Economic Roundtable on 'FNS'

" And hello again from Fox News in Washington. -- General Motors filing for bankruptcy in the federal government taking a 60%. Ownership stake. We want what -- at -- today how much government intervention is too much. We brought in top leaders from the public and private sectors Republican senator Richard Shelby. Presidential economic adviser Austan Goolsbee. Investment banker -- ballot and from mountain view California the chairman and CEO of Google. -- Before we get to our discussion of government's role of the private sector mr. -- I want to ask you about the latest jobs numbers nine point 4% unemployment. 345000. More layoffs. In Mandy. A couple of months ago the White House projected unemployment was going to top out in September. At no more than 8%. Are we now headed for double digit unemployment more than 10%. I hope."

" Not when you are right the economy's clearly gotten substantially worse from the initial predictions that were being made not just by the White House but by -- private sector. In this report. Minus 345000. Is a terrible number. But it's a substantial improvement from what the job losses have been that's the smallest job loss since September of last year. So it's encouraging but. Really bad what's your latest projection on how high unemployment will go and when it will pay. I drove stay out of the forecasting game there are official forecasts in the next update of those forecasts I believe are coming out in August a matter for the four. Forecasting what the budget -- going to be obviously. I don't think there's any question it's going to be a rough patch not just in the immediate term before. Little bit of time could you got to turn the economy around. And jobs and job growth tends to come after you turn the economy around so it's it's likely going to be a little higher now one thing to know. He is the unemployment rate rose despite the job loss figure coming whale well down and being well lower than expectations. And that is because. There were a number of people -- dropped out of the labor force because they were discouraged workers. When you start to see a little bit of possibility that you can get a job you're gonna see a bunch of people -- the labor force looking for work. The unemployment rates going to go up a little more aren't."

" Let's get to our main topic. Government motors big financial stakes big bailouts for all the financial companies a public health plan. Senator Shelby you say that the Obama administration is taking us down the road to socialism explain. Well obviously so they intervene last fall in the bank. Crisis. No one -- ever done it on that scale before now the automobile. Crisis -- bush you have to go back the Bush Administration they started. Now you talking about a massive health care plan. While we're trying to ride our economic -- I believe that there's no doubt that we're going down to government intervention everywhere government ownership. Unprecedented in this country and it's so wrong role in -- this road is a slippery slope. Let me bring in Fred now -- doubt the president says that he has no interest in running businesses he's just trying to save them from collapse and then get out let's watch what he --"

" I don't want to run auto companies. I don't wanna run banks. I've got to warn -- got to run or edit I've got more than enough to do so. The sooner we can get out of bad business the better --"

" Going to be. Fred Malick in the middle of -- financial crisis in the middle of a terrible recession put the president really let General Motors and Chrysler AIG and Citibank I wonder."

" I think -- two different situations her look at a time of -- like we -- in the war on terror abandon her principles and -- things -- at a time of economic peril. Abandoning the principles are made of the greatest economic engine and -- history of the world and equally wrong. And I think what you hear -- two different situations. I would label the injection of capital from the financial institutions to stabilize the financial system. That's a war of necessity. He had to do that. But digging dirt road show to think in General Motors and then -- in bankruptcy. That's -- choices the wrong choice. And I think you're gonna help political involvement in General Motors going forward and decreasing competitiveness -- increases and I think it's going to it's been hurt the American people."

" Eric -- I want to put something up on the screen that you said just last week let's take a look. The last thing you want is the government in your board room telling you what to do but let's take a look at what has happened -- General Motors the government. Is telling General -- not to import small cars from China but to make them here. We had the spectacle this week of senator is bringing in their heads of of General Motors and Chrysler -- them not to close dealerships for all the talk. About not micromanaging is not exactly what the government is doing. Well it depends on what they actually do at the moment it's all this posture. It seems to me that what Tracy we have except try to save General Motors given the roughly a million jobs that were related in time of incredible pain and job loss -- figure that it. The choice was bankruptcy the supply chain goes away the loss of the American automobile industry. Or -- band aid it needs to be a band -- it needs to be -- which we get out. Private capital is that it is the source of jobs in our country. I can't imagine that we want to own these countries -- companies very long. But but but mr. it's that it isn't just a question of making speeches I -- you had. Barney Frank the head of the financial services committee. Called General Motors this week and say -- GM warehouse in his district in Massachusetts as part of the deal. The General Motors agreed in the government push them that they're not going to continue to make some small cars in China they're gonna make them here to protect jobs for the UAW so this is. Forgive me industrial policy. Well again."

