'This Week' Transcript: Geithner

Plus, NJ Governor Chris Christie and the roundtable

July 25, 2010 —

TAPPER: Secretary Geithner thanks for joining us. Good to see you. So, the administration has had a number of successes after big battles, stimulus, health care legislation, new rules for Wall Street, but you have a big battle coming when it comes to the Bush tax cuts. If they remain in place, as Republicans want, it will cost three trillion dollars every ten years. The administration has said it wants to keep the ones for people who make under $200,000 a year, individuals and $250,000 for couples. That will cost $2.5 trillion over 10 years. Ben Bernanke the chairman of the Federal Reserve said that with the economic outlook unusually uncertain, extending the Bush tax cuts would have a stimulative effect on the economy. Is he right? GEITHNER: I don't think it should be a battle, Jake. You know, what the President's proposing to do is to leave in place, to extend tax cuts that go to more than 95 percent of working Americans and to leave in place tax cuts that are very important to incent businesses to hire new pe -- new employees and to invest in expanding output. We think that's a -- the -- it's a very strong package. We think it's the right package. We think it's fair. We think it's responsible. Now, we also think it's responsible to let the tax cuts expire that just go to 2 percent to 3 percent of Americans, the highest earning Americans. We think that's the responsible thing to do because we need to make sure we can show the world that they're willing as a country now to start to make some progress bringing down our long -- our long-term deficits. TAPPER: Don't you think it will slow economic growth? GEITHNER: No. Just letting those tax cuts that only go to 2 percent to 3 percent of Americans, the highest earning Americans in the country expire. I do not believe it will have a negative effect on growth. TAPPER: This package that you're talking about pushing in Congress to -- to save the Bush tax cuts for people under $200,000 individuals and 250 for couples -- GEITHNER: And in fact, we go beyond that. Because you know, we're proposing to extend the make or pay tax cut which also goes to 95 percent of working Americans. And a set of very important business tax cuts targeted for small businesses themselves, expensing, zero capital gains rate for investment in small businesses. These things, we think, are very helpful, very powerful. TAPPER: And when are you talking about pushing that into Congress? GEITHNER: Congress is on the verge of what we hope will be enactment of a very strong package of tax measures for small businesses and ways to help them get credit so they can expand. TAPPER: So, before the election? GEITHNER: Oh, absolutely. TAPPER: A number of Senate democrats, moderate Senate democrats have said that they oppose repealing or allowing to expire the Bush tax cuts on the wealthiest Americans that they think that would be harmful to growth. Are you guys going to have the votes to get through the package you want which is focused more on middle and lower income America? GEITHNER: Oh absolutely. I believe we will. TAPPER: Some in the administration and internal discussions are talking about maybe just keeping all the Bush tax cuts for a year or two. Those aren't -- that's not going to happen? GEITHNER: I don't believe it should and I don't believe it will. Again, because what the president's proposed is to make sure we're leaving them in place for the people that need the most and can make the most difference in helping make sure this economy comes back. That we heal the damage caused by this crisis. TAPPER: Job creation has not gone as well as you hoped. What more can you do? I know there's this small business lending initiative. What more can you do given the lack of appetite on Capitol Hill for any spending programs? Any more stimulus? GEITHNER: Well you know, the President's proposed a very strong package of help for small businesses which you just referred to. He'd support giving more support to states so they can keep teachers in the classroom. TAPPER: Fifty billion dollars in emergency spending but the Congress has not acted on that. GEITHNER: They haven't yet, but we can (inaudible) case for doing it. They're going to, we're going to keep at that. But right now, the best thing the government can do in addition to those things, is help create the conditions for the private sector to start to invest in hiring again. Now, we've seen six months of positive job growth by the private sector. That's pretty good. TAPPER: By the private sector. GEITHNER: Pretty good this early in a recession. TAPPER: Although you count in the public sector with the layoffs and the census jobs. GEITHNER: But only because of census. But you know, what matters is -- is the private sector starting to hire people, add back hours and that's what's critical. And you're seeing that happen now. Now we want it -- we want to see it happen at a faster pace. But I think most people understand that you know, this was a deep crisis. The scars ran very deep. Devastating damage. It's going to take time to repair that damage, take time to grow out of this. But we're making progress. TAPPER: In 2009 when President Obama talked about unemployment insurance extensions he talked about how it was paid for. This time, it was not paid for, the $34 billion in unemployment insurance extensions became added to the national debt. Republicans on Capitol Hill argued that they wanted to pay for it and they supported it but they just wanted it offset by spending cuts. Given the fact that we're going to be -- we're going to have unemployment for the foreseeable future, high unemployment. Isn't it the fiscally responsible thing to do to not treat this as emergency spending but treat this as something we know is coming down the pike so we're not just laying this burden on our future generations? GEITHNER: I don't think so. In a crisis that was this bad and a recession that was that deep. With this amount of lasting damage, scars from recovery, it's appropriate to treat these things as emergencies.

