Transcript: 'This Week' Economic Debate

Sens. McCaskill, Bayh, Shelby and the Chamber of Commerce's Thomas Donohue.


MARCH 8, 2009






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

(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.


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"!


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.

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...


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...

MCCASKILL: And as a matter of confidence, I think it's important for us to point out that there's two kinds of banks that we're talking about here. The -- the commercial banks, the small, local banks, they're fine, and people need to realize that. Your local bank is loaning money; it is operating as it always had.

It may be suffering in its stock prices because of what's going on in the stock market, but they are doing a great job. In fact, most of the commercial banks, the local banks, have loaned more money in the fourth quarter of last year than they had the fourth quarter the previous year.

STEPHANOPOULOS: But what do you do with these big banks, these few big banks that are in big trouble?

MCCASKILL: Well, I think -- I think a plan has been laid out. I think -- and now they're -- what they're doing is they're doing this evaluation to look at the strength and the weaknesses of each of these banks so we know what's there, and then they're going to have those capital asset funds available to help them stay liquid, the big banks.

But I think this is a matter of continuing to look aggressively at how we can help without wasting taxpayer money.

BAYH: George, the real problem here is this whole concept of too big to fail. Some of these institutions -- and you can put some of the big three automotive companies in the same category -- if they were to go down, the problem is, it's not just them. They take -- it's called, you know, collateral damage, a whole lot, hundreds of thousands of blue-collar working men and women, other smaller financial institutions who were not involved in these bad decision- makings, they'd all pay the price, too.

STEPHANOPOULOS: So you can't close down the big banks?

BAYH: Well, what we have to do is stabilize them for the time being to avoid the collateral damage, put into effect regulation to make sure that this does not happen again, and if institutions are going to get, quote, "too big to fail" so that the taxpayers will have to come in, maybe they have to operate under a different set of rules.

STEPHANOPOULOS: And what -- go ahead.

SHELBY: George, subsidization of anything for very long never works. You don't stop. The automobile business, those companies, Chrysler, Ford, and General Motors, they're in deep trouble. We know that. I've suggested they go into Chapter 11. That's where they belong. And they could reorganize. We could get, you know, money in place for them. We could do it if they did it and did it right. Short of that, the UAW will run those companies and run them into the ground.

DONOHUE: Now, I can get pretty close to that issue. We need to do something -- I'm not sure all three of those companies -- and I'd like to see the three end up being two -- but if there are going to be any resolution here, General Motors has to be willing to be very, very tough and take the big step, if they have to. Otherwise, they're not going to get any place with their unions or be able to deal with the franchise rules in the states on the dealers.

This is an issue which I believe that all of us have a similar view about. I don't think it's exactly the same when you start looking at the banks.

The senator's right in the long term. We have to take some of these really toxic banks and straighten them out. This senator is exactly right that 90 percent of the banks in the country are doing a great job. The only thing is, 25 million small businesses can't get their money from banks.

We have to get the asset back -- lenders back in business. We have to put individuals in the position to do what they've always done, is to lend to small companies. Those guys create the jobs.

STEPHANOPOULOS: Let me bring this back to the issue at the top, the congressional agenda right now, spending bill more than $400 billion, more than 8,000 earmarks. Senator Bayh, you're one of two Democrats who's come out unequivocally against this bill, in part because of the earmarks, in part because of the size.

Do you think that you're going to be able to prevail? Senator Reid could not get the 60 votes he needed on Thursday.

BAYH: I think ultimately they'll get the votes to pass the bill, George, but I think there are substantive and perceptional problems with this bill. Substantively, the deficit is over $1 trillion. Our national debt is going up more than $1 million per minute. We have to borrow most of this money from abroad, which weakens our country.

I think this is a time to show that we can economize, do better than across-the-board increases that are many times the rate of inflation. So that's my substantive problem.

For example, if we were just to continue last year's levels of spending for the remainder of this year, we'd save $250 billion over the course of the next 10 years to help solve our long-term deficit problems.

The perceptual problem, which I think is just as great, is that, at a time when many Americans are having to tighten their belts, many businesses are having to make tough decisions, it looks as if Congress is just on auto pilot, immune -- immune from the problems that most people face.

BAYH: That undermines confidence in the system. I think we need to keep faith with the American people and show we can do what they do everyday.

STEPHANOPOULOS: Senator Shelby, you're one of the few Republicans who's actually for this bill. Why is he wrong?

