'Meet the Press' transcript for Oct. 12, 2008

MR. TOM BROKAW:  Our issues this Sunday:  U.S. stocks continue their free fall, the financial crisis spreads across the globe.  Do the presidential candidates have viable plans to solve the financial meltdown?  How do their economic proposals stack up?  The campaigns square off.  For Senator Obama, former chairman and CEO of Goldman Sachs, New Jersey Governor Jon Corzine. And for Senator McCain, former director of the Office of Management and Budget and former Ohio Congressman Rob Portman.

Then, Wall Street is getting a bailout, but how are Americans faring on Main Street?  McCain attacks Obama's character.  How will it all impact voters when they head to the polls in just 23 days?  Our political roundtable weighs in: Erin Burnett, anchor of CNBC's "Street Signs" and co-anchor of CNBC's "Squawk on the Street"; Paul Gigot, The Wall Street Journal's editorial page editor; John Harwood of CNBC and The New York Times; and Ted Koppel, managing editor of The Discovery Channel.

But first, here to talk with us about the race for the White House in the midst of this economic crisis, McCain supporter Rob Portman, who--a former Ohio congressman; and Obama supporter Jon Corzine, the governor of New Jersey.

Welcome to both of you, obviously.  The financial representatives of 20 countries were here this weekend.  They discussed the crisis, but apparently they went home without doing anything specific.  Same time, Secretary of the Treasury Hank Paulson has announced that the United States will now start investing in banks.  This is changing at warp speed every day.  But I think the fundamental question for the American people is this:  Is the economy going to get worse before it gets better?

GOV. JON CORZINE (D-NJ):  The answer to that has to be, unfortunately, yes. When you have destruction of value that we've seen, $8 trillion from the high of the stock market a year ago, 4 trillion in the last 10 days, people understand that they've lost protection of their retirement savings and other things, and that erodes confidence.  And so they're going to spend less and be a little less proactive about how they go out and spend scarce dollars.  And that's going to hurt the economy, slows production, has an unfortunate negative impact that I think has yet to be fully appreciated in the real economy.  We've seen, obviously, the decline in homes, but now I think you're going to see rising levels of unemployment, unfortunately, and that, that's, that's a real problem as we go ahead in the months ahead.

MR. BROKAW:  Congressman, do you see any light at the end of the tunnel?

FMR. REP. ROB PORTMAN (R-OH):  I do.  It depends on what we do, Tom.  I agree with what Jon said about the crisis in confidence as well as the financial crisis.  But if we move and move quickly, I think we can pull out of this and relatively quickly.  I think the, the issue that has been underlying so much of this is the housing market.  And one reason that Senator McCain has focused on this home resurgence plan, which says let's get these people out from under their mortgages, people who are under water on their mortgages, this is going to be necessary for us to hit rock bottom for us to come back up.  So I hope that that $700 billion gets out, but that it gets out in the right way.  And I know you talked a moment ago about equity infusions in some of these financial institutions.  That may be where some of it ought to go, but the focus, John McCain is saying, and I think he's right, is to stabilize these housing prices.  Until we do that, I think it's going to be tough to see the economy get back on its feet.  So I think the answer is, yeah, we're going to be in for some tough times for a little while, but it can be more quickly righted, we can get this economy back on track more quickly if we deal directly with the housing crisis, as Senator McCain has talked about.

GOV. CORZINE:  Well, I agree with the idea that we ought to stabilize housing prices.  I don't agree with the idea that we ought to be bailing out the banks that made the loans, as I think Rob would recognize on Tuesday night when Senator McCain talked about a program to bail out the mortgages.  That, that sounded good, that was part of the $700 billion program to start with.  On Tuesday, he came out with a program that said that we're going to pay the full value for those mortgages, bailing out the banks that actually made those loans.  I think that's a horrible idea.  The taxpayers will end up underwriting it.  What we need to do is restructure mortgages.  There's a couple of ways to do that, change the bankruptcy laws or you could actually buy mortgages at their market value today and then go in and restructure them with the individuals.  And yes, we ought to be stabilizing housing prices.  I think actually we could even buy houses, like they did back in the--in the '30s under the RFC program, the Reconstruction Finance Corporation.  But the way that Senator McCain has done it is sort of really messed up on how it would actually impact folks.

