'This Week' Transcript: Timothy Geithner

Transcript: Timothy Geithner

ByABC News
April 17, 2011, 5:00 AM

WASHINGTON, April 17, 2011 — -- AMANPOUR: This Week, a ticking time bomb. All eyes on theexploding national debt.

(BEGIN VIDEO CLIP) PRESIDENT BARACK OBAMA: Doing nothing on the deficit is just notan option.

(END VIDEO CLIP)

AMANPOUR: And that looming threat which could force the UnitedStates government to default.

(BEGIN VIDEO CLIP)

REP. JOHN A. BOEHNER, R-OHIO, HOUSE SPEAKER: There will not bean increase in the debt limit without something really, really bigattached to it.

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AMANPOUR: Tough questions for President Obama's point man on theeconomy, Treasury Secretary Timothy Geithner.

(BEGIN VIDEO CLIP)

GEITHNER: The people who would take this to the edge, to thebrink, they'll own responsibility.

(END VIDEO CLIP)

AMANPOUR: And then the leading edge of the opposition, the TeaParty. Key members join us, 100 days after a revolution swept theminto office. How far are they willing to push the president and theirown party to fulfill their promise to balance America's checkbook?

And later.

(BEGIN VIDEO CLIP)

DONALD TRUMP: We have to take our country back.

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AMANPOUR: What to make of this surprise Republican frontrunner?Plus, Hillary Clinton warns the Arab spring may melt into a mirage inthe desert. But will it? A special reporter's notebook from TerryMoran at the heart of the revolution that is still unfolding.

Welcome to our viewers here and around the world. PresidentObama hits the road this week on a mission to sell his brand of fiscalresponsibility to the American people. This just days after HouseRepublicans approved their dramatic plan to tackle the debt crisis.At issue: A national debt that has ballooned to more than $14trillion. The United States is now borrowing $2 million a minute.

As for the plans, President Obama wants to end the Bush taxbreaks for the wealthiest Americans, and he's calling for spendingcuts, including at the Pentagon, and cost-cutting reforms to Medicareand Medicaid. Republicans are demanding steep spending cuts, no taxhikes, and a massive restructuring of Medicare and Medicaid that wouldfundamentally transform two pillars of the American safety net.

The plans are worlds apart, and the clock is ticking. In amonth, the United States will reach its borrowing limit. In order toborrow more money to meet obligations, Congress must vote to raise thedebt ceiling, and getting Republicans on board may not be that easy.I spoke with Treasury Secretary Tim Geithner about the showdown andthe stakes.

(BEGIN VIDEOTAPE)

AMANPOUR: Secretary Geithner, thank you for joining us.

GEITHNER: Nice to see you.

AMANPOUR: The debt ceiling is going to be the next big battle,it is the next big battle. Can you really spell out in plain Englishfor our viewers what is the impact, if it's not raised, for the UnitedStates and for the average American?

GEITHNER: Well, I want to make it perfectly clear that Congresswill raise the debt ceiling.

AMANPOUR: You're sure about that?

GEITHNER: Absolutely. And they recognize it, and they told thepresident that on Wednesday in the White House. And I sat there withthem, and they said, we recognize we have to do this. And we're notgoing to play around with it. Because we know -- we know that therisk would be catastrophic.

And it's -- you know, it's not something you can too close to theedge.

AMANPOUR: So what they say in private is not quite what they sayin public?

GEITHNER: Well, you know, they have said in public, too, thatthey recognize that America has to meet its obligations.

Again, you know, this is just about the basic trust andconfidence in the United States. It's about the basic recognitionthat we made commitments, we have to meet our commitments. There's noalternative, and they recognize that.

AMANPOUR: What if it wasn't raised? What is the doomsdayscenario?

GEITHNER: I'll be very direct about it, and people understandthis. Again, anybody running a business or -- understands this. Whatwill happen is that we'd have to stop making payments to our seniors-- Medicare, Medicaid, Social Security. We'd have to stop payingveterans' benefits. We'd have to stop paying all the other paymentson all the other things the government does. And then we would riskdefault on our interest payments. If we did that, we'd tip the U.S.economy and the world economy back into recession, depression. I think it would make the last crisis look like a tame, modestcrisis. It would be much more dramatic. The cost of borrowing wouldgo up for everybody, and it would have a permanent devastating damageon our credit rating as a country. And that's why there is noresponsible person that would take any risk that we allow the world tostart to fear that the U.S. would court that -- that tragedy.

Again, if you take it too close to the edge, then people willstart to wonder, really, what are we doing, what are we thinking.

AMANPOUR: You seem to be confident. You're saying that theywill vote to raise the debt ceiling. On the other hand, you're alsoleading quite a concerted campaign with Wall Street, with big bankersto try to persuade the Republicans -- those who may be doubting this-- that they have to do this. So you're not sure?

GEITHNER: Well, we're not -- we're not leading that, because thebusiness community is -- wants to make sure that people up thereunderstand. You know, remember, there's a lot of new people up there,and this is a hard vote for people. And you know, there's been alittle bit of a tradition that people play politics with this. So thebusiness community is doing what we'd expect to make sure people upthere don't miscalculate. And again, the people who would take thisto edge, to the brink, they'll own responsibility for calling it toquestion, our credit worthiness, and that would not be a responsiblething to do.

I'll tell you what -- what's the hard thing to do. The hardthing is not to raise the debt limit, because Congress will always dothat, and they recognize that. The hard thing is to try to takeadvantage of this moment, and get Republicans and Democrats to cometogether and lock in some reforms that will reduce our long-termdeficits.

