NBC "Meet The Press" - Transcript


MR. GREGORY: We are back. The biggest challenge facing this administration by far is the deep economic hole this country is still in. This week, the government adjusted its economic growth numbers, illustrating that the economic recovery is slower and more fragile than previously thought. Here to shed some light on what the administration calls Recovery Summer, the former chair of the Democratic National Committee and governor of Pennsylvania, of course, Ed Rendell; New York City Mayor Michael Bloomberg; and former chairman of the Federal Reserve, Alan Greenspan.

Welcome to all of you. There is so much to discuss, and we'll get to as much as we possibly can.

Mayor Bloomberg, Recovery Summer is how the White House is describing this, and yet, we know that the recovery in the second quarter is slower, we know that unemployment is stubbornly high, that companies have a lot of cash but they're not hiring. So my question is, why is it that recovery feels so much like recession?

MAYOR MIKE BLOOMBERG: Well, you have the public not wanting any new spending, you have the Republicans not wanting any new taxes, you have the Democrats not wanting any new spending cuts, you have the markets not wanting any new borrowing, and you have the economists wanting all of the above. And that leads to paralysis. And paralysis, it leads to uncertainty, and uncertainty is not good. You don't make spending decisions, investment decisions, hiring decisions, or whether-you're-going-to-look-for-a-job decisions when you don't know what's going to happen. You pass 2,000-page bills, but the regulations are where all the details are. Everybody's got to lobby up with lobbyists and, and lawyers, and nobody knows what the future is. That's not good. We have to end the uncertainly, and until you do that, I don't think you come out of this recession.

MR. GREGORY: Dr. Greenspan, the Associated Press reported on a survey this week of economists, and we'll put a portion of it up on the screen. "A bleaker outlook for the economy into 2011. The U.S. economic recovery will remain slow deep into next year, held back by shoppers reluctant to spend, employers hesitant to hire." That's according to an AP survey of leading economists.

"The latest quarterly AP Economy Survey shows economists have turned gloomier in the past three months. They foresee weaker growth and higher unemployment than they did before." The current Fed chairman, Bernanke, said the outlook is "unusually uncertain." A little bit of newer generation Fed speak there. Does that mean--do you think that means the economy gets worse before it gets better?

MR. ALAN GREENSPAN: Maybe, but not necessarily. I think we're in a pause in a recovery, a modest recovery. But a pause in the modest recovery feels like quasi recession. Our problem, basically, is that we have a very distorted economy in the sense that there has been a significant recovery in a limited area of the economy amongst high-income individuals who have just had $800 billion added to their 401(k)s and are spending it and are carrying what consumption there is. Large banks, who are doing much better, and large corporations, whom you point out and the--and everyone's pointing out, are in excellent shape. The rest of the economy, small business, small banks, and a very significant amount of the labor force, which is in tragic unemployment, long-term unemployment, that is pulling the economy apart. The average of those two is what we are looking at, but they are fundamentally two separate types of economy.

MR. GREGORY: If you add in the housing crisis, which remains a crisis, do you think it's possible that we get this double-dip recession that a lot of people fear?

MR. GREENSPAN: It is possibly if home prices go down. Home prices, as best we can judge, have really flattened out in the last year. And while it is true that most economists expect a small dip from here, largely as a consequence of the ending of the tax credit, the data don't show that at this particular stage. If home prices stay stable, then I think we will skirt the worst of the housing problem. But right under this current price level, maybe 5, 7 or 8 percent below is a very large block of mortgages which are underwater, so to speak, or could be underwater, and that would induce a major increase in foreclosures. Foreclosures would feed on the weakness in prices, and it would create a problem. So that--it's touch and go.

MR. GREGORY: Governor Rendell, one of the things that Secretary Geithner said on this program last week is that we've reached a point, as he said, where we need to make a transition to a recovery led by private investment, led by the private sector. So, you know, government has to take its foot off the accelerator when it comes to stimulus. But here's a reality that we're talking about at so many states where, on the local level, on the state level, huge, huge cutbacks creating more unemployment in states. Governor Paterson telling The Washington Post earlier this month, we'll put it up on the screen, "We may be looking at a culture and lifestyle around this country that will start to remind people of the Depression, not a recession, if we cut through these budgets much more." That's the tension. Governor of New York, of course, saying, you know, government can't pull back when you have so many people still in need.

