'Meet the Press' transcript for August 2, 2009

MR. DAVID GREGORY:  This Sunday:  Has the great recession found a bottom?

PRES. BARACK OBAMA:  We may be seeing the beginning of the end of the recession, but that's little comfort if you're one of folks who've lost their job and haven't found another.

MR. GREGORY:  If this is recovery, has the administration misread the stimulus plan's impact on the economy and jobs?  And is government playing the most effective role?  Our guest, the president's top economic adviser, director of the National Economic Council, Larry Summers.

Then, the fight over health care, will the White House prevail?  And the president's conversation about race held over a high-profile beer.  Plus, a special look inside the 2008 race for the White House and how some battles of the campaign are front and center today.  We're joined by the authors of the just-published book, "The Battle For America 2008," Dan Balz and Haynes Johnson, and two former congressmen, Democrat Harold Ford Jr. of Tennessee and Republican J.C. Watts of Oklahoma.

But first, the president's chief economic adviser, the director of the National Economic Council, Dr. Larry Summers.  Welcome back to MEET THE PRESS.

DR. LAWRENCE SUMMERS:  Good to be with you, David.

MR. GREGORY:  So the big news this week is that the economy shrank in the second quarter of the year, but less than expected; and, as so many Americans know, unemployment is still a big problem.  Is the recession over?

DR. SUMMERS:  We're certainly in a very different place than we were.  Six months ago, the economy was in a nosedive, people were talking about the possibility of another depression, the statistics all suggested a vertical decline.  None of that is the situation right now.  We're certainly starting to see a turnaround, a turnaround in production that leads most professional forecasters to expect that if you look at economic output over the next six months, it's actually likely to start to increase.  Now the jobs picture's going to be serious for a long time to come.  The best that can be said so far is the rate at which we're losing jobs is declining; but there, too, the picture is improving.  We've got a long way to go, we're going to need to carry through with the full program that the president has put in place. We're going to need to continue to take steps to stimulate the economy, like the very successful Cash for Clunkers program, so that we're keeping at doing everything we can to push this economy forward.  But we are in a very different situation.  We have walked back from what we were facing six months ago, and that is because of the policies that were put in place.

MR. GREGORY:  When do you think the economy starts growing again?

DR. SUMMERS:  I think if you look at the overall output statistics, the GDP, as economists call it, a very great likelihood--and this is what most professional forecasters say--is that we'll see growth going forward in the second half of this year.  Why?  Inventories have been run down and firms are going to have to build those inventories back.  The evidence is that from a very, very low base housing production, automobile sales are likely to start to increase, and the recovery and reinvestment program is going to gather force over the next six months, that people are able to spend more of the extraordinary tax assistance they've received as more and more of the 3,000 projects come on line and start to spend out.  Already in Florida you've seen 14,000 teachers' jobs that wouldn't have been there this spring preserved as a consequence of the Recovery Act.  So all these factors, the rising impact of the Recovery Act, inventory accumulation, what's going to happen in housing and automobiles, these all are leading--and, you know, don't trust those of us in the administration, most professional forecasters, too, expect output growth.  Now, historically--and this is why we are absolutely not complacent, we continue to be just very dissatisfied with where the economy is--historically, increased hiring typically lags increases in output, so it's going to take time before you see it in the unemployment and the employment statistics, so we've got to keep pushing.

MR. GREGORY:  I want to stop you on that point because I want to return to jobs in just a moment.  The question is when there's recovery in the economy. One economist this week, who's been rather skeptical all along, has said it's going to feel a lot like the recession.  To that point, you've got housing prices that are down 17 percent from where they were a year ago.  And here's the headline in the lead story in The New York Times today, "Prolonged aid to unemployed is running out." Is the administration to this point going to have to extend those unemployment benefits?  It's already been expended at a historic level.  Will there have to be further extensions?

DR. SUMMERS:  We'll work with Congress to make sure that unemployment insurance continues to perform its basic function of protecting the unemployed.  That was an important element in the recovery and reinvestment program.  It's helped people who've become unemployed; it also helped the economy by maintaining spending.  And we'll do what's necessary to make appropriate, appropriate unemployment benefits available.  We're seeing--you mentioned housing--already 200,000 Americans have seen modifications under the president's program, it's increasing by 30,000 or more a week.  We expect it to be half a million by November 1st.  And we're going to be holding the banks accountable for performance under that program.  Just this week, you're going to see for the first time publication of data, institution, banking institution by banking institution on how much they're doing, what fraction of their mortgages are, are being adjusted.  So we're very focused on making sure that we implement as vigorously and with the best possible management accountability all of these measures.

