'This Week' Transcript: Treasury Secretary Timothy Geithner

Feb. 7, 2010 — -- ABC News: This Week

Jake Tapper Interview with Treasury Secretary Tim Geithner

TAPPER: The latest jobs numbers are disappointing in a lot of ways. Larry Summers was on this broadcast in December and he said that the economy would be creating jobs by the spring. Do you still believe that to be true?

GEITHNER: Absolutely. But remember where we were a year ago. You know, you had an economy that was shrinking at an annual rate of 6 percent. Three-quarters of a million Americans were losing their jobs every month. And the president acted with enormous force and care to get this economy growing again.

And the economy is now growing again. So we're seeing some encouraging signs of healing. This is going to take a while, and it's going to be uneven. But there's encouraging signs in this report. The unemployment came down modestly and created jobs back in November.

And our job, our responsibility is to make sure we're working very hard to reinforce this recovery. And we're seeing this growth that has just been established translate into more jobs.

TAPPER: How possible is it that we're going to have a double dip recession?

GEITHNER: I think we -- we have much, much lower risk of that today than at any time over the last 12 months or so. Again just think of where we are. We are in an economy that was growing at the rate of almost 6 percent of GDP in the fourth quarter of last year. The most rapid rate in six years. So we are beginning the process of healing.

And we have the capacity as a government to try to make sure we are reinforcing that process. And we help guide this economy back to the point where we're not just growing again, but we've seen growth translate into jobs. And that we're reaching the lives of all Americans.

TAPPER: I think a lot of Americans wonder if you're doing enough. There was a more than $800 billion stimulus package. They're talking now on the Hill about a more than $100 billion jobs package. But still, if you look at the budget that you guys introduced, you're still projecting 10 percent unemployment this year, more than 9 percent next year, more than 8 percent next year.

I realize that's going in the right direction, but it's still a staggeringly high number of unemployed. Are you doing enough?

GEITHNER: We need to -- we have more work to do, absolutely we have more work to do. And you heard the president at the State of the Union say, we want to work with the Congress now to try to make sure we are creating incentives to create more jobs, we're encouraging business investment, we're putting resources into infrastructure, we're giving help to state and local governments.

And it is very important people understand that we have more work to do and we can afford that, it's important to it, our basic priority still is to make sure that this growth we're seeing now, which is very encouraging, translates into more jobs more quickly.

TAPPER: The new senator from Massachusetts, Scott Brown, one of the first things he said after being sworn in was that the stimulus package has not created one job.

BROWN:"The last stimulus bill didn't create one new job. And in some states, the money that was actually released hasn't even been used yet."

GEITHNER: Oh, I don't think there's any basis for that judgment. I mean, again, just think where we were. January of 2009, three-quarters of a million Americans losing their jobs. We have an economy now that's growing again. With growth you're going to see jobs created.

Again, we already saw some job -- a month where we had positive job growth. But, you know, it's going to take a while. It took a long time for these problems to develop. They're going to take some time to heal. But we're in a much stronger position today.

But our priority has to be, and I think you see broad recognition of this now, is to make sure we're working very hard to make sure that we're seeing this growth translate into more jobs to reach more Americans.

TAPPER: Some critics wonder how hard you're working when they look at, for instance, last March. You and the president introduced a program to shore up $15 billion in loans for small businesses. And according to the special inspector general for TARP, Neil Barofsky, no details for that plan have come out, none of that money has been disbursed, that's last March, it's the 7A program.

Have there been programs that you've introduced that just have not worked?

GEITHNER: Look, the programs that the president supported in the Recovery Act were very, very effective. You saw small -- lending by the Small Business Administration increase by more than 70 percent -- 75 percent from the lows. And we have been very effective at trying to make sure we're opening up the broader credit markets to companies around the world.

Again, remember where we were in January of last year. You know, if you were a company, large or small, if you were a family trying to borrow to buy a house or borrow to buy a car or put your kids in college, or you were a municipal government, you did not know whether you were going to be able to get a loan.

So it is tougher out -- it is tough out there still, but we have made dramatic progress in trying to make sure we bring stability to this financial system at much, much lower cost than anybody anticipated.

You know, again, last February, people thought it was going to cost maybe half a trillion dollars to put out this financial fire, and by getting private capital to come in and replace our investments, by allowing to bring those investments back out of the banking system, we've saved the taxpayer lots of money, and we have resources now we can use to try to make sure we're working very hard to meet our -- you know the many other challenges we face as a country.

TAPPER: Isn't the problem though not so much that the credit is not available, but that the businesses are not taking out the loans because nobody is buying anything?