GOV. ED RENDELL (D-PA): Well, first of all, I, I want to piggyback on what the mayor said. I think the mayor's absolutely right about the paralysis. But I think the paralysis is driven mostly by partisanship and by the fall election. David Walker of the Peterson Foundation said it best. We should still be investing in things that stimulate the economy, and we can do that at the same time that we put together a long-term plan for deficit reduction. We can do both, and we have to do both. For example, and you've heard the mayor and I talk about infrastructure, well, the infrastructure part of the stimulus has worked. There's absolutely no question about it. We can demonstrate in Pennsylvania and other states around the union how it's produced good-paying jobs, both on the construction sites and back in American factories. It has worked. We should be investing more money in our infrastructure right now. We need it, number one, and number two, it's the best job creator.

MAYOR BLOOMBERG: You know, if you look back in the 1930s, the money went to infrastructure. The bridges, the municipal buildings, the roads, those were all built with stimulus money spent on infrastructure. This stimulus bill has fundamentally gone, started out with a $500 rebate check, remember. That went to buy flat-screen TVs made in China. That didn't exactly help our economy. Then all of this other stimulus money that's been given out to governments, they're using it for operating rather than investment. And the monies that are going to, to the private sector, they're doing the pet projects for companies that happen to have some influence throughout this country. And the argument is, "Well, these people would get laid off if we didn't do that," but nobody's directing this money at the people who've already been laid off.

MR. GREGORY: Where do you see unemployment as we move through the rest of this year and beyond?

MR. GREENSPAN: I feel we just stay where we are. The--there is a gradual increase in unemployment, but not enough to reduce the level of unemployment.

MR. GREGORY: We're at or about 10 percent.

MR. GREENSPAN: Well, we're 9.5, and...

MR. GREGORY: Right. But I'm saying, is that where we remain, do you think?

MR. GREENSPAN: Yeah, yeah. I, I would say that there's nothing out there that I can see which will alter the, the, the trend or the level of unemployment in this context.

MR. GREGORY: Interest rates, how long before they start coming up? Do they need to stay low?

MR. GREENSPAN: Well, the problem there implies that the government has control over those rates, meaning the Federal Reserve and the Treasury Department, in a sense. There is no doubt that the federal funds rate, that is the rate produced by the Federal Reserve, can be fixed at whatever the Fed wants it to be, but which the government has no control over is long-term interest rates, and long-term interest rates are what make the economy move. And if this budget problem eventually merges to the point where it begins to become very toxic, it will be reflected in rising long-term interest rates, rising mortgage rates, lower housing. At the moment, there is no sign of that, basically because the financial system is broke and you cannot have inflation if financial system is not working.

MR. GREGORY: Mayor Bloomberg, let me talk about the tax cut debate which is gripping Washington right now and will for some time. E.J. Dionne writes this in his column this week in The Washington Post. "Political stupidity, U.S. style" is the headline. "Can a nation remain a superpower if its internal politics are incorrigibly stupid?

"Start with taxes," he writes. "In every other serious democracy, conservative political parties feel at least some obligation to match their tax policies with their spending plans. David Cameron, the new conservative prime minister in Britain, is a leading example.

"He recently offered a rather brutal budget that includes severe cutbacks. I have doubts about some of them, but at least Cameron cared enough about reducing his country's deficit that alongside the cuts he also proposed an increase in the value-added tax, from 17.5 percent to 20 percent. Imagine: a fiscal conservative" who could--"who really is a fiscal conservative.

"That could never happen here because the fairy tale of supply-side economics insists that taxes are always too high, especially on the rich." And yet the administration says economic growth won't be affected if you let the tax cuts expire for the wealthiest Americans.

MAYOR BLOOMBERG: I don't think you want to run the risk that they are wrong. I would say let's go on with the tax cuts for another couple of years, but you couple it with long-term solutions. And you have to look at what's politically possible.

MR. GREGORY: Governor Rendell, that is not the position of the administration or Democrats, who want to make this a, a big midterm election issue.

GOV. RENDELL: And, and interestingly, I certainly agree with what the mayor said. It--what we've got to do is, I think Simpson-Bowles is very important. I think both parties have to get together...

MR. GREGORY: That's the debt commission's suggestions on how to cut spending.

GOV. RENDELL: The debt commission. Both parties have to get together and say, "We're going to do this together, we're going to make the changes. They're not going to be popular, but they're necessary." But you have to have increased taxes along with those reductions. And this fairy tale that increased taxes on the rich is going to hurt the economy, well, we don't have to look any further than 1993. What Bill Clinton did, without one Republican vote, is essentially the same thing. He raised taxes on the top 2 percent in, in America. That was combined with budget cuts that the president and the Republican Congress did together, and it produced 23.5 million new jobs in the seven years that followed.

