CQ Transcriptswire

SPEAKERS: BOB SCHIEFFER, HOST

LARRY SUMMERS, PRESIDENT-ELECT OBAMA’S ECONOMIC ADVISER

MICHAEL ERIC DYSON, GEORGETOWN UNIVERSITY

JOHN DICKERSON, SLATE

[*] SCHIEFFER: Today on “Face the Nation” from Capitol Hill, two days before the inauguration, an exclusive interview with President- elect Barack Obama ’s top economic adviser Larry Summers. In just two days, the new president will be sworn in for what is expected to be the largest crowd ever to gather here. But when the crowds go home, the new president will be left to solve the worst economic crisis since the Great Depression.

Larry Summers will be his top adviser in that effort. Can it be done? How long will it take? We’ll start there. Then we’ll get perspective from Georgetown University historian Michael Eric Dyson and John Dickerson of Slate Magazine. I’ll follow with some thoughts of my own on presidents’ inaugurations and what comes after. But first, fixing the economy on “Face the Nation.”

ANNOUNCER: “Face the Nation” with CBS News Chief Washington Correspondent Bob Schieffer. And now, from CBS News in Washington, Bob Schieffer.

SCHIEFFER: And good morning again from Capitol Hill. Joining us here the incoming director of the National Economic Council, Larry Summers. Mr. Summers, thank you. Well, it’s going to be quite a couple of days here. But once the music stops you’re going to have your work cut out for you.

The economic recovery package you and the new president are proposing now up to $825 billion -- some people say even that is not going to be enough. I think you yourself have written it would be worse to do too little than to do too much. Is this going to pass? And when will begin to see the effects of it?

SUMMERS: The president’s gotten a terrific response so far from members of the House, members of the Senate. We’re working hard and in collaboration with the House and the Senate. I expect the program will pass within a month. Some of the adjustments can take place almost immediately as people see more income in their paychecks, as state and local governments will get support so that they can prevent lay-offs of teachers, policemen, other essential personnel. And there are a ton of shovel-ready projects that are out there that are out there that are being canceled right now that aren’t going to have to be canceled when this program passes.

All told, there’s enough here that Christina Romer, the president’s chief economic adviser has estimated that will create between 3 and 4 million jobs. That estimate has been validated by others on the outside.

This really is, we believe, what the economy needs. It provides the jobs that it’s so obvious that people need. You know, we had the worst year ever in terms of job loss last year. But it’s doing the work that the country needs to do, whether it’s roads, whether it’s energy, whether it’s health care.

SCHIEFFER: But is this going to be enough? Is this going to be enough, or have we reached the limit of how far we can go on this? Will it have to be larger? SUMMERS: This is one phase of the president’s program. He’s also committed himself to substantial efforts with respect to housing, to prevent foreclosures, to a financial recovery program that will get the credit, get the credit flowing again. And he’s made it very clear that he is going to do what is necessary to get us out of this economic hole.

This is the largest such program in the country’s history. Three million, 4 million jobs is going to make a very big difference. It all depends on psychology, but we are going to be leaning forward throughout this administration. The president’s made it clear that our errors are not going to be of standing back. The president is going to insist that we do what’s necessary to get this economy moving.

SCHIEFFER: A big part of it, of course, is going to be tax cuts. But I guess the question-- and there already seems to be some disagreement on this. Are you going to try to repeal the tax cuts for the upper-income people, as Nancy Pelosi wants to do, the so-called Bush tax cuts? Or are you going to let those stay in place for a while?

SUMMERS: Look, our overall focus is going to be on increasing spending. On net there is going to be a substantial tax cut for the American people. No one with an income of under $250,000 is going to see their taxes go up. Working families are all going to get $1,000. The Bush tax cuts, as you know, Bob, are scheduled to expire in two years, in any event, just by law. Just what the timing will be is something that is going to be worked out going forward.

SCHIEFFER: Well, are you...

(CROSSTALK)

SUMMERS: But the focus is really going to be on moving this economy forward by putting money in the hands of the people who need it the most, America’s middle class families.

SCHIEFFER: Well, let me get back to the question. Are you going to leave those tax cuts in place, or are you going to let (inaudible) expire?

SUMMERS: That’s going to be something that’ll get worked out in the legislative process. The focus right now for the president, I believe the focus for all Americans, should be on how we’re going to get this economy going. And that really goes to the question of what we’re going to do for middle class families.