GEITHNER: Well, again, you know, we had a huge shock to the American economy. And you're still living with the aftermath -- the aftershocks of that basic trauma. So businesses were very, very cautious. But if you look at what's happening today across the country, you're seeing again the first signs now of businesses starting to take some risk again, starting to invest again, and starting to add jobs back again.

But, you know, our job is to make sure we're working to reinforce that process.

TAPPER: The Congress just voted to raise the debt ceiling to more than $14 trillion dollars. Moody's, the bond rater, just said, quote, "unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture for the next decade will at some point put pressure on the triple-A government bond rating.

Is the United States going to lose its triple-A government bond rating? And what happens when the credit markets are no longer willing to buy U.S. debt?

GEITHNER: Absolutely not. And that will never happen to this country. And again, if you step back and look at what has happened throughout this crisis, when people were most worried about the stability of the world, they still found safety in Treasuries and the dollar. You're still seeing that every time. People are reminded again about the many challenges you see around the world.

That is a very, very important sign of basic confidence in our capacity as a country to work together to fix these problems. We've done it in the past. We -- this is within our capacity to do. And the best way to get there is going to make sure that this economy is growing again. That translates into more jobs that reach more Americans.

That's the only path to try to make sure that we're able to turn to -- fix our long-term fiscal problems.

TAPPER: Do you think the budget that the administration just introduced takes enough serious measures to reduce the debt? I see that there is some tinkering here with spending freeze, some tax increases, letting the Bush tax cuts expire for the wealthiest Americans. But do you think it's a serious attempt?

GEITHNER: Absolutely. Again, look what the president proposed. The president proposed to cap non-security discretionary spending.

TAPPER: That's only one-eighth of the budget.

GEITHNER: No, but that's a very important thing to do. And that requires -- you know, we have some very tough choices to make, and we outline in that budget some things that are going to be very unpopular and hard for people to make people understand or recognize we have some tough choices to make.

We work with Congress and the House passed yesterday the restoration of basic disciplines in budgeting that all Americans live with so that...

TAPPER: Pay-go...

(CROSSTALK)

GEITHNER: ... we have to make sure we pay for new programs. You're seeing, again, across the political spectrum now a basic recognition that deficits matter. Very good for people to understand, again, that deficits matter. That tax cuts aren't free. Got to pay for our programs. And we've proposed in the budget some important steps to restore some basic fairness to our tax code and begin the process of bringing down those deficits.

And again, the president's budget proposes to bring the deficit down from its current levels very, very sharply to below 4 percent of GDP over the next four years or so. And we want to work with Congress to set up a bipartisan commission to try to make sure that we're going beyond that to address our long-term problems.

TAPPER: Do you think the fact that you guys are pushing the bipartisan commission is indicative of the fact that our political system is not capable of taking on the serious challenges our nation faces?

You and I know that the money, as Willie Sutton says, said, that -- why do you rob banks? Because that's where the money is. The money is in entitlement programs: Medicare, Medicaid, Social Security, things that you do not touch in this budget.

The fact that you need a bipartisan commission to recommend cuts or tax increases, doesn't that indicate that our political system is incapable of making these tough decisions?

GEITHNER: Jake, I am very confident in our ability as a country to bring people together and make sure we are solving these challenges and these problems. We've done it in the past, it is completely within our capacity to do as a country.

But of course, it requires you bringing people together across the aisle to step back from politics, to try to bring practical solutions to things that are very important to our future as a country. And the president is committed to do that.

We're going to give the Republican Party the chance to share in the responsibility and the burden and the privilege of trying to fix the things that were broken in this country.

TAPPER: Republicans are afraid this is just a back door for tax increases. Are you willing to say that tax increases are off the table for this commission? Let's sit down and talk about the long-term structural problems with entitlement spending?

GEITHNER: The president's view, and this is a view shared by many Republicans, and it builds on what we've seen with effective commissions in the past, like the Greenspan commission that President Reagan established to help restore the financial footing of Social Security, is that for this to work, you've got to bring people together to step back from politics, day-to-day politics, and to bring fresh ideas to solve these kind of problems.

That's the only way to do it, we think. And we're committed to doing that. We've got to do it on a bipartisan basis, and we're deeply serious about doing this.

TAPPER: The president, during his State of the Union address, also talked about a deficit of trust, the fact that Americans don't trust government.

OBAMA:"We have to recognize that we face more than a deficit of dollars right now; we face a deficit of trust. Deep and corrosive doubts about how Washington works."

TAPPER: Whether it's at your -- your time as head of the New York Fed, your time dealing with AIG, or your time as Treasury Secretary, do you think that you bear any responsibility for that deficit of trust?