" In the first place these are highly regulated industries as we know it's -- this is just another example of the kind of regulation people -- doing. At the end of the day this will hurt their competitiveness and they're going to have to stop it. Going to have to run as a private company they're going to have to shed the dealers unfortunately all these painful steps that they should have done ten years ago which is what got them into the situation in the first place."

" mr. Goolsbee I'd like you do to follow up into a discovers that but I also wanted to talk about the clash between policy. And profits the government wants. General -- is to make as small cars fuel efficient cars. While all the indications are that according to the market the cars that they make the most profit on. Our suvs and pick up truck so so which takes precedence profits for the taxpayer shareholders. Or environmental policy."

" Look the president made totally clear in his remarks and he specifically said we are not going to be in the business of telling. General Motors or anybody else what kind of cars to make. Where they should open their plants or anything of the sort the president made clear we want to get out of this as quickly as possible we are only in this situation. Because. Somebody else kick the can down the road and that's really an understatement. They shook up the can they opened the can and handed to us in our -- Senator Shelby knows that to be true when George Bush. Put money into General Motors almost explicitly with the purpose how many. Dollars do they need to stay alive until January 20 2009. There was no commitment to restructuring. To making these viable enterprises of any kind of made none of the serious sacrifices. And Republicans in the Senate. Attached a list of conditions they opposed George Bush's intervention because they said the unions had not made the following sacrifices. In the Obama plan. It asked more and received more from the unions and from the other stakeholders. Then the people that objected to the bailout last November asked for so we have."

" Finally put them and bring his -- and that all candidates first of all I advocated last follow it a General Motors and Chrysler's. Best bet would go to chapter eleven DN it would save a lot of money not a political restructuring -- what's happened. Where the bondholders have have been sacrificed. The unions have have -- today and you've got a combination now. The unions and government government ownership and General Motors majority. And it and the unions. I don't see a good model to make money for these companies survive down the road -- not like you're in the business world do you see micromanaging going on here by. -- not only the White House but also by 535. Senators and congressman."

" Well I think I think by the White House certainly I groups that are -- look. We can't for decades we've had a bankruptcy system in this country that has worked well and -- fuel free enterprise system and and a possible way. It is impervious to politics because run by a federal courts now what have you done taken out of the judicial independent over the executive. And I think you've injected politics into senator Shelby is right. There was no sense in putting billions of dollars in and then declaring chapter eleven afterwards if you're gonna let him go into bankruptcy and -- the courts working through what this amounts to. He is a bailout for the unions at the expense of secured creditors. And it broken contract was secured creditors and treated the use more favorably. And I think let's watch let's let's listen carefully -- said I respect his judgment but let's watch what they do not what they say and what they do it."

" Because that's difficulty if at some point either the Bush Administration back in the fall or you guys when you took over. Had just that going to chapter eleven we're not -- taken ownership stake we're not gonna give you fifty billion dollars what would -- happen. At that time or now they're going into bankruptcy with Chrysler they're going through bankruptcy understand -- it is on that is plaguing him."

" You have done if you had tried to put them in bankruptcy look senator Shelby may be correct I don't know why the Bush Administration simply handed the money and -- the problem on to the next guy. But in this circumstance of the president faced. If the alternative is immediate liquidation of these companies in the midst of the worst recession since 1929. It does seem that that is something we ought to take into account. In chapter eleven where you're trying to do restructuring that is precisely the form. That this. Restructuring is taking. I completely disagree if you look at the fact this is not a circumstance where they've handed everything to the union all the stakeholders have made sacrifices. The unions and workers have made major cuts. They they're facing tremendous additional layoffs they had wages cut benefits cut. They had restructuring of their pension and health obligations. And they made more sacrifices. Then as a comparison. In the steel industry where there was no government and."