TAPPER: Many of the details on the Wall Street Reform Bill that President Obama just signed will be determined by regulators. In fact, the bill also gives more power to some regulators, some of the same ones who failed us the last time around. Why should we be confident that they're going to get it right either with the rule making or next time there's a crisis? GEITHNER: Excellent question. But actually, the theory, the basic strategy in this reform bill does not rest on the wisdom of regulators. It does two very important things, though. It'll help consumers make better choices with better disclosure, much more clarity about the terms of the credit card contract or mortgage loan so they get better protection against the risk of being taken advantage of. But it also gives authority we did not have to put in place strong constraints on risk taking on all the nation's largest institutions. That authority did not exist before and it was central to what caused the near collapse of the financial system. TAPPER: Will these powers have allowed you, if had been Secretary of Treasury at the time or your predecessor Hank Paulsen to have staved off the financial crisis? GEITHNER: I don't think there's any reform bill, no law in any country that can prevent all financial crises. But if we had had this authority as a country, it -- we would have been able to limit risk taking and deal with the trauma that came from the stakes these firms made much more easily. It would have caused much less damage. It would have been much less severe, caused much less damage to the basic fortunes Americans and businesses across the country and to our -- and our long term fiscal position. TAPPER: You eluded to the Consumer Financial Protection Bureau that was created. Many liberals and labor unions and consumer groups say there's one person they want for that job. Elizabeth Warren. The woman who thought it up. Do you support that idea? GEITHNER: She is a enormously effective advocate for reform. Probably the most effective advocate for reform for consumers for consumer protection in the country. She has huge credibility and she played a decisive role in helping make the public case for reform and she was early on this, way ahead of everybody else. TAPPER: 2007 she wrote that -- that -- she came up with that idea. GEITHNER: And even before that she was pointing out to people the risks of what's happening in the housing market and credit market. So she has enormous credibility and she'd be an excellent leader of that institution. But that's a decision the President's going to make. TAPPER: Some in the White House say that -- that you've had concerns about her appointment because she she's been a sharp critic of you, she's been a sharp critic of Treasury Department policies. Do you have concerns? GEITHNER: I don't have concerns and I should say in that context that she has been playing a very important role in providing oversight over the programs we put in place to break the back of this financial crisis. You know, put out this financial fire. TAPPER: Ken Feinberg issued a report including that U.S. banks paid out $1.6 billion in unwanted -- unwarranted bonuses to top earners during the height of the meltdown. Seventeen banks made these payouts after getting TARP funds, after getting bailout funds. GEITHNER: It's a -- you know, it really is an incredible thing. And that's what he reminded of which is in early '09, on the basis of performance in '08, in the middle of the worst financial crisis since the Great Depression, firms that had taken support from the government because they could not manage without it still paid out substantial sums of money to people who made the decisions that caused the crisis. TAPPER: Is there nothing that can be done about this? GEITHNER: Well, you know, he spoke to that earlier this week. What he did do, though, and this was enormously effective was he went and used the authority he had to change behavior going forward. So you didn't have taxpayers' money after he had that authority go to enrich the people that had brought the system to the edge of collapse. Now, what he's also done and what our responsibility is to make sure these firms can never again go back to paying their executives to take risks that could imperil the stability of the country as a whole, the economy as a whole. So, he's done a great job. Very tough judgments. Limited authority in some cases, but he uses authority very well. TAPPER: Why is it that U.S. automakers when they received bailout funds had to take serious steps to take -- what are called "haircuts"? Salary reductions, layoffs. And banks didn't. Banks -- I mean, you had Ken Feinberg supervising their salaries as long as they were receiving TARP money, but then they paid the money back and did whatever they wanted. How come banks didn't have to do that? GEITHNER: Great question. And that's why we have financial reform. Because we had for the country as a whole, a process of bankruptcy for dealing with failure. We did not have a similar process that could deal with the failure of large financial institutions. That was a tragic failure for the country because what it meant is when firms like AIG or Lehman or Bear Stearns manage themselves to the point where they could not survive without the government, we had no tools like bankruptcy to force them to restructure and protect the taxpayer from losses. But what this financial reform will do is to give us that authority. A type of bankruptcy regime that we can use for these large institutions because, again, this is a basic commitment in the bill. Banks should be paying for the cost of bank failures. We don't want the taxpayers paying for the cost of bank failures. And we should have the ability to dismember them, put them out of existence, put them out of their misery without it causing catastrophic damage to the economy as a whole. TAPPER: The Treasury Department issued a currency report and concluded that China was not manipulating its currency. Very few legislators on Capitol Hill seem to agree with that report, and I'm wondering if you agree with it. GEITHNER: Well, what China did, and this is the important thing, after a long period of pegging their currency to the dollar, holding their currency constant against the dollar, they have now started to allow it to move upward again to appreciate, to strengthen their response to market forces. Now, of course, they just started that process. It's just the beginning, and what matters to us and to all of China's trading partners is that they let that currency appreciate, as they did the last time they allowed us to move. What matters to us is how fast and how far they let it go. TAPPER: But you stand by the idea, stand by the assertion, that China is not manipulating its currency? GEITHNER: Oh, absolutely. But again, they begin the process of letting it start to reflect market forces. That's very good for China. It's very good for the United States. TAPPER: Lastly, this has been an odd week for the Obama administration -- not necessarily for the Treasury Department, but for the Obama administration, given the whole kerfuffle with Shirley Sherrod and the Agriculture Department. President Obama has said this is a teaching moment for him and his administration. Secretary Vilsack said something similar. Did you learn anything from watching your colleagues go through this? GEITHNER: Well, as the president said, I think you saw a general rush to judgment everywhere -- in the press and outside the press. And I think I agree with it -- it's something that we should all take some caution from and look at these things carefully. But he spoke to that, I thought, well earlier this week. TAPPER: Secretary Geithner, thanks so much for joining us. GEITHNER: Thanks, Jake.

TAPPER: And joining me now is someone who also knows from budget challenges, New Jersey's Republican governor, Chris Christie. Governor, thank you so much. Welcome to "This Week."

