'Meet the Press' transcript for Jan. 11, 2009

MR. GREGORY:  Mm-hmm.

MR. GIGOT:  But I think that--there--remember, we're forgetting something. The Federal Reserve has been pushing trillions, literally, $2 trillion onto its balance sheet as, as already a form of stimulus.  And that has begun last fall, a little bit earlier, and that's going to flow through the economy, and it usually takes about a year or so before that makes a difference.  So I think that's going to work even no matter what the Congress does.

MR. GREGORY:  The issue of impact, Mark Zandi, speaks to some of the risk of how long it takes.  This is how The New York Times reported it Saturday:  "The risk is that Obama and the Congress will weigh down their effort with measures that cost many billions of dollars but may not have much impact on economic activity.  Tax breaks, for example, usually produce less than $1" worth "of stimulus for every dollar they cost, economists say.  Spending on public construction projects, like highways and bridges, produces the most economic activity--but there's a limit to how many projects are `shovel-ready,' and even those take time to generate jobs and ripple through the economy."

MR. ZANDI:  Yeah, that's exactly right.  The, the, the spending, the infrastructure spending, the aid to state government is the most efficacious form of stimulus, it has the biggest bang for the buck.  But I do think you need some tax cuts, and, and there's two reasons for that.  One, you need to broaden support for this package.  You need a lot of people to sign on, because you want to get it done quickly, in February.  And the other thing is it gets into the economy very quickly, stimulus right away, this spring, this early summer, and obviously the economy needs help as quickly as it can get.

MR. GREGORY:  Is it--yeah, go ahead.

MR. HARWOOD:  There's a couple points about what Mark was saying.  First of all, Mark is an example of some of the assets that the Obama team has in this argument.  Mark did not support Barack Obama during the campaign, and yet he's echoing some of the arguments the Obama team makes.  On the question of whether it's enough, what Obama told me was this package was built to grow. They were proposing...

MR. GREGORY:  Right.

MR. HARWOOD:  ...on the low end, knowing that during the legislative process it was likely to get bigger.  But of course that exacerbates the question that--if that happens, that Bethany raised, which is how we're going to pay it back.

MR. GREGORY:  And what about--Paul, what about the idea of tax cuts as being as stimulative as infrastructure spending?

MR. GIGOT:  Well, I think they're much more stimulative if they're the right tax cuts.

MR. GREGORY:  Mm-hmm.

MR. GIGOT:  I mean, we have a capital strike going on right now.  Nobody wants to take any risks, nobody wants to make any investments.  Part of it's the uncertainty about the damage that Congress might do, but part of it is also the fact that everybody's frozen.  You need the incentives to invest, particularly in the private sector.

MR. GREGORY:  Right.

MR. GIGOT:  I think a, a tax cut, a big corporate rate tax cut, for example, or an across the board tax cut would be a lot more stimulative than this public spending, which has to come from somewhere.

MR. GREGORY:  Right.

MR. GIGOT:  You got to borrow it, you got to tax it, and that money, will it be put for more productive uses than that private dollar would have done?

MR. GREGORY:  Congressman, the, the inclusion of tax cuts at this level is being seen in large measure as a political statement as well; this is how you bring Republicans onboard for this stimulus.  Is--does he have the balance right, do you think?

REP. BONIOR:  I don't know that the balance is right.  We'll, we'll find out. My sense is that this is going to pass.  There's no way that this--the package will not pass.  The question is what the mix will be.  Can he--could you pass it without Republican support?  You probably could.

MR. GREGORY:  Right.  But that's not how he wants to do it, in this sense.

REP. BONIOR:  But it's not how he wants to do it, and some people are suggesting that he's setting up the, the plate here for future programs so we can have more bipartisan support.  But the, the, the piece that was raised by Mark here is, is absolutely right.  I mean you don't get the bang out of the buck with the tax cuts like you do with direct spending.  The acceleration on spending and moving the money through the economy helps more.

MR. GREGORY:  But how does that get paid out?  I mean, I want to help people understand, because I don't think I understand fully.

REP. BONIOR:  Sure.