That's -- that's going to be -- that's really important to do,because the world is watching now. And they want to know thatWashington takes these things seriously, and is willing to get aheadof this problem.

You see the Republican leadership say, and you see the presidentof the United States say, and you've seen a bipartisan fiscalcommission say, that we need to try to lock in reforms that will bringabout -- about $4 trillion in deficit reduction over 10 to 12 years.When they all agree that we have to do it, they agree on the basicmagnitude, the basic -- same basic timeframe, then we have a chancenow to get Congress to lock in some concrete targets and concretetimelines. And then enforce them there, just to make sure it happens,and I think we can do that.

AMANPOUR: And yet, this week, when the president made hisspeech, certainly, many Republicans thought that they were sort ofambushed.

(BEGIN VIDEO CLIP)

OBAMA: And I don't think there's anything courageous aboutasking for sacrifice from those who can least afford it and don't haveany clout on Capitol Hill.

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AMANPOUR: Is this the right tone, do you think, that willencourage people like Speaker Boehner to actually come together and,as you hope, get this thing passed?

GEITHNER: Look, we recognize, the president recognizes, andRepublicans recognize, this is something we have to do and we have todo it in a bipartisan basis. Neither side has the votes to do this ontheir own, and you have to come together to do it.

AMANPOUR: What can you give to the Republicans ahead of thisvote?

GEITHNER: Well, let me step back for one sec.

You know, we, in the years before this crisis, we were piling ona lot of debt. As a country now, we borrow about 40 cents for everydollar we spend. We're on an unsustainable path. And that -- again,that's why it's so constructive and so encouraging you see Republicansnow and Democrats all saying this is an important commitment, andlaying out the same basic order of magnitude cuts that are going to benecessary.

Now, we have very big disagreements on what the right balance is,but there are things we agree on and we can lock in today. The thingswe're going to disagree on for some time, we can take more time toresolve.

But what we think we can do is lock in some targets for deficitreduction, specific timeframe, ways to make sure those happen, thatthere are credible enforcing mechanisms, and we can agree on that nowand still give us some room to debate and to disagree and to negotiateon composition of tax reform.

AMANPOUR: Now that we're talking about budget cuts and that'sthe whole conversation in Washington, is that going to damage therecovery?

GEITHNER: No, I don't -- I think we can do this -- and that's avery good point, I'm glad you raised it.

One of the reasons why you want to do this in a way that'sbalanced and has a medium-term plan, you know, it locks in changesover several years, is because you need to do this gradually so thatyou protect the recovery, and I think we can do that.

But we can make these changes, if we do it carefully, without, Ithink, hurting the economy, without adding to the burden on the middleclass, and without gutting or eroding investments in things we need tomake sure we do in the future.

AMANPOUR: So the president, also in his speech, talked aboutrevenue raising -- taxes, taxes on the wealthy. GEITHNER: Well, I think it's important for people to recognizethat we cannot afford to extend these tax cuts for the wealthiest 2percent of Americans. We can't afford it and we have to do taxreforms.

AMANPOUR: So Speaker Boehner says that's a non-starter.

GEITHNER: But there's no surprise to that. You know, theybelieve that.

But I think, you know, Chairman Ryan's budget helps explain whythis is going to be essential, because if you want to extend these taxbreaks for the top 2 percent, then either you have to ask me to go outand borrow trillions of dollars from the Chinese or from foreigninvestors or from Americans, from our children, or you have to cut --as he proposes to do -- very, very deeply into basic benefits forseniors, the disabled, the poor. And we don't need to do that inorder to restore balance for our fiscal position.

AMANPOUR: Will raising taxes on the wealthy be enough to reallymake a dent in the deficit? Many economists are saying that you'regoing to have raise taxes on the middle class as well.

GEITHNER: Yes, very important question, and I'm glad you raisedit.

And think about it this way. If you -- it's true we have tobring these deficits down, but if you do it in a balanced way, thatincludes spending savings, reforms to health care and tax reform, thenyou can do it in a way that has acceptable costs for the economy,preserves our capacity to invest, and doesn't add to the burden of themiddle class.

And the reason why that's true is because a -- we have a hugeamount of spending in the tax code, special tax breaks that godisproportionately to the most fortunate Americans.

So it is possible to do this, the president believes we can dothis, I believe we can do this, without adding to the burden on themiddle class.

AMANPOUR: Where would the specific reforms be? The presidenttalked about closing certain loopholes and certain deductions forpeople. Where would the specifics be?

GEITHNER: Well, the two basic foundations of this we think thatwould be responsible, are, again, to let the tax cuts -- temporary taxcuts put in place under President Bush for the top 2 percent -- letthem expire.

And the second is to reform the tax code by eliminating some ofthese special expenditures, special tax breaks, again, that godisproportionately to the wealthy Americans.

AMANPOUR: Which ones? GEITHNER: Remember, only -- only 30 percent of Americansitemize. And those benefits, even like the mortgage interestdeduction that lets people have two homes, pretty expensive homes,those are things, again, if you target them on the most fortunateAmericans, they can afford to take a little bit larger share of theburden. They can afford to do that.

AMANPOUR: The IMF, and there's the meeting this weekend, hasbasically said that the United States is not doing enough right now toattack its deficit problem, and that dramatic measures, drasticmeasures should be taken.

Are you going to take any more drastic measures? I mean, they'recomplaining.

