'Meet the Press' transcript for Dec. 14, 2008

MS. FIORINA:  ...the Detroit automakers, and big unions, the truth is we're not as concerned, and we should be, about the hundreds and thousands of small businesses who actually create two-thirds of the jobs in this country.  Which brings me all the way back to the original problem.  We have a recession, a deepening recession right now because credit is unavailable.  Credit is unavailable to small businesses so they can't hire.  When hundreds of small businesses can't hire 10 and 15 people, over time that creates big unemployment numbers.  They may not have big unions to represent their interests in Washington.  They're the little guy, but the little guy matters. When credit isn't available, consumers don't have the money they need to spend.  So I think we have to go back to the root of this problem, ultimately, which is credit is still unavailable.  And that is despite massive bailouts of big financial institutions who are still not lending.  And I think we also have to remember in this debate about the automakers, whether it's a $15 billion bailout or a $30 billion bailout...

MR. GREGORY:  Mm-hmm.

MS. FIORINA:  ...that won't save the auto industry.

MR. GREGORY:  Let me follow up on this point, because I, I had, I had a conversation with a friend of mine out on the West Coast who's in a marketing job and worried that the loss of one additional client could actually lose him his job.  And he's got a lot of friends who are in that position.

Governor Romney, you understand the capital markets pretty well.  I spoke to some experts this week who said what people may not understand is that there's plenty of money in the economy, it simply has nowhere to go.  Can you explain what that means and why that matters?

GOV. ROMNEY:  Well, people are holding onto their money.  Consumers are saying they're concerned about the future, and so they're pulling back.  Look, what, what's happened in our economy for the American family can be illustrated by the total numbers.  The, the total net worth of Americans has dropped by about $11 trillion over this last couple of years.  And that translates into about $600 billion a year less consumer spending.  That's a lot of money that comes out of the, the stores and the automobile showrooms. And, and that's going to have to be made up somehow.  Now, you might think, well, we can make it up with exports.  But the dollar's become so strong, that's not going to happen.  You might say we can make it up with new investments.  That's not going to happen because of the credit crunch.  And the last player that can step forward is government, and that's why we're going to have to have our government take action to stimulate the economy.  I think, actually, the tax reductions for middle income individuals, lowering our corporate tax rates, those will have the biggest impact.

Actually, Greg Mankiw, former chairman of the Council of Economic Advisers, says that tax cuts have a greater multiplier effect, more bang for the buck even than more spending.  On the spending front, though, we're also going to have to spend more.  I hate doing that as a conservative, but I think we ought to spend more to upgrade our military equipment.  It's been shot up, it's been lost in the Middle East.  But the government is going to have to step forward, not only with monetary policy to add funding and capital to the capital markets so we see more lending, but also for additional spending and lower taxes.

MR. GREGORY:  And I want to get to the stimulus picture.  I want to ask both of you about that.

But, Lee Scott, let me bring you back into this just to talk about the American consumer.  You're the largest retailer in the world.  You've actually had a pretty good year this year because of your, your business model, lower prices on thing that, that people need, as you--as your mission statement says.  Where is the American consumer?  What we see in our polls again and again is that the number one thing that people are worried about is losing their job, and the number one asset in their lives, their home, continues to decline in value.  And as much as the government's trying to help out in this regard by lowering long-term rates, people still aren't confident that their home isn't going to lose more value.  So where are they mentally, psychologically?

MR. LEE SCOTT:  Well, what we're seeing is, in our surveys and interfaces with the customers, which we do extensively every month, is that energy costs have clearly dropped.  I noticed on my way in here this morning gasoline here is $1.339, so that's moved down.  We're seeing, though, that, that our customers have a great deal of faith that government will ultimately take the right action and be successful in addressing the current situation, but the number one issue today is their concern about their job.  And that is, that is clear.  You can see, across our store, things--in our pharmacy group, we have increases in prescription drugs, but not at the same rate it was.  And what we're seeing is an increase in self-treatment.  We're seeing an increase in food storage as people are cooking more at home.  And, in fact, using leftovers more extensively.  So consumers are, in fact, changing their behavior.

If I could just add, though, David, I--we think--we are optimistic over the long term--certainly, the next few months, are going to be very challenging. But we, we believe there's an opportunity here to not just address this challenge and this crisis, but what are we going to do as a country so we emerge from this crisis as a stronger America?  So are we going to address comprehensive healthcare reform...

MR. GREGORY:  Right.

MR. SCOTT:  ...or are we going to have a national energy policy?  What are we going to do about education?  Because if all we do is this one package, and we don't address the rest of it, what will keep us from coming right back to the same situation?

MR. GREGORY:  Well, and let's get to that issue of what the government can now do.

Eric Schmidt and Governor Granholm--I'll start with you, Eric Schmidt.  What has to be in this stimulus package?  You've been providing advice to the Obama transition administration.  There's talk that it could approach a trillion dollars.  A couple weeks ago, it was $500 billion.

MR. SCHMIDT:  I certainly don't know how much the stimulus package is going to be.  We have, essentially, a classic liquidity squeeze and a falling real estate market.

MR. GREGORY:  Mm-hmm.

MR. SCHMIDT:  The correct thing for the government to do is to come in with a fair amount of money to get the--get business going again.  If you're going to do that, seems to me that you should get a twofer.  The president-elect has talked about this.  Let's use that money to fix some of the problems that we have in the country--roads, bridges, schools, access to broadband.  And maybe we can work on energy policy.  In energy, for example, we're dependent upon foreign oil, which is crazy.  We've got technology in America with respect to automobiles and power systems.  We have lots of land, lots of sunshine, lots of wind, all of the natural resources that you could imagine, that we're not using.  We have technology that's been invented in America to create, to create solutions to get us off of foreign oil and start decreasing our use for, for climate-polluting things like coal.  The effect of this is we get a whole new industry started with this stimulus that's going to happen anyway.

