'Meet the Press' transcript for August 10, 2008

MR. GREGORY:  I'm David Gregory back here in Washington, where we are joined this morning by Paul Gigot of The Wall Street Journal, E.J. Dionne of The Washington Post and David Broder of The Washington Post, as well as Erin Burnett of CNBC.

Welcome to all of you.

Well, the concentration on the economy, you heard it with Tom Brokaw and Secretary Paulson, and it's a situation, Paul Gigot, that is likely to change a great deal even beyond Election Day.  A housing crisis, trepidation in the debt markets, a ballooning deficit, job losses, oil prices really affecting people in the pocketbook.  This is how BusinessWeek described the situation facing the next president:  "Politics, the weak economy, and the reality of the ballooning federal budget will all limit the next President's room for maneuver.  McCain's low-tax strategy could well be chewed up in a Congress that is likely to be even more Democratic than it is today.  Obama's lofty plans could be undone by the hefty costs of his health-care plan and other programs.  ...

"The 2009 economy will offer tough conditions for a President set on bold new policies.  ...  This year [the] gap between promise and reality may be even larger than usual.  `Whoever wins will face a big wake-up call as soon as the election is over,' says Daniel Clifton, head of Washington policy research for the investment group Strategas Research Partners.  `Many campaign promises will need to be scuttled.'" How much room will there be?

MR. PAUL GIGOT:  Sounds like why, why would anybody want to win?

MR. GREGORY:  But how much room will there be to maneuver for the next president, given this economy?

MR. GIGOT:  Well, I think he's going to have to focus on getting growth back. The stimulus, I think, the short-term stimulus that Hank Paulson talked about has failed.  There's nothing on the horizon that's going to restore growth, at least nothing we see right away.  Housing prices, we don't know when they're going to hit bottom, probably some time next year.  Oil prices are down from their peak but not much at $120 a barrel.

MR. GREGORY:  Right.

MR. GIGOT:  Still horrible.  So I think the real danger for a president next year is we've got some inflation in the economy.  If the Federal Reserve has to raise rates next year to break inflation, which I think they will, particularly then a tax increase, which Barack Obama is promising to finance so many of his ideas, I think is going to be very difficult to pull off.

MR. GREGORY:  And, Erin Burnett, Obama's also talking about additional stimulus to the economy.

MS. ERIN BURNETT:  That's right, and that's the big question.  It's interesting, Paul, what you say, talk about the stimulus package.  I mean, it cost almost $200 billion, and it did help us.  You heard Hank Paulson, it helped us last quarter.  But it was sort of, I think Tom described it well, BB guns at a--BB gun bullets at a bear.  It didn't really do much over the longer term.  So now you're starting to hear more and more talk about whether we need a second stimulus package, and do we get checks or do we do an infrastructure package?  But all of it's going to cost money.  And what I think both candidates have in common is that neither one of them have really talked about how they're going to fund a lot of the planned spending that they want to do.

MR. GREGORY:  Particularly with a ballooning deficit.

MS. BURNETT:  Absolutely.

MR. GREGORY:  David Broder, there is a political dynamic that's in play here as well, and that is how much can or should the government be involved in backstopping the economy?  We've got for Fannie Mae and Freddie Mac a potential bailout if that becomes necessary.  JPMorgan was backed up with plenty of cushion as well as they took over Bear Stearns.  And the energy debate focused on what the government should be doing to try to increase production or domestic supply.  How much...

MR. DAVID BRODER:  I think...

MR. GREGORY:  ...should and can the government do?

MR. BRODER:  Well, inevitably, the government is going to be more involved because the market system has become unbalanced.  That's what we're dealing with in all of these, these issues, whether it's energy or the, the Fannie Mae and Freddie Mac, all of them reflect failings of the pure market system.  And when you have that, the government has to step in.  Where else are you going to look?

MR. E.J. DIONNE:  But the...

MR. GREGORY:  E.J.?

MR. DIONNE:  Well, you know, Bill Cohen, former moderate Republican senator, once said that "government is the enemy until you need a friend." And I think what David said is exactly right.  What you're seeing is the collapse of a certain kind of pure, free market situation.  When you've got the Republican Treasury secretary talking about the need for new kinds of regulation of the financial industry, you've really had a sea change in economic thinking in the country.  And I think that's going to be the case no matter who wins the election.  But in terms of next year, I was talking to two Republican investment bankers, and one was laying out this awful scenario for next year, and the other Republican investments banker said, "You know, maybe this should be a great four years to give to the Democrats." And that's kind of how it feels.