CHRISTIE: I'm happy to be here.

TAPPER: So, Governor, your victory last November in the very blue state of New Jersey was heralded by Republicans nationally, seen as a blueprint for their victories. Now, a lot of Republicans who wanted you to win and admired your campaign said that you won mainly by criticizing incumbent Democratic Governor Corzine, not necessarily by a specific, detailed agenda.

And I'm wondering if, first of all, you agree with that. And, second of all, how do you see your victory in the context of what Republicans can do this November?

CHRISTIE: Well, first off, Jake, I think what we did in New Jersey last year was say very specifically what direction we wanted to take the state in. We said we wanted to have less spending, smaller government, lower taxes, and commonsense regulation that was going to help to grow private-sector jobs.

And so I didn't go line item by line item through the budget during a campaign, and I didn't think it was the right thing to do.

Now, in terms of what it tells us going forward, I think Republicans across the country need to get back to our brand, and I think that is the Republican brand. It's why I became a Republican: less government, lower taxes, less spending, and commonsense regulation that grows private-sector jobs.

And so I think if my win tells anything, it means if we get back to basics as Republicans, then we speak to some of the concerns people have in New Jersey and across the country.

TAPPER: You know, the biggest item on your agenda so far has been dealing with the budget and the huge deficit in New Jersey. Here you are on CNBC.

(BEGIN VIDEO CLIP)

CHRISTIE: We passed a budget that cuts $11 billion from our state's budget, balances it without any new tax increases on the people of the state of New Jersey.

(END VIDEO CLIP) TAPPER: Now, Patrick Murray, director of polling at Monmouth University, says, quote, "That's a nice talking point, but it's absolutely untrue. There are a lot of legal obligations that the state has that the governor just simply ignored." And the Star-Ledger reported, "Budget analysts say the $11 billion deficit was closed largely by avoiding massive costs. The budget skipped a $3.1 billion payment to the pension fund, continuing a decade-long pattern Christie had criticized, and did not pay $1.7 billion to schools under the state's formula for education aid."

So these billions that you're not funding, are you doing this just by executive fiat? How does this work? Because they're legal obligations, right?

CHRISTIE: No, listen, the legislature passed this budget. The budget I presented on March 16th has $11 billion in less spending than was projected to be done through the Corzine administration.

And so Patrick Murray is a pollster, and he's OK as a pollster, but he's not going to be all that great as a governor, because what we did here was we took $1.7 billion less in education funding. Well, a billion of that was federal stimulus money that had been spent in one year by the Corzine administration, and we were left with $1 billion hole. Really what we did was we reduced it by about $820 million in educational spending.

Across the board, Jake, we had to reduce spending. Every department of state government was cut. And so there are going to be some cuts you make you like and some that you like less, but when you have an $11 billion hole to fill, you have to fill it.

Finally, on pensions, I wasn't going to put $3 billion into a failing pension system. We need pension reform. I passed some already for new hires in March, and now this fall we're going to go after current employees and pension reform and health benefit reform because we're going broke.

TAPPER: Now, one -- in that clip, you said that there were no new tax increases on people of the state of New Jersey, but also your budget did not fund $1 billion in direct property tax rebates, the homestead rebate. That means that people's property taxes are going to go up.

CHRISTIE: Well, no, what we did, Jake, was we did a couple of things. First, we changed it from a property tax rebate program to a direct credit. We spent about $20 million a year in processing these checks and borrowing the money to send out to people. We've eliminated that.

And what we did was we skipped three-quarters of that payment in the current fiscal year as part of the shared sacrifice that everybody was going to have to make. I wasn't going to cut just programs for the vulnerable; I wasn't going to cut just programs for the rich, but programs for the middle class. Everything had to be cut.

But that program will be back as a direct tax credit in the fourth quarter of fiscal '11.

TAPPER: Now, that shared sacrifice -- I mean, is that not a tax increase, even if it's a -- I mean, if you're -- if you're taking away a tax rebate, even temporarily, that's a tax increase, isn't it?

CHRISTIE: No, I don't -- I don't see it that way. And in addition, what we did was we're giving the tools now to municipalities with a 2 percent property tax cap that we passed this July by me calling the legislature back into special session and with the tools that we're going to be passing this fall for them to cut spending even more at the municipal level so that people are not going to see a huge increase over the course of the next four years in their property taxes at all.

TAPPER: OK, there's been a lot of tension between you and teachers, as you've been wielding your budget ax. Here's one example from a recent town hall meeting.

(BEGIN VIDEO CLIP)

(UNKNOWN): You're not compensating me for my education and you're not compensating me for my experience. That's...

CHRISTIE: Well, you know what? Then you don't have to do it.

(UNKNOWN): Teachers do it because they love it. That's the only reason I do it.

CHRISTIE: That's good. Well, then -- well, and you -- and, listen, and teachers go into knowing what the pay scale is.

(END VIDEO CLIP)

TAPPER: I know you said your issue is with teachers' unions and not with individual teachers, but what do you say to residents of your state who say that they like your stance on taking on the teachers' unions, but a clip like that makes it seems like you don't really respect the teaching profession.

CHRISTIE: Well, I do respect the teaching profession. I'm a product of the public schools in the state of New Jersey, and I care deeply about our public education.

But here's what we can't have any longer: We can't have one sector of our society sheltered from the ravages of the recession at the cost to the people who have been hurt by the recession the most.