MR. GREGORY:  By the way, I'm just curious, before I get to Governor Granholm.  What, what is--the way people use Google, the search engine, tell you about their psychology in the, in the--in this, this economy?

MR. SCHMIDT:  Well, a--it's interesting that the Internet continues to grow sort of independent of whether there's a recession or not.

MR. GREGORY:  Right.

MR. SCHMIDT:  The--we, we've seen quite an increase in, in queries of things like "discounts" and "bargains" and things like that.  And we know that shoppers are using the Internet to get--do better pricing.  They're getting better value.  But, but, fundamentally, they're behaving as you'd imagine.

MR. GREGORY:  Right.

MR. SCHMIDT:  They're more careful about money, they're doing more comparison shopping, and they're buying.

MR. GREGORY:  Governor Granholm, what, what do you say?  What has to be in the stimulus?

GOV. GRANHOLM:  Well, I think it has to be a broad-based economic recovery package.  I mean, first of all, you have to make sure that we don't do further harm, and that's why making sure, for example, that three million people don't lose their jobs with the auto industry and, and the related industries is very important.  But in addition to that, the governors of the states are really focused on what is it that's going to put people to work right now.  So we have--I mean, for example in Michigan, we've got over 800 projects that have all been engineered--when I say projects, I mean roads, bridges, etc., things where dirt will fly, and they're just sitting on the shelves because we have had no funding to be able to, to put those--you know, to put shovels in the ground.

MR. GREGORY:  Mm-hmm.

GOV. GRANHOLM:  This will enable people to get to work.  But--to be put to work.  But it's also the count--what is known as countercyclical measures, meaning when times are tough you need safety net--the safety net more.  And so we have less money, but we have more need for people on health care, for people on unemployment, etc.  So you have to make sure you do both things. You fund the countercyclical things so that you keep people form being hurt...

MR. GREGORY:  Right.

GOV. GRANHOLM:  ...and you also fund this ability to get them to work.  And I think Eric is right on the money.  Make sure that the money is going toward something that will have the long-term benefit of transforming the economy, particularly in reducing our dependence on fossil fuels.

MR. GREGORY:  But, but, Carly Fiorina...

MR. SCHMIDT:  Well, the governor, the governor has plants in her state which could be converted...

GOV. GRANHOLM:  Right.

MR. SCHMIDT:  ...to building batteries and battery systems for automobiles. They're empty right now.  Let's use them.

GOV. GRANHOLM:  Let's go!

MR. GREGORY:  But, Carly Fiorina, let's talk...

MR. SCHMIDT:  All right.

MR. GREGORY:  ...about tax policy, because you mentioned that just a moment ago.  I, I've talked to, to some people in the economy, some bankers this week who say, you know, the problem with a rebate, for instance, is that people may use it once, they might save it, but a sustained tax break lets them know that that money's going to be there.  But the governor--Governor Romney talked about corporate tax relief.  But isn't what's more important here is the consumer, more that middle, middle income tax relief so you get consumers driving some of this recovery rather--because it's not so much a question of businesses not spending.  They have to cut back because both they can't get loans and because the consumer is shrinking.

MS. FIORINA:  I think the consumer is extremely important.  And, as everyone has said in their own way, the first concern of the consumer is, "Will I have a job?" And that's why getting the job creation engine going is so important.

MR. GREGORY:  Mm-hmm.

MS. FIORINA:  Eric is correct that innovation is a job creation engine.  But the reason I keep talking about small business is because small businesses are the engine of job creation in this country.  Two-thirds of the jobs come from small-business owners.  So we have to make it easier for small businesses to form and hire and grow and prosper.  Tax policy can help with that, absolutely.  But I also think it's important to realize that businesses, whether they're large, medium or small, businesses want to have some certainty about the--what the tax climate is, so that they can plan.  And Governor Romney is absolutely correct, when we have the second highest business tax rate in the world, that does not encourage businesses to form and grow here. It is also true that there is a difference among states in their business tax policy, and so a lot of states have used tax policy to attract jobs.  Southern states have used tax policy, state tax policy, to attract auto jobs, for example.  So I think tax policy makes a huge difference in job creation, it makes a big difference in small businesses in particular.  But we got to get the job creation engine going.  Government can help, certainly; but, ultimately, businesses create jobs in this country.

MR. GREGORY:  Lee Scott, generally your view about the role government could play--and let me use a specific example, and that's the area of housing prices.  We don't know where the bottom is for the housing market.  Nobody knows that.  It's just like the stock market in terms of actual prices here. But there is an attempt here by the federal government and the Federal Reserve to buy up a lot of this long-term debt, in effect to own the majority of mortgages in the country, which--as opposed to investors owning them--which is certainly an important new trend.  But it doesn't necessarily incentivize people to go out and buy a home if they are concerned that the value's going to continue to go down.  Should the government provide insurance to homeowners to guarantee the principal, which is something that's being discussed right now?

MR. SCOTT:  Well, I don't know.  It's hard for me to be critical of government intervention in the mortgage business, since my wife and I got our first house in the early '70s through a 5 percent tax rebate that came from buying a $30,000 home.

MR. GREGORY:  Mm-hmm.

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