GEITHNER: We -- I think we all agree, and again, it's importantfor people to recognize, Americans to recognize, that the world iswatching us. They want to see, is America up to this.

Of course we're up to this. We can handle this challenge. Butit does require that we act. We can't just keep putting this off. Wecan't get behind this risk. Because then if we do, then the worldwill lose confidence in us and you'll see growth weaker and Americanswill pay more to have to borrow, and more of our savings will have togo to foreign countries. So we have to do this.

AMANPOUR: And yet, your very close ally, Britain, is in a yearor more of its austerity program, and the results don't look great.Retail sales are plunging, income looks like it's going down. I mean,that can't give you a lot of confidence, can it, on this austerityprogram?

GEITHNER: We're in fundamentally different positions, the U.K.and the United States. Their challenges are much greater challenges.They had a much larger hole to dig out, a much larger financial systemthey had to reform, and they have a much harder road ahead of them.

We're in a fundamentally stronger position. And although we haveto move too to reduce our deficits, I'm very confident, if we do it ina balanced way, that you can do this without putting at risk thisexpansion. You have to do it gradually.

And again, this is why you want to do it over a multi-year periodof time.

AMANPOUR: A lot of views this week, a lot of disappointmentamong many people that many of those big bankers and financialinstitutions responsible for the financial crisis have still not beenprosecuted, punished.

I mean, how does that bring confidence to the American people?

GEITHNER: Well, let me just say, I agree that you saw a --really a huge loss of confidence in the average American in ourfinancial system and how it works, whether it protects them fromabuse, whether it's a fair system with the kind of integrity you need.And financial systems require trust and confidence. And you saw inthis crisis just terrible mistakes, devastating loss of confidence.

AMANPOUR: Do you think that some of these people should havebeen at least prosecuted, punished?

GEITHNER: You know, that's really a question for my colleaguesin the enforcement --

(CROSSTALK)

AMANPOUR: I know it is. I know it's not your job. But in termsof trying to build confidence in the American people?

GEITHNER: I'll tell you what I think. I think two things arevery important. One is, we have to have a more stable system. Wehave to have a system that provides better protection for consumersand investors, and that's what we're building. That's what Congresspassed, and that's really my job, to make sure that happens.

But that is not enough. You also have to have confidence in theAmerican people that our enforcement authorities will hold peopleaccountable, make sure they abide by those rules.

You need both those two things, and we're starting to rebuildthat. And I'm very confident that we're going to be -- do a betterjob and be ahead of the rest of the world in doing that.

AMANPOUR: So you've had a pretty rough couple of years. It'sbeen a pretty thankless job in the -- trying to get out of thisrecession in a fragile recovery now. Secretaries Clinton and Gateshave said they won't be around for a second term. Will you?

GEITHNER: I got a lot on my plate still, and we've got a lot ofchallenges ahead. And I want to tell you, this is hard, but I believein this work and I enjoy these challenges.

AMANPOUR: So you'll stay.

GEITHNER: Well, again, not going a -- I'm going to keep attrying to fix what's broken here, make sure we're helping get theeconomy growing and help deal with these long-term challenges.

AMANPOUR: Secretary Geithner, thank you very much, indeed.

GEITHNER: Nice to see you.

AMANPOUR: Thank you.

(END VIDEOTAPE)

AMANPOUR: Up next, Tea Party nation. Sarah Palin and DonaldTrump rallying the faithful across the country this weekend. Themovement has already taken Congress by storm and changed theconversation here in Washington. We've gathered a group of Tea Partyfreshmen to ask whether they've only just began the fight.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SARAH PALIN, FORMER ALASKA GOVERNOR: We didn't elect you to juststand back and watch Obama redistribute those deck chairs. What weneed is for you to stand up, GOP, and fight.

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AMANPOUR: Sarah Palin at a Tea Party rally in Wisconsin thisweekend. Her message to the movement's representatives in Congress,don't sell out your principles. Those principles -- small government,big cuts -- are setting the agenda in Washington these days.

Tea is the drink of choice on Capitol Hill and as John Donvantells us, it may be the flavor of the month at the White House too.

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JOHN DONVAN, ABC: Tea? No, that would be water, and there youhave beer, champagne, soda pop, a nice, cold smoothie, a shot oforange juice, and yes, OK, he also drinks tea. In fact, it seems hehas had to swallow quite a bit lately. So much so, that this week,when the president at last put forth a budget proposal of his own, itsounded somewhat tea-stained in places.

OBAMA: We have to live within our means. We have to reduce ourdeficit.

DONVAN: A message not at all like the theme he rode into office.Remember?

OBAMA: I do believe the government should do that which wecannot do for ourselves. That's why I'm going to create a $25 billionfund to help states and local governments pay for health care, pay foreducation.

I do think it's important for the federal government to step up.

DONVAN: But then some new folks came to Washington, and theyhave really changed the conversation. The 59 members of Congresssworn in this season who are not only Republicans, but who are alsomarching behind this, and the movement that has claimed it for itself,the Tea Party, which wants smaller government and lower taxes, whosesupporters a mere two years ago were only really just gettingacquainted with each other when they took to the streets. A lot offolks who didn't do politics before, and now some of them are inpolitics.

He owned a pizza parlor. He's a dentist from Washington state.A funeral director from Florida. A nurse. And he, a car salesmanfrom California.

They came in saying they wanted to change things. Wait, that washis line.

OBAMA: That's what change is.

