Transcript: 'This Week' Economic Debate

ABC'S "THIS WEEK WITH GEORGE STEPHANOPOULOS"

MARCH 8, 2009

SPEAKERS: GEORGE STEPHANOPOULOS, HOST

SEN. CLAIRE MCCASKILL, D-MO.

SEN. EVAN BAYH, D-IND.

SEN. RICHARD C. SHELBY, R-ALA.

THOMAS DONOHUE, PRESIDENT, U.S. CHAMBER OF COMMERCE [*] (BEGIN VIDEO CLIP)

STEPHANOPOULOS (voice-over): Good morning, and welcome to "This Week."

'This Week with George Stephanopoulos' guests: Sens. Claire McCaskill, D-Mo., Evan Bayh, D-Ind., head of the Chamber of Commerce Thomas Donohue, and Sen. Richard Shelby, R-Ala.

(UNKNOWN): I don't know how I'm going to pay my mortgage.

STEPHANOPOULOS: Economic shock.

HALL: We've never had four straight months of job loss in excess of 600,000.

(UNKNOWN): We don't have any feeling whether there's one more shoe to fall or whether Imelda Marcos' closet is about to come down on us.

STEPHANOPOULOS: With no bottom in sight, President Obama tries to spark confidence.

PRESIDENT BARACK OBAMA: Throughout our history, we have met every great challenge with bold action.

STEPHANOPOULOS: But is Washington meeting the economic challenge or making it worse?

(UNKNOWN): We have to show that the government can discipline itself.

STEPHANOPOULOS: What will it take to stop this spiral? Questions this morning for Democratic Senators Evan Bayh and Claire McCaskill, Republican Richard Shelby, and the CEO of the U.S. Chamber of Commerce, Tom Donohue, our "This Week" debate.

Then...

RUSH LIMBAUGH, TALK SHOW HOST: Why doesn't President Obama come on my show?

STEPHANOPOULOS: ... Rush and the White House square off. That and the rest of the week's politics on our roundtable with George Will, Cokie Roberts, David Brooks, and E.J. Dionne.

And, as always, the Sunday funnies.

JAY LENO, TALK SHOW HOST: We gave them $165 billion, now we're giving them $30 billion. You know what AIG stands for? "And it's gone"!

(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. In this morning's New York Times, President Obama promises to put all the pillars in place for economic recovery this year, but his pledge follows a week in which nearly all signs pointed toward a recession that could last far longer. It's an economic emergency.

How to address it is our topic this morning with four key players here in Washington: Republican Senator Richard Shelby; Tom Donohue, CEO of the U.S. Chamber of Commerce; and Democratic Senators Evan Bayh and Claire McCaskill.

And let me begin with another headline. This is the Washington Post. I don't know if you guys saw it yesterday. And the headline pretty much gets to the heart of the problem here, "Job Losses Could Drown Stimulus."

Senator McCaskill, are we at the point where we can say now that we're going to actually have to do more, that it's time for a second stimulus package?

MCCASKILL: Oh, I think it's too early for that. What you're seeing is jobs -- job loss is always a lagging indicator. It's not a leading indicator in a recession. And we've said all along in the stimulus, besides the tax cuts, which people forget to mention, a huge chunk of tax cuts, money going right back into the pockets of the American people, we're trying to keep job losses from being as great.

Even when we were debating the stimulus, we kept saying over and over again there was going to continue to be significant job loss. It's a matter of whether or not we can keep from that job loss being as severe as it could be had we not done the stimulus.

Related

This Week Transcript: Peter Orszag and Eric Cantor

WATCH: Economic Emergency Debate

WATCH: The Economy: Washington Doing Enough?

STEPHANOPOULOS: But, Senator, by the assumptions of President Obama and his team are -- that we would have 8.1 percent employment -- unemployment all year long, we saw that already this month. We know it's going to get worse, at least the president has said, before it gets better, so he's not going to be able to save the 3.5 million jobs he talked about.

BAYH: Well, it's a little soon to conclude that, George. And we may need -- need to have to recalibrate what we do as we go along as the facts change. He did inherit one heck of a mess, and it's gotten worse over the last couple of months.

The depth of domestic problems was worse than expected. The global nature of the recession, with Europe and China now struggling, was worse than we expected.

But let's give this a little time. I was with Ben Bernanke a couple of times this week. He does think that some things in the credit markets are beginning to get better, but there is a lag between when you put policy into effect and when it actually starts having an effect in the real world.

And the second lag, George, perhaps most important, is the psychological one. It does take some time before things -- before people realize that the substance is actually getting better. My guess is that'll start later this year or the first part of next year, and we're moving aggressively to make sure that it does.

STEPHANOPOULOS: The question, Senator Shelby, is, what is going to create that confidence? What is going to change the psychology of the markets right now? You want to...

SHELBY: I believe, if we can straighten out the banking system and get banks lending again and get confidence in our banking system -- the American people don't trust the banks. They know -- they're not investing in the banks. The banks aren't lending. And without lending, this -- this country's economy is based on credit, you know, credit to small business, medium-sized business, and that's not happening today.

We've got to do it, and we've got to do it right. TARP certainly didn't do it. I opposed that; a lot of people didn't. But -- but we can't go down that road again. And what I fear is, is Paulson II or TARP II or TARP III.

STEPHANOPOULOS: Well -- well, we've seen Secretary Geithner and the president say that now we're going to take a middle-ground approach. They've out the beginnings of their plan on the banks. You don't approve of that?

SHELBY: I don't think it'll work. I think that they've got to close some big banks. They don't want to do it. We're -- we're going down the same road Japan was going down.

STEPHANOPOULOS: So you're in the same place -- I had Senator Lindsey Graham on the problem a couple of weeks ago. He said we're going to have to close, nationalize some of the big banks.

SHELBY: I don't want to nationalize them. I think we need to close them...

(CROSSTALK)

STEPHANOPOULOS: So when you say "close," what do you mean by them?

SHELBY: Close -- close them down, get them out of business. If they're dead, they ought to be buried. We bury the small banks; we've got to bury some big ones and send a strong message to the market. And I believe that people will start investing in banks. People aren't...

STEPHANOPOULOS: So you're talking Citigroup?

SHELBY: Well, whatever. Citi's always been a problem child.

STEPHANOPOULOS: You're shaking your head.

DONOHUE: Well, I believe that the TARP thing had a very important value, and that is, it put liquidity in the banks that let them meet their requirements. Otherwise, they would have to be put out of business. And they're holding that money. They haven't spent it. They're waiting to find out where the floor is.

And when they get to the floor, then we'll be able -- on the economy, then we'll be able to figure out how to put more money back in the economy.

STEPHANOPOULOS: Is it practical to talk about closing down big banks?

DONOHUE: It's not practical to talk about closing a bank that is integrated throughout the whole global economy. It is practical to talk about buying some of those assets away from those banks and holding them in an institution that would have both public and private money, but it's not practical...