years, Republicans actually lead Democrats when asked who in Congress would do a better job with the economy, Republicans leading Democrats for the first time in several years. So even if Republicans aren't making the arguments that you -- that you think would be compelling to the American people, the fact is, the voters seem to be turning towards them.

FINNEY: You know, it's interesting. I went and looked at the numbers from this period in 2006, when I was at the DNC, and actually, they were -- we were about even with Democrats and Republicans, and nobody at that point in time thought that Democrats were poised to take over control of the House and Senate.

I say that to say that there's a long time between now and November. A lot can happen. Certainly, I think it's a good thing that the president has been out on the stump talking about and trying to tout some of these accomplishments and trying to sell these programs. I think he didn't do that early enough, frankly, with the stimulus package, and that was a mistake that I think they've recognized.

So, again, I think there's a lot that can happen. We'll see.

DOWD: Well, I think -- here's the difficulty that the Democrats are in, I think, is the Republicans don't have to really have a proactive message in order to win elections in -- in this year.

TAPPER: (inaudible)

DOWD: All they have to be is not them, and that is a fine in the short term. In the long term, they definitely have to have a more proactive, more affirmative message.

The problem the president has -- has had is, since he's been in office, the economy has lost 4 million private-sector jobs. We are not going to gain back, as far as I know, which I would love for it to happen, that in any -- any distant future right now to gain that back, and so the Democrats who now have an unpopular health care package, that they have -- that now don't have time to sell before the election and probably want to get off of it as soon as possible, they have an economy where the public thinks they are not performing well on, the only interesting issue that the president seems to be doing well over the Republicans on is terrorism, which is actually a reverse from what it was four or five years, when the president, President Bush, was behind Democrats on the economy and ahead on terrorism. Now that the economy's the dominant issue, Democrats are behind.

REICH: And, look, the key point, I think -- and the Democrats are hoping for this -- is that, despite the high level of unemployment, which is almost inevitably going to be with us going into November and possibly also with us going into the general election, that the direction is correct and that the public is looking and will look more at the direction of the economy than at the absolute level of how bad it is.

We don't know. We don't have data, because we haven't been here before, as to whether that hypothesis is correct.

WILL: But economics, Bob, is always a science of single instances, that is, you're -- you only need economics as a science particularly urgently when you're in a situation you've never been in before. So we are at sea here.

So we look around for what we can predict. You've predicted one thing, which is interest rates will not be essentially zero forever, and when they change, they'll go up, and that has to be somewhat adverse to economic growth.

There's another thing about to happen, absolutely certain, in less than nine months, we have a huge tax increase hits the economy, as the Bush tax cuts expire, and that's not going to be helpful.

REICH: Well, that tax increase is only on the people who have only $250,000 or more in earnings. And let me just say, demand in the economy, where it comes from is the middle class, people who are earning anywhere between $40,000 and $90,000 a year. They have been hit extraordinarily hard. They will not get hit hard by a tax increase. Their medical bills will be lower. And hopefully, they will feel a little bit more confident.

WILL: Which is to say, most of those affected by the Bush tax cuts are going to still get the Bush tax cuts, is what you're saying.

REICH: No.

TAPPER: But if I could move on to one thing, I know one thing that they're worried about at the White House right now is this concept of hyper efficiency, that is, that the companies have shed jobs and they are learning how to function without these employees, which might mean even more prospect of a jobless economy. How concerned are you about that?

REICH: Jake, I'm very concerned. This is the long-term problem, and it's a problem for Democrats, Republicans, for Americans, for middle class. You see, as globalization has proceeded and as technological change has proceeded, many Americans without the right skills -- and most Americans, you know, they have college degrees -- most Americans have high school degrees, but not everybody has a college degree, nor should they -- but, you see, we don't have the skills that we need to keep up in a global economy.

And, therefore, when the dust settles, maybe people will have jobs, but they're not going to have very good jobs. They have priced themselves out of a global economy. And that is going to lead to even a wider gap between people at the top and average working Americans. WILL: Bob mentions globalization. One of the most fascinating developments in recent months was the announcement this week that in March General Motors sold more -- a lot more cars in China than it did in the United States.

REICH: George, that's what the big companies are doing. Big companies are doing well globally. They're not doing well in the United States. They're hiring like mad abroad. They're not hiring in the United States. And we are beginning to see now something that some of us predicted years ago, and that is a really decoupling of the strategies of big companies, big global companies headquartered in the United States, from the American economy.

TAPPER: There's one other thing I wanted to ask before we -- we take a turn to Michael Steele's job, which seems to be at issue, and that is, I could almost hear your teeth gnashing in the Green Room when I was interviewing Summers and Greenspan on the subject of financial regulatory reform.

REICH: Well, look, the fact of the matter is that Alan Greenspan and Larry Summers and Bob Rubin all, if any trio were responsible for deregulating this financial economy, whether you're talking about getting rid of the Glass-Steagall Act that separated commercial banking from investment banking, or you're talking about saying to Brooksley Born at the Commodity Futures Trading Commission, "No, you may not regulate derivatives," it's those three.