MR. GREGORY:  The criticism of this administration is that it has misread the impact of the stimulus on the economy, and here are the raw numbers when it comes to the unemployment rate.  As of February 17th of 2009, the day that the stimulus plan was signed, unemployment was at 7.6 percent, it's now at 9.5 percent.  Experts like yourself believe it's going to go up over 10 percent. Roughly two million jobs have been lost since the stimulus came on line, after this administration said in a report that if you pass a stimulus plan, we'll hold unemployment steady at 8 percent.  What went wrong?

DR. SUMMERS:  David, I, I think that's really very, with great respect, I think that's really a very misleading way of putting it.  The administration's report was very clear that the stimulus would build over time, that less than 10 percent of the job creation would take place during 2009, that the largest impacts would be felt as the program took effect, as all of those projects got started.  So we forecast that there would be a meaningful impact felt right away, but that that effect would increase very substantially.

MR. GREGORY:  Wait a minute, that--is that fair to say I'm misleading...

DR. SUMMERS:  And that's what's--and that's, and that's what...

MR. GREGORY:  ...when he says he would keep it at 8 percent?

DR. SUMMERS:  ...and that's what's happened.  Now, it's true that unemployment is higher.  It's higher than almost anyone forecast at the beginning of the year; and it's higher because, frankly, what we inherited was much worse.  Most of the surprise increase had already taken place by March, and you can hardly hold the administration accountable for that.  It turned out that businesses were even more scared than we realized; and, therefore, relative to past recessions, as demand for their products declined, they were much quicker to lay people off than they, than they have been.  And so there was a surprise in the employment statistics, but that didn't have to do with the impact of the stimulus.  That had to do with the baseline that we were dealing with.  You saw that.  You see evidence for that also, David, in this last economic report.  In addition to giving us the data for the second quarter, which is what everybody's talked about, the negative 1 percent, it also gave us data on revisions of the whole history of GDP.  And what those revisions showed us is that last winter the economy was much weaker than we thought it was at the time.

MR. GREGORY:  OK, but, Doctor...

DR. SUMMERS:  So, yes, there's been a surprise.

MR. GREGORY:  OK.

DR. SUMMERS:  But it's got nothing that bears on what the impact of the stimulus has been as distinct from an uncertainty we very much recognized, which is the uncertainty about how bad the economy is...

MR. GREGORY:  All right.  But wait, but wait a second.

DR. SUMMERS:  ...and what the baseline was.

MR. GREGORY:  But, Dr. Summers, wait a minute.  You say it was misleading to bring up the 8 percent.  The reality is that you wanted near-term economic impact from the stimulus.  You gave a speech within the last two weeks during which you said unemployment is a real problem, that it was a surprise.  My question is if you didn't get the near-term economic benefit that you wanted, you were surprised by that, does it have an impact on whether or not the president would consider repealing any of the long-term spending, given the deficit problem?

DR. SUMMERS:  The president is very focused and will come to this, I hope, on the long-term deficit problem; but he is very committed to carrying through on the Recovery and Reinvestment Act, which is really a program over the next two years.  Let me say, let me say it again, because this is an important point for your viewers, the economy surprised on the downside.  We didn't know how bad it was last winter.  That's what we've learned from the data revision. Because we didn't know how bad it was, unemployment is high.  That does not speak to the efficacy, the extra impact that we've gotten from the administration's program.  That's right on track.  You can count the jobs, the 14,000 jobs, teacher's jobs in Florida, the jobs saved across the country of cops and teachers.  You can see it in the other people whose state and local governments haven't laid off.  You can see it in the contracts and the hiring for construction projects.  You can see it in a sign that consumer confidence, which had been collapsing, as people have gotten used to having higher pay checks, consumer confidence has improved somewhat.  So, yes, the situation's even worse than we thought, but that actually makes the kind of recovery program, the investments in the country's future, the measures to support the financial system not less important, but actually much more important.

MR. GREGORY:  So you stand by your claim that this stimulus act will create three to four million jobs when it's all said and done.

DR. SUMMERS:  This stimulus, this stimulus program will create more jobs.  We were always very careful, very, very careful to say we'll save or create. What that was intended to say very clearly is relative to what would have taken place in its absence.  We recognize nobody can know where the economy is going to be with any precision, but what we can know is that if we prevent cops and teachers from being laid off, if we enable consumers to spend more, if we put people to work investing in weatherizing 75 percent of federal buildings, then more people are going to be working than if we don't do any of those, any of those things.

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