For instance, the building trade unions in our state, they have unemployment at 35 percent to 50 percent. They're getting no raises. They're getting no benefits any longer, yet their property taxes continue to go up to pay for 4 percent and 5 percent salary increases demanded by the teachers' unions in a 0 percent inflation world and that most of the teachers in New Jersey, because of their unions, pay nothing towards their health benefits from the day they're hired until the day they die.

Now, I have to tell you, Jake, we can't have one set of rules for one small sector -- the public sector unions -- and a different set of rules for everyone who's being hurt by this recession and say that those people are being hurt the most by the recession. By the way, you pay for this special treatment.

I mean, now, that may be tough talk to people, and it's direct, but candidly, that's what we have to do if we want to get budgets under control in New Jersey and around the country.

TAPPER: You're -- you've been known in the statehouse and nationally for a blunt style. Here's an example of that.

(BEGIN VIDEO CLIP)

CHRISTIE: Like it or not, you guys are stuck with me for four years, and I'm going to say things directly. When you ask me questions, I'm going to answer them directly, straightly, bluntly, and nobody in New Jersey is going to have to wonder where I am on an issue.

(END VIDEO CLIP)

TAPPER: That's a high bar, so let's do it. Directly, straightly, bluntly, should New Jersey join the lawsuit that other states have filed against the Obama administration over the individual mandate in the health care reform bill?

CHRISTIE: I have both my attorney general and my commissioner of health studying two things: first, what are the chances of succeeding in the lawsuit? Because with limited resources in New Jersey, I'm not going to throw good money after bad. And, secondly, what's the effect of this 2,000-page bill going to be on the people of New Jersey? When I get answers back from them, I'll make a decision.

TAPPER: What's your impulse?

CHRISTIE: I don't have an impulse. I'm waiting to get briefed on it.

TAPPER: Immigration reform. You've said this issue is too important to demagogue. Who is demagoguing in the Senate right now? And what is the solution to immigration reform?

CHRISTIE: Well, first of all, on demagoguing, I wasn't talking about anything that's going on now. That's a 2-year-old quote, and there were some things going on in New Jersey at the time while I was U.S. attorney that I thought was demagoguery, and I called it that.

Listen, this issue is a federal issue that should be handled by the feds and should be fixed finally. As a former United States attorney, I had to deal with these issues for seven years, and we simply didn't have the resources to deal with them effectively.

So the president and the Congress have to step up to the plate, they have to secure our borders, and they have to put forward a commonsense path to citizenship for people.

And until they do that, states are going to struggle all over the country with this problem, and so is federal law enforcement, who doesn't have the resources to do it effectively.

TAPPER: Is the Republican Party in Congress been a help or hindrance to that cause for immigration reform?

CHRISTIE: I think it depends on which Republican you're talking about. I don't think the party has had a generalized stance. I think there's been, you know, folks who have been all over the map on this issue. And, candidly, I don't think there's one general Republican position.

TAPPER: Well, there are Democrats offering a bill, and they can't -- they can't get any Republicans to join them.

CHRISTIE: Well, listen, the fact of the matter is that they have to find a way to build consensus. And I think that's what the president said he wanted to do when he came to town, and I think that's the challenge for those who are in the majority: find a way to build consensus.

That's what I've been doing in New Jersey, Jake. We have a Democratic legislature. I've passed a budget with those $11 billion in cuts with a Democratic legislature, a property tax cap with a Democratic legislature, pension reforms with a Democratic legislature.

If you want to lead and build consensus, you can, and it's on the obligation of those people in charge to build consensus.

TAPPER: Two more quick questions. One, the stimulus bill. Net positive for New Jersey or negative?

CHRISTIE: I think short-term positive, and we're now feeling the negative.

TAPPER: Lastly, I know you like to talk about New Jersey's cultural icons. You prefer to talk about Springsteen, but the New York Times today has this profile of Snooki from "Jersey Shore."

CHRISTIE: Sure.

TAPPER: MTV's "Jersey Shore," positive for New Jersey or negative?

CHRISTIE: Negative for New Jersey, I mean, because it -- what it does is it takes a bunch of New Yorkers, who are -- most of the people on "Jersey Shore" are New Yorkers -- takes a bunch of New Yorkers, drops them at the Jersey shore, and tries to make America feel like this is New Jersey.

I could tell people, they want to know what New Jersey really is? I welcome them to come to New Jersey any time. The Jersey shore is a beautiful place, and it's a place that everybody should come on vacation this summer. We've got another six weeks or so of summer left. Come to New Jersey.

TAPPER: Governor Christie, thanks so much for -- for sharing your views.

CHRISTIE: Thank you, Jake.

TAPPER: The roundtable is next with Sam Donaldson, Cokie Roberts, Donna Brazile, and Stephen Hayes. And later, the Sunday funnies.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

O'REILLY: Department of Agriculture official Shirley Sherrod was caught on tape saying something very disturbing. Ms. Sherrod must resign immediately.

SHERROD: I was faced with having to help a white person save their land, so I didn't give him the full force of what I could do.

(UNKNOWN): The full speech has been released by the NAACP, and it backs up Ms. Sherrod's version.

TAPPER: Apparently she's watching this briefing, Shirley Sherrod, on CNN right now. Is there anything you want to say to her?

GIBBS: On behalf of the administration, I offer our apologies.

VILSACK: I asked for Shirley's forgiveness, and she was gracious enough to extend it to me.

(UNKNOWN): He jumped the gun.

SHERROD: To have people think that I was a racist really, really hurt.

