INTERVIEW TRANSCRIPT

C-SPAN’S “NEWSMAKERS”

Guest: Austin Goolsbee, Economic Advisor, Barack Obama for President

Reporters: Marty Crutsinger, Associated Press and Michael Crittenden, Dow Jones Newswires

Moderator: C-SPAN

TAPE DATE: Friday, September 5, 2008

AIR DATE/TIME: SUNDAY, September 7, 2008 at 10 a.m. and 6 p.m. ET

Please use with attribution to C-SPAN’s “Newsmakers”….*

* NOTE: C-SPAN should appear in all-caps because it is an acronym for Cable Satellite Public Affairs Network

Please contact John Cardarelli in C-SPAN's Media Relations Department at

202-626-8797 or jcardarelli@c-span.org for questions

© NCSC

Copyrighted material: use with attribution only

ROBB HARLESTON, HOST, C-SPAN’S “NEWSMAKERS”: On today's edition of "Newsmakers," we'll be talking about Senator Barack Obama's economic plans and what plans he may put into play if he's elected president in November. Polls show the economy right now is the number one issue on voters' minds.

Talking to us about Senator Barack Obama's economic plans, from Chicago is Austin Goolsbee. He is an economic adviser with the Barack Obama for President campaign. And here in Washington to do the interviewing are Marty Crutsinger of the Associated Press and Michael Crittenden of the Dow Jones Newswires. And we'll start the question with Marty Crutsinger.

MARTIN CRUTSINGER, ASSOCIATED PRESS, CHIEF ECONOMICS WRITER: Professor Goolsbee, the Labor Department reported that unemployment in August jumped to a five-year high of 6.1 percent. It was the eighth straight month that we've lost jobs in this country. We also had a report Friday that mortgage foreclosures have gone to a record high. It's just a litany of bad economic news at the present time, and yet the polls show that the presidential race between your candidate, Senator Obama, and Senator McCain is remaining close. Normally, at a time like this, you would think that the challenger would be way ahead in the polls.

Can you say what the disconnect is, why the Obama economic plan isn't reaching, connecting with more middle-class voters?

AUSTIN GOOLSBEE, BARACK OBAMA FOR PRESIDENT, ECONOMIC ADVISER: Well, I'm an economic policy adviser, so as you get into the political, you're a little out of my lane, but I would say, A, as you know, traditionally in a presidential campaign people really start paying attention after Labor Day, so I think part of the issue is just that this has been going for a long time and only now are people really starting to sit down and compare the programs between the two candidates.

And, two, even in these polls, which this early in the general election typically don't have a whole lot of meaning, if you look at those polls, while the race is close, on the subject of who do you think either, A, would do a better job managing the economy, or, B, understands the economic problems facing people like me, Obama has actually a bit of a sizable lead in those areas, despite the race being close.

It's always difficult for the challenger to get any kind of a large lead in today's kind of environment. I mean, John McCain is not the incumbent, but I do think the fact that he's advocating the very policies rooted in the same philosophy that George Bush followed that got us here is ultimately going to count very heavily against him.

CRUTSINGER: There are some Democrats, though, sir, that have criticized the Obama economic plan, saying either it's too complicated or you've not done a good enough job connecting with the concerns of middle-class voters. Are you planning on tweaking that plan at all? Are you going to change it, going into the last two months of this campaign?

GOOLSBEE: Well, look, again, Marty, you're drifting us to the political rather than to the content of what's in the economic plan. As you know, there are people saying it should have more detail. There are people who look at the great level of detail and then say it should be simpler. We're certainly not going to be driving the economic plan based on what some weekly poll showed at the very beginning of the race.

For the last year and a half, Obama's outlined a program that's clearly geared toward the concerns of ordinary working Americans. It's got tax relief for 95 percent of workers. It has a real energy plan, has a real education plan, confronts the health care cost crisis in the country.

