'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 has got 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 work together.

STEPHANOPOULOS: Can Congress pass the president's test? Will the plan forestall more staggering job loss? And what can be done to shore up failing banks and save peoples' homes? Questions this morning for the president's top economic adviser and the Republican Party's brand-new chairman.

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

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


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

STEPHANOPOULOS: ... President Obama's first setbacks. That and the 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't get 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. Late last night, senators filed the latest version of the stimulus deal they hope to pass Tuesday, and that same day, President Obama's team is likely to unveil its latest version of the bank bailout plan.

Here to discuss all that this morning, the president's top economic 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 chart that shows the House and Senate versions of this stimulus package. Let me show our viewers that right now. The overall cost is about the same, the House $820 billion, Senate $827 billion, but the composition different. The Senate has about $100 billion more in tax cuts, but $40 billion less in state aid, $20 billion less in education, $15 billion less in payments to individuals, some other differences.

I know that, when the president was meeting with these moderate Republican senators this week, including Senator Susan Collins of Maine, he told them he endorsed their efforts to scrub the bill of what they called excessive spending. Does that mean the president prefers the Senate version to the House version?

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

If there are programs that aren't going to serve important purposes, they should be -- they should be eliminated. He certainly believes 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 the Senate bill passes, as most people expect at this juncture, and craft the best possible approach going forward.


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

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 that the most important elements have been -- have been brought down. Paul Krugman, writing on his blog this morning, said, "Some of the most effective and most needed parts of the plan have been cut." He's citing especially that $40 billion in state aid.

And he goes on to say that, "My first cut says that the changes to the Senate bill will ensure that we have at least 600,000 fewer Americans 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 higher education, 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 do is go after support for education. And there are huge problems facing state and local governments, and that could lead to a vicious cycle of layoffs, falling home values, lower property taxes, more layoffs. And we'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 views as that process -- as that process...

STEPHANOPOULOS: That's what I'm trying to get at. If he -- if he 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 education and state spending cut, or move it more to the Senate side"?

SUMMERS: George, I don't think this is about the House bill or the 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 both bills can surely be improved, and the president's going to work as thoughtfully and aggressively as he can to move this process along, drawing on the -- drawing on the very important strengths that are contained in both these bills.

STEPHANOPOULOS: But it sounds...

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

SUMMERS: At the same time, he has insisted that this not be Washington business as usual, no earmarks. We don't engage in wasteful programs just because they're a tradition or someone's prerogative.

So it's not going to be a matter of choosing between two products. It's going to be a matter of creating the best possible bill we can for the country.

STEPHANOPOULOS: So it sounds like what -- it sounds like what you're saying is the president's overall message is, "There's great overlap here. I might as president prefer to have more education funding, 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 the sake of an economy that lost 600,000 jobs in one month alone. That's as many jobs as there are in the state of Maine. So coming together, making sure that the investments are as productive as they possibly can be, that's the president's priority.

STEPHANOPOULOS: As you know, the overwhelming majority of Senate Republicans and House Republicans are opposed to this bill. And the Senate Republican leader, Mitch McConnell, said the other day that Democrats 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, unemployment was still 15 percent. What got us out of the doldrums that we were in during the Depression was the beginning of World War II.


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

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

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

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

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

SUMMERS: The president's walked a long mile. You know, in his first week as president, George, he went up to speak to the Republican Senate caucus and the Republican House caucus. Already he's asked me to 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 take any of their ideas.

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

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

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

SUMMERS: The president wants the most effective program he can possibly -- he can possibly have at a time when, frankly, even since the 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 a time when the economy is looking worse and worse does not seem the right -- does not seem the right way forward. Rather, the right way forward is to improve the -- is to improve the program. Look, the president has said again and again and again that if there are programs that aren't effective, if there are programs that won't work, he is open to compromise and discussion on those. His bottom line, though, is we need a major program, we need it quickly to create those 3 million to 4 million jobs.

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

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

Already in a depression?

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

But let's remember. In the Depression, the unemployment rate was 25 percent. GDP had fallen in half. We were really in a very different 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's why the president's economic recovery program is so important. That's why it needs to be twinned, as it will be this week, with the financial recovery program directed at shoring up the flow of credit so 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 speech tomorrow. Administration officials are telling me it's now more likely on Tuesday?

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

STEPHANOPOULOS: So Tuesday it is. Let me show what's been reported so far about the elements, the broad-based elements of what are in the plan that you've been working on with Secretary Geithner: a proposal to insure banks against more losses, as has already been done with Citibank; some kind of a facility to purchase the toxic assets, although that may be done through trying to encourage private investors to buy up the toxic assets; injecting more capital into the banks; 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 previewing Secretary Geithner's announcement, but I can tell you this: The focus is going to be on increasing the flow of credit and doing it with transparency, with accountability for those who receive support, and with a kind of consistency that, frankly, we haven't seen so far.

