Larry Summer & Minority Whip Cantor on "This Week"

Larry Summer & Minority Whip Cantor on "This Week"

By This Week - December 13, 2009

STEPHANOPOULOS: President Obama is just back from Oslo with his Nobel, heading back to Copenhagen for those climate talks, leaving behind health care talks that appear to be stalling in the Senate, and poll numbers that have been falling to their lows of 2009. Our roundtable is standing by to debate all this. They may weigh on Tiger too, but let's check in first with our headliners, Larry Summers, President Obama's top economic adviser, and Congressman Eric Cantor , the House Republican whip. Gentlemen, welcome to both of you.

SUMMERS: Good to be with you.

STEPHANOPOULOS: And Mr. Summers, let me begin with you, and let's start with just the overall economic situation right now, especially on jobs. We saw that drop in unemployment in November, but private economists predict that unemployment is likely to head back up. Mark Zandi sees it peaking at about 10.6 percent next year. Others say it could go up to 11 percent. Is that in line with your forecast?

SUMMERS: George, here is what I know. We were talking about depression, we were talking about the financial system collapsing. Today, everybody agrees that the recession is over, and the question is what the pace of the expansion is going to be.

These things happen in stages. First, GDP goes up. That has happened. Then, hours that are worked by workers who already have jobs go up. That's starting to happen. Then employment goes up. We got very close to that this year, this month, with only 11,000 jobs lost. And then unemployment starts to come down. So these problems weren't made in a month or a year, and they are going to take a substantial time to solve. But what we can take satisfaction from is that we've walked back from the brink. And you know, forget what we say. Most professional forecasters are now looking for a return to job growth by spring.

Now, when job growth starts, more people are going to be looking for work, so it will take a little longer for the unemployment statistics to come down, but make no mistake, we were losing 700,000 a month when President Bush turned the economy over to President Obama. The number last month was 11,000.

STEPHANOPOULOS: Let me pin you down on that, though. You believe the economy is actually going to be creating jobs in the spring.

SUMMERS: That is the judgment of most professional forecasters. That's right, George.

STEPHANOPOULOS: So given that...

SUMMERS: If you look at the employment statistics, they will show employment growth. They were showing losing 700,000 a month. Last month, they showed losing 11,000 jobs. They will bounce from month to month, but I believe that, as do most professional forecasters, that by spring, employment growth will start to be turning positive. STEPHANOPOULOS: So given that, we saw the president allowed (ph) some job creation ideas earlier this week. What is the upper limit on what he will sign into law in terms of new job creation measures early next year? $100 billion?

SUMMERS: The president is going to work with Congress to do what's necessary. George, it's a bit of a Washington thing to put this in terms of price tags. For example, the president is doing a whole set of things, working with other...

STEPHANOPOULOS: But the American people want to...


STEPHANOPOULOS: It's not a Washington thing.

SUMMERS: To promote our exports. That doesn't have a -- that does not have a direct cost. But the president has talked about doing things for infrastructure. It doesn't cost anything to encourage banks, as the president will be doing, to meet their responsibilities and expand the flow of credit to small business.

We're in a very different -- we are in a very special kind of economic situation, and frankly, jobs have to be the top priority, and every bill is going to be a jobs bill going forward. We hope we can find common ground. We emphasize support for small businesses, repairing the nation's infrastructure. These ought to be things that everybody can agree on.

STEPHANOPOULOS: Well, let me just pin you down, though, one more time on that. You did lay out a number of ideas that don't cost money, but extending unemployment costs money. Aid to states and local governments costs more money. Investing in infrastructure costs money. So what is the upper limit on what President Obama will sign?

SUMMERS: The president is going to do what's necessary to respond to this crisis. He's put a figure of $50 billion on the infrastructure support that he proposes. His proposals on unemployment insurance are primarily a continuation of the legislation that the Congress has already passed and that has been put in place. And he recognizes that when we take new steps, we have to do it in the context of a framework that is fiscally responsible. We can't just look in isolation at one measure. We've got to look at the $8 trillion in deficit over the next 10 years that the president inherited, and start making progress with respect to those deficits. That's what the president did in his budget. That's what the health care bill does with the most consequential set of health care reforms that have ever been put forward, and they are now on the brink of passage.

STEPHANOPOULOS: But let me ask you about on health care, because the president has said consistently that he wants health care to bend the cost curve, to bring overall health care costs down. But this week, the administration's chief actuary for Medicare and Medicaid concluded that the Senate health bill would actually increase national health spending by about $234 billion over the next 10 years. Can the president sign legislation that actually increases national health spending?

SUMMERS: We'll see what legislation ultimately emerges. The president is going to sign legislation that helps the budget over the next 10 years, helps the budget more over the 10 years after that, and we're already seeing employers start to respond to the provisions directed at influencing health insurance costs. Over time, when the commission is in place, we will star to see further reforms in Medicare.

And look, George, we've taken an incredibly conservative approach to this. The program includes, for example, significant support for preventive care. That's not being given any credit, but we know that over time, better health habits for all of us can reduce costs. So yes, the legislative process isn't pretty, and it's certainly not pretty on health care. But we will get to a point where we have significant reductions in health care costs.

STEPHANOPOULOS: So bottom line, are you saying that if the administration's own actuaries say that the bill on the president's desk increases health care costs, he will not sign it?