On a whole bunch of areas, it's been highly detailed. It is vastly more substantive than anything the McCain campaign has put out and is fiscally responsible. And I think the contrast couldn't be greater with the approach of McCain, which is the same as the Bush approach, that, hey, we're in trouble so let's cut taxes for the highest-income people and the biggest corporations and hope it trickles down.

I think, as we go forward in the next two months, all we've got to do is lay out what's actually in their programs. And I don't think, if people start looking at the content, I don't even think it's close.

MICHAEL CRITTENDEN, DOW JONES NEWSWIRES, BANKING AND FINANCING REPORTER: Well, professor, on that point, there's been so much rhetoric about taxes. John McCain talked a lot about over the last few days – his camp has been characterizing your tax plan in various ways, probably not ways that you'd favor.

GOOLSBEE: Not accurately, yes.

CRITTENDEN: Well, I mean, and to that point, could you maybe just walk us – just very straightforward, a brief synopsis, because there has been lots of discussion.

GOOLSBEE: Absolutely. Yes. You put it in a very nice way. I would describe what they have been trying to do is just ripping the page one out of the oldest playbook they have and just try to portray any Democrat as being for raising taxes and more spending. Now, if you look at the Obama program, it's simply not true. It isn't a tax increase.

Overall, his program cuts taxes for 95 percent of working Americans and their family and, overall, cuts taxes for the economy and would set them at a level that is equal as a share of the economy to almost exactly what it was under Ronald Reagan in the 1980s. So, in the Obama tax plan, there's effectively three parts. For the vast majority of people, those making less than $150,000 per year, there would be substantial tax relief.

You would get a credit for the payroll taxes you pay. There are tax incentives to help make health care affordable, to help make education affordable, a series of other things like that – tax relief for seniors. For people 150,000 to 250,000 in income, there would be no change in tax rates. And for those people making $250,000 or more per year, tax rates would go back, at most, to what they were in the 1990s under Bill Clinton and, in some cases, the rates would be lower than that.

Those three parts are basically the centerpiece of his tax plan, that we ought to give tax relief and that we ought to give tax relief to the people that are struggling. On the McCain side of the ledger, they are also increasing taxes on some people. It's just that the people they're increasing taxes on are people that are working and are getting health insurance. So McCain is offering a health care tax credit and he's financing it by raising the taxes on anybody that gets health care from their employer, that that would be treated as taxable cash income and bump you up into higher tax brackets.

And the people who are getting substantial tax relief under McCain are people making a whole lot of money, well in the several hundred thousand dollars. For people averaging almost $3 million a year, his average tax cut is more than $550,000 per year.

So it's a totally different philosophy. The Obama philosophy is Bush tried what McCain's doing and it didn't work. Let's try something different, let's try to give the relief and the job creation to ordinary Americans, and McCain's is on the other side.

CRITTENDEN: Well, how do you propose paying for it? Because I've seen a lot of the proposals. They are very detailed. People talk about the deficit. It's exploded. How do you pay for these proposals?

GOOLSBEE: He has put forward the pay-fors on every proposal as we've gone along. As you probably followed, for the year and a half we were in the Democratic primary, there was a great deal of discipline between Senators Clinton and Obama, in which everything each of us put forward we argued how it would be paid for, because the terrible fiscal irresponsibility legacy of the last eight years was something they wanted to get away from.

So in this tax program that I'm describing, it pays for it, A, by, as I say, letting the Bush tax cuts expire and repealing almost all of them for people making more than $250,000 a year. Two, it identifies specific tax loopholes that corporations are using internationally, ending the tax breaks in the tax code that encourage them to ship jobs overseas and a series of other revenue measures that offset those. And, on the whole, it is a net tax cut and it's paid for by a net spending cut, so Obama would decrease the deficit relative to what it is today under current policy.

The independent analyses from the "Wall Street Journal," from the Tax Policy Center of Brookings and elsewhere have verified that that is true. And that is in great contrast to the McCain plan, where they have put forward tax cuts that are twice as big and twice as regressive as what George Bush put forward. And it would explode the deficit.

