'Meet the Press' transcript for Dec. 28, 2008

MR. GREGORY:  We're back with our roundtable this morning, joined by Richard Wolffe of Newsweek, Todd Purdum of Vanity Fair, Michelle Singletary of The Washington Post, and Rich Lowry of the National Review.

Welcome to all of you.  The new year is going to be a hard year when it comes to the economy.  Look at some of the headlines that we pulled just from the last couple of days:  "States Cut Medicaid Coverage Further," "Like Many States, Ohio Reaches for a Lifeline" from the federal government, "Downturn Ends New York's Boom in Construction," "Retail Sales Plummet" after the holidays.

This is what Jeff Immelt said--he's the CEO, of course, of General Electric, the parent company of NBC--at a speech in November:  "The economic crisis doesn't represent a cycle; it represents a `reset.' It's an emotional, social, economic reset.  ...  People who understand that will prosper.  Those who don't will be left behind."

Michelle, what do you think that means?

MS. MICHELLE SINGLETARY:  I think that--I love that he said "reset," because--I am actually glad that we had this recession because we were on a path that we couldn't get off, and we did need that reset.  We need, we needed people to step back and stop taking on so much debt and really go back to the basics.  The basics are the basics because they always work no matter what the economy is.  Live below your means, don't take on so much debt and save.

MR. GREGORY:  And that's not just advice for individuals, but for businesses.

MS. SINGLETARY:  Well, I mean, you know, we, we, we bought into this.  I say we drank the Kool-Aid that "Let's use other people's money." Well, the problem is we ran out of other people's money.  And so, you know, look at the companies that went down.  Why did they go down?  It's not because they didn't have a good business premise, it's because they had too much debt and not enough cash.  They had all these high-rolling times, but they weren't setting aside all this money that they were earning.

MR. GREGORY:  Well, what happens to the psychology of the country, as David Axelrod suggested, if we get into double-digit unemployment?

MS. SINGLETARY:  Well, you know, in some communities, we are already in double-digit employment.

MR. GREGORY:  Right.

MS. SINGLETARY:  You look at the African-American community, Hispanic community, we are already there.  And, and, and it's going to be bad.  It's going to be bad.  But, you know, there's hope.  This, too, shall pass.  And if people do the right thing, take the message that you can't keep on the same path that you were before, we will be OK.

MR. GREGORY:  Rich Lowry, the role of government has been vastly expanded in a Republican administration.  Has the public's view of what the government should and can be doing to fix the economy changed?  And will it change under this new president?

MR. RICH LOWRY:  Well, at least, at least temporarily, David.  And the way I look at this, and this is a uncomfortable observation for someone who sits where I do on the political spectrum, but big paradigm shifts in terms of how we view our politics and our economy, they usually happen before the figure who's associated with them in history.  So, arguably, in the '20s and the '30s there was a bigger break between Coolidge and Hoover, who's a real activist president, than it was between Hoover and FDR.  You look at the late '70s, Congress passed tax cuts, Carter deregulated before Ronald Reagan came into office, who's associated with those sort of changes.  And now we have a conservative Republican president who supported this massive financial bailout, and then has used it to bail out the auto companies before the liberal activist president has even taken office.  So that's a sign to me that this might be a big, historic shift.

MR. GREGORY:  One of the questions, Richard Wolffe, is what specifically does the new president believe should be done about housing?  A lot of people in the economy feel that until you do something about housing prices or to ease the correction in housing, that psychology won't change, people won't spend money if they feel like their number one asset is declining in value.  But there's a debate, I understand, within the Obama team about what specifically they can and should do to ease that correction for the homeowner.  Where do you think he'll fall down on that?

MR. RICHARD WOLFFE:  Well, there is a debate here and, and partly because they've spent so much money not changing anything--or at least the current administration has.  If the focus is on psychology, I think they are on a very long and difficult path.  We're halfway through this recession by many conservative estimates.  It will be a long time before the psychology turns around.  It's about confidence in the marketplace, for sure.  But also growth. What they're really focusing on is growth in the broader economy.  Until that really moves on, nobody's going to be spending money.  Companies are not going to be investing capital.  So the question is, not just specifically about the housing market.  Of course there are troubled institutions, troubled pieces of paper.  So much money has been thrown at that.

MR. GREGORY:  Right.

MR. WOLFFE:  Moving that forward is going to take a much bigger group of policies.

MR. GREGORY:  Is he going to get a blank check from both Democrats and Republicans in Congress to do what he feels he needs to do?

MR. TODD PURDUM:  I don't know that he'll get a blank check, but I think he'll probably have pretty broad support.  And partly because no one should be invested, no one will be invested in his failure.  Every member of Congress has to deal with his or her district.  And look what happened with the initial refusal to support the bailout.  That was because of pressure coming from their districts.  So I don't think anybody wants to, to dig us deeper here. And if, if the Obama Administration comes forward with some, you know, reasonably creative ideas for going forward, I think the Congress will go along.

