'This Week' Transcript: Bonuses, Bailouts and Budgets

Mar. 22, 2009 — -- ABC'S "THIS WEEK WITH GEORGE STEPHANOPOULOS"

MARCH 22, 2009

SPEAKERS: GEORGE STEPHANOPOULOS, HOST

JARED BERNSTEIN, CHIEF ECONOMIST TO VICE PRESIDENTBIDEN

SEN. KENT CONRAD, D-N.D.

SEN. SUSAN COLLINS, R-MAINE

REP. MIKE PENCE, R-IND.

[*] (BEGIN VIDEO CLIP)

STEPHANOPOULOS: Good morning, and welcome to "This Week."

Bonus anger boils over.

(UNKNOWN): Arrogance, incompetence and greed.

STEPHANOPOULOS: Washington responds.

(UNKNOWN): The people have said, "No." In fact, they've said,"Hell no."

(UNKNOWN): The only way to get their money back is to tax itback.

PRESIDENT BARACK OBAMA: They've got a bomb strapped to them.You don't want them to blow up.

STEPHANOPOULOS: Did AIG and the banks get what they deserve orhas Congress gone too far? What does the bonus battle mean forObama's budget, the treasury secretary, and his new bank plan?Questions for top players from the House, the Senate, and the WhiteHouse, our "This Week" debate.

Then, the president hits Leno's couch and ESPN, but should hehave stayed home? That and all the week's politics on our roundtablewith George Will, Donna Brazile, Robert Reich, and ABC's businesscorrespondent Betsy Stark.

And, as always, the Sunday funnies.

COLBERT: Let's go get AIG!

(END VIDEO CLIP)

ANNOUNCER: From the heart of the nation's capital, "This Week"with ABC News chief Washington correspondent George Stephanopoulos,live from the Newseum on Pennsylvania Avenue.

STEPHANOPOULOS: Hello again.

Well, you can sum up Washington's agenda this week in just twowords: anger management. The key question: how to deal with therage unleashed by those AIG bonuses without undermining the broadereffort to fix our financial system.

To debate what's been done and what comes next, we're joined thismorning by Republican Senator Susan Collins, a key member of theSenate Appropriations Committee; Congressman Mike Pence, the chairmanof the House Republican Conference; from the White House, JaredBernstein, chief economist to Vice President Biden; and the chairmanof the Senate Budget Committee, Kent Conrad.

Welcome to all of you. And let's begin with those AIG bonuses.

Senator Conrad, the House passed a 90 percent excise tax on anyfirm that got more than $100 billion bonuses to any firms getting morethan $5 billion from the federal government. Will the Senate pass asimilar excise tax?

CONRAD: The simple answer is, "I don't know."

STEPHANOPOULOS: Will you vote for one?

CONRAD: I've got my doubts whether that's the best way to dothis. I think there are certain constitutional questions about theimposition of a tax on a limited group of people. But, look, I don'tthink there's any question we've got to try to do everything we can toget the bonuses back.

You know, if -- if I were in charge of AIG, I'd call in thesefolks and I'd say, "Look, you either give them back or you're fired."That we can do, because we own the company.

STEPHANOPOULOS: But the government doesn't yet have the ability-- the treasury secretary is seeking it -- to get the resolutionauthority. But right now, they say -- the White House says thegovernment doesn't have that ability.

CONRAD: I'll tell you who does have the ability, is the manwho's running AIG. He is in charge of the company. He could call inthose people and say, "Look, you either give it back or you're goingto be fired."

There's no way you can justify, when the federal government isputting up $170 billion to rescue that company, that folks who wereinvolved in creating this mess get $165 million in bonuses.

STEPHANOPOULOS: Senator Collins, your Maine colleague, SenatorSnowe, said she'd prefer to wipe out any bonuses to any financialinstitution receiving government money. Do you agree?