SCHIEFFER: You said you think you’ll see some of the impact of this stimulus package immediately. But is the economy in general going to get worse before it gets better? How long do you think is going to last before we’re out of this thing?

SUMMERS: We’re inheriting -- President-elect Obama is inheriting a situation no president has inherited since FDR. The economy lost 2.6 million jobs, you know. When Bill Clinton left office and I left as his secretary of the Treasury, the country was buying back the federal debt. President-elect Obama, even before anything in his program, is inheriting a deficit of over $1 trillion dollars. These problems weren’t made in a week or a month or a year, and they’re not going to be fixed in a week or a month or a year.

You look at the forecasts. There’s no question, almost no question, that the economy is going to decline for some time to come. But what we can do is demonstrate a commitment to the job creation, to the income creation, to the financial repair that are necessary for a recovery. And that will instill confidence, and it will come. Just when it will come, no one can say. And the next months are almost certainly going to be difficult.

But, you know, Bob, psychology is a lot of this. I think the sense of a new leader with a clear plan, with a commitment to being aggressive, to recognizing that government’s got to support the market system at a moment like this, I think that’s going to add to confidence. You know, it’s never happened before in our history that a president has gotten a major piece of legislation supported in the Congress even before he’s inaugurated...

SCHIEFFER: Do you think...

SUMMERS: ... as the president did with finance. So it’s going to be very hard for some time, but we’re going to make progress.

SCHIEFFER: Do you think we’ll see unemployment actually get to 10 percent?

SUMMERS: I don’t think so, Bob. I think while we’re going to see substantial job losses, frankly what’s important about the president’s program here is that it is going to contain what would otherwise be just a vicious cycle. People spend less, therefore, others earn less, therefore, they spend less.

We’re going to stop that vicious cycle. And we’re going on contain this problem. The president is going to do whatever it takes to achieve that objective.

SCHIEFFER: You’re getting a lot of the credit for helping to get this done. But Congress finally agreed to release the rest of the so- called TARP money, the $700 billion in emergency funds that were going to the banks and financial institutions. Now are you going to have the second half of that, $350 billion more, released? Aren’t you going to have to really tighten restrictions on the banks and these institutions and how they’re going to use this? Aren’t there going to have to be some better rules than we’ve seen thus far?

SUMMERS: Bob, after all the difficulties that that program has had, all the money that’s been given away where people haven’t seen much benefit, Congress’ willingness to support that was really a reflection of the trust they place in President- Elect Obama. And the president-elect and all of us on the economic team led by Treasury Secretary Geithner are going to do this in a very different way.

The focus isn’t going to be on the needs of banks. It’s going to be on the needs of the economy for credit. Whether it’s for housing to prevent foreclosures, whether it’s for automobile loans, consumer credit, small business, municipalities, the focus is going to be on credit. The focus will be on transparency.

There’s going to be a Web site that’s going to show everything the federal government disburses. And it’s going to show what people don’t recognize, which is the obligations for repayment that institutions recur and when those payments are scheduled. And there’s going to be accountability, accountability for lending.

SCHIEFFER: Let me just ask you this.

SUMMERS: Yes.

SCHIEFFER: Has what has already been given to the banks and so forth -- has that done any good?

SUMMERS: Bob, the honest answer is that if it hadn’t been given, we don’t know what would have happened. And it could have been catastrophic way beyond what we saw last fall. But anyone who looks at it has got to be disappointed when they look at what’s happened to lending, have got to think the results have been unsatisfactory, got to think we need a more proactive approach that’s got its focus on what is really the financial center of this problem, which is maintaining an adequate flow of credit. And the institutions that receive government support have to face tough regulation, honest evaluation of their capital needs. When those capital needs are met, they’ve got to be expected to use the money productively for the economy.

SCHIEFFER: Can you force these banks to loan this money and get this going? Because that seems to be the problem in some of the cases here. The money goes out but nothing seems to be happening on the other end.

SUMMERS: There is going to be a very different level of rigor in the evaluation of institutions, in the plans that are designed, in the expectations for institutions. And so, institutions that are healthy, that don’t need it just to survive are going to be expected to lend above their baseline levels as part of this program.

