CROWLEY: Facing the prospect of disastrous congressional elections, the Obama administration, trying to fuel recovery, is considering a package of business tax cuts. The president is expected to announce this week an extension of the research and development tax credit. Other proposals under discussion to help small businesses include a temporarily payroll tax holiday.

Over half of all the private sector employees work in small businesses. The idea is that those tax cuts might push those businesses into hiring again. Joining me now to discuss these proposals and more, thank you very much, Richard Trumka, president of the AFL-CIO; and Todd McCracken, president and CEO of the National Small Business Association.

Gentlemen, thank you so much. I want to just step back one second before we talk about specifics. And it struck me this morning, reading our research that every major paper has analysis that is just kind of heart-wrenching about what the economy is going to do.

One of them that caught my attention came from The L.A. Times talking about jobs. The nation's job deficit is so deep that even a powerful recovery would leave large numbers of Americans out of work for years. Experts say: "And with growth now weakening, analysts are doubtful that companies will boost payrolls significantly anytime soon."

So let me get you both to start out by giving me your version of the state of economy.

TRUMKA: You want to start with me?

CROWLEY: Sure.

TRUMKA: Well, it's obviously a tough economy for working people right now. And this Labor Day, workers are actually looking for economic patriots, people that will help to create good jobs, that will stop the outsourcing, that will help build retirement security, and they are looking for people to do that.

But they have a lot of hope because the foundation has been built. You know, for eight years, we got worked over by the Bush administration. And now we have an administration that is working with us instead. So there is some hope.

The foundation has been built. We've reined in Wall Street. We've done something to control health care. And we've started the process.

CROWLEY: I think this is a tough sell. And I want to ask you about some specifics, but first let me get, Mr. McCracken, your -- from your viewpoint, representing small businesses, how do they feel the state of the economy is?

MCCRACKEN: Well, it's pretty grim out there. A lot of small businesses do see some opportunities, but most of them are kind of in a stagnant or even a downward growth piece right now.

The thing we need -- we think is needed the most is access to credit and capital for small companies. Because that's what is going to enable them to take advantage of opportunities when they do have them, and hire that next employee and really begin to grow.

Unfortunately, you know, there are some proposals on Capitol Hill right now that would really help with that, and they have been stuck in the mud. And we really hope we can move forward on some of those things in the next few weeks.

CROWLEY: And again the idea is that would help workers.

MCCRACKEN: Absolutely.

CROWLEY: The small businesses employ so many people across the country. So let's just talk a minute about the idea of making permanent the research and development tax credit, which presumably would, you know, presume more innovation in the workplace, loosening credit. I mean, these are a number of things that the administration is looking at.

But in what way do you sort of think that this might be -- is this really a matter of changing policy or doing something, or is this a matter of a business cycle that is just going through the ropes and has gone back down a little bit, and kind of moving on its own?

TRUMKA: This is a business cycle. This is the result of 30 years of failed policy. In this country, we tried to say that we would have a low-wage, and high-consumption society. And that simply doesn't work, because the society -- our economy is built by consumer spending. And consumers can't spend when they don't have money.

CROWLEY: Well, doesn't that argue then for tax cuts all around? We talk about this payroll tax cut for small businesses, but how about, as Republicans argue, a tax cut for everybody so that they can buy the things that small businesses are selling?

TRUMKA: Well, when you get into tax cuts for the very rich, they don't buy much. And that's what happened. That's what resulted in the deficit in the last 30 years. They gave more tax cuts to the rich. They did not give them to the people that needed it.

We have been in the forefront of trying to rein in Wall Street and say, we do need more credit for small and mid-sized businesses so that they can start creating jobs. All of that will help, but it may not be enough, even the holiday on taxes may not be enough, the research and development tax credit may not be enough.

We need to create demand. And the best way to create demand is to put money in people's pockets. We need to invest in jobs, because without the jobs you won't get that demand.

MCCRACKEN: Yes. I do think that we are at the end of a bubble. This whole thing was created by a bubble that had lots of factors that came into why it was created in the first place.

But the reality is, it is going to take time for us to grow our way out of this. But that does not mean that we can't put into place some key policy objectives now that will help with that and will speed that up a little bit. And putting money in the pockets of both consumers and small business people so they can take advantage of the opportunities when they come along is crucial.

CROWLEY: Well, you know what's going on out there. We are hearing from more and more people showing up in the polling that people think, well, wait a second, we spent a trillion dollars and what we got for it was a 9.6 percent unemployment rate, a housing market that is dreadful.