MAYOR BLOOMBERG: OK, but keep in mind you had that virtuous cycle going. We did not have a war, and a lot of things went perfectly.

GOV. RENDELL: There's no question. But there's also no question that that's irrefutable. If it was going to hurt small business, you would have seen not anywhere close to 23.5 million jobs created.

MR. GREGORY: Well...

GOV. RENDELL: What I think we ought to do, sit down after the election, because it's our only chance to do this, everyone takes responsibility for cutting the entitlement programs which, as the mayor said, are absolutely necessary. We maybe phase in the elimination of the tax, tax cut for the rich over two or three years. I'd accept that. But taxes, as you said and Prime Minister Cameron did, you have to do both. You have to cut spending, and we ought to be doing that, you have to continue the short-term stimulus, as David Walker said, and you've got to raise some revenue.

MR. GREGORY: All right. Well, Dr. Greenspan, it's not often that you hear Democrats and liberals quoting you. But, in this case, they did when it come to--came to tax cuts because of an interview you gave recently with Judy Woodruff on Bloomberg television. Here was the question: "Tax cuts [that] are due to expire at the end of this year. Should they be extended? What should Congress do?" You said, "I should say they should follow the law and then let them lapse." Question: "So to those interests who say but wait a minute, if you let these taxes go my taxes go up, it's going to depress growth?" You said, "Yes, it probably will, but I think we have no choice in doing that, because we have to recognize there are no solutions which are optimum. These are choices between bad and worse." You're saying let them all go, let them all lapse?

MR. GREENSPAN: Look, I'm very much in favor of tax cuts, but not with borrowed money. And the problem that we've gotten into in recent years is spending programs with borrowed money, tax cuts with borrowed money, and at the end of the day, that proves disastrous. And my view is I don't think we can play subtle policy here on it.

MR. GREGORY: You don't agree with Republican leaders who say tax cuts pay for themselves?

MR. GREENSPAN: They do not.

MR. GREGORY: Couple of other topics I want to get to. Financial reform is a big one. A couple weeks from now a big sequel's coming out to movie theaters, and a lot of people like to watch the movies, and this is greed. This is the sequel to "Wall Street." And here was a clip from that original film, "Wall Street." Let's show it.

Mr. MICHAEL DOUGLAS (as Gordon Gekko in "Wall Street"): Greed, for lack of a better work, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.

MR. GREGORY: Today is Wall Street different, and will financial reform make Wall Street different?

MAYOR BLOOMBERG: The devil's in the details. A 2,000-page bill that very few people have ever read, but it basically turns over to the SEC and the Fed and other agencies the responsibility to write regulations. This is a dream piece of legislation for lobbyists and for lawyers. And nobody knows the answer to your question.

MR. GREGORY: Let me show something, Dr. Greenspan. David Brooks in his column writes about this bad blood between the Obama administration and the, the business community, which has only gotten worse because of financial reform. And I'll put it up on the screen, what Brooks writes in his column. "The psychological war between business and the Obama administration also is taking a toll. Business types think the administration is stuffed with clueless professors. Some administration officials think corporate honchos are free-market hypocrites prowling for corporate welfare." How did things get so bad? Because a lot of people in the business community say a big part of the problem is there's nobody who works in the administration that's actually run anything, that's actually run a business, and that's contributing to their attitude and their policies.

MR. GREENSPAN: I can't answer that question, and the reason I can't is I've never seen anything like this. I've been in and out of Wall Street since 1949, and I've never seen the type of animosity between government and Wall Street. And I'm not sure where it comes from, but I suspect it's got to do with a general schism in this society which is really becoming ever more destructive. We've got to change it.

MR. GREGORY: You see it firsthand, you see that animosity. Why?

MAYOR BLOOMBERG: The public is upset. If they haven't lost their job, they know somebody that has. If they haven't lost their house, they know somebody that has. What do you do? When something's wrong, it's government's job to fix it, it must be government that's responsible for causing it. Government wants to stay in office, they look for somebody else to blame. And it's much too simplistic to say the banks did everything wrong. We all wanted to expand the economy, we all wanted to expand home ownership. We all wanted Wall Street to create the money so we could have all these mortgages. And then invariably that leads to excess, and then invariably that leads to a correction, more violent with time. And then we have to look for villains. And we've got to stop all this. One of government's jobs is to promote the economy and to promote American commerce and finance and the arts around the world. And this constant tearing each other apart--we can sit down and we can say, "What did we do wrong?" and "How are we going to fix it?" But always pointing fingers and finding fault with everybody, we need to find solutions.

