'This Week' Transcript: Bonuses, Bailouts and Budgets
Transcript of Sens. Kent Conrad, Susan Collins, Rep. Mike Pence and Vice President Joe Biden's chief economist Jared Bernstein
Mar. 22, 2009 —
ABC'S "THIS WEEK WITH GEORGE STEPHANOPOULOS"
MARCH 22, 2009
SPEAKERS: GEORGE STEPHANOPOULOS, HOST
JARED BERNSTEIN, CHIEF ECONOMIST TO VICE PRESIDENT BIDEN
SEN. KENT CONRAD, D-N.D.
SEN. SUSAN COLLINS, R-MAINE
REP. MIKE PENCE, R-IND.
[*] (BEGIN VIDEO CLIP)
STEPHANOPOULOS: Good morning, and welcome to "This Week."
Bonus anger boils over.
(UNKNOWN): Arrogance, incompetence and greed.
STEPHANOPOULOS: Washington responds.
(UNKNOWN): The people have said, "No." In fact, they've said, "Hell no."
(UNKNOWN): The only way to get their money back is to tax it back.
PRESIDENT BARACK OBAMA: They've got a bomb strapped to them. You don't want them to blow up.
STEPHANOPOULOS: Did AIG and the banks get what they deserve or has Congress gone too far? What does the bonus battle mean for Obama's budget, the treasury secretary, and his new bank plan? Questions for top players from the House, the Senate, and the White House, our "This Week" debate.
Then, the president hits Leno's couch and ESPN, but should he have stayed home? That and all the week's politics on our roundtable with George Will, Donna Brazile, Robert Reich, and ABC's business correspondent Betsy Stark.
And, as always, the Sunday funnies.
COLBERT: Let's go get AIG!
(END VIDEO CLIP)
ANNOUNCER: From the heart of the nation's capital, "This Week" with ABC News chief Washington correspondent George Stephanopoulos, live from the Newseum on Pennsylvania Avenue.
STEPHANOPOULOS: Hello again.
Well, you can sum up Washington's agenda this week in just two words: anger management. The key question: how to deal with the rage unleashed by those AIG bonuses without undermining the broader effort to fix our financial system.
To debate what's been done and what comes next, we're joined this morning by Republican Senator Susan Collins, a key member of the Senate Appropriations Committee; Congressman Mike Pence, the chairman of the House Republican Conference; from the White House, Jared Bernstein, chief economist to Vice President Biden; and the chairman of the Senate Budget Committee, Kent Conrad.
Welcome to all of you. And let's begin with those AIG bonuses.
Senator Conrad, the House passed a 90 percent excise tax on any firm that got more than $100 billion bonuses to any firms getting more than $5 billion from the federal government. Will the Senate pass a similar excise tax?
CONRAD: The simple answer is, "I don't know."
STEPHANOPOULOS: Will you vote for one?
CONRAD: I've got my doubts whether that's the best way to do this. I think there are certain constitutional questions about the imposition of a tax on a limited group of people. But, look, I don't think there's any question we've got to try to do everything we can to get the bonuses back.
You know, if -- if I were in charge of AIG, I'd call in these folks and I'd say, "Look, you either give them back or you're fired." That we can do, because we own the company.
STEPHANOPOULOS: But the government doesn't yet have the ability -- the treasury secretary is seeking it -- to get the resolution authority. But right now, they say -- the White House says the government doesn't have that ability.
CONRAD: I'll tell you who does have the ability, is the man who's running AIG. He is in charge of the company. He could call in those people and say, "Look, you either give it back or you're going to be fired."
There's no way you can justify, when the federal government is putting up $170 billion to rescue that company, that folks who were involved in creating this mess get $165 million in bonuses.
STEPHANOPOULOS: Senator Collins, your Maine colleague, Senator Snowe, said she'd prefer to wipe out any bonuses to any financial institution receiving government money. Do you agree?
COLLINS: Well, first of all, all of us are angry that this happened in the first place. And it could have been prevented. It isn't just the head of AIG. The treasury secretary could have made as a condition of receiving the money a requirement that would have prohibited these bonuses.
But as angry as I am, I agree with my colleague that we need to be careful. And the problem with the Senate bill is it is so wide in its scope that it would apply to tens of thousands of employees all across this country who had nothing to do with getting us in this mess.
STEPHANOPOULOS: That's the Senate excise tax proposal, which is only a 35 percent tax, but it would apply to a far broader number of companies.
COLLINS: Right.
