'This Week' Transcript: Larry Summers & Michael Steele

Transcript of ABC's This Week with George Stephanopoulos for Feb. 8, 2009.


FEBRUARY 8, 2009




STEPHANOPOULOS: Welcome to "This Week."

After bitter debate...

SEN. LINDSEY GRAHAM, R-S.C.: Look at this bill. This bill hasgot to be done by tonight.

SEN. BARBARA BOXER, D-CALIF.: Holding up a bill, theatrical.Did you ever do that when George Bush was president?

STEPHANOPOULOS: A deal in the Senate.

SEN. SUSAN COLLINS, R-MAINE: At a time of crisis, we can worktogether.

STEPHANOPOULOS: Can Congress pass the president's test? Willthe plan forestall more staggering job loss? And what can be done toshore up failing banks and save peoples' homes? Questions thismorning for the president's top economic adviser and the RepublicanParty's brand-new chairman.

STEELE: Get ready, baby. It's time to turn it on.

STEPHANOPOULOS: Michael Steele and Larry Summers, only on "ThisWeek."


OBAMA: This is a self-induced injury. I screwed up. This is abad mistake.

STEPHANOPOULOS: ... President Obama's first setbacks. That andthe rest of the week's politics on our roundtable with George Will,Robert Reich, Newt Gingrich, and Claire Shipman.

And, as always, the Sunday funnies.

JAY LENO, TALK SHOW HOST: You can tell a lot of these CEOs don'tget it. They said, "Well, that's $500,000 a month, right?"

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. It is all about the economy. Latelast night, senators filed the latest version of the stimulus dealthey hope to pass Tuesday, and that same day, President Obama's teamis likely to unveil its latest version of the bank bailout plan.

Here to discuss all that this morning, the president's topeconomic adviser, Larry Summers.

Welcome back to "This Week."

SUMMERS: Good to be with you, George.

STEPHANOPOULOS: Let me start out by putting up a little chartthat shows the House and Senate versions of this stimulus package.Let me show our viewers that right now. The overall cost is about thesame, the House $820 billion, Senate $827 billion, but the compositiondifferent. The Senate has about $100 billion more in tax cuts, but$40 billion less in state aid, $20 billion less in education, $15billion less in payments to individuals, some other differences.

I know that, when the president was meeting with these moderateRepublican senators this week, including Senator Susan Collins ofMaine, he told them he endorsed their efforts to scrub the bill ofwhat they called excessive spending. Does that mean the presidentprefers the Senate version to the House version?

SUMMERS: No, the president feels that, above all, we need amajor program enacted very quickly that will create 3 million to 4million jobs. He believes we need to perfect it in every way we can.

If there are programs that aren't going to serve importantpurposes, they should be -- they should be eliminated. He certainlybelieves that. He's open to good ideas from both -- from both sides.

But we're going to have to look at both these bills, assuming theSenate bill passes, as most people expect at this juncture, and craftthe best possible approach going forward.


SUMMERS: There are certainly good ideas in both versions, andwe'll have to draw from those ideas in creating an ultimate vehicle,but the most important thing is that people come together and createthe 3 million to 4 million jobs. You know, there's 90 percent overlapnow.

STEPHANOPOULOS: Well, let's...

SUMMERS: We've got to get to closure on the last 10 percent,George.

STEPHANOPOULOS: Some of the critics of the Senate bill say thatthe most important elements have been -- have been brought down. PaulKrugman, writing on his blog this morning, said, "Some of the mosteffective and most needed parts of the plan have been cut." He'sciting especially that $40 billion in state aid.

And he goes on to say that, "My first cut says that the changesto the Senate bill will ensure that we have at least 600,000 fewerAmericans employed over the next two years."

SUMMERS: There's no question we need -- we need a large,forthright approach here. There are crucial areas, support for highereducation, that are things that are in the House bill that are very,very important to the president.

STEPHANOPOULOS: But will the Senate bill produce fewer jobs? SUMMERS: There's no question -- no question what we've got to dois go after support for education. And there are huge problems facingstate and local governments, and that could lead to a vicious cycle oflayoffs, falling home values, lower property taxes, more layoffs. Andwe've got to prevent that.