(END VIDEO CLIP)

TAPPER: L'affaire Sherrod, one of the many topics we'll talk about on our roundtable today with Stephen Hayes from the Weekly Standard and Fox News Channel, Donna Brazile, the Democratic strategist and our dear friend, and ABC News' own Sam Donaldson, and, of course, Cokie Roberts.

Thanks, all of you, for being here.

We'll get to Sherrod in a second, but first I just want to talk a little bit about the Geithner interview. Secretary Geithner said he hopes there isn't going to be much of a fight over trying to keep the tax cuts for the lower income, under $200,000, $250,000 for a family, but repeal them or let them expire for wealthier Americans. Is there going to be a fight?

HAYES: Yes, hope will only take you so far. I think there will be a fight, and I think one of the main constituencies in the fight is going to be moderate Democrats, as you pointed out in your questioning of him.

I think you're going to see moderate Democrats who walk back from the administration's eagerness to see this tax hike on what they're calling the wealthiest Americans.

TAPPER: Donna?

BRAZILE: The 2011 budget anticipates that we can close the deficit largely by allowing the Bush tax cuts to expire. I think the president should not get into the argument should he, should he not, but rather to present a series of -- a new tax package. Don't call it Bush tax cuts, but a new tax package that is aimed toward the middle class, towards small businesses, that will close tax loopholes, and to ensure that the -- whatever package we put forward is fiscally prudent, it's paid for, and that it helps spur economic growth.

TAPPER: Sam, where do you think this is going?

DONALDSON: Well, of course, they should continue those tax cuts for 95 percent, as Secretary Geithner said. And as far as the wealthy are concerned to go from 35 percent as the top rate before the deductions to 39 percent is not going to kill them. It really won't. They're going to have something to eat the next day.

But here's my proposal. There is a point...

TAPPER: A proposal from Sam Donaldson.

DONALDSON: Here's my proposal.

(UNKNOWN): I like that.

DONALDSON: There is a point that at this moment perhaps we should continue to extend the tax cuts across the board, but put in a trigger. When our national product gets better, when our unemployment gets better, use some other indexes. Then the trigger automatically raises it for the wealthy back to 39 percent.

ROBERTS: Triggers never work. We've put in triggers -- Congress puts in triggers all the time. It's basically fig leaves, and then they don't -- they don't ever do it.

DONALDSON: The reason it doesn't work, Cokie, is that Congress doesn't follow through.

ROBERTS: That's my point.

DONALDSON: I don't think there's a chance that Republicans would agree with my modest suggestion.

(CROSSTALK)

ROBERTS: ... look, it's obviously not just an economic question. It's a political question. And -- and who gets to frame it? Do the Democrats get to say the Republicans claim that they're against the deficit, but they want to keep in all these tax cuts for those really rich people, including those Wall Street bankers who got those huge bonuses, or do the Republicans say, look, here are Democrats going at you again, raising your taxes just so they can -- just so they can raise that spending, because they want the government to take over every -- every part of American life?

And I think that's a lot of what this debate will be framed around and what this election will be framed around.

TAPPER: And this debate comes as Ben Bernanke, the Fed chair, is calling the economic outlook unusually uncertain, which is chilling words for some people.

ROBERTS: Including the market. I mean, he said those words and 200 points down.

DONALDSON: The market is beginning to start to levitate again, maybe unwisely, but Europe has produced better numbers just this past week. The earnings season looks really good for some of the big companies, not just the banks, but some of the companies, Caterpillar, some of the people who make things. I think we're going to come out of it.

HAYES: But the numbers are mixed. I mean, that's the rosy scenario.

(CROSSTALK)

HAYES: The numbers are mixed, and there are plenty of numbers that are pointing in the other direction. I think if you look at the big picture, the question I think facing -- facing sort of everybody in Washington right now with respect to the tax cuts, one of the things that surprised me most about your interview with Tim Geithner was that he said raising taxes on the wealthiest Americans won't have a negative effect on growth, that was a stunning statement to me.

I think you could poll 1,000 economists and find very few of them who would agree with what Tim Geithner just said, and one of those people is Christina Romer in the White House, who has written before about the negative effects of tax cuts, and, in fact, has an article...

(CROSSTALK)

ROBERTS: Of tax increases.

HAYES: ... of tax increases, and has an article in the current American Economic Review, June 2010, in which she says tax increases have a large and substantial negative effect on consumption and growth.

ROBERTS: Now, they have to be really especially careful about the estate tax, however, because...

DONALDSON: There is none.

ROBERTS: Well, there isn't one at the moment.

TAPPER: There's not right now. And the heirs of George Steinbrenner are happy for that.

ROBERTS: Exactly. So then if they bring it back, they'd better do it overnight, you know, so that people aren't doing in their parents in anticipation.

TAPPER: Donna, you wanted to say something?

BRAZILE: Everyone is concerned about the deficit, and that's why we have to be careful how we frame this. I mean, you and I both know that -- Stephen, that over the last 10 years we've seen the top 1 percent, their incomes have grown. Meanwhile, the bottom half of the country, the bottom half of all income earners, they've seen their wages stagnate.

So I think the president needs to be wise enough to take a look at the entire array of tax cuts that he could provide to small businesses and middle-income individuals that will help spur economic growth.

ROBERTS: But, of course, the one number that matters is the unemployment number. I mean, that is the number that everybody really cares about. And -- and the president himself is now saying, again, expected to get to 8 percent or lower until maybe the end of 2012.

And that -- you know, that then becomes not only a dampening -- have a dampening effect on the economy, but that becomes...

(CROSSTALK)

DONALDSON: There are two commissions...