STEPHANOPOULOS: So you're against both the House and the Senate excise tax?
COLLINS: I'm not against getting the money back. In fact, I feel very strongly that we do need to recoup the money. I'm just not certain that either the House-passed bill nor the Senate bill are the best approach.
We need to look for an alternative means of recouping this money that doesn't cause further harm to our economy as we're trying to get banks lending.
STEPHANOPOULOS: But is there one? Is there another means? I mean, that's the question.
COLLINS: Yes. As Kent Conrad said, I think there are other approaches. We can have the treasury secretary put more heat on AIG. He never should have allowed this to occur in the first place.
We can make sure that there is pressure for people to voluntarily get the money back or else they're going to lose their jobs or there's going to be no further funding for AIG.
STEPHANOPOULOS: Some of that has started to happen. You voted against the House excise tax, correct?
PENCE: I did, George. And, you know, I -- I opposed the Wall Street bailout from the beginning, like most House Republicans. And the truth is, House Republicans share the outrage of the American people over the idea that we would use taxpayer bailout money for executive bonuses.
But, you know, the real answer here, the real option I'll share with my two Senate colleagues, what we ought to say is to AIG, we ought to say, "No more bailout money until AIG recovers all of the more than $200 million that's been distributed in executive bonuses."
What's the Democrats brought to the floor this week was really a constitutionally questionable bill that was really nothing more than a transparent attempt to divert attention away from the fact that, because of Democrats in Congress and the administration, these bonuses were able to be distributed to begin with.
There was language in the bill that was authored by the senator from Oregon and Senator Snowe that would have prevented these bonuses from going forward. And that language was removed, we're told at -- at the urging of the administration.
And I -- you know, this week's -- this week's effort was really a -- you know, it was a -- it was a disappointing spectacle, and it was -- it was mostly driven by the fact that Democrats are trying desperately to draw attention away from the fact that they made these bonuses possible.
STEPHANOPOULOS: Let me bring the White House in here. There's two separate strands of argument here, number one, that the Treasury could have prevented it in the first place, and, number two, what is the White House posture on this bill?
When the -- when the excise tax passed the House, the president put out a statement saying it rightly reflects the outrage that many people feel, yet all weekend long, it appears the White House has been backing away from that. And the White House chief of staff, Rahm Emanuel, has been telling many people, including the financial community, that this bill is not going to reach the president's desk.
BERNSTEIN: Well, look, George, I think on -- on the first point, you really have to differentiate between what you can legally do about bonuses moving forward and about clawing back old bonuses. Clawing back old bonuses really does invoke constitutional issues, but as the president said, we are going to pursue -- and I know the Congress feels the same way -- any means, any legal means necessary to do so. So I think the important point about this bill is that you -- you understand the anger that the bill engenders because the idea that a firm would take taxpayer money and use it to pay out bonuses, retention bonuses to retain, to retain employees who, by their work, partially led to hundreds of thousands of other people losing their jobs.
STEPHANOPOULOS: Yes, but that's the sentiment behind the bill, but the consequences of the bill -- a lot of people in the financial community say that banks who are now getting TARP money are going to try to give it back as quickly as they can because this could cripple them...
BERNSTEIN: Well...
STEPHANOPOULOS: ... and then, secondly, that the private investors, the government needs to come in to help buy up the toxic assets or these banks are going to be scared off.
BERNSTEIN: And this is -- and this is a really important point. This -- this kind of clawback legislation has to balance between the need to address the absolutely reasonable and well-justified anger of the Congress and the American people about how this money is being spent in these undeserved bonuses and the need to pursue financial stability.
I think the way the president says it is exactly correct. What happened at AIG, vis-a-vis these bonuses, is a symptom of a much larger problem. And we cannot lose sight of the larger problem, which is stabilizing financial markets.
STEPHANOPOULOS: So -- but that's what I'm trying to get at. Does the president believe that the House bill and the Senate draft bill to tax and have an excise tax on these bonuses undermines the financial system? Is he opposed to them?
BERNSTEIN: I would say the way Senator Conrad said it is -- is absolutely correct. I think the president would be concerned that this bill may have some problems in going too far -- the House bill may go too far in terms of some -- some legal issues, constitutional validity, using the tax code to surgically punish a small group. That -- that may be a dangerous way to go.
That said, let's see what comes out of the Senate. He has not said he won't sign this bill. Let's see what comes out of the Senate. Let's see what gets to his desk.
PENCE: Well, George, it's important to remember here that -- and the president said this on the White House lawn this week -- I was really struck by the fact, the president said, well, the problem here is that people are making this kind of money to begin with.