By the estimates of the Tax Policy Center, McCain's program would add almost $350 billion per year to the deficit. So if we want to get into a discussion of fiscal responsibility, it's astoundingly clear that Obama's program starts us on a path of fiscal responsibility and McCain is just pulling the same old page out, where he says we're going to have literally $3.5 trillion of additional tax cuts, on top of what Bush did. We're going to call for increased spending on defense, increased spending on No Child Left Behind, and then he's claiming he's going to balance the budget by 2013, without specifying which of the $800 billion that would be needed to balance the budget under his program. Which $800 billion does he want to cut out of the budget?

CRUTSINGER: Professor, on that point, you mentioned that you were comparing it to a current policy baseline, but of course you understand that both plans, both Obama and McCain, would greatly increase the deficits if you compare it to the CBO baseline, because the current policy assumes – you make assumptions that the Bush tax cuts that are scheduled to expire in 2010 would continue, those tax cuts would continue and the fix for the AMT would also continue.

If you take away that, compare it to the CBO baseline, you would increase the baseline by $3 trillion, McCain would increase it by $4 trillion over the next decade. Isn't that the reality that whoever is president is going to have to face coming into office?

GOOLSBEE: No, there are two realities. One, before we get to the baseline, the numbers that you cited for John McCain are not accurate. In the Tax Policy Center, they show that the four trillion number, the additional one trillion beyond what Obama has, is only with the accounting gimmicks that the McCain campaign has been engaging in.

If you look at what John McCain is actually calling for on the stump, it's up to $7 trillion. So there's a difference between the two candidates of almost $4 trillion. Second, as regards to the baseline, it's a technical point, but the issue is what is the realistic alternative that you're comparing to.

Obama looks at the current deficit and says we need to shrink it, and his program would shrink it from where it is now. Now, the CBO baseline, which involves all of the accounting gimmicks put in place by George Bush – that is, pushing the cost of things just outside the budget window and assuming that we would have a huge tax increase the day after the budget window ends, that's embodied in the CBO baseline by law. That's what they have to do.

No realistic budget analyst thinks that that's the proper comparison, and I would point out that under the CBO baseline, the government would be running surpluses. So compared to a world in which the government ends all the tax breaks that George Bush put in place, including the ones on the middle class, and runs a surplus, it is true Obama runs a deficit compared to that. But it is also true that John McCain's deficit is $350 billion a year larger than anything that Obama is running.

I mean, when you're going down the hill, the first thing you need to do is slow down before you can turn around and start heading back up, and they've pushed us so far down a hill in the last eight years that the realistic thing is to start to slow down and then, in the long run, do what Obama has proposed, and that is let's start thinking about the ways to address the rising health care costs in the country, which are at root the critical issue facing Medicare and the long-run entitlement cost in this country.

CRUTSINGER: So these numbers, I understand what you're saying about the CBO baseline, except that's the measure that we use to try to compare things. You're not concerned with a $3 trillion figure for a decade in which we're going to have the baby boomers retiring and Social Security and Medicare?

GOOLSBEE: I am concerned. It's inaccurate to say I'm not concerned. I am concerned. The issue is you couldn't raise – in the policy you're describing, that would involve raising taxes by $3 trillion and, at this moment, raising taxes by $3 trillion is a bad idea. So what Obama's viewpoint is, is, A, let's reduce the deficit from where it is. Let us start on the path of fiscal responsibility. Let us not increase the deficit by the things he proposes in the campaign, which he has not, and let us not get on the McCain-Bush approach, which is let's have multi-trillion dollars in additional tax cuts for very high-income people and corporations, and let's promise to balance the budget sometime in the future with spending cuts that we never specify.

The comparison between the two candidates, whatever your baseline, is John McCain's is $4 trillion worse. So whatever criticisms one has about baselines or what the current fiscal situation is, that criticism is two to three times more critical of McCain's program than of anything Obama's talking about.

CRITTENDEN: Professor, judicial nominees obviously get a lot of attention in recent elections, but financial – for a lot of the regulatory positions here in Washington, there's going to be a huge turnover. We have rising bank failures, Treasury is dealing with Fannie and Freddie. There's a lot of issues. Wall Street's very fragile right now.