DONVAN: But the Tea Party folks may, may have a better shot atthat, because their obvious distaste for the politics of compromise --that is what changed the conversation, and almost shut the government.And yet when a deal was reached that cut the budget by $38.5 billion,which is historic, they had wanted 100 billion. That's why many ofthem defied their own Republican House Speaker John Boehner, votingagainst a deal that he reached so that then he needed a lot ofDemocratic votes to pass it, raising the question who is leading whom?They of course are still going to want big tax cuts, and that's goingto be a fight, because he also talked this week about government thatis worth saving. And said.

OBAMA: There's nothing serious about a plan that claims toreduce the deficit by spending a trillion dollars on tax cuts formillionaires and billionaires.

DONVAN: Because, to him, that tea sounds like Kool-Aid, and thathe's not drinking.

I'm John Donvan for "This Week" in Washington.

(END VIDEOTAPE)

AMANPOUR: And joining me now to discuss lessons learned and theroad ahead, four Tea Party stars from the House freshman class. Allof them new to elected office. With us from Florida, CongressmanAllen West. From North Carolina, Renee Ellmers. And here in theNewseum with us, Congressman Joe Walsh of Illinois, and SteveSoutherland, also of Florida.

Thank you all for joining us. Thank you, and welcome back to theprogram.

Steve Southerland, let me ask you first. You all came toWashington to tame that deficit, to cut spending. Now this latestbattle is going to be about raising America's debt ceiling. Are yougoing to vote for that? You heard what Secretary Geithner told me,that it would be catastrophic if that didn't happen?

SOUTHERLAND: Sure. Well, let me say this. You know, they arepushing for a single subject vote, a clean debt ceiling vote, and I'mnot for that.

Look, we've got to have some guarantees going forward, caps andsome guarantees that if we raise that debt ceiling, that we get thiseconomy on a trajectory to where we service our debt, like any banker.A banker wants to know--

AMANPOUR: So you can see raising -- you could see voting for itif something was given to sweeten it?

SOUTHERLAND: Well, it's going to have to be a lot more than justsweetening it. I mean, it's going to have to be concrete. And I'veyet to see that from the administration. They talk about thenecessity of raising the debt ceiling, yet they've proposed nothingregarding guarantees that we can satisfy our debt long-term.

AMANPOUR: They have talked about trying to reach some kind oftargets and some kind of compromise around what both sides are talkingabout now, which is cutting spending.

AMANPOUR: Congressman Walsh, do you believe when Tim Geithnersays, and also the chairman of the Fed, Ben Bernanke, that not raisingit could be a recovery-ending mistake?

WALSH: I wish -- Christiane, I wish they got as excited andanimated about all of this debt we're placing at the feet and on thebacks of kids and our grandkids. That's what sent us here. Look,look, business as usual in this town is no longer going to exist. Wewere sent here -- the American people sent us here, because in a largeway they recoiled against a lot of this spending the president wasputting upon us.

If you're going to ask this Congress to support a raise in thedebt ceiling, there has got to be something structural on thisspending site. Because we've got to cut up this credit card.

A couple examples. I sponsored two weeks ago a balanced budgetamendment in the House. Something very structural that would makethis town do what households do, what a number of states do. It'sgoing to have to be tied to something pretty major like that.

AMANPOUR: So I asked you about the stakes that Tim Geithnerraised. Congressman West, do you believe it when the secretary of thetreasury, the chairman of the Fed, say that the stakes are this high?

WEST: Well, one of the things, having served 22 years in theUnited States military, I don't believe in leadership by fear andintimidation. I think that leaders have to come up with viablesolutions, I agree with one of the things that Joe Walsh just broughtup, we need to have a balanced budget amendment.

We need to put in spending control measures, such as a cap onfederal government spending. I say 20 percent, because that'shistorically a good spot to be at. Right now federal governmentspending per the GDP is about 24 percent, and the president is goingto take it up to 25 or 26 percent.

But I think also now is a great time where we can cut ourcorporate business tax rate in half, bring it from 35 percent downfrom 22 to 20 -- 20 to 22 percent. Because there's a lot of capitaljust sitting out there we could use to invest in long-term sustainablejob growth.

But the most important thing, we should have some type of triggermechanism so that when you reach a certain percentage of getting closeto this debt limit, there are automatic spending cuts that come rightin.

This is not about a debt ceiling being raised. This really comesdown to debt suggestion, because this is about 73 or 74 times we'vedone it. We have got to be fiscally responsible.

AMANPOUR: All right.

WEST: And right now we're not showing that to the Americanpeople.

AMANPOUR: Let me ask you about the Paul Ryan budget, which allof you voted for this week. Congresswoman Ellmers, the House did passthat budget and everybody voted for it, as I said. And it includes aradical restructuring of Medicare, essentially converting it to avoucher system, sort of privatizing it.

Now the Congressional Budget Office estimates that the averagesenior will then have to end up paying an extra $6,000 or more out oftheir own pocket, I mean, how do you think that that will sit with thevoters? With the American people?

ELLMERS: Well, let me just say, Christiane, that, first of all,as a nurse, you know, Medicare is an issue that we absolutely have todeal with. And, as you know, you mentioned in the Ryan budget thatthis issue is going to be addressed.

It is not a voucher system. Basically what we will be doing isallowing seniors to be able to make the choices for their health care,the same that we in Congress are doing. It's the very same basicplan. And it actually saves money. It saves money in Medicare overtime and it actually increases the coverage, but at the same time, italso increases coverage for those in the low income areas as well.