You know, it was back in 2007 that Barney Frank authored a bill that capped executive compensation across the board, well before any bailouts, well before any crisis on Wall Street. And I believe that then-Senator Barack Obama had the companion legislation in the Senate. And now we read this morning that the administration's talking about broad-based caps on compensation.
The answer here is to focus on AIG. What House Republicans proposed was that we ought to say to AIG, "No more bailout money until you go and collect back 100 percent of the bonuses that you've distributed."
STEPHANOPOULOS: Does everybody else at the table agree with that proposal?
BERNSTEIN: I don't. No, I -- I don't. I don't -- in the following sense. You can't -- you said it yourself, George, a second ago. There's something called resolution authority. That's a -- a very complicated way of saying the FDIC can come in and take a bank into bankruptcy. We know how to do it. We've done it.
What we don't have at this point is the legal authority to do the kinds of interventions that Representative Pence -- we need those. We're talking about those. We need to have those moving forward.
But the idea of going back and kind of clawing back contracts that were legitimately made, that is something we need to consider.
(CROSSTALK)
PENCE: ... something about clawing back. We own 80 percent of AIG. I didn't support the Wall Street bailout, still don't. But we essentially nationalized AIG. And all these legal niceties notwithstanding, you know, it's -- quite frankly, it's anti- competitive and anti-free market for the Congress of the United States to be passing legislation that targets, or to use Charlie Rangel's statement earlier in the week, that uses the internal revenue code as a political weapon.
STEPHANOPOULOS: How about you, Senator Conrad? Do you agree that -- no new money to AIG unless they give back this -- these bonuses through some -- in some fashion?
CONRAD: Look, to me, unfortunately, the cat's out of the barn, the horse is out of the barn. You've already put up $170 billion. So, you know, frankly, I would take a different tack.
I would call the head of AIG to the Treasury and I would say to him, "Look, you call in those employees and you tell them they give back the money or they're out of a job." And the head of AIG has absolutely got that authority. He's the head of the company, and we own...
(CROSSTALK)
STEPHANOPOULOS: And several of them have already given back. Several -- several employees have already given back some of the bonuses. We're going to learn more...
(CROSSTALK) CONRAD: Yes, I understand some have, but many have not. And you really have to ask yourself, what is in their head? What can they possibly be thinking of that they're collecting bonuses in a midst of a crisis like this? I mean, shame on them.
COLLINS: They would not have jobs were it not for taxpayer money going into AIG. I think that the proposal that the congressman has outlined makes more sense. It's more targeted. But, obviously, if Treasury had put provisions in the contract as a condition of receiving the funds, this never would have happened in the first place.
STEPHANOPOULOS: I want to -- I want to move on to the president's budget that's going to start to be considered in both the House and the Senate this week. And we all saw the reports on Friday from the Congressional Budget Office saying that the president's economic assumptions were a little too optimistic, according to the Congressional Budget Office. They say the deficit will actually be $2.3 trillion higher over the next 10 years than the president estimates.
And, Senator Collins, you supported President Obama on the stimulus package.
COLLINS: Yes.
STEPHANOPOULOS: Can you support his budget?
COLLINS: No.
STEPHANOPOULOS: Why not?
COLLINS: Because it brings our debt levels to an unprecedented level. It would double the public debt in 5 years, triple it in 10 years, the highest percentage of GDP since after World War II, CBO says, by the year 2019, 82 percent of GDP. That's the equivalent of the public debt.
That is not sustainable. It poses a threat to the basic health of our economy.
STEPHANOPOULOS: Senator Conrad, you've had questions about the president's budget, as well, although you support the general approach. And I want to show a question we got from one of our -- our listeners. Let me put it up on the board.
It's Laurie Watkins (ph) of Rolla, North Dakota. The president in his budget has a plan to cap payments for agriculture subsidies at $250,000 and also no subsidies to farms making in revenues more than $500,000 a year. And here's what Laurie (ph) asks. She says, "You're opposed to President Obama's budget because it is not sustainable. Why, then, are you against cutting farm subsidies for farmers making $500,000 or more? Isn't this the same as the AIG bonuses?"
CONRAD: No, not at all. And that's not what the proposal does. They've just got it wrong. The president's proposal has -- does not relate to farm income. It relates to farm sales.
STEPHANOPOULOS: Revenues.
CONRAD: Farm sales. No one has ever, ever proposed limiting payments on that basis. That was just a mistake. So I could not support that.