What can we sort of expect – you don't need to name names, obviously, at this point – but what sort of resumes and what types of characteristics could we foresee from regulatory policy from an Obama presidency?

GOOLSBEE: Well, I'm not going to name any names for you, but I think if you look at Obama's track record and if you look at everything he says on the campaign trail and you look at the advisers he has now, it's clear that on issues that are serious facing the country, like the credit crunch and the financial meltdown that we have been facing for the last year, he's going to be seeking extremely informed advice people from both parties and people that can address the issues head on.

So you probably have seen that over the course of the last year he got the strong endorsement of Paul Volcker himself, who said he was coming out of retirement to endorse Obama because he thought this was a person that could bring sides together, and that's what he really needed. He gave a very detailed speech on what ought to be the role of financial oversight and regulation of the government going forward this March.

And anybody who's interested in that issue, I recommend they go read the speech, because it's really quite informed and quite good. And on the strength of that speech, the got the endorsement of Bill Donaldson, David Ruder and Arthur Levitt, the former heads of the SEC, Bill Donaldson, a lifetime Republican who told me he had never endorsed a Democrat in his life.

So I think you would expect to see, in the strictly financial world, people from a lot of different perspectives, but very informed. And the second thing I would point out on this issue is that Senator Obama has been massively ahead of the curve and foresighted on these issues of housing crisis, financial and credit crunch. A year ago he gave a speech at NASDAQ that still looks quite timely, in which he says Democrats are often pegged as being anti-capital markets and anti-business, but it's not true.

He believes that capital markets are extremely important and have helped make us the richest country in the world, and that capital markets cannot function without the public's trust, and that in a world where you've got billions of dollars off the balance sheets, where you've got rating agencies accused of conflicts of interest, where you've got things taking place that undermine the public trust.

In a world like that, oversight isn't bad for capitalism. It's good. What we see is that when a small group of people go totally out of control, lending standards out of control, outright fraud taking place, it deeply undermines the ability of the free market to finance investment. People pull their money out because they're uncertain as to what's happening. And Obama's been way, way out front on that.

And on the housing component, which has been driving a lot of this, 2.5 years ago he was up in the Senate, trying to get legislation introduced that would address the deteriorating lending standard. A year and a half ago, the sent a letter to Chairman Bernanke and Paulson saying, from where he was sitting, he saw a great possibility of housing crisis and we ought to take a series of specific steps right away to prevent that from happening. They crinkled up his letter and threw it away.

I think on these issues of financial markets and credit, he's shown great judgment. He's shown great taste in advisers and people and he's got a lot of good ideas. And, again, the contrast with Senator McCain's camp could not be greater.

HARLESTON: We're talking about Senator Barack Obama's economic ideas and what he plans to put in play if he's elected president, and discussing this with us today is Austin Goolsbee. He's coming to us from Chicago. He is an economic adviser with the Barack Obama for President campaign. He's also the Robert P. Gwinn professor of economics in the Graduate School of Business at the University of Chicago and a research associate at the National Bureau of Economic Research. We'll get back to the questioning with Marty Crutsinger of the Associated Press.

CRUTSINGER: Professor, if I could switch to trade for a minute, that seems to be one of the areas where there's some of the biggest differences between the two campaigns. Senator McCain in his acceptance speech Thursday night talked about that he was a free trader, that Obama wants to raise protectionist barriers and that that would harm the economy. Could you talk a little bit about that? You were involved in that a bit in discussions with the Canadians during the primaries. Just what does Senator Obama want to do in renegotiating the NAFTA agreement and the other agreements?

GOOLSBEE: Look, let's start with NAFTA. Senator Obama has had the same position on NAFTA in all the years that I've known them. There has not been any change in his position. His position is very simple. He is not for abolishing NAFTA. He's not for protectionist barriers. He is for putting enforceable labor and environmental standards into the core of the NAFTA agreement.