MR. BROKAW:  Congressman, let me just...

FMR. REP. PORTMAN:  Yeah.

MR. BROKAW:  You're not getting a lot of support from some very conservative publications.  If I could just share with you what The National Review had to say.  They said, "McCain's plan is a full bailout for lenders, and it cannot do much more than the Frank-Dodd bill," which is another kind of housing relief bill, "without letting ruthless borrowers and other reckless types off the hook.  It is time to acknowledge that the government has gone as far as it can without creating a level of moral hazard that is unacceptable.  Give Frank-Dodd," that's the other housing bill, "and the Paulson plan time to work."

FMR. REP. PORTMAN:  Yeah, well, I think they're wrong.  And they're wrong because there are conditions attached to it so that it's not focused on the lenders.  It's focused on the people who are under water on their mortgages, where their house value is not equal to their mortgage.  And it doesn't just affect those people, by the way, who are in this situation, it affects whole neighborhoods.  People don't want to have foreclosures next door to them because it's going to affect the price of their home.  So again, you know, we can, we can do a lot of different things with the 700 billion, including the guarantees and the loans that are talked about, some of which may be a good idea because it helps to be sure the taxpayers get paid back, but until we deal with the housing crisis, it's going to be very tough for us to write this economy.  And your question was about the economy.  You know, people are not as much interested in what happens on Wall Street as they are what happens in their neighborhood and on Main Street.  And until we get the housing crisis contained, it's going to be a very difficult.  And I think there's where John McCain's right.  And so, you know, to get an answer to your question, we can get this economy back on track and, over the long term, we need to do a lot more in terms of energy policy, tax policy, health care and so on.  But we can't do it until we get the housing crisis contained.

MR. BROKAW:  Well, let me ask you about, The Politico is reporting this morning that Senator McCain is going to unveil a new economic plan, that he's working on something this weekend.  Among the measures being considered are tax cuts, perhaps temporary, for capital gains and dividends, the officials said.  "The market is the focus," a McCain adviser told Politico.  "You want to stop the fleeing from the market.  No more bailout money is being contemplated," the adviser said.  "We've written a check to everyone in sight. We're not in that game." Is that an accurate reflection of what's going on in the campaign?

FMR. REP. PORTMAN:  I don't know, but what I do know is raising capital gains right now and raising dividend taxes, as Senator Obama has proposed, is exactly the wrong prescription.  You know, Jon used to be in this Wall Street world, he may disagree with me.  But, my gosh, when the market has tumbled over 20 percent in the last week, to talk about raising capital gains rates is just exactly the wrong thing.  You want investors to have that confidence that Jon talked about that's missing in the market.  And what John McCain is saying, at a minimum, let's not raise taxes on anybody, including people who have capital gains.  We want to encourage them to invest.  We want to encourage them to get back into the market.

I don't know if they're thinking about doing even more.  I do know that Senator McCain did propose this week something very interesting on 401(k)s and IRAs.  People have seen their values diminish dramatically, and he's saying they shouldn't be forced to pull it out and pay taxes on it at age 70 1/2. That makes a lot of sense.

MR. BROKAW:  Governor.

GOV. CORZINE:  Now is the time for steady leadership.  We can't have a new economic program each morning we wake up.  That's what's been going on. Unfortunately, with regard to how the bailout package was put together and the whole structure in Washington, and it's certainly the case with Senator McCain's various proposals.  This mortgage program that we talked about was included in the Frank-Dodd proposal, it was included in the $700 billion, and there have been changes; but it is still the basic, we ought to help mortgages.  Now we're coming up with a new plan.  What Senator Obama has talked about and is absolutely is essential is make sure that we use thoughtfully this $700 billion, including, by the way, investing in banks. Direct investment will stabilize--they call it recapitalization--stabilize the banks.  Then he has talked about let's make sure that we have middle class tax cuts.  He's been talking about that for months.  Ninety-five percent of the folks, about 90 percent will get tax cuts, 95 will get no increases, including on capital gains above--below $250,000.