ROBERTS: ... political problem.

DONALDSON: ... running right now, the presidential commission appointed and a private one with Pete Domenici and Alice Rivlin that are looking at this problem of our debt and our economic situation, and both of them say, by the end of the year when they report, we're going to be stunned by the projections for this country if we don't start cutting unnecessary expenses and getting hold of the debt.

ROBERTS: Well...

TAPPER: It's not just unnecessary expenses. Some of them are necessary expenses. It's Medicare and Social Security.

(CROSSTALK)

DONALDSON: ... building a second engine for a fighter that the Defense Department says is unnecessary?

ROBERTS: Well, you know perfectly well, Sam, that that doesn't save you any money. I mean, you start...

DONALDSON: Oh, a few billion.

ROBERTS: You could close down this Capitol or turn it into condos and you could close down every domestic program that we have and you'd still have a deficit because of Social Security, Medicare...

DONALDSON: That's defense spending.

ROBERTS: ... and interest on the national debt.

BRAZILE: And the loss of revenues. I mean, this recession has taken a bite out of the economy. We're not collecting money, so we need to...

(CROSSTALK)

ROBERTS: Particularly on capital gains.

BRAZILE: That's right.

HAYES: Which -- which is why the single most important thing the government can do right now is get out of the way of private-sector growth. And raising taxes in a recession on whomever is, I think, one of the most foolish things you could possibly do at this time.

And, look, the administration implicitly buys the argument that raising taxes in a recession is a bad idea. You've heard administration officials articulate this before, and it's behind what they did in the original stimulus with the tax cuts.

(CROSSTALK)

DONALDSON: So sign on to the idea that now it's a bad idea, but at some point we're going to come out of this recession.

TAPPER: Well, there is -- and there are voices in the administration...

(CROSSTALK)

DONALDSON: ... and now they raised them, OK?

TAPPER: ... talking about -- there are people in the administration talking about maybe just keeping the Bush tax cuts in place for everyone for a year longer...

ROBERTS: Well, that's what you were saying.

TAPPER: ... or not, but Geithner said no.

DONALDSON: But a trigger. Otherwise the Congress will never come back and say...

(CROSSTALK)

HAYES: ... have the same debate -- have the same debate in two years.

BRAZILE: I'm going to be like the Republicans for 30 seconds. How do we pay for it? How do we pay for it? We know that the Bush tax cuts is one of the driving forces...

(CROSSTALK)

HAYES: It is -- it is part of it, but that's on static scoring. If you look at what it does for economic growth, you could argue that you'll make up some of the revenues...

BRAZILE: So how many jobs were created during its period when we had the Bush tax cuts, from 2001 to 2008? How many jobs?

HAYES: I don't -- I don't know the number.

BRAZILE: Hardly any. We lost jobs. That's the point. The point is, we should have tax cuts that help spur economic growth. Bottom line, it's about jobs, jobs, jobs.

ROBERTS: I think that's right. The question is, what cuts? And not just "cuts." And I think that...

HAYES: Sure, OK. Let's say that small business is the engine for job growth.

BRAZILE: I agree with that.

HAYES: But the people that we're talking about, these so-called wealthy, most of them are small-business owners. So if you're talking about cutting taxes for people who can...

DONALDSON: Most of the wealthy...

HAYES: ... put people back to work, that's who you're talking about.

(CROSSTALK)

DONALDSON: ... most of the wealthy, the top 3 percent are small-business owners? Wrong. There are some, yes, of course.

BRAZILE: It's less than a quarter.

DONALDSON: Come on, Stephen.

TAPPER: We can have PolitiFact come in and weigh in on that one. BRAZILE: They will. Trust me.

TAPPER: I do want -- I do want to move to the subject of the unemployed. And by the unemployed, I mean Shirley Sherrod, who is the most notable unemployed person in America right now. The White House says they had nothing to do with it, but Shirley Sherrod on CNN, after speaking to President Obama, said she wasn't so sure.

(BEGIN VIDEO CLIP)

SHERROD: I firmly believe that someone in the White House was telling them that the White House wanted me to resign.

(END VIDEO CLIP)

TAPPER: Now, Donna, the White House says, no, this was all Agriculture Secretary Tom Vilsack's call. Do you believe that?

BRAZILE: They've told me the same story, and...

TAPPER: That's not what I asked you.

BRAZILE: I know.

(LAUGHTER)

They told me the same story, and I'm reluctant -- and I trust the source. My source said we had nothing to do with it, but, you know, once we got on top of it, we moved it.

Look, Ms. Sherrod told a story that is just as amazing as the hymns from "Amazing Grace." It was a story of redemption. And yet we all know from the facts that everyone, everyone -- there's enough pro (ph) to go around to ensure that everyone continue to eat bird until turkey season.

But the truth is, is that the White House jumped the gun, Fox News and others who allowed this -- this -- this bogus tape to hit the airwaves...

ROBERTS: NAACP.

BRAZILE: ... and the NAACP...

TAPPER: The NAACP, absolutely.

BRAZILE: ... that did not call their local chapter, did not confer with Ms. Sherrod, it's a mind-boggling story. I talked to Ms. Sherrod. You know, when you grow up in the deep South, as I did, you know the -- you know the history of the movement and you know the history of the Sherrod family. You know Shirley Sherrod's personal story. I'm ashamed that so many people failed to even just simply Google her name.

ROBERTS: But the truth is, the only people who could fire her were the administration. Fox News couldn't fire her. The NAACP couldn't fire her. Only the administration could fire her. So they really bear the most culpability here, I think by a long shot.