MR. GREGORY:  I want to talk about what we learned from this bubble.  Because everybody's talking about that for new regulation and lessons learned from what we experienced in this housing crash--no.  This is what--Henry Blodget, in Atlantic magazine wrote the cover story, on why Wall Street always blows it.  He was a Merrill Lynch analyst during the, the Internet bubble.  He writes, "Why did Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac, AIG and the rest of an ever-growing Wall Street hall of shame take so much risk that they ended up blowing their firms to kingdom come?  Because in a bull market, when you borrow and bet $30 for every $1 you have in capital, as many firms did, you can do mind-bogglingly well.  And when your competitors are betting the same $30 for every $1, and your shareholder start demanding that you do better, and your bonus is tied to how much money your firm makes--not over the long term, but this year--the downside to refusing to ride the bull market comes into sharp relief."

Michelle, it's not so easy to put the brakes on when everybody's making money.

MS. SINGLETARY:  It's not.  But you have to.  You have to.  The companies and individuals did the same thing.  You know, Proverbs says that the borrower is slave to the lender.  And if we just internalized that message, we would all be much better right now.  And, and it, it's a shame that we had to get to this point, but we have got--I mean, you talked about the psychological change.  We have got to do this.  We have got--we--you know, you and I talked about this.  You know, we have this whole Ponzi scheme of shifting money around, and no one is saving, no one's doing the things that they're supposed to do.  It is critical that we address the housing issue.  Some people will lose their home, and they should lose their home.  But if you're in your home right now and the value is going down, and you have no intention on selling or refinancing, what do you care what it's worth?  It's where you live.  It's not a bank.  It's not an ATM.  So stop worrying about that.  If you got savings, and you have a decent job and you've got health care, go ahead and spend. It's OK.

MR. GREGORY:  Well, you actually write about something that Congress should take up in a recent column.  You say, in terms of passing the buck, "There's some good that could be had," you write, "from the current crisis in corporate America.  When someone is pleading for a handout, you can get something in exchange for rescuing them.  It would be idiotic if Congress didn't take advantage of this crisis"--(Gregory coughs) excuse me--"and find a way to better control the way executives are compensated.  If we now have an economy in which we cannot allow certain industries or companies to fail, then we need better governance over executive compensation."

Rich, is that really where Congress should be spending its time?

MR. LOWRY:  Well, look, the problem is--and I think Michelle's on to something here--when you're a company and you take government money, you've sort of lost the moral claim to control yourself.  And that's why Detroit is going to end up producing green cars, basically mandated by Congress.  That's why the banks are going to face, I think, really serious pressure, kind of mandated lending regulation.  And if things continue to go south, it wouldn't surprise me if we begin to see really serious proposals to nationalize the banks.

MR. GREGORY:  Is that something that would, that would fly in Congress?

MR. WOLFFE:  Well, they're not, they're not going to use that language, but, de facto, that's what's really already taking place.  The question is, you know, you can focus on these individual industries, you can look at the housing market.  But there is a fundamental question that undermines the philosophy that we have looked at for the last 20 years about unfettered free markets, whether it's safe to put money into the stock market.  Are the banks going to be there?  Are the regulators doing their job?  Are the credit agents performing their tasks?  To rebuild all of that is not just a monumental task, it has a huge impact on the politics, because conservatives have put their confidence in an ideology that is as broken now as the big government philosophy was in the early '90s.  The era of big business, in many ways, is over.  Politics in Congress across the country's going to have to deal with that, just as homeowners are going to have to deal with their own personal budgets.

MR. GREGORY:  Rich, is that fair, do you think?

MR. LOWRY:  Well, this--we're, we're definitely probably seeing an end to a 25-year era that ran right through Reagan, through Clinton, and through Bush that depended on free markets, free trade and deregulation.  Now, how far we're going to go in the other direction is one of the big questions.  And I would counsel against going too far in the other direction.  But there is, as I was saying earlier, a big possibility of a paradigm shift here.

MR. GREGORY:  Let's talk about the political dimension to all of this.  This week Newt Gingrich, former speaker of the House, of course, said the Republicans are in a tough spot when it comes to criticizing the new president.  This what he said:  "I think the country is so tired right now of a style of Republican attack politics that has become a caricature of itself, they instinctively go, `I'm tired of that.' It's ineffective against Barack Obama right now.  The country is faced with serious problems and is about to have a brand new president.  You'd have to be irrational not to want the new president to succeed."

MR. PURDUM:  I think, as usual, Speaker Gingrich puts his finger on something pretty essential.  I mean, he's about the smartest guy in Washington in many ways.  And, you know, he has his problems, but he's always been out there being able to see when the wind is changing, and this is one of those times, I think.  President-elect Obama has this metronomic kind of regularity.  He never gets too excited when things are going well, he never gets too upset when things are going badly.  And I think in some ways the public, over time, over the length of his campaign responded to that, and that's effectively what answered a lot of doubts about experience and other qualifications.  So I think, you know, the, the sort of Rovian style of "demonize your opponents, say they're bad," that, that has passed a little bit from the scene for the moment, I think.

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