And you can argue all you want that things are getting better or that it has been going on for 30 years, that the Bush administration was terrible, whatever you want to do, the fact is people think -- and Congress is in no mood to spend more money. How do you make that argument? MCCRACKEN: Well, I do think that there are some things that can happen relatively quickly that don't cost a lot of money. For instance, there is a jobs bill sitting in the Senate that they are going to be taking here in just a week-and-a-half that will free up a lot of credit for small companies at a very low cost of capital for the government. The SBA has loan programs that have been essentially on idle since the end of May, because Congress has not acted. They can get those enacted and reauthorized, billions more dollars will flow into small companies that will enable them to buy capital or buy equipment, hire employees, rent new spaces, and really begin the process of growing the economy.

TRUMKA: And there was not a trillion dollars, and it was three quarters, and it was bifurcated in a number of different ways. If we'd have spent...

CROWLEY: Well, if you just count the stimulus package, it was about three quarters, but then other stuff has been added on to that.

TRUMKA: If we'd have done stuff in infrastructure, the more we do in infrastructure, the more jobs we create, the more jobs we create, the lower the deficit.

CROWLEY: But there was infrastructure money in the stimulus bill.

TRUMKA: Yes, the mistake that was made with that was that they were all short-term projects. We couldn't invest in anything that was going to take more than 18 months. And as a result, we couldn't bring in private investment. That was one of the mistakes in this.

CROWLEY: So you both sort of agree that more money is needed, more federal input in terms of the money is going to be needed to jump-start both the small business arena and get jobs back.

TRUMKA: In the short term, absolutely.

MCCRACKEN: Yes, it has to be smart money, we're not ones for throwing unnecessary dollars at it. But, yes, both -- and tax cuts and access to credit, those are the key places.

TRUMKA: And here are three things that they can do between and election day. We have the Surface Transportation Act reauthorization, create a lot of jobs in the process. The Clean Water Act, the clean energy act, guaranteed loans for nuclear power, all of those would create tremendous amounts of jobs and push the deficit down at the back end, so it's a twofer.

CROWLEY: Where do you think these jobs will be coming from when they come back? Some of these may be gone forever. Now if you look at small business right now, you have seen -- you are now seeing lean and mean machines, of those who have survived.

They are using technology. They are pushing the workers that they do have, much higher productivity. Then you look at places where usually recovery comes from, contractors -- housing and building contractors, that's not going to happen because there is all of these empty buildings and houses that are for sale. Automakers, they have cut back, I mean, that has been brutal up there in the number of workers they have cut back.

Where are these jobs going to come from? Are they only going to have to come from the government?

TRUMKA: No, absolutely not. They are going to come from small and mid-sized businesses. And they are going to come from...

CROWLEY: But they are not...

TRUMKA: ... clean manufacturing, green manufacturing. That is out there. There are millions of jobs to be had. And at the same time we create those jobs, we make ourselves more efficient as a nation, and more able to compete.

CROWLEY: But there are not millions of jobs now.

CROWLEY: I mean, I keep hearing tens of thousands of green jobs. The problem is, we need hundreds of thousands of green jobs, and they're not there yet.

MCCRACKEN: We need about 15 million.

CROWLEY: Yes.

MCCRACKEN: We need about 15 million.

CROWLEY: So, 15 million. How long before we have actually 15 million green jobs, even in small businesses?

MCCRACKEN: Well, it's going to be -- it's going to be a while, but that's why we have to think about this in a broad base. I don't really think the recovery is going to be, you know, a sectoral recovery. We're going to have to think about small businesses that are adding one and two and three jobs apiece across all kinds of different industries.

But if they're going to do it, they have to be able to exploit the opportunities when they have it in front of them. And to do that, they've got to have access to money, because the -- to take advantage of a new -- of a new opportunity, you have to hire people, buy equipment, maybe lease some space.

Those three things, no one's going to wait for that. The employee is not going to wait to get paid. The -- the vendor is not going to wait to get paid, and the landlord is not going to wait to get paid. But the small-business owner is not going to give their money for 60, 90, 120 days. That's -- that's the gap that we've got to figure out how to fill, and that's what's missing right now because the banks aren't lending to small companies.

CROWLEY: I'm going to ask you two to pause right here, because we're going to come back with you. More on the economy and some politics with Richard Trumka and Todd McCracken when we come back. (COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CROWLEY (voice-over): The union vote is tried and true in the Democratic Party, not just because big labor is a core constituency in the party base, but also because unions are a treasured trove of feet on the ground, turning out the vote, working the phones, knocking on doors, which has not always been gratifying this year. One Ohio organizer said, "When our canvassers call on our members on their door steps, they hear Glenn Beck or Bill O'Reilly in the background."

In the face of increasingly gloomy national polls for Democrats, Richard Trumka took the "all politics is local" approach at a recent news conference.