GEITHNER: Oh, I -- let me just say that I feel very proud for the actions we took to help to stem the damage caused by this crisis. And I feel it's a great privilege to have been able to work with this president to move so quickly and effectively to again -- to bring an economy that was in free fall -- a financial system at the edge of collapse, and to begin the process of healing.

But we all recognize, and I deeply recognize that we have a lot more work to do. And we are working very hard to make sure that the American people understand that we're going to make sure they don't bear a penny of loss for solving this financial crisis. Again we've brought back a huge amount of the money that the government was forced to put in the financial system.

And we are working very hard right now to try to make sure we put in place strong reforms that provide basic protections to Americans from ever again facing this kind of crisis again.

TAPPER: A year ago when you and the president introduced the mortgage modification program…

OBAMA: "Under this plan, lenders who participate will be required to reduce those payments to no more than 31 percent of a borrower's income. And this will enable as many as 3 to 4 million homeowners to modify the terms of their mortgages to avoid foreclosure."

TAPPER: If a year ago I had told you that today I'd be sitting here, and only 66,000 Americans had permanent mortgage modifications, would you have said at the time that that was a success?

GEITHNER: Oh, Jake, I think it's very important to recognize this program is providing very, very substantial cash flow relief right now to more than three quarters of a million Americans. And we -- we believe we're still on a path to be able to reach many, many more American households. And of course we're going to make sure that those temporary modifications translate into permanent modifications. But again...

(CROSSTALK)

TAPPER: But a lot of those temporary modifications were done verbally though. They weren't done with the paperwork that a lot of...

(CROSSTALK)

GEITHNER: No. We're -- we're absolutely committed to make sure that translates into what we said it would, which is for eligible Americans -- they're getting permanent modifications that substantially lower their monthly payment. Now, Jake, remember like, you know, again for the average household that translates into hundreds and hundreds of dollars every month for them.

That is real benefits -- great -- has greater income for them to meet their basic needs. But again step back for a sec. In February and March of last year house prices were falling off the cliff. People thought house prices might fall another 20 -- 30 percent. And we've had six months now of early signs of stability in house prices. So what that means is millions and millions of Americans -- middle class families across the country are now seeing more stability, and what is a basic source of financial security for all Americans.

Those programs were enormously effective in helping again pull a housing market that was in near collapse back to the point now where you're seeing the signs of stability.

TAPPER: Recently the president introduced a way of attacking the issue of banks that are too big to fail. He called it the so-called, "Volcker rule." Some sources close to you said that you had some concerns about that rule. What were those concerns?

GEITHNER: Oh, I am committed, and the president is committed to make sure that the reform package Congress moves forward -- puts in place tough, conservative, effective constraints in risk taking on the largest institutions in the country. And I am very confident we're going to be able to do that. This is an important part of that.

And I'm very supportive again of this basic principle. You want to make sure that institutions that have the privilege of access to the safety net the government provides aren't allowed to use that to subsidize the kind of risky activity that could bring the financial institutions to the edge of collapse.

TAPPER: And you are also concerned that you want -- you didn't want these American firms to be unable to compete with the...

(CROSSTALK)

GEITHNER: Oh, of course. Of course. But I'm very confident we can make sure that we are working very closely to raise global standards around the world so we have a level playing field.

And you know we are -- we have -- we are going to have a much stronger financial system ahead than we had going into this crisis. Because we are going to make sure that again we're putting in place stronger protections against risk taking. And we're going to make sure that we work with countries around the world so that we're raising standards globally -- not just raising the United States.

TAPPER: Lastly when you came in, and you met with President Obama, you told them about five bombs that needed to be diffused. Fannie, Freddie -- some others. And you recently said -- you compared your experience to the movie, "The Hurt Locker."

GEITHNER: Oh, no. I wasn't comparing my experience. There's nothing like what we faced to what American soldiers face every day.

(CROSSTALK)

TAPPER: Still diffusing these bombs, even if they were theoretical economic bombs, was -- must have been very nerve racking.

GEITHNER: This was like nothing anybody in public office today, or in the last few decades have ever faced. It was the gravest most dangerous moment since the great depression of the United States. Again remember we had a -- we were in a situation where people were no longer sure they could safely keep their money in the strongest American banks.

It was catastrophic, and it translated directly into factories closing. Millions of people losing their jobs, and their homes. Economic -- it could be around the world came to a sudden stop. It was the gravest moment we've ever seen. And we were very, very effective, because of the leadership of the president, moving very quickly with enormous care and force to bring stability.

And those policies have got this economy growing again. And as I said we've been able to put out this financial fire at much, much lower cost than anybody anticipated. And what that means is we have much more resources now available to meet our long-term challenges.

TAPPER: I guess was, all I mean was,-- personally, even though I know you don't like talking about your personal life all that much, or your emotions all that...