COLLINS: Well, first of all, all of us are angry that thishappened in the first place. And it could have been prevented. Itisn't just the head of AIG. The treasury secretary could have made asa condition of receiving the money a requirement that would haveprohibited these bonuses.

But as angry as I am, I agree with my colleague that we need tobe careful. And the problem with the Senate bill is it is so wide inits scope that it would apply to tens of thousands of employees allacross this country who had nothing to do with getting us in thismess.

STEPHANOPOULOS: That's the Senate excise tax proposal, which isonly a 35 percent tax, but it would apply to a far broader number ofcompanies.

COLLINS: Right.

STEPHANOPOULOS: So you're against both the House and the Senateexcise tax?

COLLINS: I'm not against getting the money back. In fact, Ifeel very strongly that we do need to recoup the money. I'm just notcertain that either the House-passed bill nor the Senate bill are thebest approach.

We need to look for an alternative means of recouping this moneythat doesn't cause further harm to our economy as we're trying to getbanks lending.

STEPHANOPOULOS: But is there one? Is there another means? Imean, that's the question.

COLLINS: Yes. As Kent Conrad said, I think there are otherapproaches. We can have the treasury secretary put more heat on AIG.He never should have allowed this to occur in the first place.

We can make sure that there is pressure for people to voluntarilyget the money back or else they're going to lose their jobs or there'sgoing to be no further funding for AIG.

STEPHANOPOULOS: Some of that has started to happen. You votedagainst the House excise tax, correct?

PENCE: I did, George. And, you know, I -- I opposed the WallStreet bailout from the beginning, like most House Republicans. Andthe truth is, House Republicans share the outrage of the Americanpeople over the idea that we would use taxpayer bailout money forexecutive bonuses.

But, you know, the real answer here, the real option I'll sharewith my two Senate colleagues, what we ought to say is to AIG, weought to say, "No more bailout money until AIG recovers all of themore than $200 million that's been distributed in executive bonuses."

What's the Democrats brought to the floor this week was really aconstitutionally questionable bill that was really nothing more than atransparent attempt to divert attention away from the fact that,because of Democrats in Congress and the administration, these bonuseswere able to be distributed to begin with.

There was language in the bill that was authored by the senatorfrom Oregon and Senator Snowe that would have prevented these bonusesfrom going forward. And that language was removed, we're told at --at the urging of the administration.

And I -- you know, this week's -- this week's effort was really a-- you know, it was a -- it was a disappointing spectacle, and it was-- it was mostly driven by the fact that Democrats are tryingdesperately to draw attention away from the fact that they made thesebonuses possible.

STEPHANOPOULOS: Let me bring the White House in here. There'stwo separate strands of argument here, number one, that the Treasurycould have prevented it in the first place, and, number two, what isthe White House posture on this bill?

When the -- when the excise tax passed the House, the presidentput out a statement saying it rightly reflects the outrage that manypeople feel, yet all weekend long, it appears the White House has beenbacking away from that. And the White House chief of staff, RahmEmanuel, has been telling many people, including the financialcommunity, that this bill is not going to reach the president's desk.

BERNSTEIN: Well, look, George, I think on -- on the first point,you really have to differentiate between what you can legally do aboutbonuses moving forward and about clawing back old bonuses. Clawingback old bonuses really does invoke constitutional issues, but as thepresident said, we are going to pursue -- and I know the Congressfeels the same way -- any means, any legal means necessary to do so. So I think the important point about this bill is that you -- youunderstand the anger that the bill engenders because the idea that afirm would take taxpayer money and use it to pay out bonuses,retention bonuses to retain, to retain employees who, by their work,partially led to hundreds of thousands of other people losing theirjobs.

STEPHANOPOULOS: Yes, but that's the sentiment behind the bill,but the consequences of the bill -- a lot of people in the financialcommunity say that banks who are now getting TARP money are going totry to give it back as quickly as they can because this could cripplethem...

BERNSTEIN: Well...