TAPPER: But those -- and those two moves the Obama administration is looking to undo. They want to regulate some derivatives, and they want to put a wall between commercial and investment banking activities, not to the degree that existed before.

REICH: This is my -- my worry. Everybody is enthusiastic -- or everybody who says that they're looking at financial reform is enthusiastic about doing something about the too-big-to-fail problem. But when it comes right down to it, if you look at the details, there is nothing in the hopper right now that is going to fundamentally change the situation so that, 5 or 10 years from now, you don't have a few big banks making wild bets with other people's money and then expecting to be bailed out by the federal government.

TAPPER: OK. I want to move on to the Republican National Committee and Michael Steele's job. Tony Perkins, who is the head of the conservative Family Research Council, is now telling Republicans and conservatives, "Don't give money to the RNC." Here he is.

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PERKINS: What appears to be excessive spending at a time of economic hardship for most of the country, at a time when the Republicans are complaining about the spending in Washington by Democrats, look, if you can't run a party, you certainly can't run a country.

(END VIDEO CLIP)

TAPPER: George, is this the right job for Michael Steele?

WILL: No. He has fundamentally misconstrued his job, which is to be the face and the ideological spokesman for the Republican Party. There are a lot of people who do that. The best party chairmen are like major league umpires. If at the end of the game they go back into the dressing room and no one has noticed them, they've done their job brilliantly. They strive for anonymous perfection, and that should be the role of the party chairmen.

The best Republican Party chairman, Ray Bliss of Ohio, who rebuilt the party after the Goldwater meltdown, Bill Brock, former senator from Tennessee, who built the party up on the eve of the Reagan triumph, they were perfectly anonymous. And I'm not sure that this man has understood that.

DOWD: You know, obviously, I'm not a rocket scientist, but when you have lesbian bondage strip club associated with your name, it's never a good thing for anybody...

TAPPER: In politics.

DOWD: ... unless you're employed at the strip club. You know, the only difference between Democratic officials at a strip club and Republican officials at a strip club is Democratic officials say hi to each other.

I think the problem is hypocrisy, is purely hypocrisy. It's not the strip club and all that. It's Republicans go out there and talk about fiscal responsibility and they talk about family values, and they have a party leader and party officials who go to a strip club, who are involved in this process, that say that their private actions or their actions of donors' money does not match what their message is, and that's the problem.

TAPPER: But, Karen, in addition this problem, tell our viewers what American Crossroads is.

FINNEY: So, American Crossroads is an organization that is being formed by, you know, Republican Party stalwarts like Karl Rove, Jo Ann Davidson, a former co-chair of the RNC, Ed Gillespie, among others, essentially with the goal of raising money to support candidates going into the next election.

TAPPER: It's a shadow RNC.

FINNEY: Exactly. And so when you have this -- and I -- you know, this is really not about the strip club expenditures. This is about a chairman who doesn't understand his job. And when you are the party out of power, your job is to raise money, to win elections, and build the party infrastructure.

On the one hand, when you talk to folks at some of the other Republican committees, sure, will the money help from the shadow RNC? Yes. But you need a strong RNC during a midterm election to do the ground game and to do GOTV activities. And it is an embarrassment for the Republican Party to have to talk about an expenditure. It's not just about going to strip clubs. It's about, when Michael Steele walks into a room with a donor and asks for a big check, and that donor is looking at an FEC report that shows travel on jets and travel in limousines, what am I giving you the money for?

REICH: Well, you know, there's obviously a kind of an off- message problem here for the Republicans. And, Matt, when you talk about hypocrisy, yes, but hypocrisy is not exactly something new in this town. I think there's -- there's a larger issue...

DOWD: Which is why this town's ratings are so bad.

REICH: But there's -- I wanted to get to that, because I think that voters -- and it's not just Tea Parties -- voters all over this country right now are saying, as they've said before -- but I think with a greater sense of commitment and intent right now -- they're saying, the establishment politicians just don't get it. They don't know where we are. They don't understand what we're suffering with regard to unemployment or the economy. They don't understand fiscal responsibility. They don't -- they don't get any of the -- anything that we are talking about in our families and among our friends.

And this is bad. It's bad for Democrats. It's also bad for Republicans.

DOWD: Well, I agree. I think the -- I mean, the big...

REICH: Incumbents. It's bad for incumbents.

DOWD: The big problem today is a total lack of public trust the public has of trust in Washington, whether it's Democrat or Republican. This is not a partisan problem, is when you have corrupt scandals with Charlie Rangel and all of that, just who have come up -- Republican scandals and new Republican scandals, is which is why the Congress as a whole is rated at the lowest point it's ever been rated. President Obama's numbers are dropping. There is a lack (ph) of total trust in the institution of politics in Washington.

REICH: And Washington is just totally out of -- out of -- out of keeping with America.

FINNEY: Of course it is. But there is a deeper problem that the RNC has. Let's be honest. Any time when you have the first African- American president and the first African-American chairman of the party of a party with a very dwindling base, you may be able to win race by race with the Tea Parties, but you cannot win a national election if you can't bring in a broader coalition of voters.