So we're going to have to try to come together in the conference.And the president is certainly going to be active in sharing his viewsas that process -- as that process...

STEPHANOPOULOS: That's what I'm trying to get at. If he -- ifhe shares his views...

SUMMERS: ... goes on.

STEPHANOPOULOS: ... is he going to be saying, "Wait a second.Move this more to the House side, because I don't want this educationand state spending cut, or move it more to the Senate side"?

SUMMERS: George, I don't think this is about the House bill orthe Senate bill. It's about the best bill for America.

STEPHANOPOULOS: So which of the ideas are better?

SUMMERS: There are respects -- there are respects in which bothbills can surely be improved, and the president's going to work asthoughtfully and aggressively as he can to move this process along,drawing on the -- drawing on the very important strengths that arecontained in both these bills.

STEPHANOPOULOS: But it sounds...

SUMMERS: There are certain priorities -- education, health care,infrastructure investment -- that the president is certainly not goingto want to lose sight of.

SUMMERS: At the same time, he has insisted that this not beWashington business as usual, no earmarks. We don't engage inwasteful programs just because they're a tradition or someone'sprerogative.

So it's not going to be a matter of choosing between twoproducts. It's going to be a matter of creating the best possiblebill we can for the country.

STEPHANOPOULOS: So it sounds like what -- it sounds like whatyou're saying is the president's overall message is, "There's greatoverlap here. I might as president prefer to have more educationfunding, but the most important thing right now is to get this done."That's his most important goal.

SUMMERS: The most important thing is to get this done for thesake of an economy that lost 600,000 jobs in one month alone. That'sas many jobs as there are in the state of Maine. So coming together,making sure that the investments are as productive as they possiblycan be, that's the president's priority.

STEPHANOPOULOS: As you know, the overwhelming majority of SenateRepublicans and House Republicans are opposed to this bill. And theSenate Republican leader, Mitch McConnell, said the other day thatDemocrats have failed to learn the lessons of history.


SEN. MITCH MCCONNELL, R-KY., SENATE MINORITY LEADER: The big-spending programs of the New Deal did not work. In 1940, unemploymentwas still 15 percent. What got us out of the doldrums that we were induring the Depression was the beginning of World War II.


STEPHANOPOULOS: They say the president is repeating mistakes ofthe past.

SUMMERS: Those who presided over the last eight years, the eightyears that brought us to the point where we inherit trillions ofdollars of deficit, an economy that's collapsing more rapidly than atany time in the last 50 years don't seem to me in a strong position tolecture about the lessons of history.

We need an approach that's very different than the approach thatwe had that brought us to this point. That's what the president isproviding. There are millions of people in this country who needwork. There is a huge amount of work that needs to be donemodernizing our schools, creating a green economy. And what thepresident's program does is give that needed work to the millions ofpeople who need work.

That's why a very wide consensus of economists -- they maydisagree about the details or which particular step you should take,but a very wide cross-section of opinion believes that this economyneeds help quickly.

STEPHANOPOULOS: The president hoped for far more bipartisansupport, a much broader bipartisan coalition to support this bill. Doyou accept the criticism from some that what he should have done isweigh in harder when the House was passing their legislation to makesure that some of the spending that's been criticized wasn't in thereor -- I guess I'm saying, was there a better way to do this? Or isthe failure of bipartisanship a failure of Republicans?

SUMMERS: The president's walked a long mile. You know, in hisfirst week as president, George, he went up to speak to the RepublicanSenate caucus and the Republican House caucus. Already he's asked meto be up with the Republican caucus twice. That's two more...

STEPHANOPOULOS: But they say he...

SUMMERS: That's two more times than I was there...

STEPHANOPOULOS: ... he went and talked to them, but didn't takeany of their ideas.

SUMMERS: ... with the -- with the eight years. He's been opento a number of ideas. The president was very strongly criticized bymany in his own party for the fact that the measure includes more thana third tax cuts, including several major tax cuts for business.

But it hasn't really been enough. And ultimately the presidentcan't do more than walk a long way down the road towardsbipartisanship. But if you look, traditional Republican areas, smallbusiness, support for business, business investment more generally,they're represented in this program. So we've been very open to thebest ideas from all sources.