MR. GREGORY:  You have a big infrastructure project, how long does it take for that to actually get paid out, even after you get passage?

REP. BONIOR:  It take a while.  But...

MR. GREGORY:  And that's a factor.

REP. BONIOR:  Well, but, but what happened--I, I was in the Congress back in the late '70s, and we had the same very argument, and there was a question of whether we should do an accelerated public works bill.  And people would say, "Well, if we do that, it'll take a while to get into the economy," and we talked and we talked and we talked.  We finally did it.  But when we did it, it did hit and had a tremendous impact in terms of putting people to work and moving us out.

I would also point out that, with regard to Bethany's concern, and it is a good one, Bush, Reagan--both Bushes and Reagan and Gerald Ford, also, were--had to engage this question of spending and whether they wanted to deal with the deficits.  And they eventually caved on it because it is the way out.

MR. GREGORY:  And we're going to get to deficits in just a moment.

The politics, John Harwood.  Here was the headline on Thursday in the Los Angeles Times:  "Stimulus Hits Big Wall:  Politics.  Competing ideas mean a package may not pass until mid-February as economists caution against a diluted plan." How much trouble with Congress?  Some of the critical Democrats--John Kerry, Carl Levin, Tom Harkin, Barney Frank, Kent Conrad, even the majority leader, Harry Reid, said, "I don't work for Obama."

MR. HARWOOD:  You know, you were asking about has he got the balance right substantively in this package?  I think he's got the balance right politically at this moment.  The flak you were describing from Democrats is just about right for Barack Obama.  You need a little bit of flak to convince Republicans you're dealing with the other side.

MR. GREGORY:  Right.

MR. HARWOOD:  And on the, the Republican side, what's striking is how little flak there is.  You know, I was talking earlier this week--or last week to Tom Coburn, conservative senator from Oklahoma; disagrees with parts of the package along some of the lines that Paul was suggesting, but says that Barack Obama is gaining confidence on Capitol Hill with the way he's reaching out to people, how straight up he is in dealing with Republicans.  And you're getting people like Mitch McConnell and John Boehner saying, "Yes, we might be able to do some business with him."

MR. GREGORY:  Let's talk about the hard sell for the public, because this is really amazing.  We put together a chart that I think will really blow a lot of people away.  Here it is.  This is the federal bailout money and stimulus spending beginning in February of 2008, and it includes what could be passage of a new stimulus in February of 2009.  So 12 months we're talking about.  So the stimulus package from February '08, Bush administration, $168 billion. The money allocated to bailout Fannie Mae and Freddie Mac, 200 billion.  Now, only 13.8 billion of that has been drawn down by Freddie Mac.  Bailing out AIG, the big insurance company on Wall Street, $122.8 billion.  The TARP, the financial bailout, 700 billion.  Now that, you know, only half that's been used, they're trying to get the other half.  The Obama plan, at least $775 billion, and it could go up from there.  It's a total, Paul Gigot, of $1.9 trillion just for stimulus and bailout.  That's staggering.

MR. GIGOT:  It is staggering, and it's staggering that a lot of it occurred on the, on a Republican's watch.  Let's be honest about it.  But at some point those are claims on future taxpayers, OK?  You can borrow it for a while, but ultimately somebody has to pay it back, and that means your children and--or your grandchildren.  And so I think at some point you have to say, "Let's slow down.  Let's stop." Somebody has to say, "Let's make sure that the things we're spending this on are actually more productive than the dollar that the private sector would spend it on."

MR. GREGORY:  And, Bethany, are we getting bang for the buck on that huge line item of spending?  Is it making a difference?

MS. McLEAN:  I think it's really hard to know, and we won't know the answer to that for years.  What's really interesting is how quickly the mood of the nation moved.  If you think back to a year ago, it was moral hazard:  How do we make homeowners who took out mortgages they couldn't afford suffer?  How do we make Bear Stearns shareholders suffer?  And all of the sudden here we are, the issue moral hazard is just completely off the table.  No one talks about that anymore.  And that's just a dramatic change in the mood when you speak about public support.

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