Look, we just passed the farm bill last year. In the United States Senate, we got 81 votes. It did not add a dime to the deficit. It was fully paid for. And I don't think this is the time to reopen it.
On the other hand, I will propose a budget that does have savings in agriculture, because we're going to have to have savings across the broad spectrum in light of these new numbers.
Look, $2.3 trillion over 10 years is a stunning amount of money. In fairness to this administration, they locked down their forecasts three months ago. There's been a lot of bad news since.
So we've got a worsening situation. That requires adjustments, and it's going to have to be across a broad front, including agriculture.
STEPHANOPOULOS: And the president's prepared to accept these kinds of adjustments?
BERNSTEIN: The president is prepared to negotiate on this budget with folks like those at this table, and certainly Senator Conrad has been a longtime budget negotiator at times like these. And the president's been very clear about this, as has our budget director. We don't expect these folks to sign on the dotted line.
What we do expect -- what we do expect and what we are going to stand very firm on, because this president, this vice president have made this clear, that there are these priorities that brought them to the dance here: energy reform, health care reform, education, all done in the context of a budget that cuts the deficit in half over our first term.
STEPHANOPOULOS: Yet -- yet as the president's pursuing these priorities, you have former supporters on -- on the stimulus, like Senator Collins, saying, no, she can't go along. You've got Democrats, like Senator Conrad, saying your ideas on taxes we can't accept.
BERNSTEIN: Well -- well, George...
STEPHANOPOULOS: You're not going to get the kind of revenue you're calling for. So these are really major changes the president has to contemplate.
BERNSTEIN: Not necessarily, George. I mean, we've -- we've been here before. This is opening negotiations of a -- of a large and historically unique budget.
Now, we know that this budget ramps up deficit spending in the first couple of years. And the reason we do that is because this economy is facing something we really haven't talked about yet today, one of the deepest and more far-reaching recessions of any of our lifetimes, backed up by a -- a crisis in financial markets that we haven't seen since the days of the Great Depression.
Let us not lose sight of the people who realty haven't come into this conversation yet, middle-class folks who are facing an 8 percent unemployment rate, African-Americans, facing a 13 percent unemployment rate, over 20 million people underemployed right now.
And so this budget needs to take into account the difficulties that American families are facing in the face of the toughest recession of many of our lifetimes.
STEPHANOPOULOS: Congressman Pence, and the question is, will the House Republicans and Republicans in general also come up with a budget that addresses the kinds of concerns that Jared Bernstein just raised?
PENCE: The House Republicans are going to come up with a budget alternative that is going to be built on fiscal restraint and getting this economy growing again. Look...
STEPHANOPOULOS: A comprehensive alternative?
PENCE: It's going to be a comprehensive alternative. And let me tell you, after -- it's after months of runaway spending on the federal level. I mean, we saw last -- last year's Wall Street bailout, the part of -- auto bailout, and then we saw the so-called stimulus bill, then the omnibus bill.
You know, the American people have had it. I mean, the president's budget, the American people know, spends too much, taxes too much, and it borrows too much. And they want this government and this administration to start doing what families in my district in eastern Indiana, small businesses and family farms are doing, and that is making decisions, setting aside tomorrow what we don't have to spend until today, and putting the family budget ahead of the federal budget.
You know, the president yesterday said on his radio address, he said a firm foundation -- a lot of people will be singing that phrase in churches this morning -- he said his firm foundation of spending on energy and education and health care, well, the firm foundation in this country is our faith in God, our economic freedom, and our natural resources, and the American people know it.
BERNSTEIN: George, let me respond to that by -- by telling you what happened last Thursday. A couple of days ago, Vice President Biden and a number of cabinet secretaries, along with Senator Amy Klobuchar, your colleague, took us out to Saint Cloud, Minnesota, for the -- a meeting of the White House task force on the middle class.
Well, we had a town hall meeting of middle-class folks who did not represent anything like what we just heard from Representative Pence, respectfully.
What these folks stood up and said is, "Tell us about the recovery package and how we can get a hand up, not a hand out, from that package. Tell us ways in which this can extend unemployment insurance for those of us who have been involuntarily unemployed for week in and week out, looking for jobs in a labor market that is shedding hundreds of thousands of jobs. Tell us how this can free up some capital, free up some investment capital so we can expand our firm."
We heard that verbatim from...
PENCE: I don't doubt that he heard that. When you called for me to be on this show, I was at a kitchen table in a farm in Rushville, Indiana, with eight small-business owners and farmers. And every single one of them were desperately concerned about the fact that half of the people that are going to pay higher taxes under the president's budget are small-business owners. They're desperately concerned about the...