SUMMERS: I am saying that the president's bill will meet what has been the agreed test, that the Congressional Budget Office assesses the bill and concludes that it reduces the budget deficit. To do anything else would be irresponsible. I am also saying that in the view of most experts, the judgments made about imposing a fee on Cadillac policies, the judgment included in the bill with respect to taking politics out of the process of reimbursing health care, the support for prevention contained in the bill goes after some of the fundamental problems in the health care system.

STEPHANOPOULOS: I understand that, but if I heard you correctly, you are saying the bill must reduce the deficit but does not necessarily have to reduce overall health care costs.

SUMMERS: Look, the criterion for passing a bill is what happens to the budget. That's our budget process. I am telling you that we're very confident that this bill will reduce health care costs in whatever form ultimately emerges from the Congress.

STEPHANOPOULOS: OK, let me ask you just a final question. President Obama is calling in the heads of some of the country's biggest banks tomorrow to try to get them to lend more to small businesses and consumers, and that seems to be a big failing so far. You point out that the administration has stabilized some of the programs, have stabilized the financial industry. But we see the banks making money, paying back the TARP funds, but not really increasing lending. What more can President Obama do to encourage that, or is the bully pulpit really his only option?

SUMMERS: Look, he's going to have a serious talk with the bankers. The country did incredible things for the banking industry. Those things had to be done to save the economy, but no major bank would be intact, in a position to pay bonuses, if that extraordinary support had not been provided. The bankers need to recognize that. They need to recognize that they've got obligations to the country after all that's been done for them, and there is a lot more they can do, and President Obama is going to be talking with them about what they can do to support enhanced lending to customers across the country. We were there for them. And the banks need to do everything they can to be sure they're there for customers across this country.

STEPHANOPOULOS: OK. Thank you very much, Mr. Summers. Let me now bring in Congressman Cantor. And you heard Larry Summers there, Congressman Cantor. The president is going to be bringing in the banks for a serious talk tomorrow. What should he say to them?

CANTOR: Well, listen, George, no question that there is a still a deprivation of credit in this country for small businesses. And when the president meets with the bankers, I hope that the discussion centers on what seems to be a real overreaction, if you will, on the part of some auditors in the regulatory arena that are looking at risk taking as something that just shouldn't be done at all. We know in our economy that the prosperity we know has been built on calculated risk. What we've got now is a situation where there are so many performing loans out there that seem to be called by regulators, because we still have a depression in our asset values. And what I'm hopeful that the discussion occurs is about that, is about trying to get some type of transparency on the part of what regulators are asking of our banks, so that we understand and policy makers in Washington and frankly the small businesses that are looking to the banks can understand why it is that when they go to their bank, they're not getting their loan.

STEPHANOPOULOS: And it comes in the wake of the House passage on Friday of this financial reform legislation. Not a single Republican member of Congress voted for that bill. And yesterday, President Obama accused House Republicans of colluding with lobbyists in the financial industry to hurt American consumers. Listen.


OBAMA: Just this week, Republican leaders in the House summoned more than 100 key lobbyists for the financial industry to a pep rally and urged them to redouble their efforts to block meaningful financial reform. We can't afford to let the same phony arguments and bad habits of Washington kill financial reform and leave American consumers and our economy vulnerable to another meltdown.


STEPHANOPOULOS: Your response?

CANTOR: Listen, none of us want another meltdown. None of us want the kind of abyss that we were peering into this time last year. There is no question. And we also want to make sure that people got a fair shot in terms of accessing good investments for their future and their retirement. The bill that came to the floor, frankly, was a bill that created a permanent bailout for banks. It put Washington in the seat to determine which banks will fail and which will succeed, and it extended TARP in terms of making it a permanent program. That's not what America wants. We also have a study that we saw that showed that this bill that came to the House floor that got no bipartisan support would increase interest rates almost 1.5 percentage points, and the prediction was that that would kill about a million jobs over the next five years.

Now, like it or not, we are an economy that is built on credit. We've got to get some reason back into the game here. Right now, investors, small business people are staying on the sidelines. They are not expanding. They are not hiring. There is a reason for that. They can't seem to understand where Washington goes next. And what the Republicans believe is, Washington has got to stop its activism and start to get some common sense back into the regulatory mode so that people can once again figure out how to go about making their investments and doing so with some transparency.

STEPHANOPOULOS: We've seen zero Republican votes on this financial reform legislation, one Republican vote in the House on health care, zero on the stimulus. Clearly the Democrats in your view are owning this economy going forward, share any blame if it goes down. If the economy recovers over the next year or two, are you prepared to give Democrats all the credit?

CANTOR: George, when we heard the unemployment numbers come out a few weeks ago and there was a reduction in the number of jobless folks, absolutely, we want to embrace that. But I can tell you, you look to see the record of this administration and the majority in Congress over the last 11 months, we have seen unprecedented spending. The deficit has increased enormously. If you look at the kind of deficit that we've incurred over the last three years that the Democrats have been in control of Congress, 60 percent of the overall deficit from the last 10 years has occurred in that period. And frankly, with the incurrence of that debt, we've seen very little result.

That's why we believe very strongly that we ought to choose another way. Last week, we were at the White House, called there by the president. We presented our no-cost jobs plan, and we said, you know what, none of us like where we are. We all want to get Americans back to work. And there is a way that we can do it by not costing the taxpayers any more. We can do so by finally blowing the whistle on spending and see if we can focus on the kinds of things that American businesses, small and large, are looking for in terms of trying to reestablish some certainty so we can grow this economy again.

STEPHANOPOULOS: OK, Congressman, thanks very much for your time this morning. That debate will continue.

CANTOR: Thank you, George.


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