(CROSSTALK)

GEITHNER: Right.

TAPPER: ... much publicly -- personally it must have been nerve racking.

GEITHNER: Oh, it was -- it was hard. But, you know, we were all very focused on what we could do. And you know, this -- this job -- these jobs are a little bit like the fireman. They're a little bit like the doctor. And they're a little bit like the people that go and try to diffuse bombs. It's a mix of those things. And I'm very proud of what we've been able to do. But of course I understand -- I -- ever minute with a recognition that we have a lot more work ahead of us.

TAPPER: Secretary Geithner, thanks so much for joining us. Really appreciate it.

GEITHNER: Nice to see you.

TAPPER: And we're joined now by our roundtable to talk aboutthat interview and all the day's news. We're joined by George Will,Peggy Noonan of the Wall Street Journal, Al Hunt of Bloomberg News,John Podesta of the Center for American Progress, and Ruth Marcus ofthe Washington Post.

Thanks so much for joining us.

George, Tim Geithner said that businesses are now starting toborrow because they are now starting to take on risk because we'reemerging from this economic crisis. Is the economic crisis the onlyreason why businesses are hesitating?

WILL: No, I think there are a number of things. It's what theydon't know and what they do know. What they don't know is what energyis going to cost. The president says he's going to push on with capand trade, which would raise the cost of everything. They don't knowwhat the cost of health care will be. The president says he's goingto push on with health care reform.

Furthermore, they do know that their taxes are going to go up.The expiration of the Bush tax cuts on the rich are actually tax cutslargely on small business. Since the 1980s, the net -- almost all netnew job creation has been in small start-up companies five years oldor younger.

Furthermore, they know that interest rates eventually are goingto go up. They can't go down. They're zero now. So any increase ininterest rates is going to be adverse.

To add that to the fact that 42 cents of every dollar Washingtonspends this year is borrowed, and you add that to the fact that in2009, every penny of tax revenues was spent before an appropriationsbill was passed. That is on entitlement programs or interest rates.That's why they're worried.

TAPPER: John, just -- I know you don't agree with everythingGeorge said...

(LAUGHTER)

... but...

PODESTA: I don't know what George is proposing. It seems to methat if -- the other thing we absolutely know is that if we return tothe policies that got into this mess, it's going to produce the sameresult. So I think the president has to move forward with trying toreform the health care system, which is now eating up more than 17percent of our gross domestic product...

TAPPER: How? What's the direction on that?

PODESTA: Well, I think that he's going to press ahead to try toget reform done either through some combination of passing the Senate-passed health care reform bill with some fixes or perhaps asubstantial package that would reduce overall costs in the health caresystem and expand coverage, but somewhat scaled-back package, but Ithink he's going to try to do it this year, and I think he's going totry to get us off of our so-called addiction -- I remember that phrasefrom George W. Bush -- addiction to foreign oil and try to create aninnovative energy economy.

So there's a lot of work to do, as Tim Geithner said. They'vegot to really thread the eye of a needle to create jobs in the shortterm, but to deal with the long-term deficit problems that the countryfaces.

MARCUS: I'm going to find one common area of agreement withGeorge, which is that I agree that the businesses are loathe to startborrowing and to start creating jobs, but I disagree almost entirelywith all the reasons that George said that that exists.

It's not because of fear of higher taxes. Most of it, it's -- avery, very small sliver of small businesses would be affected byhigher taxes.

It's not because of not knowing about health care costs or energycosts. It's because of a fundamental concern -- which is completelyjustified -- about the future path of the economy short term.

In other words -- and you can see it in the reaction that theadministration itself had to -- what seemed like good news on theeconomy with the jobless rate this month. It is going to be a longslog out of this, and it's not at all clear that it's going to be asteady uphill climb. It may be a steady trough that inches veryslowly uphill. It may go down again before it goes up. And that'swhat's holding back business.

NOONAN: I think people who might otherwise be hiring or takingon new help or expanding are feeling nervous. I think they're feelingnervous in part because every time the administration speaks abouteconomic issues, what they say doesn't sound true. It sounds likesome kind of mix between "rah-rah" and gobbledygook.

So -- so another problem I think is that the administration didnot depart from the Bush administration way of spending and spending,and people can see it. Bush kind of broke the bank, and now Obama isdouble-breaking the bank. And so people look at this and they think,"I don't feel secure to hire someone. I can sort of feel the pressureof bad stuff coming down the pike," so I think that's part of theproblem. TAPPER: Al, you also have been critical of the economic messagecoming from the administration. When you heard Secretary Geithner inthat interview and when you've listened to the president morerecently, has that improved at all?