And then, what is maybe most important, we need a real economic stimulus. We're in what you call a liquidity trap.  You can, you can, you can lead a horse to water, but it doesn't drink.  Right now nobody has confidence to do things.  We need to be putting demand into the system.  That means infrastructure--build highways, build schools, build our energy system so that we can actually create jobs, get people back to work.

MR. BROKAW:  How do you pay for that?

GOV. CORZINE:  Well, if, if we're going to spend $700 billion bailing out Wall Street, we ought to actually be able to come up with $50 billion--which is what Senator Obama has talked about--on infrastructure and helping states. You know, people like the state of New Jersey are going to end up cutting employment, cutting our expenditures, and decreasing demand.  We need to make sure that we're driving our economy by not cutting back at just at the time we need to do it.

There is talk in Congress of another $150 billion program.  I'd rather take some of the money out of the bailout plan and put it into this.  The fact is is that Congress decided we ought to go from a $700 billion program to a--what was it?--800 and--825 billion.  We can afford it.  We can't afford not to have greater demand on the economy.

MR. BROKAW:  If you were in your old job as director of the OMB, would you say that's a good idea, Congressman?

FMR. REP. PORTMAN:  Well, you know, I would say that we need to be really careful here.  We have a $10 trillion debt now, and Senator Obama is very good at coming up with new ideas, ways to spend the taxpayers' money, when, in fact, it's the spending that is partly responsible for getting us into this situation.  And it's very simple, you know, as we become a debtor country, the value of the dollar as been impaired and it has made everything more expensive.  The reason we've been sending $700 billion a year over to foreign countries to buy their oil is, in part, because the value of the dollar has gone down, in part because we've been irresponsible in our spending.  So just more spending is not going to answer this question.  This is why, again...

GOV. CORZINE:  Tom--oh, go ahead.

FMR. REP. PORTMAN:  Let me just, let me, let me just finish in terms of how to get the economy back on track, because that's ultimately, you know, what people care about.  And Jon was right.  He said the bailout shouldn't just go to Wall Street.  That's what Senator McCain is talking about.  Have it go to your neighborhood banks, the community banks.  Have it go to people who are under water in their mortgages.  Be sure you're providing people tax relief, not raising their taxes.

And, by the way, in terms of middle class tax relief, John McCain's proposal is not George Bush's proposal.  He has a doubling of the exemption, as you know, which goes squarely to the middle class.  He also has this $5,000 refundable tax credit, meaning he has more tax relief for the middle class and for lower income folks than is in the Obama plan.  That's, that's, that's the math.

MR. BROKAW:  So me, if I can here...

FMR. REP. PORTMAN:  So of course you can do that.

MR. BROKAW:  If I, if I...

GOV. CORZINE:  You got to...

FMR. REP. PORTMAN:  But let's not raise taxes on small business and raise capital gains.  It's the wrong thing to do.

GOV. CORZINE:  Every independent analysis shows that Senator Obama's tax cuts for the middle class are about three times what is...

FMR. REP. PORTMAN:  That's because...

GOV. CORZINE:  ...being proposed by the--McCain.

FMR. REP. PORTMAN:  ...they don't go to the root of the fundamental...

GOV. CORZINE:  It is, there, there are other elements that aren't included in Senator Obama's with regard to college support tax credits and other issues. Just working on tax policy, Senator Obama's tax cuts for the middle class, 90 percent of Americans, is three times what Senator McCain is proposing.  And that's the exact same policies that we followed under the Bush administration.

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