He has said, since he's been running, he would work with the president of Mexico and the prime minister of Canada to do that, because we don't want to create a situation where it's a race to the bottom and that it's in the interest of all parties to make sure the agreement is working.

Now, that isn't protectionist. Once again, when John McCain says Barack Obama is for erecting protectionist barriers to keep out the world, he's just deliberately not paying any attention to what Obama's actual program is. He's just pulling an old page out of the playbook and getting up and reading it, saying, oh, he wants to cause a Great Depression.

It's not true. Barack Obama repeatedly says – and this is his position on trade, that trade is not bad for the country, trade has been good, and that we cannot build a moat around the country. The global economy is here and we have to compete to win. He's outlined specific steps of how we do that, investing in science and technology, investing in the training of our workers, investing in a trade policy that works for the country.

In addition to that, as he says, we cannot ignore the fact that there have been millions of people left out in the bounty of globalization and opening of markets, that if we do so we put at great peril all of the gains of globalization, because it generates a tremendous political backlash, that if we are not mindful of the concerns for just the most basic labor and environmental standards, all the will and favor of trade agreements of any form dry up, and we've seen that in Washington.

Second, it doesn't help the case for those of us – I'm a free market economist from the University of Chicago. So everyone I know is a total free trader at heart. It doesn't help the case of those people, like me, who believe that open markets are important for the growth of this country, that if you pick up a free trade agreement, it's 1,000 pages long. Twenty pages of it is about free trade and 980 pages of it are special giveaways to whatever company happened to be at the trade negotiating table and made sure to get theirs, and that the role of special interests has deeply undermined the case for openness in the United States.

You see that in both parties, and so Obama's view is we are going to have a commitment to the US competing in the world and doing well and succeeding. It has to be about building a new consensus rooted in eliminating the insecurities of American workers. He has voted for free trade agreements. He has opposed some free trade agreements. What is foremost on his mind is what is good for the United States, what is good for average Americans and average consumers and he is absolutely committed to carrying that out.

CRUTSINGER: Would an Obama administration support the passage of the pending deals with South Korea, with Colombia and Panama?

GOOLSBEE: On each of these cases, look, in the Democratic platform itself there is a phrase that says we need to complete a successful multilateral – we want to complete the successful multilateral negotiation of the Doha round, which fell apart. On the case of Peru, he was for the agreement. In the case of South Korea, anybody who looks at the South Korea agreement sees that there are a great number of holes in it.

The Bush administration was rushing, they were under the gun because their fast-track authority was going to expire. It's obvious that the Korean negotiators knew that and so they insisted on a very hard bargain for the U.S. So it does almost nothing to open up Korean markets on automobiles in particular, and in manufacturing in general, and so Obama issued a statement that said Korea is a great ally and there is much to like in the agreement, but there is much not to like in the agreement and, as it stands now, we can't support it.

But to be totally clear, not supporting flawed agreements and not supporting the passage of new flawed agreements is completely different and is completely inaccurate to describe that as being in favor of erecting tariff barriers and for building a moat around the country. That is the accusation that John McCain is leveling, and it's just completely false.

If you look at Barack Obama's policies and his statements, he is not a protectionist and he is not for building a moat around the country. He's for addressing the insecurities of American workers and for making it so that the United States succeeds in the global economy.

In the eight-year legacy of Bush, where they put forward this false choice, where you're either for anything they call a free trade agreement, regardless of whether they intend to enforce it, regardless of whether it's riddled with loopholes. And, if you aren't for that, then you are, in the words of John McCain, a Smoot-Hawley protectionist trying to drive the economy into a depression. I mean, it's a false choice and it's really a misrepresentation.

HARLESTON: The last question for Austin Goolsbee will go to Michael Crittenden of Dow Jones Newswires.

CRITTENDEN: Professor, there's been a lot of talk in Congress. We had one stimulus package earlier this year. There's been a lot of talk among Democrats, maybe we need another. The Bush administration is not going to play ball. We pretty much already know that.

You've talked about an energy tax credit. What other stimulus measures do you think might be needed, whether or not we're in a recession or not. Obviously, it's debatable. What stimulus measures would you propose, say, for the first 100 days?