STEPHANOPOULOS: But on the biggest criticisms coming from thebulk of Republicans right now, that the package should be smaller andmore targeted to tax cuts, less spending, the president has reachedhis bottom line? He's not going to go any further in that direction?

SUMMERS: The president wants the most effective program he canpossibly -- he can possibly have at a time when, frankly, even sincethe process of developing this package began six or eight weeks ago,the economy looks worse than it did at that time.

And bringing the amount of help we give the economy down at atime when the economy is looking worse and worse does not seem theright -- does not seem the right way forward. Rather, the right wayforward is to improve the -- is to improve the program. Look, the president has said again and again and again that ifthere are programs that aren't effective, if there are programs thatwon't work, he is open to compromise and discussion on those. Hisbottom line, though, is we need a major program, we need it quickly tocreate those 3 million to 4 million jobs.

STEPHANOPOULOS: Let me -- let me get to the state of theeconomy, because some economists have been even more alarming than youare right now.

STEPHANOPOULOS: This week, two economists, the president of theFederal Reserve Bank of San Francisco, Janet Yellen, said, "I think wedo have the same type of dynamics taking place that do happen in adepression." The managing director of the IMF, Dominique Strauss-Kahn, was quoted in Bloomberg News as saying, "Advanced economies arealready in a depression, and the financial crisis may deepen unlessthe banking system is fixed. The worst cannot be ruled out."

Already in a depression?

SUMMERS: We're in a very serious situation, George. This isworse than any time since the Second World War. It's worse than Ithink most economists like me ever thought we would see.

But let's remember. In the Depression, the unemployment rate was25 percent. GDP had fallen in half. We were really in a verydifferent situation than that.

But all of this concern -- the risks of deflation, for example --points up the importance of acting as aggressively as we can. That'swhy the president's economic recovery program is so important. That'swhy it needs to be twinned, as it will be this week, with thefinancial recovery program directed at shoring up the flow of creditso that people can get the loan to buy a car...

STEPHANOPOULOS: Let me -- let me ask you about that.

SUMMERS: ... so that we can address the problem which has,frankly, gone unattended for much too long of declining house prices.

STEPHANOPOULOS: Let me ask about that financial overhaul.Originally, Secretary Geithner was supposed to give that speechtomorrow. Administration officials are telling me it's now morelikely on Tuesday?

SUMMERS: Yes, I think there's a desire to keep the focus rightnow on the economic recovery program, which is so very, veryimportant.

STEPHANOPOULOS: So Tuesday it is. Let me show what's beenreported so far about the elements, the broad-based elements of whatare in the plan that you've been working on with Secretary Geithner:a proposal to insure banks against more losses, as has already beendone with Citibank; some kind of a facility to purchase the toxicassets, although that may be done through trying to encourage privateinvestors to buy up the toxic assets; injecting more capital into thebanks; increased lending by the Federal Reserve; and, of course,foreclosure relief for homeowners.

Are those the basic, broad principles inside the plan?

SUMMERS: You know, I'm not going to get into previewingSecretary Geithner's announcement, but I can tell you this: The focusis going to be on increasing the flow of credit and doing it withtransparency, with accountability for those who receive support, andwith a kind of consistency that, frankly, we haven't seen so far.

So, yes, there will be support for banks so that they remainstable, are in a position to lend. There will be support for thecredit markets more generally. And absolutely critically, there willbe support and pressure that assures that these needless foreclosuresare avoided and that government is acting aggressively to contain thedamage in the housing markets.

STEPHANOPOULOS: So it's probably $50 billion to $100 billion inthe package to prevent these foreclosures?

SUMMERS: The president's made clear that he's very committed toforeclosures. I expect that it will be $50 billion or more that willbe directed at providing support for the housing sector of oureconomy.

STEPHANOPOULOS: And there was a -- a report in the New YorkTimes yesterday that this plan would not require banks to start -- tostart lending or to lend more. Is that true?

SUMMERS: The program will have -- I'm not -- as I say, George,I'm not going to get into describing Secretary Geithner's program...

STEPHANOPOULOS: But that's a pretty fundamental point.