TRUMKA: The selection is a choice. And, quite frankly, it will be decided race by race, workers deciding which candidate is on their side.

CROWLEY: The AFL-CIO plans to work in 26 states. It will focus on 18 Senate races, 70 House races. At the polls and in the right spots, the labor vote can be pivotal. In the last five congressional elections, more than 60 percent of the union vote was for Democratic candidates.

Still, union membership is down from its heyday, and its influence has diminished. In the past five elections, the percentage of voters who are union members has gone from 16 percent to 12 percent.

More with Richard Trumka and Todd McCracken in a moment.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CROWLEY: We are back with AFL-CIO President Richard Trumka and National Small Business Association President Todd McCracken.

Thank you all both for being here. You were saying as we went to break that what you needed was for the financial institutions to kind of open up, make credit a little bit easier. The fact of the matter is that part of the reverberation from this recession has been to say to banks, "You gave out too much money to people who shouldn't be getting it," and now we're asking them to give out more money. What do we do with the banks and that -- you know, because you need them to give -- and are pushing for small-business tax cuts.

TRUMKA: Well, we've really been in the forefront of that, trying to get money, and the proposal that we've made is that we ought to take used TARP money or money that was paid back and unused TARP money and give it to regional banks, so that they can lend to small- and mid-sized businesses, because there is a credit crunch out there, and they haven't been lending.

What they did is they went the opposite way. Maybe they were too loose...

CROWLEY: Well, it's a pendulum, right?

(CROSSTALK)

TRUMKA: They were too loose, and then they went too tight.

CROWLEY: And whose fault (ph)?

MCCRACKEN: I think, yes, the pendulum is exactly the right analogy, because it swung too far in one direction, now it's swung too far in the other direction, and we've got to get them back -- back in the middle, and we think there are proposals on the table that can help us do that.

The small-business lending fund idea that was just mentioned we think is a smart way to -- to start and to get the -- the SBA- guaranteed lending going again we think is also a really productive thing.

I mean, that's -- it doesn't really get banks to make bad loans, because they still have skin in the game. They're not going to go out and make crazy loans. But it -- but it really helps the small companies get the extra credit they need.

CROWLEY: Mr. Trumka, tell us what the president has done right, first of all, in trying to deal with this economy. And where do you think he's gone wrong?

TRUMKA: Well, first of all, he did the stimulus package. You know, let's remember what he inherited. He inherited a banking industry or an economy that that was about to fall off the end of the cliff. He inherited a recession.

So he's brought us back. He's brought sanity back to the financial system here. He has brought the economy back somewhat. He's created more jobs in this recession than George Bush did in eight years as president with a surplus. So he's done that.

CROWLEY: But 62,000 jobs last month is not enough.

TRUMKA: Oh, of course it's not enough.

CROWLEY: Right.

TRUMKA: We need between 400,000 and 500,000 jobs a month.

CROWLEY: So you think the stimulus package was a good idea and you think it saved us from going off the cliff?

TRUMKA: I do. It was too small at the time, and everybody knew it was too small, but it was all they could get passed because of Republican opposition.

CROWLEY: And so, first, what makes you think you can get anything passed the Republican opposition at this point, especially since the country has gotten more and more concerned about the deficit? But -- but, secondly, to my first question is, what has he done wrong, do you think?

TRUMKA: Well, the first thing that was done wrong in the stimulus package was, When we did infrastructure, it only addressed short-term infrastructure projects, so that we couldn't get a project that would take three or four years to complete and create a lot of jobs. They were all smaller jobs.

It should have been geared toward longer stuff.

TRUMKA: More of the money should have been structured towards infrastructure and helping state and local governments, because what we see right now is, the extraordinary spending of the federal government is being negated by the contracting of the state and local government...

CROWLEY: Sure.

TRUMKA: ... and that's why we're seeing the -- the... CROWLEY: Yes, where they're going to still look at more teachers and firefighters, policemen, and that's part of the AFL-CIO, that are getting laid off now because those state budgets have to be balanced.

TRUMKA: But if we hadn't given them aid, we could have lost 900,000 teachers, firefighters and police. That's not good for the country. That's not good for our children. That's not good for our future.

CROWLEY: Mr. McCracken, what has the president from your point of view done right and what has he done wrong?

MCCRACKEN: He really has focused on the lending stuff for small companies, and I think that's a really productive thing. He seems sort of -- sort of gets the need to really -- to inject credit capital in small companies and how it's really the lifeblood of what they do.

And what he's done wrong, I think, is not really focus on that nearly early enough. I mean, we're talking about a small-business lending fund now in September into the end of a recession. This should have been on the table a year-and-a-half ago, and things like this should have been on the table a year-and-a-half ago.