" Where the union -- with I believe 17% of the company and the bondholders who had thirty. Billion dollars in debt end up with much less is a private investor what message would that send you. But the question here is whether they're going to be able to raise money and the capital markets in the future and I don't really know. I worry about any one group having too much influence over this outcome politicians the unions the employees what have you. This needs to be a competitive global business. My concern about General Motors was that the cost needed to be -- a long time ago. And they were paying the penalty now both the Bush Administration and -- about an illustration. Actions were -- relative to what should have been done by the private sector is a failure of the private sector that got into this we need to get back to getting people who want to run a business and make money. -- we do that the better. Senator Shelby let let let's turn to another aspect of that and that is financial bailout. You don't like them you voted against TARP but I want to put up some numbers -- that are. Very -- the Dow Jones closed on Friday at 8763. That's -- 34%. From the low in March. And the Obama administration is expected to announce this week that some of the major banks that may be able to replay. Up to fifty billion dollars of that TARP money so when you use -- a month not so long ago let's let some of these big banks fail where you won't."

" No -- not wrong I think some of the banks could fail -- that pain. Failures always painful. But you take city court. Citicorp's business sick institution a long time this -- back at third. Time they've been in trouble they keep down downsize and they don't have to downsize more there -- under fire right now. Would the world -- and if they closed one of these banks to know it wouldn't. We would have been better -- the -- the Citicorp with all the absolutely it is whenever it -- all over the world update you we -- save money of the taxpayers big time and sent a message to management. That nobody's too big to fail not the brokers told us in the banking committee testified. A lot of institutions financial institution. Probably too big to exist. Do you do you agree -- Fred --"

" No I don't. I think that you'd have a domino effect but the -- The Lehman bankruptcy started a a kind of a domino effect creating a -- we had -- we have -- I think if we've let this city -- fail in all due respect to senator Shelby. Who are greatly respect I think you could have had a domino effect it could eroded confidence in the United States financial system. And you couldn't be patient even greater crisis today. -- that as they should earlier that was something you had to do. It's not like these other things that you don't have to do."

" Mr. Goolsbee the latest news is that the administration is about to name -- paid. As far to ensure the companies that receive federal bailouts. Meet what are going to be new executive pay guidelines in fact there's even thought that the administration wants to set up. And new rules new regulations for the entire industry that would ban -- plans that are seen as rewarding risky behavior true."

" Look the everyone knows that we've got into a situation. Before in the run up to this financial crisis where. And senator Shelby to his credit identified it early there were a number of leaders that identified it and senator then Senator Obama was was out front. That. Too much of the mentality was I want to get my pay even if that means. Doing something it's going to undermine the company. Doing some is going to undermine the financial system and we want to get away from that mentality that page should be tied to long term performance. And that -- should be based."

" Why aren't going to be telling me because you're saying I think that if if -- I'm an easier thing you're saying -- figure -- not only. A company this except in federal money but -- one that isn't that the government is gonna set pay guidelines and you can have a -- ruling on what's an appropriate pay structure I've."

" Thank you may be mixing a few things one it's totally clear that if the government is saving your bacon. And giving you money that they have some input on whether you're wasting the money or what you're doing with the operation I don't think anybody disputes that. The purpose is to set up clear rules ahead of time so that we don't get in -- situations where people say you're changing rules after the fact. On broader -- issues the president has always been in favor of things like say on pay legislation so shareholders. Could have a say. On the pay that the executives at their companies. Are behaving in. And there are a series of principles best practices. That I think it's perfectly appropriate to --"

" Okay I I I know we could talk about that -- bright -- but we've got one other big subject to talk about is going to be the big subject this coming week. And for weeks to come in Washington that's health care reform the president wants a public health option. Despite its opposition during the campaign he now says that he's willing. To consider mandates. On individuals to get health insurance on employers the paper health insurance as long as there's a hardship waiver. Senator -- what's wrong with."

" when we don't know how much goes cult in whose don't pay far. Secondly it will be the first step in the destroying the best health care system the world is -- that because government when the government's involved more and more in the details. And you start the one -- deal. And you got the government compete with private enterprise with -- all the incentives government has in the power. They will destroy the marketplace for health care and it will be a mistake in the American people better be careful in what they world."

" I want to ask you to aspects of this this -- the first of all the question of whether the public health insurance plan lives out all the private health insurers and also. The question about -- during the campaign. Candidate Obama attacked John McCain for the idea of taxing health care benefits --"

" McCain would make you pay income tax on your health insurance benefits. Tax and health benefits for the first time ever."