MR. GREGORY: But, Governor, you--when you are a president at a time of such high unemployment and, and recession, to have such a poor relationship with the business community is a very difficult thing, particularly when you have the Treasury secretary saying, "Look, it's got--recovery can only be led by the private sector."

GOV. RENDELL: Right. And it's got to be repaired, there's no question about it. But I, I think it goes to a fundamental question: Is regulation, per se, bad? Is better regulation bad? I think better regulation is good for the business community, and I think that's something we should get together on.

MR. GREGORY: I want to go around the horn on, on some final thoughts on, on key issues, and I'll start with you, Mayor. On immigration, what is the impact of what we've seen, the judge's ruling this week, the protests that continue on something that you feel strongly about, which is a more comprehensive solution?

MAYOR BLOOMBERG: Well, it, it--there will be a lot of litigation, I think there's no question about that. And whatever Arizona is allowed to do and does do is not going to have a great impact on the rest of this country. This is a national problem. We have to get control of our borders. You can only do that if you make companies obey the law and not hire undocumented or illegals. They can only do that is--if they have a Social Security card that has biometrics so they know whether the person is legal or not. We have to do something about the 12 million undocumented here. Yes, they broke the law, but we can't deport them. Let's get over this pointing fingers and do something about that, whether it--they have to pay a fine, learn to speak English, the history, you can do that. And then you have to give visas for the skills we need. Canada sets aside 36 percent of their visas for people with skills they think their country needs. We set aside 6 percent. We educate the doctors and then don't give them a green card.

MR. GREGORY: I'm, I'm almost out of time, so I just want to--Governor, I want to go to you on this point about high unemployment. When you were here some months ago you said, for the Democrats to keep control, if there's unemployment that's double digits, very hard to do. Do Democrats hold the House?

GOV. RENDELL: I think we hold the House. We lose significant seats, but we hold. And I think we hold the Senate only because the Republicans have made a slew of mistakes, PR mistakes like opposing unemployment compensation extension, like going after the president for the BP deal. There weren't 5 percent of Americans who didn't think that was a good deal.

MR. GREGORY: Dr. Greenspan, the Dow, an important barometer, as you've said before on this program, because there's real money there, there's real wealth. Are we out of the woods in the sense that Dow 10,000-plus you think is here to stay?

MR. GREENSPAN: I wish I could answer that one. It's a critical issue because, as you point out and as I've always believed, we underestimate the impact of stock prices on economic activity. Asset prices are having a profoundly important effect. What created the extent of the contraction globally was the loss of $37 trillion in market value. It collapsed the value of collateral in the system and it disabled finance. We've come all the way back--maybe a little more than halfway, and it's had a very positive effect. I don't know where the stock market is going, but I will say this, that if it continues higher, this will do more to stimulate the economy than anything we've been talking about today or anything anybody else was talking about.

MR. GREGORY: Final political point, Mayor Bloomberg. Congressman Rangel, do you think he should stay in his job or should he step aside?

MAYOR BLOOMBERG: Well, it's very sad. It's not good for New York. He was one of our representatives and was going to be a powerful one who could really deliver for New York. I'll let Congress worry about whether he did the things that he is alleged to have done. But the whole thing is, I think, symptomatic of we don't have the kind of disclosure, Congress doesn't have the kind of self-policing and openness and visibility that this country deserves.

MR. GREGORY: 2012 is still something that people speculate about, Mayor Bloomberg, and you said something interesting...

MAYOR BLOOMBERG: We are not going to get the Olympics for 2012.

MR. GREGORY: The Wall Street Journal reported this, thinking about your future, "[Bloomberg] suggested the main reason he's not seeking the White House" in 2012 "is because he can't get elected. His only supporters, he joked [in a speech up at Dartmouth]" in New Hampshire, "are Diana Taylor, his longtime companion, and his 101-year-old mother, Charlotte." God bless her.

"`Every one of my positions cuts out half the country,' Mr. Bloomberg explained. `I'm pro-choice. I'm pro-gay rights. I'm pro-immigration. I'm against guns. I believe in Darwin.'" Even with so, so many independents in vogue these days, you will rule out a run again?

MAYOR BLOOMBERG: I will rule out a run. I've got the best job that I could possibly have. I've got 1251 days more to do it. I'm looking forward to every single one of them. And I will call my mother to check on her political leanings.

MR. GREGORY: All right. We'll leave it there. Thank you all very much.

And up next, leadership tests for President Obama, ethics charges against Congressman Charlie Rangel, and all the attention over Chelsea Clinton's big wedding last night. Presidential historian Doris Kearns Goodwin and Time magazine's Mark Halperin are next after this brief station break.