And now they're also talking about a payroll tax holiday of some substance. We were talking about that also a year-and-a-half ago. We think something like that should have been in the first stimulus package, and things would have been -- we would have been in better shape than we are right now.

TRUMKA: You know, Todd, in all fairness to the president, the House of Representatives has passed 400 bills that are sitting at the doorstep of the Senate. And because of the obstructionism of the Republicans right now, they haven't been able to be passed. Much of what you've talked about are in those 400 bills that Democrats and the president advocated. CROWLEY: But he was advocating -- I mean, he was -- had his hands full and was advocating something larger and some other things. Let me ask you something, because I had two men in here who were heads of very large companies who said the president just has this anti- business tone, businesses are worried about like what's coming next, there's this uncertainty. Do you think that the president has an anti-business tone?

MCCRACKEN: I -- I think it can be perceived that way, because the -- a lot of things that have come out of -- of Washington in the last year-and-a-half do inject a degree of uncertainty into the economy. And that does hurt job growth, because you have to realize that for a company adding another job or adding (inaudible) is a long- term decision. It's not something they do lightly.

And they have to look into the future and know what's -- what they think is coming and whether they're going to be able to sustain this. And -- and the financial reform, the -- the -- the health care reform, and now all the uncertainty over what tax policy is going to be over the next few years does sort of add to that general unease. And there's no getting around that.

CROWLEY: And keeps jobs from coming, because I don't want to hire, because we don't really know what's going to go on. But let me move you on to...

TRUMKA: But wait, wait, wait. All of those were absolutely essential, and it's unfair to say that the president is anti-business. This president has done more and given more to tax cuts to business than -- than anybody before.

CROWLEY: He did say -- he saw how it could be perceived that way.

TRUMKA: Well, and, you know, he has -- we had no choice but to rein in Wall Street. We had no choice but to rein in health care costs. We have no choice but to look at a tax code that now rewards people for taking jobs offshore and trying to reverse that.

All of these things have come about because of the bad policies of the last 30 years, and this president is trying to correct them.

CROWLEY: Let me ask you about one -- one final policy, and that is about the Bush tax cuts. As you know, they are scheduled to be -- to expire in January. This president wants to keep them for anyone who makes $250,000 per household or under. I want you to listen to Joe Biden a little bit ago on this subject.

(BEGIN VIDEO CLIP)

BIDEN: The only argument that our colleagues, our Republican colleagues make is, well, this is really going to hurt small business if you don't extent the entire Bush tax cuts. Here are the facts: 3, not 3 percent of the small businesses in America would benefit one single, solitary penny of extending that top 2 percent tax cut. So this is just a bunch of malarkey. (END VIDEO CLIP)

CROWLEY: Mr. McCracken, clear this up for us, because every time we start on this -- start down this tax cut thing and the $250,000 mark, what we hear is this is going to hurt small businesses. Is this overall a drain on small businesses? Should the tax rates expire on those making $250,000 and up?

MCCRACKEN: We think this is the wrong time to have taxes go up for -- for small companies, because they do pay taxes at this rate, so we think Congress should at least temporarily extend...

(CROSSTALK)

CROWLEY: For everyone?

MCCRACKEN: Yes, these taxes, because this is the wrong time to increase taxes on anybody, because the companies that do pay this tax -- and it is a minority of small companies, for sure -- but the ones that do are the more successful ones who are most likely to be growing jobs and the ones that we want to continue to be successful and we don't want to put disincentives in place for them to do it.

But the vice president is correct that it is only a fraction of small companies that pay taxes at...

(CROSSTALK)

CROWLEY: But those companies that tend to create most of the jobs?

MCCRACKEN: Exactly. The jobs aren't spread across evenly across all small companies.

CROWLEY: OK. All right. And you've got the last...

TRUMKA: It's not fair to -- it's not fair to say most of the jobs. They create some of the jobs, not most of the jobs.

CROWLEY: Well, most of the jobs within the small-business industry.

TRUMKA: Not most of the jobs within the small businesses. They're not created by the 3 percent. They're created -- the vast majority are created by the other 97 percent. So it's not fair to say most jobs are created by that top 3 percent, because they are -- are not.

CROWLEY: I'll give you the last word.

(CROSSTALK)

MCCRACKEN: Well, there's the question of job creation versus jobs -- jobs that exist. Most small businesses -- most jobs exist in -- in the other businesses, but I think the more successful, growing companies that pay the higher rates are creating most of the new jobs, so it depends on how you look at it.

CROWLEY: Todd McCracken, it always comes out (inaudible) Todd McCracken, Richard Trumka, thank you so much for joining us. Happy Labor Day to you both.

TRUMKA: Happy Labor Day to you.