" But now. The president tells democratic senators he's willing to consider the idea it either taxing. People who will make a certain amount of money or taxing health care plans. That are of the certain values and a complete 180 degree policy --"

" Let me say two things about that number one. That what health. Care exclusion as they call it that was not in the president's plan now the president has committed that he's going to work with congress. And sold they have put forward a whole series of ideas that he's willing to look at to do an achievable. Health care cost reduction. And health care expansion. For people who are uninsured but that's not the president's plan so I think it's a little unfair to attribute to the president things that he did not put forward. And the second is willing to look into what he's willing to look at all sorts of ideas that is not in his plan it is not the president's plan that he put forward. The second is in the campaign. The McCain proposal as you described in that head. Moved from. Are the company's going to be. Paying taxes on the insurance to then shifting to let's have the individuals pay tax on their health insurance and the president. I don't think it's a secret that the president has has been and will remain highly concerned. About how ordinary Americans. Are able to foot the bills on there. That put their tax bill that's why it. They put in a tax cut for 95% of workers in the recovery packet so he's clearly gonna be mindful of that trial --"

" Not like your thoughts about -- that the benefits versus the dangers of a public. Health insurance component as one of the choices and -- so what seems to be if not a flop. -- in the sense that he's offering yet he's willing to consider this idea of taxing benefits."

" I think I think there are two major problem beyond that -- elected just to Griffin to refute what is the timing -- the cost. We should be focusing like a laser on this economic recovery -- creating jobs this health care bill does not do that we should not be folks plus. The health care bill by their investment -- over a trillion dollars of costs for the next ten years. At a time when we are mounting deficits and mounting debt that's greater than the total that accumulated in the history of our country. This could only lead to inflation is going to have a bad ending and we should put this off for a couple of years until the -- to --"

" I I want to get to -- debt is our last of it but the -- that I just wanna. To bring you into this debate about health care because the president is talking about trying to get a health care plan on his desk to sign. By October we're talking about 18% of the economy there's some proposals -- around the president has given us nothing more than principles. Is it realistic to do that kind of massive undertaking on such a short timetable. Well I hope so and the reason is that businesses have a lot of trouble with the cost of health care and heart health care costs will continue to rise. If we delay for a couple of years has been discussed. Problem is though but the cost structure just gets worse. The only way to really address this is to address the -- a combination of coverage and cost anything that the congress and the president does has to do that from my perspective the sooner the better. You won't fundamentally solve the problems in business until you solve the problem spiraling health care costs. Just driving everybody crazy but finally let's talk about the deficit in the economy has you mentioned mr. -- Fed Chairman Bernanke raised the concern this week that. Long term deficits. Could choke off any kind of economic recovery and be very damaging to the economy. Senator Shelby how serious a problem are these trillion dollar deficits as far as the I can --"

" Very very serious the most seriously we've ever seen in America. And I'm glad to see the Fed Chairman at the -- so much money talk about deficits and so forth but I can tell you. If we get to a twenty trillion dollar. This country and we -- down that road. Are. Ability. To pay in service that -- so we question all over the world just like got some of the rating agency. -- already begun to question the -- for the first time they will surely question hours because we're the largest. Debtor in the world and growing by leaps and back -- the national debt was 41%. Of the economy. It last year under the Obama budget plans that would rise up to 82%. The national debt. 82% of the total economy and 39 that's not sustain."

" I will say two things about that number one we know that in the short run. In the midst of the deepest recession since 1949. You don't try to tighten the belt at that moment we're talking about the longer run. In the longer run the two major things that have happened. In the forecasting of the budget. Our number one the economy's deterioration. Means that they're forecasting substantially lower revenues and importantly number two. The Obama budget. Removed. All of the budget and accounting gimmicks and put forward here is the actual fiscal state that we face. Now compared to the actual policies. That George Bush had in place. That what they call the current policy baseline. Obama is cutting the deficit more than two trillion dollars. Over the ten years compared with what he was inheriting. The only sense in which he is budget is expanding the deficit. Is compared to the accounting gimmicks and things that nobody actually believe we're going to take place like --"

" Counts on borrowing 46 cents out of every dollar the government spends. We got this in trouble in this country as a nation by over leveraging and private sector and -- and visuals so. You tell me the answer is to leverage the entire country Barbara 46 that from the -- point 5% which it's senator -- points out come from China."

" We're going to have to leave it there Fred -- Austan Goolsbee senator Shelby. -- up in California we want to thank you all so much for joining us today participating in what I think we all agree is an important debate thank you gentlemen here."