SUMMERS: But he will be -- he will be proposing a program thatwill make certain that we are stabilizing this system and increasingcredit -- credit flows, because that's got to be -- that's got to bethe objective to increased credit flows.

STEPHANOPOULOS: But you will not be asking for more money inthis package?

SUMMERS: In this package, we are going to use -- you know, it'spretty rare for -- I'm not sure there's any precedent for a presidentbeing successful in passing legislation even before he's elected. Andso it was a very significant step when the authorization to use theremainder of the $700 billion TARP funds was given to the presidenteven before he was elected.

And, frankly, after all the problems that program has, thepriority now has to be restoring trust, demonstrating that thefinancial system can be supported in ways that are accountable andtransparent, and make a difference.


SUMMERS: And that's what -- that's where the president's focusis going to be.

STEPHANOPOULOS: But Senator Conrad and many private economistshave said that you're going to need to be asking for $300 billion to$500 billion more for the financial institutions down the road. Isthat a reasonable estimate?

SUMMERS: Right now, the focus is on beginning a process ofrepair.

SUMMERS: What was done averted what could have been a profoundcollapse, but the credit markets in the country aren't working right.And that's an important part of the reason why the economy's notworking right.

STEPHANOPOULOS: But more money going to be needed down the road?

SUMMERS: And right now, we've got to put more money -- rightnow, we've got to put more money in to make that system more effectiveand to do it with transparency and accountability.

We'll do what's -- we'll do what's necessary. That's somethingthe president has been very clear on. He wants us -- he believes thegovernment needs to be leaning forward, that we need to make sure thatwe are ahead of these problems. And he'll be recommending whatevernecessary -- whatever measures are necessary to achieve thatobjective.

STEPHANOPOULOS: So no new money now, but maybe down the road?

SUMMERS: We'll see what happens, George.

STEPHANOPOULOS: Mr. Summers, thanks very much for your timetoday.

SUMMERS: Thank you.

STEPHANOPOULOS: And now for the Republican perspective, thechairman, the new chairman of the Republican National Committee,Michael Steele.

Welcome to "This Week" and your first appearance as chairman.

STEELE: Good to be here. Yes, it is. It's great to be withyou.

STEPHANOPOULOS: Well, you heard Larry Summers right there on thestimulus package. He says that after eight years, after the lasteight years, your party has no credibility on the economy.

STEELE: Well, I think that's laughable. I mean, he acts like wehave spent the last eight years in -- in this -- in the mess thatwe're currently in. This is about 18 months old.

The reality of it is, Bush inherited a recession. He got usthrough that recession. The spending was out of whack. There's nodoubt about that. And a lot of Republicans had a problem with thelevel of spending that took place during that time.

But the economy did grow. Close to 6 million jobs were created.Now we're on the downside of that and -- in that cycle. And thequestion now becomes, how do we as a country shore up this economy?

And I had -- didn't hear anything from Mr. Summers that assuredme or reassured me that this administration gets it when it comes tohow you create wealth in this nation. It is not by spending dollarson programs that you can put in a separate bill and deal with lateron, instead of focusing on, you know, tax credits and -- and relieffor small-business owners, incentives for people to get back into thecredit markets, to deal with the mark-to-market rules that havestymied the banks and -- and deal with the housing crisis.

STEPHANOPOULOS: But outside of Washington, some strongRepublican voices have said the stimulus package is needed now.Governor Arnold Schwarzenegger, Governor Charlie Crist of Florida, hesupports the package.


GOV. CHARLIE CRIST, R-FLA.: This program will help us witheducation, with health care, Medicaid specifically, infrastructure.These are the kinds of things that produce jobs. It could mean $13billion to the sunshine state. It comes at a time when we need it.People need jobs. It's about jobs, jobs, jobs.


STEPHANOPOULOS: He suggests that you and Republican Partyleaders here in Washington are on the wrong side of the biggest issue,jobs.

STEELE: Well, no -- you know, with all due respect to thegovernor, I understand where he's coming from. Having been a stateofficial, I know what it means to get those dollars when you're intight times.

But you've got to look at the entire package. You've got to lookat what's going to create sustainable jobs.