Privately, people have admitted that -- and, you know, this is not the first time Michael Steele has been an embarrassment or has misappropriated funds or not done what he's supposed to be doing. Privately, people have admitted that part of the reason, in addition to the technical aspects of two-thirds vote to vote him out, he's an African-American, and you have to be very careful about, what signal does that send, if you were to remove an African-American, again, at a time when the base of your party is dwindling?

That is a longer-term problem than simply going to a strip club or spending money on jets.

DOWD: I'm not going to argue against the liabilities that the Republicans have and their lack of a real strategy and their lack of a real program. The interesting thing...

FINNEY: Or message.

DOWD: The interesting thing to me, granted all those things? They're going to pick up 25-plus seats in the House this year. They're going to probably pick up five or six or seven seats in the U.S. Senate. They're going to pick up governors races.

As of right now, Barack Obama could not get re-elected, if the election was held today, based on his approval ratings and based on history. And so Republicans have all those problems? Democrats have a bigger set of problems, because they own the levers -- they own the levers of power in a town in a time when people are fed up with it.

REICH: I don't -- I don't think that's -- that's right. If -- if the Republicans have an alternative, whether it be health care or the economy, and Americans really understood that there was an alternative, and the Republicans were articulate about advancing that alternative, maybe you would be right, but there -- we've -- I don't remember a Republican Party that was just as consistently negative about everything.

The public knows that there are deep problems that have to be faced, and the Republicans are...

(CROSSTALK)

TAPPER: ... you're shaking your head that the Republican Party -- you don't buy that they are perceived as negative about everything?

WILL: I would set up Congressman Paul Ryan of Wisconsin's roadmap for tax reform, job growth, and entitlement reform...

TAPPER: You embrace that more than John Boehner does, though...

WILL: Well, that -- that could well be. I'm right, and he's wrong. But...

(LAUGHTER)

(CROSSTALK)

WILL: ... against all the so-called ideas, these recycled Great Society, New Deal ideas, of which my friend, Bob, is so enamored.

TAPPER: I just want to change to one topic, and it's a -- it's a -- it's a, I will admit, a rather uncomfortable topic on this Easter day, but we have two Catholic roundtablers here from opposing points of view politically, and I want to talk about the fact that the Vatican is having some serious trouble right now on this Easter Sunday. A cardinal today diminished the criticism -- disputed the criticism against Pope -- the pope, saying it was gossip.

Matt and Karen, I'd like to get your thoughts on this. Karen, where is the disconnect between Rome and American Catholics in the pews today?

FINNEY: Yes. You know, Rome is doing what it has done for centuries, and that is, it's protecting itself. And I think the disconnect is that, in Rome, the Vatican is treating this as a crisis for the institution and not a crisis for the faithful.

You know, the mission of the church is to serve the faithful and to serve the innocent, not to leave children to be preyed upon by sexual predators, and that is essentially what is happening. That's what happened in the United States. Now we're learning that it is a much bigger problem.

And so I think this is a very -- I will be going to church after the show today, and I go to church with a very heavy heart. This is a real crisis of faith for many of us who are questioning, what is the mission of the church if we can't protect children from within our midst?

For American Catholics, look, the Catholic Church in America has a very different political reality to deal with than the Vatican does, and so what I think you've seen this past week in some of their statements is, they're kind of trying to figure out how to deal with their political reality in the United States, recognizing that they can't quite totally come out against the pope in Rome.

You know, the Catholic Church in this country has wielded a lot of power. And now that American Catholics are having this crisis of faith, that is a real challenge to the power of the church.

TAPPER: And, Matt, you and I were talking about some poll numbers about the pope and the fact that, actually, his unfavorables are going up and undecideds are increasing.

DOWD: Yes, his numbers today (inaudible) approval of how he's handled this, which in my mind, if you're a P.R. person, he's -- they've handled it worse than Toyota handled their recall situation, much worse than Toyota handled the recall situation, and farther worse characteristics.

You know, I -- I -- I was an altar boy, grew up in Catholic schools, went to Catholic college, am a Catholic. To me is we -- there is a ton of great, wonderful priests and a ton of great, wonderful bishops. And I think the pope in his own way has tried to handle this in a forthright way, more so than John Paul did in -- in what happened on.

The problem is -- and I agree with Karen -- the problem is, it's an institutional problem. It's an institution that, in my -- my view, has grown so big and so unwieldy and now only feeds itself, only serves to feed its own self and has forgot about the flock, the billion people out there that are Catholics.

What Christ's actual mission was 2,000 years ago, which wasn't to create an institution that is based in Rome, that serves -- that is only there to serve the priests or serve the bishops, but is to serve the flock. So at a time of Easter, I believe that we have to have some serious renewal of that institution, in many ways like it happened 700, 800 years ago during the Protestant Reformation, because today, it's an entirely huge institutional problem.

TAPPER: We have to leave it there, unfortunately. I know the roundtable will continue talking in the Green Room. And you can watch that on abcnews.com. And you can get political updates all week long by signing up for our newsletter also on abc.com.

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