And so that is why I am very much for the Ryan budget. I thinkit answers all of the issues that we've just been talking about. Andwe can go...

AMANPOUR: Let me just ask you, because you raised the issue thatit provides you the same -- it provides people the same sort ofbenefit that Congress has. You know, obviously, there are bigdifferences between members of Congress and the very poor.

And most economies -- economists, whether you're quibbling overnumbers, do actually say that seniors will not be able to keep up withthe rising costs, they will have to pay out of their pocket. I mean,I guess I'm still asking, is that fair?

ELLMERS: Well, as it is -- no. Actually that is not correct.And, as it is right now, if we do not address Medicare, as it is, itwill be -- it will not be there for myself, it will not be there forour children or our grandchildren. And we have to address the issue.And we are. And the Ryan budget does that.

And it actually improves upon all of those areas ofunsustainability that we're faced with. So, you know, the numbersplay out. AMANPOUR: OK.

ELLMERS: And I'm very much in favor of it. Again, we must saveMedicare. We have a spending problem in this country, not a revenueproblem.

AMANPOUR: All right. Well, you raised revenue problem. Let meask you too, congressmen Walsh and Southerland. The Ryan budget doesnot talk about raising revenues. President Obama's proposal does,eliminating tax cuts on the wealthy.

Can you really sustain what everybody is calling for just by cutsin public services? Doesn't there need to be revenue-raisingmechanisms?

SOUTHERLAND: Go ahead, Joe.

WALSH: Christiane, you raise revenue by growing the economy.And everything this president has done the last two years has goneagainst that. You get taxes and regulations off the backs ofbusinesses so that revenues can increase.

AMANPOUR: I know -- I know that that is your position. Butthere's so much evidence, even going back to Ronald Reagan, where hedid tax cuts and in fact the debt increased, and then he had to maketax increases. I mean, can you really cut public spending by thatamount and just expect to balance the budget?

WALSH: But -- and Steve will say this, in the '80s, governmentrevenues went up. We didn't cut spending. Revenues went up in the'80s. Every time we've cut taxes, revenues have gone up, the economyhas grown.

Look, Christiane, I've said this before, the president of theUnited States ought to be ashamed of himself. And I don't know whyyour profession hasn't gotten on him more. Two months ago he presentsa budget and doesn't even talk about entitlement reform. And then allof a sudden last week he gets a redo?

The Republicans are leading on this, perfectly prepared to takewhatever political hits we have to take, because the crisis is sosevere. I wish he would be a part of this.

AMANPOUR: But that is an interesting point you made, abouttaking the hits that you have to take, because, for instance, thereare all sorts of ads now, going out about Medicare, and being carefulabout it.

You know, the Republicans actually tried to put those ads out in2010 and did get seniors on their side. So you're not concerned thatthese cuts and this restructuring of Medicare is actually not going tobe good for you at the voting?

SOUTHERLAND: Well, listen, great leadership understands thatsometimes you're going to take hits. And you don't make this decision-- you don't make decisions in the best interests of American peopleand expect to be applauded for everything you do.

Look, we have dug ourselves a hole and the only way that we candig ourselves out or climb out of this hole is to make some verydifficult decisions. I've said, numerous times here on the Hill, Imay lose 2012, but I'm not going to lose me in this process.

And so we've got -- if we care about these programs, we have tomake decisions now in order to save them.

AMANPOUR: All right. Well, thank you very much indeed, all ofyou, for joining us.

And up next, our powerhouse "Roundtable," with insight from AliceRivlin, the Clinton budget director who helped Paul Ryan with hisbudget; political analysis from Matthew Dowd; President Obama's closefriend, Massachusetts Governor Deval Patrick; and our own George Will.That's ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: These are the kinds of cuts that tell us we can't affordthe America that I believe in and I think you believe in. I believeit paints a vision of our future that is deeply pessimistic.

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(BEGIN VIDEO CLIP)

REP. PAUL D. RYAN, R-WIS.: What we got was a speech that wasexcessively partisan, dramatically inaccurate, and hopelesslyinadequate to addressing our country's pressing fiscal challenges.

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AMANPOUR: An acrimonious week of punch and counterpunch inWashington, President Obama and House Republicans outliningdramatically different visions for the size of government and its rolein American life.

This conversation will be the foundation of next year's election.

And joining me today to make sense of it all, ABC's George Will;Alice Rivlin, Bill Clinton's former budget director, who has workedclosely on Medicare overhaul with Congressman Paul Ryan; Matthew Dowd,former chief political strategist for George W. Bush; and PresidentObama's close friend, Massachusetts Governor Deval Patrick. His newbook is called "A Reason to Believe."

Thank you all for joining me today.

PATRICK: Good morning.

AMANPOUR: Good morning to you all.

George, the president came out and presented his vision. So thebattle is enjoined, as we saw.

Is this a beginning to a great compromise to where this countryneeds to be?

WILL: I don't think so, not yet. He didn't present analternative budget. I can't -- maybe Alice can remember this -- Ican't, in 40 years in Washington, remember a president submitting abudget and two months later saying, "Oh, never mind" -- say aMulligan, in effect.

So, in effect, he has not yet presented other than a critique ofPaul Ryan's budget. Now, both parties are clearly making a wager.The Republicans are wagering that the American people mean what theysay and that it's different this time. The president's party iswagering that they don't, that they're still rhetorically conservativebut operationally liberal.