HUNT: Not much. They don't have anyone that really conveys avery coherent economic message. I don't think it is. I disagree withPeggy and George in the sense that I think it's the policies. I -- Ido think there's a psychological problem that is huge.

A year-and-a-half ago, the global economy almost went off thecliff. Everyone knows that, whether you're a small-business person oryou're Goldman Sachs. There is a sense that we have avoided thecataclysm, that we're on the way back, but there's nervousness aboutthat.

And if we're -- if we are on the way back, we're not on the wayback very -- very rapidly. If you look at that jobs report the otherday, yeah, the headlines were pretty good. It went to single digitsfor the first time in a long time. But when you dig deep in there,there was a lot of very, very discouraging numbers there.

So I think -- I think the psychological problem is -- is -- isreally very vivid.

TAPPER: OK. We're going to have to take a quick break. Butafter the break, the roundtable will be back with the politics ofnational security and Sarah Palin's Tea Party speech. And, of course,later, the Sunday funnies.

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FALLON: Let's take a moment to remember the accomplishments ofthe Democrats' 60-seat supermajority.

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PALIN: The administration says then there are no downsides orupsides to treating terrorists like civilian criminal defendants, buta lot of us would beg to differ. For example, there are questions wewould have liked this foreign terrorist to answer before he lawyeredup and invoked our U.S. constitutional right to remain silent.

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Our U.S. constitutional rights.

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TAPPER: That's former Alaska Governor Sarah Palin speaking inNashville last night at the Tea Party convention, one of the manytopics we'll talk about in the roundtable.

George, let me ask you a question. Does Governor Palin have apoint there when she's talking about the failed Christmas Day bomber,Umar Farouk Abdulmutallab, being able to invoke our constitutionalrights?

WILL: She has a point in that it seemed reflexive on the part ofthe government without much thought about this. Here was someone whocame from Yemen, from Al Qaida in the Arabian Peninsula, who you wouldthink would have interesting things to tell us, and they instantlyMirandized him, after, what, 50 minutes of conversation. I understandhe's still being interrogated, but he still does have a lawyer.

The point of counterterrorism is not to prosecute successfullyterrorists; it's to prevent terrorists from committing their acts inthe first place. It is prevention, not prosecution. And this lookedlike just another way of saying, "We're not George Bush," which isn'tthe point.

MARCUS: Well, I mean, they -- it actually might have been a wayof saying, "We are George Bush," since that's exactly what happenedwith the shoe bomber.

I think that it's fairly clear that that particular incident wasnot well-handled. I agree with George. It was -- there was notenough consideration given to differing routes of dealing with it. Onthe other hand, he was not instantly Mirandized. He did answerquestions for 50 minutes. From my point of view, that was not longenough, and I think next time around there's going to be a lot moreconsideration given to various routes.

At the same time, I think it's been completely over-dramatizedwhat rights he would have gotten in another setting. Whether or nothe's instantly Mirandized and whether or not he's interrogated is onething. Whether he's tried in a criminal court or in a militarycommission, he's still going to be invested with all sorts of rightsthat apparently Sarah Palin's not comfortable with.

HUNT: Well, but I think the problem here was that theadministration itself six months earlier set up something, the high-value intelligence group, that was precisely for areas like this.

And the premise, which I think is anti-Bush, is that a skilledinterrogator is far more important in getting information from aterrorist than all the waterboarding and Cheney-esque tortures in theworld. I think they're right on that, and they -- they bypassed it.They didn't use it this time.

Moreover...

TAPPER: Well, it wasn't operative until a couple weeks ago.

HUNT: Well, they set it up in August, though, Jake.

TAPPER: Right.

HUNT: And Dennis Blair wasn't aware that it wasn't operative.That's -- that's a problem.

The second problem -- I don't think prosecutions are unimportanthere. They didn't have any prosecutorial problem here. There were 40witnesses on that airplane. They had material evidence -- hisunderwear, if you will -- so I think they botched this one up.

I agree with Ruth. I don't think it was a terrible...

(CROSSTALK)

PODESTA: Jake, the proof's in the pudding. He's talking. TheFBI has gone to Nigeria, got his parents to cooperate. They've talkedto them. He's cooperating. They've already rolled up a cell inMalaysia, evidently, from information that he's given.

And I think that, you know, you can huff and puff, as formerGovernor Palin likes to do, but the proof's in the pudding. He'stalking. They've gotten actionable intelligence. They're acting onit. And I think that's -- we've got to...

NOONAN: But can I just -- it is weird that the U.S. governmentis announcing to the world that he is talking. It is -- it is strangethat they're saying, "Abdulmutallab, he's singing like a bird. Allyou people back in Yemen, all you people in Nigeria and all the placeshe's been to in the past two years, realize he's giving you up. We'veturned him." That's not good for us.