But the other thing that's true is that what she actually did say gets us right back to the last conversation, because what she did say was that the divisions she came to understand were really not between black and white, but between haves and have-nots. And that is really what -- what turned her around and -- and made her fight for that white farmer.

DONALDSON: But I think, except for her, there's enough blame to go around for everyone here. The people who maliciously and with intention misrepresented the facts, I mean, I -- I believe in the First Amendment. There's nothing you can do about them, although you wish for Joseph Welch to say as he did to Joe McCarthy when Joe McCarthy was destroying someone on television, have you no decency, at last?

But from the standpoint of Obama and the administration, who are these people that they should pay attention to and be afraid of? Who's Glenn Beck? I mean, who's Bill O'Reilly? Who's Brett whatever his name is?

TAPPER: Andrew -- Andrew Breitbart...

(CROSSTALK)

DONALDSON: No, let me -- let me finish, because I want to give a little advice, since I've been doing it this morning in economics, to the president.

(UNKNOWN): OK.

DONALDSON: I want to quote another president who also said he had enemies, I'm going to -- of financial monopoly, speculation, reckless banking, class antagonism, sexism. They are unanimous in their hatred for me, and I welcome their hatred, said Franklin Roosevelt, who said I ask you to judge me by the enemies I have made.

So, President Obama, don't be afraid of them. Take them on, and let the people judge. You may lose, but if you lose, you will lose grandly (ph).

TAPPER: This is an argument you hear from a lot of liberal activists and Democratic activists. Josh Marshall, who writes at Talking Points Memo, wrote, speaking of Andrew Breitbart, who -- the blogger, the conservative blogger who originally posted this video, that -- the unfairly edited excerpt, which he says that's the -- that's the way he got it, was in that unfairly edited excerpt, and this is what Josh Marshall wrote.

"Breitbart got a piece of video he knew nothing about and published it with a central claim that he either made up or made no attempt to verify. To use terminology of infectious disease, Fox was the primary vector of this story. And to the best of my knowledge, there's been not only no disciplining of anyone in the newsroom, but as far as I can see, no retraction, apology, or even discussion of their primary role in an obvious smear. This is a journalistic felony, really, the worst kind of thing that journalists can ever do, a reality only compounded by the fact that they refuse to admit not only culpability but even that they did anything wrong."

Stephen, do you think that this -- that liberals are unfairly using this to try to discredit conservative journalists or...

HAYES: No, way. They would never do that.

(LAUGHTER)

Yes, of course, they are. Look, the timeline doesn't work. I mean, Donna's colleague, Howard Kurtz, at CNN and the Washington Post wrote that the timeline simply doesn't work. She actually resigned before or was forced to retire before anybody on Fox said a word about this. Senior vice president of news, Michael Clemente, sent out a memo talking about the need to treat this carefully, to gather all the facts.

Look, it's an easy distraction. That's what they want to do. I understand that.

The basic point, to go back to what Donna said, involves the speech, and the speech was -- you know, for -- for most of the speech, a fantastic speech, a compelling speech, a moving speech. I mean, to hear the stories about Baker County, to hear about her upbringing, to hear about the men who burned crosses in her front yard, is a compelling story. It's incredibly moving.

What happened then in the speech was that she slipped into what I think are easy accusations of racism that don't work. She said, in the -- in the middle of her speech...

(CROSSTALK)

TAPPER: This is the speech in March, the March speech, yes.

HAYES: ... the March speech, she talked about Republicans. It's always about money, she said. I haven't seen such mean-spirited people as I've seen lately over the issue of health care. Some of the racism we thought was buried, didn't it surface? Now we've endured eight years of the Bushes, and we didn't do some of the stuff these Republicans are doing because you have a black president.

(CROSSTALK)

DONALDSON: Bill O'Reilly called for her to be fired. Isn't (ph) he on Fox...

(CROSSTALK)

HAYES: So did the White House. So did the USDA.

ROBERTS: But there was racism that came up during the health care debate, with the -- with the vilification of John Lewis at the Capitol. And -- and the truth is, is that -- you know, this is a conversation we -- we just don't have.

I mean, I really think Eric Holder was right. We are cowardly about talking about race.

I had a cross burned in my front yard, too, and I know what it was like to grow up in the South in those years. And -- and the truth is that the -- that the conversation is just different among whites and among blacks. It is. And we have to be able to address that if we're ever going to get past it as a nation.

If we have any opportunity to perfect this union, that's what we have to do.

HAYES: I agree with you, but don't you think one of the reasons that we don't have this kind of conversation about race is because of the kind of comments branding Republicans as racists for opposing health care?

(CROSSTALK)

HAYES: This has -- this has nothing to do...

DONALDSON: Mr. Beck called the president of the United States a racist. What about that?

TAPPER: But is that racist, to say somebody's racist?

DONALDSON: Well, he just said branding people as racists.

(CROSSTALK)

BRAZILE: What she was -- what she was saying -- I heard the speech in its entirety, and I went public when I heard the speech. What she was talking about was the political climate, a political climate that, yes, some in the Republican Party have condoned simply because they refuse to repudiate those elements within their party that simply have gone too far, with the birther notion, with his illegitimacy, and creating the kind of racial resentment that prohibits us from having a genuine conversation about race and racism.

TAPPER: Donna, Shirley Sherrod on CNN also said something specifically about Andrew Breitbart from biggovernment.com, the conservative activist who posted the unfairly edited video, and here's what she had to say.

