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Greenspan, Schumer and Cornyn on "This Week"

Greenspan, Schumer and Cornyn on "This Week"

By This Week - October 4, 2009

STEPHANOPOULOS: And with that, let me bring in the man who has known more about the American economy for more time than just about anybody in the country, former Fed Chair Alan Greenspan.

Welcome back.

ALAN GREENSPAN, FORMER CHAIRMAN, FEDERAL RESERVE BOARD: Thank you.

STEPHANOPOULOS: You know, for most Americans, this jobs issues is the one that hits home the hardest. And that report on Friday was a surprise, much worse than people expected. What should Americans expect right now? How much worse is this job situation going to get for how long?

GREENSPAN: Well, it's very difficult to make judgments at a time like this, largely because we don't have so many incidents in history to be able to compare it to. But basically I think the issue is this.

The job report was pretty awful, no matter how you looked at it. Indeed, not only, of course, did the unemployment rate go up, but I was particularly concerned about the number of Americans who have been unemployed for six months or longer. And that went up...

STEPHANOPOULOS: Five million Americans.

GREENSPAN: But that went up sharply in September. And remember, the reason that is a problem, obviously, other than the obvious personal difficulties that families have in such a context, is that the economy loses skills. And people who are out of work for very protracted periods of time, lose their skills eventually.

And remember that what makes an economy great is a combination of the capital assets of the economy and the people who run it. And if you erode the human skills that are involved there, there is a real and in one sense an irretrievable loss.

STEPHANOPOULOS: So what do we do about it?

GREENSPAN: Well, the issue is essentially economic activity. And the reason I say that is that there is a silver lining in that particular report. And it's difficult to find one. It's that American business after Lehman Brothers collapsed and the whole financial system imploded, business expected that the economy would go down far more sharply than it in fact did.

The result was they laid off a very substantial number of people to the point that the actual hours worked fell even more than the economy. So that what we're getting is artificial numbers which give us productivity gains of horrendous amounts, meaning the amount of labor input per unit of output has been going down and down. And that can't continue. So that silver lining is at some point we're going to start to see an improvement in employment. But remember that unless there is a monthly increase of more than 100,000 a month, you've still got the unemployment rate continuing to rise.

STEPHANOPOULOS: And that's why the administration's projections show more than 8 percent unemployment through 2011. You saw the president yesterday say now he's going to look at new ideas to spur job creation.

What should he be doing now? What would you advise him to do?

GREENSPAN: Well, I think the focus has got to be on trying to get the economy going, but you also have to be careful that in trying to do too much you can actually be counterproductive. And we are in a recovery, and I think it would be a mistake to say the September numbers alter that significantly.

It is true, the last couple of weeks that some of the numbers that are coming in have been a little bit soft. But this is what a recovery looks like. In retrospect we always look back and we see the ups and the downs and the ups and the downs, and we just visually (ph) go right through it.

It's premature to act on this type of information.

STEPHANOPOULOS: No new stimulus?

GREENSPAN: Oh, no new stimulus for two reasons. One, only 40 percent of the first stimulus has been in place. And there is a considerable debate going on in the economics profession about how effective this stimulus package is.

And so mainly because of the fact that as broad as it is and as effective as it will turn out to be, it still has got 60 percent left to go. So in my judgment it's far better to wait and see how this momentum that has already begun to develop in the economy carries forward.

STEPHANOPOULOS: Back in August, you thought you would see about 2.5 percent growth in this quarter. Do you still hold to that or do these numbers make you change that view?

GREENSPAN: No. The numbers are coming in higher than that.

STEPHANOPOULOS: Higher than that?

GREENSPAN: Oh yes. It looks as though it's going to be 3 percent, maybe even possibly even higher. The problem with knowing what the third quarter is going to look like is we won't get all of the data for several months. So a lot of -- there is a lot guesswork involved. But it's on-track, at this stage, for more than 2.5 percent.

STEPHANOPOULOS: So more than 2.5. So does that mean we're heading towards a situation where you could actually see an end to the job loss or not quite yet?