RIVLIN: I thought the president did a good job. He laid out aDemocratic alternative. He made clear that he is serious about allparts of the budget, serious about getting the deficit and the debtunder control and that that has to include the entitlements, Medicareand Medicaid; it has to include defense as well as discretionaryspending cuts, and it has to include the revenue side.

The main problem with Paul Ryan's budget is he thinks we can doit without any more taxes, and indeed by extending tax cuts to upper-income individuals. And that means very dramatic, draconian cuts, inspending, especially if you leave out defense.

AMANPOUR: I'm going to get to that right in a second.

But I do want to ask you, because so many people -- and you're soclose to President Obama, Governor Patrick. So many people havecomplained that, even on the big issues he cares for, he hasn't reallygone into the fight, and, sort of, outsourced them to allies and inCongress. Do you think this now means he's going to fight for what hebelieves in?

PATRICK: Well, I thought the speech, which I didn't see -- I'veread -- was a real leadership moment. I think the president took usto the place where we really ought to be debating. It's been thesubtext for a long time. And that is, what kind of country do we wantto live in?

That's the underlying questions in terms of the budget and thedeficit and health care as well, for that matter. And that's what weshould be debating. He laid out a clear vision of the kind of countrythat he believes in, that I believe in, I think most Democrats, andfor that matter, most Americans believe in. And it's a -- it's afiscally responsible but also mutually responsible kind of community.And I support that.

DOWD: I -- to me, this whole budget fight demonstrates acomplete abdication of responsibility by both political parties inthis. Both political parties aren't willing to tell the truth to theAmerican public in different ways.

The Republicans aren't willing to tell the truth to the Americanpublic that we don't have enough revenues to pay for everything thatwe have. The Democrats are unwilling to tell the truth to theAmerican public that we cannot live anymore with the entitlementprograms as they exist today. To me, the president -- he gives a good speech; he does all that;Republicans make these grand announcements, but in the end, they areunwilling to tell the American public the truth.

They keep telling the American public they can have it all andthey don't have to pay for it. To me, the difference between the twopolitical parties today is you have a Democratic Party that believesin big government that shouldn't be paid for, and you have aRepublican Party that believes in a slightly less big government thatshouldn't be paid for. That's the problem.

AMANPOUR: Let's go back to the Paul Ryan budget, which youworked on elements of. I just -- I know it's not exactly as it turnsout.

RIVLIN: Oh, it isn't -- it isn't at all. I worked with oneelement. Paul Ryan and I have worked together on a concept forMedicare reform called premium support. It's very much like what theydo in Governor Patrick's state. But the form in which Ryan put it inhis budget was not the form that I support -- much, much lower andmuch more drastic cuts for seniors.

But I don't support the Ryan budget. I think it illustrates howmuch you'd have to cut if you don't raise taxes and you don't cutdefense.

AMANPOUR: So you heard the argument with the Congresspeople,just in the previous segment, when they were talking about Medicare.And the whole idea is that, apparently, according to economists, thatthe elderly would have to contribute more of their own, under thisreform. Is that sustainable?

RIVLIN: Some of the elderly will have to contribute more,particularly those in upper-income groups. Medicare, in its presentform, is not sustainable. We -- it is growing faster than the economyis growing and faster than we can afford.

So we have to have a reform of Medicare, phased in gradually.It's not going to throw granny in the street. And I'm granny.

(LAUGHTER)

But it's got to reduce the rate of growth of Medicare. Now, thepresident's for that, too. He just has a different way of doing it.

PATRICK: Christiane, may I just build on that? Because I wantto come back to Matt's, I think, really important points, although Iwant to differ with your -- with your outcome.

This notion that -- that the cartoons of the party, of ourrespective parties, don't talk squarely to the American people, Ithink, was exactly what the president was going at in his remarks thisweek. He talked about the importance of making Medicare and Medicaidsustainable. He has a different strategy for doing that than the PaulRyan budget. He talked about the importance of additional revenue and sharedsacrifice. He talks about and he has supported spending cuts, andthere's direct evidence of that. So I think that what the presidentis doing is exactly what Matt, if I may say, Matt, if you don'tmind...

(LAUGHTER)

... is suggesting hasn't been done for a long, long time.

AMANPOUR: Let me ask you...

WILL: Alice has uttered two inconvenient truths here that I'dlike to hear from the president. One is we've made promises we cannotkeep; that is, it's unsustainable on its current path. And the otheris that people are going to have to pay more. That's the point.

We have a 12-cent problem. 12 cents is the portion of everyhealth care dollar that the person receiving the health care pays, theother 88 percent paid by someone else. When Jack Kennedy waspresident, it was 47 percent. People had more skin in the game andhad a whole different approach, therefore, to the health care system.

AMANPOUR: But you say people have to pay more. But, again, weget back to this revenue-raising, taxes and all the rest of it. Imean, it looks like people are willing to pay more for the things thatthey believe in and that they really want.

DOWD: The problem -- the problem we have is the American publicis always willing to pay more for effective, efficient government.They're always willing to do that. But the American public going tohave a very difficult time believing that tax increases at a timewhere they don't trust that government does the job well; they don'ttrust that they know how to keep their pocketbook balanced, that theydon't know what to do when the government doesn't have a plan forthings to do. Until you prove to the American public that they shouldtrust the federal government, it's going to be very difficult to raisetaxes.

AMANPOUR: We're going to break and -- take a break and comeback. And up next, Trump turns up the heat.