PODESTA: Maybe if the -- maybe if all those politicians stoppedattacking the FBI. Mitch McConnell likened the FBI to a Larry Kinginterview. Maybe if they'd stop with the politics...

MARCUS: Now, that's cruel.

PODESTA: Well, no, I think he owes the FBI an apology. But ifthey'd stop with the politics, maybe they wouldn't have to respond toit.

(CROSSTALK)

TAPPER: Well, that's an interesting argument, because whathappened was on Tuesday there was an Intelligence Committee hearing.And both FBI Director Mueller and the director of nationalintelligence, Admiral Blair, said very tersely that Abdulmutallab --that the questioning and the interrogation was still going on.

TAPPER: After that, the White House called a briefing and toldWhite House reporters what was going on, which was thatAbdulmutallab's family was cooperating. That decision then wascriticized, as you just criticized.

Now, what the White House says is, people were criticizing usbefore. They knew Abdulmutallab was cooperating. Now they'recriticizing us for letting people know that he's cooperating. Theycan't have it both ways. Is that not fair?

NOONAN: I think two facts. One is, sometimes when you hold theexecutive and you are president and you work for a president, you haveto show forbearance and not answer back when it will jeopardize thingsin a serious way, as I think perhaps the telling everybody thatAbdulmutallab is talking might jeopardize things.

The second thing is, yes, both parties to some extent use thesegrave national security issues as a political football. People likeus always complain about it. But the fact is, at those Tuesdayhearings, everybody in American intelligence, when asked, "Do you seethe possibility of a coming attack in the next few months?" they said,"Yes, yes, yes, and yes."

Both parties should sober up on this and seriously work togetheras if they were retired people in Virginia and Maryland who used towork in the government and know now party stuff on this issue doesn'tmatter.

TAPPER: Well, Al, does the president have a responsibility --John was saying that the politics were interjected, and he wassuggesting that the Republicans were interjecting it -- does theadministration have a higher threshold to not respond, to not letthese things on?

They say, look, we're letting the American people know that weare doing everything we can to protect them. Is that fair? Or is itthat they're just trying to get political cover?

HUNT: I think they need to do that, Jake, without sometimesgoing into the particulars. And I think they probably have said morethan they needed to say here. I doubt very much that it jeopardizesnational security. I also think that almost all those experts --Peggy's right -- that if you talk to of either party will tell youthat there's somebody out there, some people out there who areplanning an attack. They want to attack us. They want to attack us soon. I don'tthink the handling of the Christmas bomber -- I envy you all, becauseyou pronounced his name better than I can -- I don't think -- I don'tthink the handling of that is going to change in any way what thelikelihood is of any successful attack or not.

MARCUS: But -- but I want to go back to something that John saidand disagree with John, which is, the proof's not necessarily in thepudding, because what if he had actionable intelligence about ongoingplots of people in the air, of people about to be deployed?

That he's talking now is terrific. I tend to think that theadministration should have sucked it up and not answered all -- notdefended itself so much, though I completely understand the instinctto do that.

But whether he talked a little bit, if he -- but it's not at allclear to me that he was telling everything...

(CROSSTALK)

PODESTA: That's a -- that's a legitimate point, but they didinterrogate him before he -- they, you know, put him under to -- foran operation to deal with his wounds. And when he came out, the FBIhas said -- I don't -- you know, the Intelligence Committee could gointo this -- the FBI has said that he's -- he decided he wasn't goingto talk anymore, and they -- at that point, they gave him his Mirandawarnings.

So that's -- it's a -- you know, it's a question of how long yougo on for. I think that's a question of judgment. Maybe you'reright. Maybe the FBI was right. I tend to listen to theprofessionals. And other people tend to listen to Governor Palin.

But I think that -- to attack the FBI...

(CROSSTALK)

PODESTA: But, you know, I come back to -- to attack the FBI fortheir conduct in this case as the Republican leadership has done, Ithink is unconscionable.

By the end of the week, we had -- we had Senator Shelby putting ahold on 70 nominees, including the head of the intelligence at theDepartment of Homeland Security, the head of intelligence atDepartment of State. I mean, what gives here? Are these peopleserious or are they just playing politics?

TAPPER: Well, and then that's interesting, because all thisdebate, all this partisanship comes during a period, a two-weekperiod, where President Obama is really hitting home the idea thatthere needs to be more bipartisanship. In fact, here's the presidentspeaking yesterday at the Democratic National Committee's winterretreat.

(BEGIN VIDEO CLIP) OBAMA: I'm proud to be a Democrat. I'm proud to be a leader ofthis great party. But I also know that we can't solve all of ourproblems alone. So we need to extend our hands to the other side.We've been working on them. Because if we're going to change the waysof Washington, we're going to have to change its tone.