STEPHANOPOULOS: ... and then, secondly, that the privateinvestors, the government needs to come in to help buy up the toxicassets or these banks are going to be scared off.

BERNSTEIN: And this is -- and this is a really important point.This -- this kind of clawback legislation has to balance between theneed to address the absolutely reasonable and well-justified anger ofthe Congress and the American people about how this money is beingspent in these undeserved bonuses and the need to pursue financialstability.

I think the way the president says it is exactly correct. Whathappened at AIG, vis-a-vis these bonuses, is a symptom of a muchlarger problem. And we cannot lose sight of the larger problem, whichis stabilizing financial markets.

STEPHANOPOULOS: So -- but that's what I'm trying to get at.Does the president believe that the House bill and the Senate draftbill to tax and have an excise tax on these bonuses undermines thefinancial system? Is he opposed to them?

BERNSTEIN: I would say the way Senator Conrad said it is -- isabsolutely correct. I think the president would be concerned thatthis bill may have some problems in going too far -- the House billmay go too far in terms of some -- some legal issues, constitutionalvalidity, using the tax code to surgically punish a small group. That-- that may be a dangerous way to go.

That said, let's see what comes out of the Senate. He has notsaid he won't sign this bill. Let's see what comes out of the Senate.Let's see what gets to his desk.

PENCE: Well, George, it's important to remember here that -- andthe president said this on the White House lawn this week -- I wasreally struck by the fact, the president said, well, the problem hereis that people are making this kind of money to begin with.

You know, it was back in 2007 that Barney Frank authored a billthat capped executive compensation across the board, well before anybailouts, well before any crisis on Wall Street. And I believe thatthen-Senator Barack Obama had the companion legislation in the Senate.And now we read this morning that the administration's talking aboutbroad-based caps on compensation.

The answer here is to focus on AIG. What House Republicansproposed was that we ought to say to AIG, "No more bailout money untilyou go and collect back 100 percent of the bonuses that you'vedistributed."

STEPHANOPOULOS: Does everybody else at the table agree with thatproposal?

BERNSTEIN: I don't. No, I -- I don't. I don't -- in thefollowing sense. You can't -- you said it yourself, George, a secondago. There's something called resolution authority. That's a -- avery complicated way of saying the FDIC can come in and take a bankinto bankruptcy. We know how to do it. We've done it.

What we don't have at this point is the legal authority to do thekinds of interventions that Representative Pence -- we need those.We're talking about those. We need to have those moving forward.

But the idea of going back and kind of clawing back contractsthat were legitimately made, that is something we need to consider.

(CROSSTALK)

PENCE: ... something about clawing back. We own 80 percent ofAIG. I didn't support the Wall Street bailout, still don't. But weessentially nationalized AIG. And all these legal nicetiesnotwithstanding, you know, it's -- quite frankly, it's anti-competitive and anti-free market for the Congress of the United Statesto be passing legislation that targets, or to use Charlie Rangel'sstatement earlier in the week, that uses the internal revenue code asa political weapon.

STEPHANOPOULOS: How about you, Senator Conrad? Do you agreethat -- no new money to AIG unless they give back this -- thesebonuses through some -- in some fashion?

CONRAD: Look, to me, unfortunately, the cat's out of the barn,the horse is out of the barn. You've already put up $170 billion.So, you know, frankly, I would take a different tack.

I would call the head of AIG to the Treasury and I would say tohim, "Look, you call in those employees and you tell them they giveback the money or they're out of a job." And the head of AIG hasabsolutely got that authority. He's the head of the company, and weown...

(CROSSTALK)

STEPHANOPOULOS: And several of them have already given back.Several -- several employees have already given back some of thebonuses. We're going to learn more...

(CROSSTALK) CONRAD: Yes, I understand some have, but many have not. And youreally have to ask yourself, what is in their head? What can theypossibly be thinking of that they're collecting bonuses in a midst ofa crisis like this? I mean, shame on them.