What this administration is talking about is making work. It iscreating work.

STEPHANOPOULOS: But that's a job.

STEELE: No, it's not a job. A job is something that -- that abusiness owner creates. It's going to be long term. What he'screating...

STEPHANOPOULOS: So a job doesn't count if it's a government job?


STEELE: Hold on. No, let me -- let me -- let me finish. Thatis a contract. It ends at a certain point, George. You know that.These road projects that we're talking about have an end point.

As a small-business owner, I'm looking to grow my business,expand my business. I want to reach further. I want to beinternational. I want to be national. It's a whole differentperspective on how you create a job versus how you create work. AndI'm -- either way, the bottom line is...

STEPHANOPOULOS: I guess I don't really understand thatdistinction.

STEELE: Well, the difference -- the distinction is this. If agovernment -- if you've got a government contract that is a fixedperiod of time, it goes away. The work may go away. That's --there's no guarantee that that -- that there's going to be more workwhen you're done in that job.

STEPHANOPOULOS: Yes, but we've seen millions and millions ofjobs going away in the private sector just in the last year.

STEELE: But they come -- yes, they -- and they come back,though, George. That's the point. When they go -- they've gone awaybefore, and they come back. And the point is that the small-businessowners take the risks. They're the ones that are out there in themorning putting that second mortgage on the house, taking the risksthat are necessary so that they can employ your -- your kids and mykids and future generations. That's sustainable, long-term growth.

Otherwise, then why do we need the small-business community? Whydon't we all just get a government job and call it a day?

STEPHANOPOULOS: So your plan would simply be more incentive tosmall businesses?

STEELE: Pardon me?

STEPHANOPOULOS: Your plan would simply be more incentives tosmall businesses?

STEELE: More incentives -- more incentives to small businesses,at the same time correcting those rules in the markets that havehindered and frustrated the banking process, that have lent itself todrying up the credit markets as we see them, dealing with the Fannieand Freddie crisis more respectfully and more proactively, instead ofsitting back and figuring out, "Oh, well, let them take care of it."That's how we got into this mess from the beginning.

Remember, in 2003, George Bush sent a bill to the Congress askingthem to deal with the Freddie-Fannie crisis at that time. And thecommittee said no.

So the reality of it is, all of this stuff that we are nowdealing with could have been dealt with along the way.

STEELE: And I don't think -- and I think a large, significantnumber of Republicans and -- and Americans out there who aren'tRepublican -- believe that the best way to handle this is not throwingmore money at it, but rather dealing with the crisis at hand...

STEPHANOPOULOS: And, in fact...

STEELE: How does -- how does -- I mean, I'm all for Pell Grants,but how does a Pell Grant, increasing funding for Pell Grant get me ajob when I just lost mine?


STEELE: And that's the question Americans are asking themselves.And that's why the president is upside-down with the voters on thisissue.

STEPHANOPOULOS: That is one program. Democrats would say thatthe broader school construction funding will create jobs. Do youaccept that?

STEELE: For a short term, yes. It's a construction job. Iagree with that. But, you know, do we need to put -- is that what you-- we need to put in place right now when you can look at other waysin the economy to stimulate that type of growth?

STEPHANOPOULOS: And your Republican National Committee haspassed a resolution about the government bailout of the financialindustry. It says, "Be it further resolved that the members of theRepublican National Committee call for all Republican members of theSenate and the House of Representatives to oppose any and all furtherbailout legislation."

Does that mean you expect to oppose the plan that SecretaryGeithner will be announcing this week and any future requests forfunding?

STEELE: Let's see what -- see what the secretary's putting onthe table. But if he's talking about more spending, yes, I have aproblem with that, and I think a lot of people do.

Look, no one's talking about the downstream effect of all thismoney getting into the markets, let alone what's happeninginternationally with governments flooding their -- their economieswith cash. There's a little thing called inflation. There's a littlething called -- you know, that form of taxation on your earnings isworse than anything else you can do.

So this is -- this is not being done in balance. This is beingdone out of balance, where everybody is feeling -- let's solve thisproblem by taking more money out of -- out of people's pockets andputting it into the system.