(END VIDEO CLIP)

TAPPER: So, Al, that speech came one day after the White Houseattacked Senator Shelby for the very thing John was just talkingabout. He had put blanket holds on all nominees because he wasconcerned, he says, about some national security issues. What's goingon here?

HUNT: Well, first of all, Senator Shelby is totally fraudulenton this to begin with. He was concerned about pork for his home stateof Alabama. This is as bad as the Nebraska carve-out. It'soutrageous what he did. It's, I think, an abuse of senatorialprerogative.

But I also, Jake, think that it's nice to give speeches. We haveto have a more civil dialogue in this town. We have to have morebipartisanship. For a whole lot of reasons, it's not going to happen.It might selectively be able to -- you might have a few areas. You'llhave some jobs bills where Orrin Hatch and Chuck Schumer might agree.

But in a -- in a broader sense, this is -- these are divisivepolitical times, and that's not going to change, at least until afterthe November election.

TAPPER: George, the administration and the president has saidspecifically that he was hoping for some bipartisanship support forsome of the small-business tax cuts and credits he's pushing. There'san elimination of a capital gains tax for investments in smallbusinesses, a tax credit for hiring, hoping for Republican support. Ihave yet to hear one Republican voice, one level of support for any ofthat.

If there's not bipartisan support for tax cuts, is there support-- is there possibility for any support for anything bipartisan?

WILL: Well, I'll volunteer. I subscribe to Milton Friedman'sview that any tax cut of any shape at any time for any reason is to besupported. So I think probably they'll get some support on this.

But he has a very aggressive agenda from which he has retreatednot one bit. I think you'd agree with that. And so when he extendshis hand, he says, "I ask only one thing of Republicans, and that isthat you quit being Republicans," and they respectfully decline.

If you have an aggressive agenda, you're going to have to push itaggressively in a partisan manner.

NOONAN: I'd add, sometimes timing is everything. If thepresident had spoken like that or acted in a manner reflective of hiscomments last year, when he first became president, instead ofpresenting some bills that want to actually know Republican support,he might be in better shape now. It's very convenient for him to besaying, "We're all in this together," when his numbers are going down.

TAPPER: You wrote recently rather approvingly of the election ofScott Brown in Massachusetts. He has -- is that unfair?

NOONAN: Sure. No, no, good.

TAPPER: OK. OK. And -- and he came here talking a lot aboutwanting to work in a bipartisan fashion. One of the first things hedid, as you saw in the interview with Geithner, we ran a clip ofBrown, was say that the stimulus bill has not created one job. Now,you can criticize with the stimulus bill, but it is -- you can -- youcan disagree with whether or not it's created 2 million jobs, butcertainly it has created one job.

HUNT: Scott Brown's.

(LAUGHTER)

(CROSSTALK)

TAPPER: But, I mean, is -- do people just come down toWashington and become partisan, if even Scott Brown is already sayingthe stimulus bill hasn't created one job?

NOONAN: Well, Scott Brown was saying things like that on the wayto election. He is very much against the -- the president's economicprogram.

I would say, look, obviously, the stimulus bill must have createdat least one job, but when you try to find out where are the jobs, howmany, what has this bill done, you know, you can't really get ananswer. It sort of all dissolves in gobbledygook. You never know. Ican't imagine Mr. Geithner knows how many jobs it's created.

WILL: It has -- it has increased federal civilian employmentdramatically, and it has preserved unionized public employee jobs inthe state and local governments.

TAPPER: John, is there any hope for bipartisan work in thisCongress this election year?

PODESTA: Well, you know, you have to kind of turn over a lot ofrocks to try to find some possibility of that. I think the one placewhere you still might be able to find bipartisan work is the effortsthat Lindsey Graham and John Kerry and -- and Joe Lieberman areundertaking to try to find out whether they can do a comprehensiveenergy and climate bill that would actually create an energyrevolution in this country.

Senator Graham has stuck his neck out. He's working hard at it.And, you know, I'm still hopeful that we can find some bipartisansupport on a bill that the president could -- could sign.

TAPPER: Bipartisan seems to be the word of the day. Sarah Palintalked a lot about there needing to be bipartisan work last night inher speech, even though she was definitely pushing a ratherconservative Tea Party agenda. What did you think of her speech,Peggy?

NOONAN: Hmm. I'll tell you, it's almost odd what struck me.The Tea Party movement itself has to decide if it is a movement, inwhich case it will probably become part of a broad Republicancoalition, or if it is going to be a third party.

It was interesting to me that Palin continually called it amovement and didn't refer to any third-party ambitions. If it's goingto be a movement, it's good news for the Republicans. If it weregoing to be a third-party thing, it would be bad news for theRepublicans, very good for the Democrats.