COLLINS: They would not have jobs were it not for taxpayer moneygoing into AIG. I think that the proposal that the congressman hasoutlined makes more sense. It's more targeted. But, obviously, ifTreasury had put provisions in the contract as a condition ofreceiving the funds, this never would have happened in the firstplace.

STEPHANOPOULOS: I want to -- I want to move on to thepresident's budget that's going to start to be considered in both theHouse and the Senate this week. And we all saw the reports on Fridayfrom the Congressional Budget Office saying that the president'seconomic assumptions were a little too optimistic, according to theCongressional Budget Office. They say the deficit will actually be$2.3 trillion higher over the next 10 years than the presidentestimates.

And, Senator Collins, you supported President Obama on thestimulus package.

COLLINS: Yes.

STEPHANOPOULOS: Can you support his budget?

COLLINS: No.

STEPHANOPOULOS: Why not?

COLLINS: Because it brings our debt levels to an unprecedentedlevel. It would double the public debt in 5 years, triple it in 10years, the highest percentage of GDP since after World War II, CBOsays, by the year 2019, 82 percent of GDP. That's the equivalent ofthe public debt.

That is not sustainable. It poses a threat to the basic healthof our economy.

STEPHANOPOULOS: Senator Conrad, you've had questions about thepresident's budget, as well, although you support the generalapproach. And I want to show a question we got from one of our -- ourlisteners. Let me put it up on the board.

It's Laurie Watkins (ph) of Rolla, North Dakota. The presidentin his budget has a plan to cap payments for agriculture subsidies at$250,000 and also no subsidies to farms making in revenues more than$500,000 a year. And here's what Laurie (ph) asks. She says, "You'reopposed to President Obama's budget because it is not sustainable.Why, then, are you against cutting farm subsidies for farmers making$500,000 or more? Isn't this the same as the AIG bonuses?"

CONRAD: No, not at all. And that's not what the proposal does.They've just got it wrong. The president's proposal has -- does not relate to farm income.It relates to farm sales.

STEPHANOPOULOS: Revenues.

CONRAD: Farm sales. No one has ever, ever proposed limitingpayments on that basis. That was just a mistake. So I could notsupport that.

Look, we just passed the farm bill last year. In the UnitedStates Senate, we got 81 votes. It did not add a dime to the deficit.It was fully paid for. And I don't think this is the time to reopenit.

On the other hand, I will propose a budget that does have savingsin agriculture, because we're going to have to have savings across thebroad spectrum in light of these new numbers.

Look, $2.3 trillion over 10 years is a stunning amount of money.In fairness to this administration, they locked down their forecaststhree months ago. There's been a lot of bad news since.

So we've got a worsening situation. That requires adjustments,and it's going to have to be across a broad front, includingagriculture.

STEPHANOPOULOS: And the president's prepared to accept thesekinds of adjustments?

BERNSTEIN: The president is prepared to negotiate on this budgetwith folks like those at this table, and certainly Senator Conrad hasbeen a longtime budget negotiator at times like these. And thepresident's been very clear about this, as has our budget director.We don't expect these folks to sign on the dotted line.

What we do expect -- what we do expect and what we are going tostand very firm on, because this president, this vice president havemade this clear, that there are these priorities that brought them tothe dance here: energy reform, health care reform, education, alldone in the context of a budget that cuts the deficit in half over ourfirst term.

STEPHANOPOULOS: Yet -- yet as the president's pursuing thesepriorities, you have former supporters on -- on the stimulus, likeSenator Collins, saying, no, she can't go along. You've gotDemocrats, like Senator Conrad, saying your ideas on taxes we can'taccept.

BERNSTEIN: Well -- well, George...

STEPHANOPOULOS: You're not going to get the kind of revenueyou're calling for. So these are really major changes the presidenthas to contemplate.