(BEGIN VIDEO CLIP)

TRUMP: Whether you liked him or not, George Bush gave us Obamaand I'm not happy about it. I'm not happy about it.

(APPLAUSE)

We have a disaster on our hands. We have a man right now thatalmost certainly will go down as the worst president in the history ofthe United States.

(APPLAUSE)

(END VIDEO CLIP) AMANPOUR: He's ahead in the polls, but does he have the ghost ofa chance? The roundtable take on the Donald.

(COMMERCIAL BREAK)

AMANPOUR: Twenty-twelve heats up with Donald Trump on the trailand a hot-mike hiccup for President Obama.

AMANPOUR: More with our "Roundtable" next.

(COMMERCIAL BREAK)

AMANPOUR: Donald Trump wants you to know that he has the brains,the bucks, and the bluster to take on President Obama. He's tellinganyone who asks him. But the question remains, is the celebritybillionaire for real? And if he is, does he have a chance?

(BEGIN VIDEO CLIP)

DONALD TRUMP, REALITY TV STAR: If I decide to run, and if I win,I will not be raising taxes but will be taking in billions of dollarsfrom other countries, and will be creating vast numbers of productivejobs, productive. Productive. And will rebuild our country. TheUnited States will be great again.

(END VIDEO CLIP)

AMANPOUR: And welcome back to our "Roundtable." So quickly, doesDonald Trump have a chance? Is this a real candidacy?

DOWD: He has a chance, just like everybody has a chance. Butthe ability for him to go from celebrity to politician, yes, I thinkis going to be very, very, very hard. I don't think -- I think in theend, his best day happened the day he started this process andeverything else from there will be downhill.

AMANPOUR: And while the candidates entered the race quitequietly, Mitt Romney. And he's busy trying to run away from hishealth care program. But as governor of Massachusetts, it's working,isn't it?

PATRICK: It's working brilliantly. We are -- over 98 percent ofour residents have health insurance today, over 99 percent ofchildren. It has added 1 percent to state spending. And we've gotour next chapter, which is to bring the system costs down, and getthose costs passed on to rate-payers.

But, you know, as an expression of our values in Massachusetts,that health is a public good, and that everyone deserves access tocare, we're there. And we have got more to do, but really proud ofit.

AMANPOUR: In the "new Medicaid," as it has been laid out underthe Ryan proposal, it gives big block grants to the states, right? Isthat good? Will that help? Will that help somebody like GovernorPatrick?

RIVLIN: Only if it has conditions on it. Now I'm not worriedabout Governor Patrick's state, but there are certainly states thatwould run away from their responsibilities to low income Americans.

So, if one were to go the block grant route on Medicaid, onewould have to have very strong controls on the amount of spending, andthat would not allow states to just say, well, we're going to forgetabout poor people.

AMANPOUR: And let me get to another big issue that came up thisweek. Secretary Clinton talked about what's going on in the rest ofthe world, in the Middle East and elsewhere, saying, unless one'scareful, this revolutionary fervor could turn into a mirage in thedesert.

Right now, the United States is locked in literally combat to getGadhafi out. There are all sorts of reasons that people are sayingthe United States should really commit its major assets, for instance,tank-busting, helicopters, the kinds of planes and aircraft that theyneed in order to break the stalemate. Why wouldn't they do it?

WILL: Because that's not why we're there. It seems almost (ph)niggling to call attention to the fact that we went in to protect thepeople of Benghazi.

AMANPOUR: Right. But there's a medieval siege around Misrataright now.

WILL: Christiane, this is the 50th anniversary of the Bay ofPigs invasion, I never thought I'd live to see a more feckless use ofAmerican power, but lo and 'hold, you live long enough, you get to seesomething like Libya.

We have no coherent exit strategy because we have no coherentobjective, other than to get someone else to overturn the existingLibyan government so that people we don't know can take over.

DOWD: To me, the big problem is the difference between Egypt andLibya, is that in the history of the world, externally imposed by themilitary democracies never work. We've basically seen that in Iraq.We're bogged down in Iraq. We've seen that in the history of thiscountry. When the people do it themselves, and rise up themselves,and do it themselves, it works. When it's imposed militarily from theoutside, it usually doesn't work.

AMANPOUR: But does it not concern you? And here we are -- andthe president has committed himself now. To draw back right at themoment where they could actually break the stalemate, is that smart?

DOWD: Well, I think the president in a situation where he hasgot our country involved in two wars. He didn't bring him there, buthe is involved in two wars. We've now had -- we're exercising theonly -- we're the only military power that exercises across the world.

We have very little resources to apply ourselves all over theworld in many ways after the discussion we just had about the budgetdeficit, when the military needs to take on some cuts, it's very hardfor him to make a decision to impose the military.

AMANPOUR: So let's get back to the budget deficit. And we heardwhat Tim Geithner talked about. People who do not vote to raise thedebt ceiling, he said, will own the catastrophe that follows. Do youthink that it will be raised and there will be some kind of compromisereached on that?

RIVLIN: I do. I think it must be raised for the same reason asthe secretary said, it will be a disaster not to. But we do need tocome together, the Republicans and the Democrats, around a plan or aplan to get a plan, a plan to force a plan. And I have a great dealof hope for the six senators, the so-called "gang of six" in theSenate, three Republicans, three Democrats, very serious folks,ranging from Dick Durbin from Illinois, who is a serious liberal, toTom Coburn from Oklahoma, a serious conservative.

And they were both on the president's commission, both signed it.They understand, and their colleagues, and I think a lot of others inthe Senate, that we have to come together, and reach a compromise.