So, yes, there will be support for banks so that they remain stable, are in a position to lend. There will be support for the credit markets more generally. And absolutely critically, there will be support and pressure that assures that these needless foreclosures are avoided and that government is acting aggressively to contain the damage in the housing markets.

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

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

STEPHANOPOULOS: And there was a -- a report in the New York Times yesterday that this plan would not require banks to start -- to start 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 that will make certain that we are stabilizing this system and increasing credit -- credit flows, because that's got to be -- that's got to be the objective to increased credit flows.

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

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

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


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

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

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

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

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

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

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

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 time today.

SUMMERS: Thank you.

STEPHANOPOULOS: And now for the Republican perspective, the chairman, 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 with you.

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

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

The reality of it is, Bush inherited a recession. He got us through that recession. The spending was out of whack. There's no doubt about that. And a lot of Republicans had a problem with the level 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 the question now becomes, how do we as a country shore up this economy?

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

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


GOV. CHARLIE CRIST, R-FLA.: This program will help us with education, with health care, Medicaid specifically, infrastructure. These are the kinds of things that produce jobs. It could mean $13 billion 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 Party leaders here in Washington are on the wrong side of the biggest issue, jobs.

STEELE: Well, no -- you know, with all due respect to the governor, I understand where he's coming from. Having been a state official, I know what it means to get those dollars when you're in tight times.

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

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

STEPHANOPOULOS: But that's a job.

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

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


STEELE: Hold on. No, let me -- let me -- let me finish. That is 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 be international. I want to be national. It's a whole different perspective on how you create a job versus how you create work. And I'm -- either way, the bottom line is...

STEPHANOPOULOS: I guess I don't really understand that distinction.

STEELE: Well, the difference -- the distinction is this. If a government -- if you've got a government contract that is a fixed period 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 work when you're done in that job.

STEPHANOPOULOS: Yes, but we've seen millions and millions of jobs 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 away before, and they come back. And the point is that the small-business owners take the risks. They're the ones that are out there in the morning putting that second mortgage on the house, taking the risks that are necessary so that they can employ your -- your kids and my kids and future generations. That's sustainable, long-term growth.

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

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

STEELE: Pardon me?

STEPHANOPOULOS: Your plan would simply be more incentives to small businesses?

STEELE: More incentives -- more incentives to small businesses, at the same time correcting those rules in the markets that have hindered and frustrated the banking process, that have lent itself to drying up the credit markets as we see them, dealing with the Fannie and Freddie crisis more respectfully and more proactively, instead of sitting 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 asking them to deal with the Freddie-Fannie crisis at that time. And the committee said no.

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

STEELE: And I don't think -- and I think a large, significant number of Republicans and -- and Americans out there who aren't Republican -- believe that the best way to handle this is not throwing more 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 a job 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 this issue.

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

STEELE: For a short term, yes. It's a construction job. I agree 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 ways in the economy to stimulate that type of growth?

STEPHANOPOULOS: And your Republican National Committee has passed a resolution about the government bailout of the financial industry. It says, "Be it further resolved that the members of the Republican National Committee call for all Republican members of the Senate and the House of Representatives to oppose any and all further bailout legislation."

Does that mean you expect to oppose the plan that Secretary Geithner will be announcing this week and any future requests for funding?

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

Look, no one's talking about the downstream effect of all this money getting into the markets, let alone what's happening internationally with governments flooding their -- their economies with cash. There's a little thing called inflation. There's a little thing called -- you know, that form of taxation on your earnings is worse than anything else you can do.

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

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

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


STEPHANOPOULOS: ... yet you're already facing some headlines about potential financial irregularities in your past. The Washington Post yesterday...


STEPHANOPOULOS: ... and I want to give you a chance to respond to these allegations -- here was the Washington Post yesterday. It says that "Steele's campaign spending is questioned." It goes on to say, "Michael S. Steele, the newly elected chairman of the Republican National Committee, arranged for his 2006 Senate campaign to pay a defunct company run by his sister for services that were never performed, his finance chairman from that campaign has told federal prosecutors."

Is that true?

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

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

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

STEPHANOPOULOS: Yet the records show -- and I hope you can clear this 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, the company was still in existence. Her lawyers were -- were telling her they were in the process of dissolving the company.

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

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

STEPHANOPOULOS: And all of the other allegations in -- in the article 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 a level and gave him credibility when no one else would. That's disturbing.

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

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

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


STEPHANOPOULOS: So they have told you, you are not being investigated?

STEELE: I have not -- this is the thing. I have not been contacted by the FBI at all. And what we sent to the Washington Post is, 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 the documentation 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 of this -- 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 to come to me. I'm going to take it to them and give them everything that they think they need. And if that's not enough, we'll give them more...


STEELE: ... because I want to clear up my good name. This is not the way I intend to run the RNC, with this over my head. We're going to dispense with it immediately.

STEPHANOPOULOS: Thank you for sharing that this morning.

STEELE: Thank you.