SHELBY: Well, I think he's wrong for two reasons. We differ on some things, agree on others.

First of all, this is -- these are a compilation of nine appropriations bills. A lot of people voted for a stimulus bill, a TARP. That's $1.5 trillion. Now they say, "Oh, we'd better not vote for a $400 billion bill to fund the government." I think we ought to fund the government and move on.

Are there some things in this bill that I don't like, I wouldn't vote for if I could? I voted for amendments, you know, to knock things out of it, sure.

But, overall, I think it's -- it's -- we need to get it behind us, and I think we will.

STEPHANOPOULOS: Now, Senator McCaskill, you are an unequivocal opponent of earmarks. You've asked for zero earmarks. You voted to strip them out, yet you're supporting this bill. I don't quite understand that.

MCCASKILL: Well, I have done everything I can possibly do to reject the process of funding -- funding projects through earmarks. I vote against earmarks when I get the chance, as long as we're voting against all of them, and I've dropped another bill to reform the process even further this week.

But I don't think I can sit on the sidelines on every budget, though, because I've got to tell you, George, you talk about a habit that's deeply ingrained and a culture that's very hard to get rid of, these guys love these earmarks. They love the ability to have the power, you know, to pick out projects to fund.

And, you know, some of the earmarked projects are great, but the process, I think, is fundamentally flawed. That's why Evan and I were the only two Democrats that voted to strip every single one of them out. And as long as we have a chance to keep reforming it, I think we need to keep moving forward and get the government funded. BAYH: And just one distinction from what Richard said. The TARP vote was about stabilizing the financial system at a moment of crisis last September or October, when the economy, according to the chairman of the Fed, was about to collapse. And hopefully we're going to get most of that money paid back.

The stimulus bill, the job-creating bill, that was focused or was supposed to be focused like a laser on stabilizing the economy at a time when you pointed out in the headlines, it is in terrible straits. This is just general government spending, and it's increasing many times the rate of inflation.

What are we, as members of Congress, going to do to sacrifice, to show the American people that, in the long run, there is some fiscal discipline around this town if we can't keep restraints into place for just one year? What does that say to the marketplace?

So I think this is an important part of re-instilling confidence and, frankly, helping the president, who wants to get the deficit down and wants to remove these earmarks.

STEPHANOPOULOS: Senator Shelby, you have more earmarks in that bill than just about 40 other senators. Can you defend the process?

SHELBY: Absolutely. I can defend every earmark. Every one of my earmarks have been released to the press. Every one has -- has, I think, been vetted in the committee and publicly in my state.

I don't want an earmark that has no merit, but I do believe that we ought to have the power to appropriate things with merit. And that's what I -- that's one of the reasons I'm voting for this bill.

MCCASKILL: Yes, I think it's important to point out that a lot of the senators that stood up with righteous indignation on the stimulus bill, talking about earmarks in the bill and earmarks in the bill, are back two weeks later for a huge chunk of earmarks.

And this is an equal-opportunity sin, George, as you pointed out. The -- every single member of Republican leadership is participating fully in the earmark process.

So what I hope people quit doing is using earmarks as a partisan fight, because it is not partisan. It's about...

STEPHANOPOULOS: Although Senator Shelby is consistent, to be fair. He's consistent that he's for earmarks and he's for the bill.

MCCASKILL: He is. He is. He is. He's a loyal appropriator.

SHELBY: And not only that, I'll tell you, the stimulus bill was loaded with earmarks. There was one coming out of Illinois, $2 billion...

MCCASKILL: That was competitively -- that was competitively done, George.

SHELBY: Oh, yes. Nobody believes that now.

MCCASKILL: But it was. It was a five-year...


SHELBY: It was competitively done because the president wanted it, and he's the biggest earmarker of all.


SHELBY: Bush was the biggest earmarker. All of them are earmarkers.


DONOHUE: If we talked as much about jobs as we talk about earmarks, we'd be better off.

STEPHANOPOULOS: Well, I actually want to move to health care right now, because you were part of a health care summit this week that President Obama convened. Here's President Obama speaking at that summit.


OBAMA: Nothing is harder in politics than doing something now that costs money in order to gain benefits 20 years from now. It's -- it's the single hardest thing to do in politics, and that's part of the reason why health care reform has consistently broken down.


STEPHANOPOULOS: And, Mr. Donohue, you were at this summit. There's been something of an evolution at the Chamber of Commerce. You were at the summit saying you support the president's goals. You believe we can get something done this year.