BERNSTEIN: Not necessarily, George. I mean, we've -- we've beenhere before. This is opening negotiations of a -- of a large andhistorically unique budget.

Now, we know that this budget ramps up deficit spending in thefirst couple of years. And the reason we do that is because thiseconomy is facing something we really haven't talked about yet today,one of the deepest and more far-reaching recessions of any of ourlifetimes, backed up by a -- a crisis in financial markets that wehaven't seen since the days of the Great Depression.

Let us not lose sight of the people who realty haven't come intothis conversation yet, middle-class folks who are facing an 8 percentunemployment rate, African-Americans, facing a 13 percent unemploymentrate, over 20 million people underemployed right now.

And so this budget needs to take into account the difficultiesthat American families are facing in the face of the toughestrecession of many of our lifetimes.

STEPHANOPOULOS: Congressman Pence, and the question is, will theHouse Republicans and Republicans in general also come up with abudget that addresses the kinds of concerns that Jared Bernstein justraised?

PENCE: The House Republicans are going to come up with a budgetalternative that is going to be built on fiscal restraint and gettingthis economy growing again. Look...

STEPHANOPOULOS: A comprehensive alternative?

PENCE: It's going to be a comprehensive alternative. And let metell you, after -- it's after months of runaway spending on thefederal level. I mean, we saw last -- last year's Wall Streetbailout, the part of -- auto bailout, and then we saw the so-calledstimulus bill, then the omnibus bill.

You know, the American people have had it. I mean, thepresident's budget, the American people know, spends too much, taxestoo much, and it borrows too much. And they want this government andthis administration to start doing what families in my district ineastern Indiana, small businesses and family farms are doing, and thatis making decisions, setting aside tomorrow what we don't have tospend until today, and putting the family budget ahead of the federalbudget.

You know, the president yesterday said on his radio address, hesaid a firm foundation -- a lot of people will be singing that phrasein churches this morning -- he said his firm foundation of spending onenergy and education and health care, well, the firm foundation inthis country is our faith in God, our economic freedom, and ournatural resources, and the American people know it.

BERNSTEIN: George, let me respond to that by -- by telling youwhat happened last Thursday. A couple of days ago, Vice PresidentBiden and a number of cabinet secretaries, along with Senator AmyKlobuchar, your colleague, took us out to Saint Cloud, Minnesota, forthe -- a meeting of the White House task force on the middle class.

Well, we had a town hall meeting of middle-class folks who didnot represent anything like what we just heard from RepresentativePence, respectfully.

What these folks stood up and said is, "Tell us about therecovery package and how we can get a hand up, not a hand out, fromthat package. Tell us ways in which this can extend unemploymentinsurance for those of us who have been involuntarily unemployed forweek in and week out, looking for jobs in a labor market that isshedding hundreds of thousands of jobs. Tell us how this can free upsome capital, free up some investment capital so we can expand ourfirm."

We heard that verbatim from...

PENCE: I don't doubt that he heard that. When you called for meto be on this show, I was at a kitchen table in a farm in Rushville,Indiana, with eight small-business owners and farmers. And everysingle one of them were desperately concerned about the fact that halfof the people that are going to pay higher taxes under the president'sbudget are small-business owners. They're desperately concerned aboutthe...

(CROSSTALK)

PENCE: CBO just said every American household is going to pay$1,600 more a year in energy costs under the president's cap-and-tradeproposal.

CONRAD: Well, first of all, the place where I would diverge fromCongressman Pence is, if we didn't take these extraordinary steps,we'd be back to Hoover economics. I mean, the prescription that hejust provided is exactly what Hoover economics represented at the timeof the Great Depression.

If we did not take these aggressive steps to give lift to theeconomy at this time of significant contraction, we could have facedan economic collapse. And that wasn't just my view. That was theview of the head of the Federal Reserve. That was the view of theRepublican secretary of treasury. That was the view of the Republicanpresident of the United States.