MR. GIGOT:  But there are real limits, there are real limits as to how much you can put on the taxpayer.  I mean, you know, we've got Bear Stearns was bailed out, we've got Fannie Mae and Freddie Mac, which are huge liabilities. Now Detroit is coming up, and their politicians in Detroit, I think, is going to come up and become an issue because a lot of Democrats in Michigan and the Obama campaign--he's talked about it--say, "Well, maybe we can put John McCain on the spot by saying, `Well if you bailed out Wall Street, why can't we offer loans to Chrysler and GM and Ford?'" So--but, but there are limits.  How much--you want the government to nationalize everything?

MR. DIONNE:  No, but some of this is not about taxpayer bailout.  Some of this is about having rational rules.  I mean, we sort of had a kind of deregulation, the financial industry, that was fundamentally incoherent and created these openings for the kind of crisis you have now.

MR. GIGOT:  We, we had a mania fueled by easy credit from the Federal Reserve.  And Wall Street went wild with it, no question about it.  They used their genius to develop all these, you know, these vehicles, some of which turned out to be pretty lousy.

MR. GREGORY:  From, from the economy to big news this morning from overseas, and that is what's going on in the former Soviet Republic of Georgia.  The Russians have moved in; they are at war.  There are estimates of anywhere between 800 and 1500 civilians killed in this conflict.  The White House has weighed in.  Both the presidential candidates have hurried to get statements out and to be on top of this issue as well.

David Broder, is this a 3 AM moment in foreign policy for these candidates?

MR. BRODER:  It is, and it's particularly a moment where John McCain can claim to have been prescient, because in his basic foreign policy speech two months ago and in an interview that I did with him last week, he draws a very sharp line when it comes to Russia, says these people are being aggressive and imperialist.  There is no confusion in his mind about the character of the Putin/Medvedev government.  And he is prepared, I think, to make the case that this is a demonstration of exactly what he has been arguing for.

MR. GREGORY:  And it is another case, Erin, where the debate on the campaign trail may be completely distinct from what the next president has to deal with in terms of a huge foreign policy crisis...

MS. BURNETT:  Mm-hmm.

MR. GREGORY:  ...even as we're talking about Iraq and Afghanistan.

MS. BURNETT:  It's true.  And you know what's interesting about this, too, is it goes to show you too how complicated these scenarios are.  You hear some headline from Georgia which may sound somewhat esoteric to a lot of Americans, and people may not realize the significant oil pipelines that run through that country.  When you think about oil prices and what people are paying at the pump, Georgia's actually a crucial part of that equation.  So things that seem far away and small can become much, much broader than people realize.

MR. GREGORY:  And a resurgent Russia is something that is very much a part of the landscape for the next president.  This relationship with George Bush and Vladimir Putin went south in the course of his administration.

MR. GIGOT:  Yeah, Bush really misjudged Putin in so many ways, there's no question about it.  He's tried to do retrieve it, even I think it was last year, bringing him up to Kennebunkport to, to have a one-on-one.  It hasn't worked.  This is a resurgent Russia, and I think that whether Obama or McCain is president, they're going to have to deal with it.  The good news is, they'll probably have a united Europe.  Europe has kind of figured out--they have some experience with a imperialist Russia, and I think he can--whoever the next president is--can unite them and maybe fashion a tougher foreign policy.

MS. BURNETT:  David, too--I'm sorry--to your point earlier, it's interesting, though, in a sense we're in bed with all of these people, though.  When you talk about Fannie Mae, Freddie Mac, you talk about who owns all of these American liabilities, who owns our mortgages, who's going to help pay for our stimulus plan.  It is China; it is Russia.  So does that hamstring us perhaps a little bit in what we're able to do on the foreign policy front?  It's a key question.

MR. GREGORY:  The, the big question as well on the campaign trail is readiness to lead, to handle a crisis like this.  And the readiness issue has been a huge theme of the attack ads that Senator McCain has launched against Senator Obama.  It's been something you've seen in, in all of the ads.  Let's show clips from each of some recent ads to drive that point home.  Watch.

(Videotape)

Crowd:  (In unison) Obama!  Obama!  Obama!

Narrator #3:  (From political ad) Is the biggest celebrity in the world ready to help your family?

He's the biggest celebrity in the world.  But is he ready to lead?  Not ready to lead, that's the real Obama.

(End videotape)

MR. GREGORY:  E.J. Dionne, is it working?

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