SCHIEFFER: How far down should restrictions on bonuses for executives in these companies that are getting this money -- how far down should that go, maybe the top 25 executives? We know in some of these institutions, the top people are saying no bonuses, but the ones down below it’s kind of murky.

SUMMERS: That’s a question that Secretary Geithner and his team will be looking at very carefully. Obviously it’s different in an institution with hundreds and hundreds of super highly-paid executives than it is in a small community bank. So the rules are going to have to be crafted appropriately for the type of institution that you’re talking about.

But what’s not going to happen is that funds are going to be paid out to managers that instead could be supporting increased lending. What’s not going to happen is that funds that could be supporting increased lending are being used to finance acquisitions that may serve a bank, but don’t serve the country. Those are the things that are not going to happen under President Obama’s approach.

SCHIEFFER: What’s your evaluation of the health of the big three auto makers now? Are they going to make it?

SUMMERS: They’re clearly in serious, serious trouble. It’s a reflection of problems they’ve had for a long time. And it’s a reflection of what has happened in the economy that has reduced the demand for cars and what’s happened in terms of the availability of credit.

As you know, Bob, the Bush administration committed significant support to those institutions. And they’re seeking to develop a plan. What the president-elect has said is that any further support has to be conditioned on a real restructuring that leaves these companies in a sustainable state. That’s going require sacrifices from all the stakeholders.

We’re not going to put government money in so that bond holders can take government money -- can take the money out. So it’s going to be a significant, tough restructuring. But, look, the automobile industry is really central to the national economy. And so, it does need real restructuring. But it’s got a crucial role in our country going forward.

SCHIEFFER: All right, well, Mr. Summers, we want to wish you the very best. I expect you’re going to need everything you can get, including some luck here.

SUMMERS: Thanks very much. And good to be with you, Bob.

SCHIEFFER: OK. We’ll be back in one minute.

(COMMERCIAL BREAK)

SCHIEFFER: And joining us now, Georgetown professor Michael Eric Dyson and John Dickerson, the chief political correspondent for Slate magazine. Gentlemen, welcome to both of you.

Michael, you have a fine piece in the Washington Post this morning about this speech that Barack Obama is going to make and how it is sort of based on his upbringing, in a way.

I thought you ended it in quite a dramatic way. You said, “From the ranks of the oppressed has come a ruler. Pharaoh has replaced Moses. David is now Goliath. How that changes the rhetoric and that of the black prophets that they are accustomed to -- it puts it all in a new -- in a new light.”

DYSON: Well, thank you so very much.

Yes, I think that, obviously, we have to compare him to Reagan, the great communicator, Bill Clinton, who had a way with a phrase, and of course John F. Kennedy. But I think that his roots, oratorically and rhetorically, are in the black church. He was a member of a black church for 20 years. He heard some of the greatest wordsmiths come through there, Freddy Haynes, Lance Watson, Vashti McKenzie, Rudolph McKissick.

So these are names that are not known to the mainstream.

But when you go up into a black church and hear the kind of edifying elegance that is common to such pulpit speech at its best, I think that’s reflected in Obama. And even his pace, his cadence and his rhythm derive from that black oratorical tradition.

SCHIEFFER: John, what does he need to do here?

DICKERSON: Well, he needs to do two things. He’s going to talk about newness. He wants to turn the page, OK?

So he talked, yesterday -- on his train ride to Washington, he talked about the new -- a new prosperity. He’s going to talk about a new era of responsibility. But then he’s going to rely on old truths, because he wants to create this sense of unity that he created in his campaign, this idea that we see ourselves in each other.

Why does he have to do this? Because he’s going to ask some tough things of the American people. And only by creating this notion that we’re all in it together can he get people to work in their local communities to bring about change but also to take the hits that he’s going to offer them to get out of this economic mess we’re in.

He’s going to ask for some sacrifice. And only if everybody feels like they’re in it together are they going to give up a little.

DYSON: I think that’s true.

SCHIEFFER: And he’s got a tough balance, here, because he wants to follow up and convince people, yes, we can, which, of course, was (inaudible) his entire campaign.

But he can’t build up expectations, you know, to something -- it’s going to be tough to just balance what he can do with the idea that, you know, we’ve got to get in this together and...

DYSON: Sure. He might have to facilitate a transition from “Yes, we can” to “Now we must.”

And I think that what he can do, of course, is to continue to appeal to the spirit of the American people to come together.