So I think, again, respectfully, where I would strongly disagreeis short term. Where I would actually strongly agree is longer term.

We have got to get back to a more sustainable fiscalcircumstance. We cannot have debt pile on top of debt. We cannot runbudget deficits in the out-years of over $1 trillion a year. So we'regoing to have to...

(CROSSTALK)

STEPHANOPOULOS: ... how do you both make the investments thatyou and the president say need to be made now in energy and healthcare and education without adding to the deficit in an unsustainableway over the long term?

CONRAD: This is -- I will present a budget that I think beginsto move in that direction. It acknowledges in the short term, yes, wehave got to have added deficits and debt to give lift to this economy,but longer term, we have got to pivot. We have got to havefundamental reform of our entitlement programs. We've got to havefundamental reform of our revenue programs, because we've got a taxsystem that was really built 50 years ago...

BERNSTEIN: But, George, can I just make one point on this?

CONRAD: ... and is no longer relevant.

STEPHANOPOULOS: I've got to -- I want to bring in SenatorCollins...

BERNSTEIN: Sure.

STEPHANOPOULOS: ... on a question related to this, becausethere's also the question of how the Congress is going to do this.And the debate over -- starting in the House this week over whetherthe budget will try to be passed with the reconciliation process. Itmeans simply it gets through on a majority vote, rather than has tobreak a filibuster.

Here's what Senator Gregg had to say about that this week.

(BEGIN VIDEO CLIP)

GREGG: You're talking about something that has nothing to dowith bipartisanship. You're talking about the exact opposite ofbipartisanship. They're talking about running over the minority,putting them in cement, and throwing them in the Chicago River.

(END VIDEO CLIP)

(LAUGHTER)

STEPHANOPOULOS: Bitter words from who was meant to be PresidentObama's commerce secretary. But, Senator Collins, it's seriouslybeing debated now in the House putting at least the health careprovisions on this fast track that would only require a majority vote.Can you go along with that?

COLLINS: No. It would be a big mistake. I agree with SenatorGregg, if not his metaphor, but he's absolutely right.

You don't make major changes in policy using a system that shutsout the Republicans, that limits debate, that prohibits amendments.And I know it's not just Republicans who are concerned about this, thecentrist Democrats who are very concerned about this.

(CROSSTALK)

CONRAD: Well, look, I have said for weeks, I don't think itwould be wise to use the reconciliation process to write majorlegislation, reform legislation. That's not what reconciliation wasdesigned for. It was designed for purely deficit reduction.

And the problem is, if you try to use it here, not only does itdeeply offend the minority, but, more than that, it doesn't work verywell, because...

(CROSSTALK)

BERNSTEIN: Let me just stipulate -- let me stipulate that I --we agree with -- with Senator Conrad on this point. But I want to say-- and it's very important for -- for folks to hear that I think that,in an important way, the Obama budget is getting a bad rap in thisdiscussion in the...

(CROSSTALK)

STEPHANOPOULOS: ... move on to that. You said you agree withSenator Conrad, yet the White House has been working with HouseDemocrats on moving this whole notion of going on a fast track on thetable.

BERNSTEIN: I don't think he took it off the table. I think ithas to stay on the table. But it's something we would rather avoid.We'd rather have the...

STEPHANOPOULOS: Would you take it off the table or not?

CONRAD: Well, I'll put it this way: It is not included in thebudget that I will present to my colleagues. I have said for weeks, Idon't think it is the right way to write substantive legislation,because if you get into the details -- and we won't do that here -- itjust doesn't work very well.

But what they're -- what they're talking about...

(CROSSTALK)

CONRAD: ... is negotiating leverage, sending a signal that itstill remains open. And one thing people...

(CROSSTALK)

STEPHANOPOULOS: I'm afraid -- I'm afraid that's all we have timefor today. Thank you all very much for a very spirited discussion.

END