GREENSPAN: Well, no, I think we're getting close to that. But remember, the end of the job loss is not the same thing as if the unemployment rate is going to start down. My own suspicion is that we're going to penetrate the 10 percent barrier and stay there for a while before we start down.

STEPHANOPOULOS: Given that, even though you're not for any major new stimulus, what about extending unemployment benefits for people who are out of work? We're going to have more than a million people lose their benefits by the end of the year. Also the idea that there should be some tax credits to make sure that unemployed people are able to maintain their health insurance?

GREENSPAN: Oh, this is an extraordinary period and temporary actions must be taken, especially to assuage the angst of a very substantial part of our population. So I don't actually consider those types of actions stimulus programs. I think that they are essentially programs which support people -- essentially their living standards in part.

I grant you it has a stimulus effect, but that would be my primary focus.

STEPHANOPOULOS: How about one other idea. One of the things that I saw in the employment report that surprised me is that how many of the cuts are coming from state and local government. We know they've really been crunched. Would it make sense given that for the federal government to step in with more aid for state and local governments?

GREENSPAN: Well, basically there is a good deal of that in there. What has happened, unfortunately, is that over the last 10, 15 years, state and local governments have picked up their budgets very considerably, and they, having fiscal difficulties, which the federal government itself can't really resolve, I have no view one way or the other, but I do think that will happen.

If you're asking me as a forecaster as distinct from whether it's desirable or not, I think the pressures to do that will be there. But it's a very tricky political (inaudible).

STEPHANOPOULOS: How about on health care? We see the Senate Finance Committee about to pass, we think, their health care reform. And there is a big debate, it has now become a partisan debate of whether or not this is going to help or hurt the economy, help or hurt the deficit, help or hurt on job creation.

From what you see the Senate doing right now, what's your view?

GREENSPAN: Well, I've always had the view that the real problem that we have existed before these reform proposals came in. In other words, we have a huge fiscal hole out there which is best measured by the fact that Medicare benefits are only 50 percent funded going all the way out. And what that implies is a very significant issuance of Treasury securities to meet the ever-growing and very indeterminately large federal deficit. You cannot continue to increase the federal debt.

Of course, remember, over the generations, we have been very careful to keep the total level of debt well below the borrowing capacity of our economy so far as federal issuance is concerned. That cushion is now being tested. And I'm getting a little concerned and I don't want to find out where the upper levels are.

And the reason it's important is it will affect long-term interest rates. And long-term interest rates are very critical.

STEPHANOPOULOS: But are these proposals going to make that problem -- are they going to help it or hurt it?

GREENSPAN: Well, it depends on what the CBO writes on the Senate Finance Committee bill. We don't know what those numbers are going to look like yet. But I would say revenue neutral is not adequate. In other words, we have to not only have a revenue neutral reform program, but simultaneously recognize that we have to address the longer term.

STEPHANOPOULOS: Mr. Greenspan, thanks very much.

GREENSPAN: My pleasure.

STEPHANOPOULOS: We're going to go straight to our debate as the senators take their seats. Take a look at a long week on health care from the Senate Finance Committee.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: The insurance companies, in my judgment, are determined to protect their profits. The government is not a fair competitor. It's not even a competitor.

UNIDENTIFIED MALE: So you don't want Medicare?

UNIDENTIFIED MALE: It's a predator.

UNIDENTIFIED MALE: We have to settle down and find ways of living within the promises that have been made.

UNIDENTIFIED MALE: No one has been able to show me how they can count up to 60 votes with the public option in the bill.

UNIDENTIFIED MALE: Aye.

UNIDENTIFIED MALE: No.

UNIDENTIFIED MALE: Aye.

UNIDENTIFIED MALE: No.

UNIDENTIFIED MALE: I'm looking around, and there's some pretty tired senators here.

(END VIDEO CLIP)

STEPHANOPOULOS: The final vote was supposed to be on Tuesday, and we had deliberations all week long in Washington. We'll bring you two of the senators who were there: Democrat Chuck Schumer of New York, John Cornyn , Republican of Texas. I want to get to health care, but let's begin with the economy.

You heard Chairman Greenspan there: no long-term stimulus, but he thinks that unemployment benefits have to be extended. The House's passed a bill. Will the Senate act this week?