MARCUS: I'm not really sure that having it be a movement that'spart of the Republican Party would be good news for the Republicans.It would -- Sarah Palin talked last night about how it was a greatthing for the Republicans to have robust and divisive primaries, and Iwould think John here would say, "Yes, excellent. Let's go to it,and, in fact, have those robust and divisive primaries and pick theTea Party candidate, because running against a Tea Party candidate isgoing to be a lot easier for whatever Democratic candidate there isthan running against some kind of consensus centrist-esque Republicancandidate."

NOONAN: But at the end of the day, this is a big movement. It'sthe most respected party, I think, in the polls now. It leads beforeRepublicans and before Democrats...

(CROSSTALK)

NOONAN: ... but when these folks vote, they're not going to bevoting Democratic. They're going to be voting Republican at the endof the day.

PODESTA: I think the only thing that's certain is that it's goodnews for Republican consultants, because there seems to be a lot ofprofiteering done now (inaudible) the Tea Party movement, as wasevidenced, I think, in Nashville this week.

But I think that, so far, we've seen -- I think, actually, in theend of the day, it's going to be a problem for the Republican Party.And -- and I think Governor Palin could be a problem for theRepublican Party. This week, Wall Street Journal reported that JohnBoehner and Eric Cantor were meeting with bankers from Wall Streetsaying, "Why -- why aren't you giving us more money? We're opposingfinancial regulatory reform. We're opposing putting caps on yourbonuses."

Sarah Palin won't stand for that. The Tea Party movement won'tstand for that. And I think when that clash happens, I think theRepublican leaders in -- in Congress, I think, are going to pay aprice for it.

(CROSSTALK)

HUNT: The Tea Party movement will clearly help Republicans thisyear, because they're an insurgent party this year. They createenergy out there. They don't -- they don't have litmus tests of ScottBrown or Mark Kirk or anyone like that. However, I'm not sure exactly what the Tea Party movement is. Idon't think the polls -- the people who respond to the polls -- knowwhat it is. And it remains to be seen whether it will be an asset tothe Republican Party once you get beyond this insurgency year.

TAPPER: One thing -- and speaking of difficult Republicanprimaries, there is a difficult Republican primary, very contested, inCalifornia right now. A former Hewlett-Packard CEO, Carly Fiorina, isrunning this ad running for the Senate for the Republican nominationagainst former Republican Congressman Tom Campbell. Take a look.

(BEGIN VIDEO CLIP)

(UNKNOWN): Is he what he tells us? Or is what he's become overthe years, a FCINO, fiscal conservative in name only, a wolf insheep's clothing? The man who literally helped...

(END VIDEO CLIP)

TAPPER: There you go, the demon sheep ads. George, aside fromthe -- the fact that that demon sheep now haunts me at night, I'mwondering if you could comment on the fact that Republicans are nowrunning to the right for this mantle of fiscal conservative.Certainly that's something we see in the Tea Party movement. We'reseeing it now in California, as well.

WILL: Sure, because California has a closed primary.Republicans will vote in it. And about 15 percent of the decline tostates will vote in it. That's -- Fiorina running an ad against TomCampbell, who was running for governor until enticed back into theSenate race, I think by Meg Whitman, who's running for governor andreally doesn't want two former Silicon Valley CEOs running in tandemon the ticket, Meg Whitman coming from eBay, Carly Fiorina fromHewlett-Packard.

That said, it's the dog that didn't bark there. There's anothercandidate there, and he's Chuck DeVore. He's the conservative in therace. And I'll make you a small wager that he is the Republicannominee, neither of those two.

TAPPER: Do you want to get in on that action?

NOONAN: That -- I've watched that thing three times. It is --I'm fascinated by it. It is less like a political advertisement thanit is like a nervous breakdown. It is crazy. Its text doesn't followits art, if that's what it would be called. It's like -- it's like ananswer to the question, what would happen if Salvador Dali made a tech(ph) commercial?

TAPPER: You don't -- you don't like the demon sheep? You're nota fan of the demon sheep?

NOONAN: I kind of love it.

MARCUS: More livestock in political ads is what we need. Can wesay something about the -- the Republican lurch to claim the mantle offiscal conservatism?

TAPPER: Very quickly, yes.

MARCUS: Give me a break, OK? There is a serious proposal outthere, first for a statutory commission, now for an executive ordercommission to tackle this, to put everything on the table, andRepublicans have balked.

TAPPER: All right, and we're going to have to leave it there.The roundtable will continue in the green room on abcnews.com, and youcan get political updates all week long by signing up for ournewsletter also on abc.com.

END