AMANPOUR: And on that note, we're going to continue thisconversation in the "Green Room." And when we return, we'll take youinside the revolution with a special "Reporter's Notebook" from TerryMoran, on the dramatic changes transforming the Arab world.

(COMMERCIAL BREAK)

AMANPOUR: That was Cairo's Tahrir Square, jubilation just afterHosni Mubarak resigned after ruling his country with an iron fist for30 years.

I spoke with Mubarak in the final days of his rule. Now he isgone, but how much have things actually changed? Across the regionthe uprising continue, in Syria, Bahrain. While in Libya, Gadhafi isstill hanging on after weeks of NATO air strikes. What does it meanfor the future of the region?

Secretary of State Hillary Clinton offered a sobering warningthis week.

(BEGIN VIDEO CLIP)

SECRETARY OF STATE HILLARY RODHAM CLINTON: When we meet again atthis forum in one year, or five years or 10, will we see the prospectfor reform fade and remember this moment as just a mirage in thedesert?

(END VIDEO CLIP)

AMANPOUR: So, will dreams of democracy slip into the sand? ABC'sTerry Moran filed this dispatch from the revolution.

(BEGIN VIDEOTAPE) TERRY MORAN, ABC NEWS CORRESPONDENT: This was no mirage, it wasone of the most stirring and most hopeful events of resent years. Apeople rising. A dictator falling. A nation, reaching for a new eraof freedom. It all seemed so real.

Two months later, Cairo, a city that has seen so many centuriesof rulers, and revolutions and conquers, Cairo has returned to itsancient rhythms and ways, but a shadow has fallen across the city,across the hope of those heady revolutionary days.

Eight days ago, violent crashes erupted in Tahrir Square whichwas the center of the region which was the center of the revolutionthat toppled President Hosni Mubarak, but this time protesters weretargeting the military government that took hit place and promised atransition to democracy. Two were killed, dozens injured. It was anominous sign of increasing frustration with the change of pace here.And there are other disturbing signs.

He was charged with insulting the army.

MAGED MAHER, ACTIVIST: Yes. Criticizing the army, most of time,considered as insulting.

MORAN: But I thought you had a revolution here?

MAHER: I thought the same.

MORAN: Maged Maher is an activist and a good friend of theimprisoned blogger, Michael Nabil, whose case has become a humanrights flash point here.

Nabil was hauled to a military court last month and sentenced tothree years in prison for what he wrote.

UNIDENTIFIED MALE: We're not free yet. We went to streets andwe shouted loudly that we want freedom. If people go to jail, becauseof expressing an opinion, so we don't have it yet.

MORAN: So a question hangs over Egypt and the answer to itmatters to the whole world.

Are you free today?

UNIDENTIFIED MALE: We are free. And we are to create the systemnow.

MORAN: Abdel Rahman Yousuf (ph) is a poet. And he was one ofthe more prominent activists in the revolution.

We first met him when he was camped out in Tahrir Square duringthe protests. We returned to the square with him on Friday. A fewprotesters were there, urging national unity. The biggest securitypresence was the traffic cops.

And we found Yousef (ph) is still cautiously optimistic like somany Egyptians we met. UNIDENTIFIED MALE: We are free people but we want to be a freenation.

MORAN: It matters so much because Egypt with 85 million peopleand ancient culture have long been the center of gravity of the wholeArab world. The fall of Hosni Mubarak here helped to light the firesof revolt in country after country.

Gas prices, the dangers of terrorism, relations between Islam andthe west, it's all riding on these revolutions. And it turns out,revolution is hard and tricky work, even, perhaps especially in Egypt.

The real question in this country is did they have a revolutionor a coupe? The military has power but so do the people and theprotesters here. And the situation right now is a delicate, sometimestense balance between the guns of soldiers and demands of the people.

WAEL GHONIM, GOOGLE EXECUTIVE: I don't think Secretary Clintonwas right about the comment of the revolution becoming a mirage.

MORAN: Wael Ghonim, an Egyptian executive with Google is aleader. He helped organize it on Facebook and other social media andhe was imprisoned by Mubarak's regime during the protests. Today hetoo wants to give the military the benefit of the doubt.

GHONIM: The army is actually so far is trying to protect therevolution. They're doing mistakes just like any system in the world.Plus this is completely new to them. But at the end of the day, theyhave been showing a great deal of commitment towards protecting therevolution.

MORAN: The military government has scheduled elections laterthis year and the generals did seem to respond to the people's demandthis week when Mubarak himself and two sons were arrested forcorruption and other charges.

So, is Egypt heading towards true democracy or is it a mirage?

There are no guarantees here, but the people are rising and thereis no going back.

For This Week I'm Terry Moran in Cairo.

(END VIDEOTAPE)

AMANPOUR: And we will keep monitoring those stories. And when wecome back, a moment in history, 50 years since an iconic turning pointin the Cold War. A milestone for a perpetual thorn in America's side.

(COMMERCIAL BREAK)

AMANPOUR: With attention focused on falling dictators across theworld, a dictator right next door marks a milestone for endurance.There are parades and commemorations in Cuba this weekend on the 50thanniversary of the Bay of Pigs invasion, a turning point of the ColdWar. ABC's Jim Sciutto is in Havana and you can find his full reportonline at abcnews.com/thisweek.

That's it for our program. You can follow me online on Twitterand abcnews.com. For all of us here at This Week, thank you forwatching and see you again next week.

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