What I'd rather have us do is invest dollars in creatingpathways, incentives for small-business owners, for the businesscommunity of this country to take the risk again in the marketplace.

STEPHANOPOULOS: You just got elected of the Republican NationalCommittee last week...


STEPHANOPOULOS: ... yet you're already facing some headlinesabout potential financial irregularities in your past. The WashingtonPost yesterday...


STEPHANOPOULOS: ... and I want to give you a chance to respondto these allegations -- here was the Washington Post yesterday. Itsays that "Steele's campaign spending is questioned." It goes on tosay, "Michael S. Steele, the newly elected chairman of the RepublicanNational Committee, arranged for his 2006 Senate campaign to pay adefunct company run by his sister for services that were neverperformed, his finance chairman from that campaign has told federalprosecutors."

Is that true?

STEELE: No, it's not true. And -- and -- and those allegationswere leveled by a convicted felon who is trying to get a reducedsentence on his -- on his conviction.

And the reality of it is that the U.S. attorney, as well as thejudge, looked at what he presented and did not apply it, said therewas no credibility to it. The Washington Post ought to be ashamed ofitself for getting out in front of something without all the facts.

To the extent that we gave the Washington Post the documentationto show the receipts that were -- that were used and applied towardsthe $37,000, it was a legitimate reimbursement of expenses. If mysister had not been reimbursed, I and she would have been in violationof McCain-Feingold finance law.

STEPHANOPOULOS: Yet the records show -- and I hope you can clearthis up, as well...


STEPHANOPOULOS: ... that the payment was made in December 2007,and your sister's company had been dissolved 11 months before that.

STEELE: Well, that was -- that's -- that I don't know about.What I do know about is the fact that, as she understood it, thecompany was still in existence. Her lawyers were -- were telling herthey were in the process of dissolving the company.

So at the time when the checks were written back to her toreimburse her, she just said go ahead and write the checks to thecompany, because the company had, you know, done the services thatwere provided.

But, again, even in that instance, you can still -- there aremany companies out there that dissolve and still receive payments forservices that are rendered, and so forth. So I -- that aspect of itfor me is, again, is clarified, cleared up with the lawyers, and was alegitimate transaction back to her.

STEPHANOPOULOS: And all of the other allegations in -- in thearticle about financial transfer is false?

STEELE: It's all false. Everything -- the thing about this,George, that is so frustrating to me is that you're -- you're --you're looking -- the Washington Post elevated this -- this guy to alevel and gave him credibility when no one else would. That'sdisturbing.

The fact is, we've supplied -- all these documents are on recordwith the state board of elections, with the FEC. And I think, ifthere were any funny business there, in two-and-a-half years --because they audit, and the lord knows I have enough Democrats pouringthrough my records to -- you know, in the last few years, they wouldhave caught that. So this is...

STEPHANOPOULOS: You say it's been cleared up, but the WashingtonPost also reports that federal agents have contacted your sister justin the last few days.

STEELE: And that is for purposes of closing out this -- closingout this matter, because, once the judge -- once the judge did notapply or did not think that this was credible, in terms of reducingthis gentlemen's sentence, the FBI is now in the position of windingthis thing...


STEPHANOPOULOS: So they have told you, you are not beinginvestigated?

STEELE: I have not -- this is the thing. I have not beencontacted by the FBI at all. And what we sent to the Washington Postis, would you just wait? You're getting ahead of yourselves here.You're trying to make a story out of something that isn't a story.We'll provide you with the information.

STEELE: We faxed to them, gave to them the receipts, all thedocumentation that we have.

And let me tell you one other thing, George. We're going to --we're being very proactive about this, because I'm sick and tired ofthis -- this "gotcha" business that the Washington Post and other --others in the media attempt to engage in.

We're getting out in front. We're pulling all the data together.We're going to take it to the FBI. I'm not going to wait for them tocome to me. I'm going to take it to them and give them everythingthat they think they need. And if that's not enough, we'll give themmore...


STEELE: ... because I want to clear up my good name. This isnot the way I intend to run the RNC, with this over my head. We'regoing to dispense with it immediately.

STEPHANOPOULOS: Thank you for sharing that this morning.

STEELE: Thank you.