(CROSSTALK)
PENCE: CBO just said every American household is going to pay $1,600 more a year in energy costs under the president's cap-and-trade proposal.
CONRAD: Well, first of all, the place where I would diverge from Congressman Pence is, if we didn't take these extraordinary steps, we'd be back to Hoover economics. I mean, the prescription that he just provided is exactly what Hoover economics represented at the time of the Great Depression.
If we did not take these aggressive steps to give lift to the economy at this time of significant contraction, we could have faced an economic collapse. And that wasn't just my view. That was the view of the head of the Federal Reserve. That was the view of the Republican secretary of treasury. That was the view of the Republican president of the United States.
So I think, again, respectfully, where I would strongly disagree is short term. Where I would actually strongly agree is longer term.
We have got to get back to a more sustainable fiscal circumstance. We cannot have debt pile on top of debt. We cannot run budget deficits in the out-years of over $1 trillion a year. So we're going to have to...
(CROSSTALK)
STEPHANOPOULOS: ... how do you both make the investments that you and the president say need to be made now in energy and health care and education without adding to the deficit in an unsustainable way over the long term?
CONRAD: This is -- I will present a budget that I think begins to move in that direction. It acknowledges in the short term, yes, we have got to have added deficits and debt to give lift to this economy, but longer term, we have got to pivot. We have got to have fundamental reform of our entitlement programs. We've got to have fundamental reform of our revenue programs, because we've got a tax system that was really built 50 years ago...
BERNSTEIN: But, George, can I just make one point on this?
CONRAD: ... and is no longer relevant.
STEPHANOPOULOS: I've got to -- I want to bring in Senator Collins...
BERNSTEIN: Sure.
STEPHANOPOULOS: ... on a question related to this, because there's also the question of how the Congress is going to do this. And the debate over -- starting in the House this week over whether the budget will try to be passed with the reconciliation process. It means simply it gets through on a majority vote, rather than has to break a filibuster.
Here's what Senator Gregg had to say about that this week.
(BEGIN VIDEO CLIP)
GREGG: You're talking about something that has nothing to do with bipartisanship. You're talking about the exact opposite of bipartisanship. They're talking about running over the minority, putting them in cement, and throwing them in the Chicago River.
(END VIDEO CLIP)
(LAUGHTER)
STEPHANOPOULOS: Bitter words from who was meant to be President Obama's commerce secretary. But, Senator Collins, it's seriously being debated now in the House putting at least the health care provisions on this fast track that would only require a majority vote. Can you go along with that?
COLLINS: No. It would be a big mistake. I agree with Senator Gregg, if not his metaphor, but he's absolutely right.
You don't make major changes in policy using a system that shuts out the Republicans, that limits debate, that prohibits amendments. And I know it's not just Republicans who are concerned about this, the centrist Democrats who are very concerned about this.
(CROSSTALK)
CONRAD: Well, look, I have said for weeks, I don't think it would be wise to use the reconciliation process to write major legislation, reform legislation. That's not what reconciliation was designed for. It was designed for purely deficit reduction.
And the problem is, if you try to use it here, not only does it deeply offend the minority, but, more than that, it doesn't work very well, because...
(CROSSTALK)
BERNSTEIN: Let me just stipulate -- let me stipulate that I -- we agree with -- with Senator Conrad on this point. But I want to say -- and it's very important for -- for folks to hear that I think that, in an important way, the Obama budget is getting a bad rap in this discussion in the...
(CROSSTALK)
STEPHANOPOULOS: ... move on to that. You said you agree with Senator Conrad, yet the White House has been working with House Democrats on moving this whole notion of going on a fast track on the table.
BERNSTEIN: I don't think he took it off the table. I think it has to stay on the table. But it's something we would rather avoid. We'd rather have the...
STEPHANOPOULOS: Would you take it off the table or not?
CONRAD: Well, I'll put it this way: It is not included in the budget that I will present to my colleagues. I have said for weeks, I don't think it is the right way to write substantive legislation, because if you get into the details -- and we won't do that here -- it just doesn't work very well.
But what they're -- what they're talking about...
(CROSSTALK)
CONRAD: ... is negotiating leverage, sending a signal that it still remains open. And one thing people...
(CROSSTALK)
STEPHANOPOULOS: I'm afraid -- I'm afraid that's all we have time for today. Thank you all very much for a very spirited discussion.
END