I mean, the fact that he’s the first African-American president may not be as important as the enormous debt and crisis that he inherits and the fact that, as a community organizer, he is now in the White House, using the bully pulpit to forge connections among communities that he was used to doing as a community organizer.

So I think that you’re absolutely right, in terms of not overselling himself, but I think he can use eloquence as a -- wield eloquence as a weapon against some of the cynicism and despair that’s been out there. Just the change in tone will be a significant achievement.

SCHIEFFER: I -- I thought it was very interesting. I interviewed Bill Safire this week, the one-time Nixon speechwriter who later was the long-time columnist for the New York Times.

And he said, you know, the fact that he is the first African- American will be obvious.

DYSON: Right.

SCHIEFFER: He said he really won’t have to dwell on that. And he said it will be a successful speech if he can make it about, quote, “us” and not just about him.

DICKERSON: Well, look at what he did in leading up to the speech. He gave a video announcement in which he said explicitly that. He said, “It’s not about me. It’s about us.”

And this gets to the community organizer piece and this notion of wiring everybody together. It’s a new beginning, not just because I’ve got a lot of programs I’m going to talk about but it’s a new beginning because we’re going to lock arms to go forward together.

Now, this sounds, perhaps, a little corny, except that this is exactly what he did in his campaign, not only get people to do this but convince people that individual actions, person-to-person contact, could make a big difference. And it brought him to Washington.

(CROSSTALK)

SCHIEFFER: Go ahead.

DYSON: What I -- I hesitate to debate with Bill Safire, with the “nattering nabobs of negativity” that he talked about. But what’s interesting is that it’s true, on the one hand, that he’s absolutely right.

But on the other hand, this is a significant event, not only for African-American people but for the nation. As much as we say black people never thought they’d see this day come, many white Americans didn’t ever think they’d see this day come, or any other minority.

So there is something to be said for, the day after Martin Luther King Jr.’s 80th birthday, the celebration of it, Barack Obama ascends to the heights of American political power and becomes, de facto, the most important, or certainly the most influential man in the world.

That has to be recognized, that blood bought the price for that. It paved the way for the beauty that he is. The gracefulness that Obama embodies was made possible by the sacrifice of so many people.

The Capitol was built by slaves. The White House that he will inherit has been built by slaves. And I think that there’s a recognition of that, but that’s not just for black people. That’s for the entire nation to enjoy and to be informed of.

SCHIEFFER: You know, this will be my 12th inauguration.

DYSON: Wow.

SCHIEFFER: The first one was 1964, when I saw Lyndon Johnson inaugurated, back on those Capitol steps. I have to say, I have never seen the kind of spirit, the anticipation, just, kind of, the basic excitement that I see around this one.

DICKERSON: It’s crackling. And the historical crackling that’s going on -- you know, in Martin Luther King’s famous speech, he -- the Capitol was in his sight lines, and he talked about the fierce urgency of now. Well, that was a famous line from Obama throughout this campaign. So you have all of these historical echoes going on in this moment that I’m sure Obama will know how to ping when he’s talking.

SCHIEFFER: I’ll tell you, it’s going to be quite a moment. Frankly, I can’t wait.

Well, thank you both for helping us put it in context. I’ll be back in just a minute.

(COMMERCIAL BREAK)

SCHIEFFER: Finally, and so it begins. On Tuesday next on those Capitol steps just behind us, the old president will leave and the new president will be sworn in. It will go exactly as planned and precisely on schedule. The oath will be administered just before high noon. No force will be required to remove the old president. No troops will be necessary to install the new one. As it has been from the beginning, the old president will go; the new president will arrive, for no other reason than that is the expressed will of the American people, which is at once our greatest strength and the core principle on which America came to be.

This happens in most successful campaigns. The next president was able to capsule his reason for wanting to lead the nation in one short phrase -- Yes, we can.

On that, let us hope he is right. He faces a severe economic crisis at home and an increasingly dangerous world abroad. But from Washington in the beginning, to Lincoln on the eve of the Civil War, to Roosevelt during the Great Depression, history has shown that our worst times have produced our greatest presidents. On that, let us hope history is right. Back in just a minute.

(COMMERCIAL BREAK)

SCHIEFFER: And that’s our broadcast. We want to thank the Jones Day law firm for this window on the Capitol. Thanks for watching, and we’ll see you again next Sunday on “Face the Nation.”