DONOHUE: Well, what I did say is, in comparison to the previous big debates on health care, all of the parties are somewhere else. For the longest period of time, you knew where big business, small business, the docs, the hospitals, now they're all over the place, and they are for a very simple reason, is that health care has become not only very expensive, but very complicated and very much driven more and more by the government, who are, you know, engaged with 45 percent of paying for what's going on in the health care business.

So I do believe there is a sentiment, a willingness to listen and willingness to see what we can work out here. Of course, you know, that'll fall part at one point when everybody finds out where their car happens to be parked.

But we're going to participate in this debate and listen. There are things we all agree to. We have to do wellness. I mean, what's going on with young people in this country is crazy. We have to do I.T. It's the only industry, 60...

STEPHANOPOULOS: Information technology.

DONOHUE: Yes, 16 percent of the economy, and it's the only industry that basically doesn't use it. We have to do things about getting those people covered who are not.

You know, everybody talks about 49 million not covered. A third of them could be covered tomorrow if we took them by the hand and down, signed them into the programs that are available. A third of them can't be covered, and we have to do something about that. So there are many things we can find common ground on.

STEPHANOPOULOS: But does that mean, for example, that business is ready to sign on to a requirement to provide health care to all their employees?

DONOHUE: Well, I don't know that that's going to come apart -- around at this time. See, there is a basic issue that's more fundamental, as we look at health care, as we look at CO-2, as we look at what we're doing in labor. We're trying to hold this economy together.

This president, who we need to make sure he succeeds -- I mean, this country has to succeed -- but he wants to put more things one on top of the other faster than I think we can assimilate it.

I'm prepared to bring the business community to a legitimate discussion on health care. I'm prepared to bring them to a discussion on CO-2. But if we jam all this stuff at once, if you look at what's going up on regulation, on taxes, on costs, you see that job number and those job pictures, it'll be worse. So let's do it in an orderly fashion.

STEPHANOPOULOS: Senator McCaskill, he does bring up an important point on revenues and -- and -- and timing here. And from what I could tell this week in my reporting, talking to Republicans and Democrats on Capitol Hill, it was almost impossible to find anyone who would support the president's plans to pay for this health care by shaving the deductions for wealthy Americans.

MCCASKILL: But he gets credit for saying he's going to pay for it and laying out a plan to pay for it. I mean, we did Medicare D. And -- and -- and Bush lobbied for it and gleefully signed it into law with not any way of paying for it, no means test, billions of dollars into the pockets of the pharmaceutical companies and the insurance companies without a second thought of public money.

So I think the fact that this president is showing the discipline to say, first of all, we're going to have an honest budget, no more cooking the books. We're going to put all of this stuff on the budget so the American people know how serious the problem is. And the fact that's committed to paying for the way we get health care reform...

STEPHANOPOULOS: But can you sign on to the plan, for example, to shave the deductions for wealthy Americans to pay for this?

MCCASKILL: I mean, it's -- we're talking about somebody who makes $4 million a year, instead of getting a $350 deduction on $1,000 contribution, getting a $280 deduction on $1,000 contribution. Does that really sound like something really tough?

DONOHUE: Well, that's a -- that's a fundamentally different issue than the question that George asked about the tax rates. The issue of shaving the deduction for people that are at this time, in this economy, from people that are putting money, willingly and voluntarily, into the needs of others is not going to fly. It's dead on arrival.

STEPHANOPOULOS: You agree with that?

BAYH: Well, first, I think the president is confronted with a lot of these simultaneously because the world has confronted him with them. He didn't ask to have to deal with the recession and the global warming and the health care crisis. He's been confronted with that, so he has to deal with a lot of these things.

With regard to budgeting, I think Claire's right. At least -- remember Vice President Cheney, George, said deficits didn't matter? And they pretty quickly took the largest budget surplus in history and turned it into the largest deficit. Now we have a president who wants to get the deficit down.

I think we need to go through a progression on health care, first, look for ways to -- to economize within the health care system. By just looking at the way we practice medicine in different parts of the country, there's a lot of money to be saved. That's number one.

Secondly, maybe there are some other parts of the budget that we can economize to help pay for some of this. That's why I'm opposing the omnibus, $250 billion over 10 years? That's real money by just tightening our belts for one year.

And then, finally, the issue of revenues may have to be addressed, but I think you have to do that last, not first. And the question is, do we extend with additional tax cuts to the most affluent among us? Perhaps that's something that has to be...