(BEGIN VIDEO CLIP)

SHERROD: I know I've gotten black versus white. He's probably the person who's never gotten past it and never attempted to get past it. I think he'd like to get us stuck back in the times of slavery. That's where I think he'd like to see all black people end up again.

(END VIDEO CLIP)

TAPPER: This woman's been offered a job by the Agriculture Department as a deputy director of the Office of Advocacy and Outreach, according to the Atlanta Journal Constitution, and she's saying Andrew Breitbart wants to return to the days of slavery.

Now, you can think what Andrew Breitbart did was reprehensible, irresponsible, unfair, and a total smear. Did that justify saying he wants us to go back to the days of slavery?

BRAZILE: Well, you know, I'm not going to -- to second-guess Ms. Sherrod. I know her history. But I am going to say that Mr. Breitbart should resign, even after -- not resign...

ROBERTS: From what?

BRAZILE: Sorry, I misspoke. I'm not in the business of asking people to be fired. I've been fired once before. But I think Mr. Breitbart should apologize to her.

I mean, she -- this is a woman who -- her father was murdered, and no one was ever brought to justice. I mean, she has some -- she has some anger that she was talking about, but she also talked about how she got -- you know, how she came to struggle with this and how she went on to -- to -- to start her life anew and fight for farmers of (inaudible)

But let me just say, going back to this conversation, can we have a conversation about race? Yes. But it cannot start here in Washington. It cannot start with politicians leading the conversation. It must start back in Georgia, where Ms. Sherrod and the Spooners can help lead us in this dialogue.

And if Mr. Breitbart would like to be part of it, we welcome him to the conversation.

ROBERTS: But it's -- I disagree. I think it can start in Washington, and I think it can start in the White House. And I think that we -- that we have an opportunity -- everybody talks about this being a teachable moment. Well, let's learn and -- and let's have the president be the teacher in -- in chief. And, you know...

DONALDSON: Yes. And Mitch McConnell was asked about an aspect of this, and he says, I don't want to get into that. All right. That's his privilege not to as the leader of the Republicans in the Senate. But it takes all the sides to get into it civilly, not calling names or calling people racists on either side -- you're quite correct -- and talk about it. But it's not going to happen, unfortunately.

BRAZILE: But civil rights used to be a nonpartisan issue.

ROBERTS: That's right.

BRAZILE: It wasn't black or white or left versus white. It was Republicans. I keep telling Republicans, it was Republicans who...

(CROSSTALK)

ROBERTS: ... listen to the Johnson tapes, when Johnson was ready to sign the civil rights bill, it was, you know, dead of summer, and -- and he's saying to his aides, make sure that the Republicans are here. I'm not going to sign this without Ev Dirksen being in the room, because this is the...

(CROSSTALK)

DONALDSON: Well, Ev Dirksen, the Republican leader...

ROBERTS: ... they -- they had so much to do with it.

DONALDSON: Ev Dirksen, the Republican leader of the Senate, made the last speech in favor of breaking the southern filibuster to pass the '64 Civil Rights Act. He quoted Victor Hugo. Nothing is as powerful as an idea whose time has come. That's the way the Republicans in the Senate acted.

BRAZILE: But I hope Ms. Sherrod and Mr. Breitbart can sit down and have a -- whatever kind of summit.

(UNKNOWN): A beer summit?

BRAZILE: I don't know what she drinks.

(CROSSTALK)

DONALDSON: ... don't want to get into this.

BRAZILE: But I know that they can find a common language to talk about the future if they can only sit and listen to each other.

TAPPER: Donna, I want to ask you a question about -- Maureen Dowd in today's New York Times suggests that she should -- Shirley Sherrod should be offered a job in the White House. And she also writes this: "The first black president should expand beyond his campaign security blanket, the smug cordon of overprotective white guys surrounding him. Otherwise, this administration will keep tripping over race, rather than inspiring on race. The president shouldn't give Sherrod her old job back. He should give here a new job, director of black outreach. This White House needs one."

Whether or not the job should go to Shirley Sherrod, does this White House need one?

BRAZILE: Well, I would hope that the White House could bring in more people, people who understood history, people who could help serve this president. When they hear of a conversation like Ms. Sherrod, hopefully they won't run to the hilltop. They could sit down and say let's -- let's talk about this.

I -- I know from having talked to Valerie Jarrett that she's deeply concerned and that she's working inside the White House to make sure that this never happens again.

DONALDSON: But, Jake, it's not black outreach. Maureen, please, it's outreach on this issue for blacks and whites and people of all colors.

(UNKNOWN): Of all colors.

DONALDSON: To say, all right, we need someone for black outreach is the wrong direction.

TAPPER: Stephen?

HAYES: Well, yes, I mean, I don't think -- I think that Sam's right. I don't think that necessarily creating a new position of black outreach is -- is going to solve the country's problems on race. And certainly after looking at Ms. Sherrod, in spite of her history and the things that she said that were so moving, after seeing her comments about Andrew Breitbart wanting us to go back to slavery, would not be the ideal person for the job.

TAPPER: Cokie, 30 seconds.

ROBERTS: Well, no, I think that the basic point that there has been an ignorance in some ways of -- of the immediate past history that some of us lived through of the young people in the White House is true and that -- and that there does need to be a better understanding of that in order to -- to just try to -- to salve the wounds.

TAPPER: All right. Wonderful job, guys. Thank you so much. The roundtable continues in the green room on abcnews.com and on our new iPad app, where later you can also find our fact checks. We've teamed up with PolitiFact to fact-check the show.