GOOLSBEE: OK, we don't know exactly what the conditions will be in the first 100 days, but let's assume that we were in the same situation we're in right now. Senator Obama was very early out of the box saying we needed stimulus the first time around, where Senator McCain was saying we didn't. It's clear we did. We've now had eight months consecutive of job loss. We've lost 600,000 jobs and the unemployment rate has been rising dangerously.

Obama has proposed a second round of stimulus and relief. The first part of that, as you say, are energy rebates to deal with the high gas prices so people can afford these high energy costs, as well as high food costs, high health care costs. And the second or direct stimulus, in the form of, A, money to prevent the slashing of immediate infrastructure maintenance or infrastructure spending, so bridges, roads, tunnels, things that matter for both the economy and for everyday commuters, and they are on track to be slashed because the states have run out of money. And, second, money to states that have been hardest hit by the declines in house prices so that they don't have to, A, slash health spending and education spending, B, so that there is the possibility to address the mass foreclosure crisis, a second wave of which is potentially coming down the road.

So the energy rebates and then money that's injected straight into the economy are the two parts of what he's calling for in the second stimulus.

HARLESTON: Austin Goolsbee, economic adviser for the Barack Obama for President campaign, thank you very much for being on the "Newsmakers" program.

GOOLSBEE: Great to be here.

(break)

HARLESTON: Martin Crutsinger of Associated Press, is there anything you learned today that's going to be in the headlines tomorrow regarding the Barack Obama plan for the economy, if he should become president?

CRUTSINGER: Well, it was pretty much I think kind of a recitation of their program. What we were trying to get at, I think, is to try to get some sense of how they would answer the Republican charges against the program going into the last two months of the campaign. Because while the independent analyses of the Obama program do agree that he does cut taxes, except for those making over $250,000, families making over that amount, the McCain campaign seems to be scoring points with the fact that, no, he's really going to raise your taxes. This is the old Democratic strategy. He's going to raise everybody's taxes.

And we didn't quite get a sense of how they're going to – perhaps they have a strategy in their ads going forward how they're going to drive home the point that they're really offering a tax cut. We also didn't hear too much – he took issue with what baseline we were going to use in comparing how much either plan was going to drive up the deficits going forward. But we didn't really hear too much in details about – one, he didn't take disagreement with the fact that they would drive up the baseline and the deficits going forward, but we didn't really hear any details on where the spending cuts are.

He says they're there. He says McCain doesn't have his in as much detail. But I think the people who've looked at both economic programs think that there's a great deal of specificity lacking in both plans and where the cuts would occur to make things balance out. That's not unusual. All campaigns like to tell you what you're going to give the voters, but they don't like to tell what they're going to take away from the voters, so that's not unusual.

HARLESTON: Michael Crittenden, based on what you've heard this morning, how is the Obama plan playing on Wall Street versus Main Street?

CRITTENDEN: Well, I mean, I think you're going to see a much different, as he's sort of suggesting. They do believe in more regulation and I think a lot of voters and a lot of Wall Street people would admit that we need better oversight. One of the reasons we're in a credit crisis, all these housing problems, there was absolutely no oversight of the mortgage and housing industry.

Talking to people in the Obama campaign, some of the people they talk about aren't exactly – they're talking to Republicans, they're talking to Democrats. You'd likely see probably tighter oversight of Wall Street, but it's the type of thing – I think the challenge for them, I think Wall Street for the most part would be OK with an Obama presidency.

I think the challenge for them, as Marty was saying, is really trying to hammer home, here is our plan, getting past that rhetoric and making it clear to people the aspects of the plan. Mr. Goolsbee was very succinctly able to talk about these things, trying to boil that down to a 2.5-minute campaign ad is the challenge.

HARLESTON: Marty Crutsinger of the Associated Press and Michael Crittenden of Dow Jones Newswires, thank you very much for being on "Newsmakers."

CRITTENDEN: Thank you.

CRUTSINGER: Thank you.

END