STEPHANOPOULOS: But you said do it last, not first. If you don't have the reserve fund in there, can you really make the upfront investments you need to make in health care, for example, building on what the president did in the stimulus package on information technology?

BAYH: By that, George, I mean, the president was right to put that issue on the table, but I think we as Congress first have to see what else can be done to get the revenue and then only raise the issue of whether you raise taxes last, not first.

STEPHANOPOULOS: What can you and your Republicans colleagues sign on to here?

SHELBY: Well, I -- I think that what we've got to do is straighten up the economy first. We've got to go to banking. That will help. If we take on all these programs, this country is going to be in one heck of an economic mess.

STEPHANOPOULOS: So put off any discussion of health care this year?


SHELBY: Well, I think we can discuss it, but how are we going to fund it?

STEPHANOPOULOS: So you're for no -- no revenue increase? The president says he's not going to have the revenue increases until 2011, but you're saying not even debate it now?

SHELBY: Well, I think we're going to debate it. We debate it every day. But we should be careful in what we're doing. Let's do not push this economy and the jobs losses even further down.

STEPHANOPOULOS: How -- how do you address this question, Senator McCaskill, of scale -- and both Mr. Donohue and Senator Shelby have talked about -- and -- and priorities? You say the president didn't choose to put himself in this position, but is it -- is it appropriate at this point to scale back and say, "First things first. Let's focus on the banks. Let's focus on this job situation"?

MCCASKILL: I think the American people fundamentally understand that he's focusing on the economy first and foremost. I think there is some confusion. You know, things happen quickly. Obviously, the TARP situation was an emergency and it was everyone -- frankly, it was a remarkable moment when I saw the candidates for both parties come together on that, realizing we had a crisis of liquidity that -- and, you know, I think he's going to continue to focus on the economy.

On the other hand, George, as -- as Evan said, he's a great communicator. And I think the American people know that if we keep delaying the health care discussion, if we keep delaying the cap-and- trade discussion and -- and the discussion about our environment and global warming, that that is a very, very bad thing for our grandchildren. And, also, we have to keep focused on deficit reduction.

But what you're seeing is a president that's not afraid to take on all these issues that he knows the American people want reform, they want reform on this. So it's tough. We've got to communicate clearly. We've got to make sure that we bring the American people with us, but I think we've got the right communicator to do it.

BAYH: He's got to try and do two things simultaneously, George, first, be an idealist, look at the problems that face the country and propose bold changes to deal with those. He's doing that. But at the end of the day, he also has to be a pragmatist, and you can't insist on more than the system can deliver, although you push for all that it can deliver.

And my sense of this president is that he's a very practical person. He wants results. And at the end of the day, that's what we'll deliver.

SHELBY: I think we have to be careful, not overload the economy. Our thrust should be turning the economy around, and we do that through banks, getting people back to work.

STEPHANOPOULOS: Another issue that's going to come up before the end of this year -- and we only have a couple of minutes left -- Mr. Donohue, you're going to spend about $10 million, I've read, to try to defeat this Employee Free Choice Act, which would give union -- unions the ability to organize at a plant if they could a majority of the people at the plant to sign up.

And, Senator McCaskill, let me bring you in on this. Is there anything you can say, you believe, right now, that'll convince Mr. Donohue to back off that? And do you have the votes to get this done this year?

MCCASKILL: I'm not sure that we have the votes, and I have no hope of backing Mr. Donohue off. I would say that I think it would be fair that we have a secret ballot for decertification of unions. Right now, businesses can go with a card check.

There is no secret ballot to get rid of a union, but there is a requirement of -- of that for people to be able to organize. And to me, that seems unfair. Let's -- let's -- what's good for the goose is good for the gander. Let's put people on a level playing field and have both businesses have to have a secret ballot to decertify. Until they do that, I'm not sure they've got a lot of room to complaint.

STEPHANOPOULOS: You get the last word.

DONOHUE: That is another -- the loss of the secret ballot and the 16 other issues that labor unions want is another weight on this economy. What we need is a defibrillator that shocks this economy back into private -- positive action.

This president, this Congress, and the business community have to talk about positive things and a bright future. We need to stop letting everybody watch the president and all of us talk this economy into the can. Watch the market. The market goes down; liquidity goes down. We have a real challenge here, and we ought to seize it.

STEPHANOPOULOS: I'm afraid that's all we have time for today. Sorry, Senator. Thank you all very much for a great discussion.