SCHUMER: Yes. We're going to pass a bill this week, put it on the floor. I believe it will pass. It will extend unemployment benefits for four weeks for all states and another 12 or 13 weeks for all states above 8 percent...

STEPHANOPOULOS: Around where the House was?

SCHUMER: It will go beyond what the House was. We think that, you know, eight -- you have 8.5 percent unemployment, that's pretty bad, and you ought to get some help.

STEPHANOPOULOS: Will Republicans support that?

SEN. JOHN CORNYN, R-TEXAS: I think so. I don't know where the 8.5 percent cut off comes from, because people are comprised at 8 percent or whatever it is. For example, in Texas, now about 8 percent. And they need some help, too. So I hope we can work on that.

STEPHANOPOULOS: (inaudible)

SEN. CHARLES E. SCHUMER, D-N.Y.: We'd be happy to work on that, too.

STEPHANOPOULOS: Well, it sounds like it's going to pass the Senate this week, so can (inaudible) that are more contentious.

CORNYN: I think if Texas was below 8.5, we need to have some (inaudible).

STEPHANOPOULOS: How about the broader issue, Senator Cornyn? Chairman Greenspan says no other stimulus, but the president said yesterday he's going to have his team look at more job creation measures. Good idea?

CORNYN: Well, I think the stimulus so far has been unsuccessful in achieving the goals the president set out for it. He said, with the stimulus, we'd seen 8 percent -- no higher than 8 percent unemployment. And we now see, with 60 percent of the stimulus unspent, that that has not been successful. We're going to see unemployment over 10 percent.

Forty-three cents out of every dollar spent in Washington today is borrowed. And the American people are justifiably concerned, even scared, that the spending and the debt that's being racked up. And unfortunately, the health care issue threatens to make matters worse, not -- not better.

STEPHANOPOULOS: So still in pat (ph) is your position?

CORNYN: Well, no. I think there are things we need to do to help people who need help, like unemployment benefits and the like. But I think throwing more money at the problem and racking up more and more debt for children and grandchildren is not the answer.

SCHUMER: Bottom line, we -- we have to deal with the pain of people's unemployment now, so prolong (ph) unemployment benefits. I'd be for extending COBRA benefits, so...

STEPHANOPOULOS: And health care?

SCHUMER: Health care, as well.

STEPHANOPOULOS: Are you for that?

CORNYN: I'm for health-care reform, which means that in part what we do is we don't -- you don't have to get it from your employer to establish parity, where people get affordable health coverage...

STEPHANOPOULOS: You haven't (ph) extended it to the very people who are unemployed to buy...

CORNYN: COBRA.

STEPHANOPOULOS: OK.

CORNYN: Sure, but COBRA's not really a great solution for a lot of people, because it costs so much money. So that's part of the overall problem about making it more affordable.

SCHUMER (?): That's true.

(CROSSTALK)

SCHUMER (?): ... a longer (inaudible), and then we can do a couple of things. I'd be for extending the housing tax credit, which has helped get the housing market out of the severe depression it was in. It's getting a little better, has to go more. But...

STEPHANOPOULOS: You're ahead on that, too. So we have a lot of agreement there.

CORNYN: Senator -- well, Chuck and I agree on a lot of things, but -- well, some things. Let me put it that...

(LAUGHTER)

(CROSSTALK)

CORNYN: Johnny Isakson -- Johnny Isakson of Georgia has been championing the -- the tax credit for home purchases. Now it's getting ready to expire, and it's limited to $8,000 for first-time purchasers. His argument is, and I think he's right, is that the housing inventories, or excess housing inventories are what are dampening the recovery.

And I think he's right. So that's something we are...

(CROSSTALK)

STEPHANOPOULOS: So we have agreement: extend unemployment benefits, extend health care benefits for people who are unemployed, and extend the housing tax credit.

SCHUMER: And let me just say one other thing here, broader-term. The stimulus is working. The American people see it. Forty percent has been spent. Before the stimulus, we were losing 700,000, 800,000 jobs a month, a huge amount. It's going down. The number now is about 300,000. And Alan Greenspan said, it should turn around soon.

So, before doing a second stimulus, let's see how the rest of the 60 percent works and try to deal with the pain of some people in terms of the job front, where John and I agree, and in certain targeted areas of the economy such as housing.

STEPHANOPOULOS: OK, then, let's get to health care, where I expect you're going to see some bigger differences right now. Probably the most contentious debate you all had all week long was on this amendment by Senator Crapo, where he was saying he wanted to put forward an amendment that would basically implement the president's policy not to have any tax increases for anyone earning under $250,000.

(BEGIN VIDEO CLIP)

SEN. MICHAEL D. CRAPO, R-IDAHO: It simply provides that no tax, no fee or penalty imposed by this legislation shall be applied to any individual earning less than $200,000 per year or any couple earning less than $250,000 per year.

STEPHANOPOULOS: All but one Democrat voted against that. Why?

SCHUMER: Well, because it's the way that "tax" was defined. They're defining "tax" -- you tax the insurance companies. They made huge amounts of profit. It went from $2 billion to $12 billion in 10 years.

STEPHANOPOULOS: He left that out of his amendment, I think.

SCHUMER: No, his amendment was so broad, it could include just about anything.

They're calling the requirement that people have to buy health insurance a tax.

 

Now, you may like it; you may not like it. But it's never been a tax. We don't -- we've never called the requirement that you have to have auto insurance a tax.

So if it were narrowly defined and said, really, a direct tax on people $250,000 or lower, I think that's going to be in the bill. We're trying to avoid that in every possible way.

That's the president's promise and that's what the bill does.

CORNYN: Middle-class families are going to see higher health insurance premiums. They're going to see more taxes, more penalties under this bill.

The president can't keep his promise under the bill that's currently pending in the Finance Committee or any of the other bills that are currently in front of us.

One thing that we need to focus on is, you know, affordability is the single most important issue, bringing down the cost, bring the cost curve, making it more affordable so more people can get coverage.

Unfortunately, this bill makes things worse rather than better by imposing federal government mandates on coverage that, for example, in the Whole Foods in Austin, Texas, headquartered in Austin, Texas, they won't be able to keep their current health coverage now because it doesn't meet the minimum -- minimum actuarial value because it's a health high-deductible plan with wellness accounts that people like, but they won't be able to keep it.

Millions of people won't be able to keep what they have.

STEPHANOPOULOS: Are you sure you're going to be able to hold the line on this on the floor? I mean, that was a very close vote in committee.

SCHUMER: Yes, I think we will because, again, we are sticking to the president's promise. And here's the nub of this, George. It's difficult. The costs -- John and I agree with this -- are out of control. So it makes it very hard for middle-class families to afford health insurance, or for their employer to afford health insurance for them.

The clear thing is, if we do nothing, tens of millions of people are going to lose coverage in the next decade. Your employer will call you in and say, "Jim, Mary, you're doing a great job. I want you to stay with my company forever. Btu I can't afford health care for you."

So we have to get the costs down. Until we do, there's a push and pull here. Do you put the burden on the average middle-class person because, for -- when they're not covered; when some people are not covered, we all pay -- the average person pays $1,200 to give health insurance -- to pay for the costs of people who are not covered -- or do you wait a while?

And Olympia Snowe and I had an amendment that would both reduce the penalties significantly -- no penalties in 2013. The amount went down. And there's another idea we're doing to look at the penalties I'm going to propose on the floor, which is, instead of it being a penalty, it goes into an account like an IRA but should just go for health insurance.

And then, when you buy health insurance, that money will be used for it so it won't be a penalty at all.

(CROSSTALK)

STEPHANOPOULOS: ... you mentioned Senator Snowe. She appears to be the only Republican who's in play on the Senate Finance Committee to vote for this bill.

And you've had your former leader, Bill Frist, come out and say he would vote for the bill. He says that's what leadership is about. So does the former leader Howard Baker, former leader Bob Dole.

And may I make the argument that the Republican Party can't afford to be seen as doing nothing on this issue. How do you respond?

CORNYN: Well, we're for health care reform, but we're not for a government takeover of the health care system, which is going to do nothing but increase health care costs and basically cannibalize Medicare to the tune of $500 billion in order to pay for a new government entitlement program.

And a lot of the best ideas we've had, like medical liability reform, to eliminate or reduce defensive medicine, and giving people more choices, have been rejected along party line votes in the Finance Committee.

So we all, I think, want to see health reform. We want to make it more affordable. We want to have targeted solutions that deal with people who can't -- who don't have coverage now. But I think what has been proposed will literally make things worse, not better.

SCHUMER: I -- let me just say, Senator Frist and others have a point. Ninety percent of the amendments that were offered by my colleagues on the other side of the aisle were negative, were sort of little gotcha amendments. Senator Hatch had an amendment, states with the letter "U" shall be exempt.

They don't have a plan. It's very hard to do this. This is the hardest thing I've ever seen attempted to be accomplished in a legislative context in the 35 years I've been a legislator. We are coming together as Democrats. And we welcome Republicans. We hope Olympia Snowe will vote with us, and maybe a few others.

But the Republican Party is a party of "just say no." And this is not 1980. This doesn't work anymore.

CORNYN: George, the first amendment that was offered by Senator Jim Bunning was that this product, whatever it is, would be posted on the Internet at least 72 hours and we would know what it cost by the Congressional Budget Office at least 72 hours before there would be a vote in committee and on the floor. Our Democratic friends voted against that. Senator Snowe has been really a champion of more transparency and accountability. And frankly I get the impression that now that our Democratic friends would rather the American people not know what is in the bill because of the more they find out about...

(CROSSTALK)

STEPHANOPOULOS: ... there are secret deals in it, though. What did you mean by that?

CORNYN: Well, for example, the deal that we found out there was an $11 billion mistake by the Congressional Budget Office because the conceptual language that we voted on in the Finance Committee did not include a "hold harmless" agreement with the American Hospital Association, that they would not have to kick in anymore than $150 million toward this deal.

So those are side deals made behind closed doors, secret deals that not all of us know about. Pharma is another example. And...

SCHUMER: Let me just say, on the Bunning amendment, he wanted a two-week wait, we thought it was dilatory. Olympia Snowe reasonably said, let's get a CBO estimate, let's put the bill online for three days so that everyone can read it and see it and go over it. And that is what has happened. It went online Friday. We're not voting until Tuesday.

There is no attempt to rush this bill through. We've been at it for six or eight months. It's just that our colleagues on the other side of the aisle want nothing.

STEPHANOPOULOS: We're just about out of time. You said the Democrats are coming together. The Democrats still divided over this issue of a public option. Senator Reid says there will be a public option on the floor. You just heard Senator Baucus say the votes just aren't there. And you didn't have the votes to get it out of the Senate Finance Committee.

So what are you talking about here? Are you talking something that is more of a fallback plan like Olympia Snowe -- I don't see how you have the votes for your proposal?

SCHUMER: The more the public looks at the public option, the more they like it, because they see that it is an option. You want to keep your own insurance or go into the exchange? Do it. If you don't like it, you have an option. That's a good thing. Sixty-five percent support it.

My colleagues, to get -- we are going to come together on a public option. It will have some modifications. Senators like Tom Carper, one of the leaders of the moderate group, had made some proposals. Others are...

STEPHANOPOULOS: Allowing the states to create their own (ph).

(CROSSTALK)

SCHUMER: There are lots of different alternatives. But...

CORNYN: George...

SCHUMER: ... we need a public option simply for this reason. There is no competition in the insurance industry now -- or very little. In 94 percent of the markets, a public option will bring costs down by providing competition...

(CROSSTALK)

CORNYN: The public options is basically a pathway to a single- payer system...

SCHUMER: No, it isn't.

CORNYN: ... because the Congressional Budget Office points out that people will not be able to buy insurance commercially because the government will undercut that. And many people who now have what they like will not be able to get it.

This is the elevation of ideology over trying to find a practical solution to problems, which we agree with.

STEPHANOPOULOS: See that debate on the floor. Gentlemen, thank you both very much.

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