Gov. Tim Kaine on Recovery Summer, Midterm Elections

The following is a rush transcript of the September 5, 2010, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, ANCHOR: With the bleak economic news, many experts now predict that Democrats are going to get clobbered in the November elections. Our next guest is determined to make sure that doesn't happen. Joining us is Tim Kaine, chairman of the Democratic National Committee.

And, Governor, welcome back to "Fox News Sunday."


WALLACE: Back in June, the White House said this was going to be recovery summer. Here is Vice President Biden on just that.


VICE PRESIDENT BIDEN: The Recovery Act is working, but it's going to continue to work. It's not over. A lot's going to happen this summer. And even after the summer, there's more to come with the act.


WALLACE: But over the summer, the economy lost 283,000 jobs. GDP growth was just 1.6 percent in the last quarter. And existing home sales fell 27 percent in July.

Question: Wasn't recovery summer an economic and political bust?

KAINE: Chris, there are still challenges out there. Too many people are hurting and we've got a long way to go.

But let me throw a couple of other facts on there. After nearly 20 months in a row of private sector job loss, we've gained jobs in the private sector now eight months in a row. There was some net losses over the summer because the census phased out. But we have the private sector economy growing again. My hometown paper, the Richmond Times-Dispatch, has an article this morning about manufacturing being up.

The GDP, which was shrinking, is now growing. It's not growing fast enough. We've got to do more.

WALLACE: But the rate of growth has slowed considerably...

KAINE: But...

WALLACE: ... from 5 percent at the last quarter of 2009 to 1.6 percent in the second quarter of this year.

KAINE: It is -- it -- we've got some ways to go. But remember, we were shrinking at 6 percent a year when President Obama took office in GDP. And so there has been a turnaround from negative to positive.

It's clear that we've got a longer way to go. The auto industry's hiring again and putting people back to work. I was in Indiana last week and there was excitement about that. So we've just got to keep at this. It doesn't...

WALLACE: Are you still calling it recovery summer?

KAINE: I'm calling it -- here's what I say. I say we are climbing out of a ditch and we are climbing up.

WALLACE: I've heard that before.

KAINE: We've got to keep climbing. Yeah, there have been a few of us that have used that. But we -- the Democrats have built the ladder. We built the ladder and we're climbing again. We've got a long way to go. As long as people are hurting, this president and his team are going to be focused on the issue of jobs.

But as we're adding private sector jobs now every month, we just have to focus on things that will continue that. There's a bill right now pending on the -- in the Senate to extend lending and other tax credits to small businesses so they can keep hiring.

WALLACE: OK. The president, we're told, is going to announce a new - - if not economic plan, a series of measures...


WALLACE: ... this week. And reportedly, he wants to take -- first of all, he wants to make research and development tax credits for all business permanent. He also wants to take the $35 billion from letting the Bush tax cuts for the wealthy expire and use that instead to give tax cuts to small business and lower-income earners.

What can you tell us about what he's going to announce this week?

KAINE: Well, Chris, you know, it's a little bit above my pay grade. As I used to say when I was governor, when there's a policy, it will be announced. And before it's announced, there's no policy.

The president and his team are definitely going to announce some steps later in the week. I think, again, they will focus upon this small business bill that's pending in the Senate right now, which would increase lending to small businesses through community banks, tax -- no capital gains tax for small businesses.

But yes, they are talking about other ideas, including this research and development tax credit. The American economy has always been the innovator in the world, and we're starting to see some tremendous increases in innovation, especially in the clean energy sector.

So I know the president wants to continue to, you know, give businesses that -- you know, that incentive to continue that innovation and research that powers our economy.

WALLACE: But is part of the argument going to be to try to frame the debate "Republicans want to have tax cuts for all the wealthy, everyone making over $250,000..."

KAINE: Right.

WALLACE: "... a year. We want to target it..."

KAINE: Yes. Yeah, you put your finger on it. The Democratic strategy has been -- and it's going to be discussed in more detail later -- let's target the tax credits to middle-class folks and to small businesses, but especially let's target the tax credits to where they will do the most good, where they will have the most likelihood of increasing economic activity.

And I saw Senator McCain on before me saying that was a bad idea. This is exactly what Senator McCain supported in 2003-2004. Remember, he voted against the Bush tax cuts, and he said he wanted to target them toward the middle class and small businesses, and he felt like the tax credit were too heavily weighted toward the upper end, toward the wealthiest and the biggest...


WALLACE: Well, if we're going to play history, McCain did say just now that he calls this a deathbed conversion. The fact is Republicans were calling for more tax cuts in the first stimulus, including a payroll tax holiday. The Democratic majority refused.

Isn't this too little, too late before the election to try to help Democrats?

KAINE: Chris, I wouldn't see it that way. As you know, in the Recovery Act, when passed, a third of it was tax cuts. It was tax cuts to working Americans making less than $250,000. And now there have been eight tax cuts already have that have been given by the president and Congress to small businesses. The HIRE Act that was passed last spring... WALLACE: But the payroll tax cut was one of the ideas that a lot of Republicans had. Democrats refused to put it into effect in the first stimulus.

KAINE: That was an idea that was considered. It was not put into effect, that's true. But let's not forget there were numerous tax cuts for small businesses in the first stimulus.

The HIRE Act was a tax credit bill for businesses that hire that was done in the spring. Senator McCain did not vote for it. Only very few Republicans did vote for it. But that was tax credits for hiring.

So the president, when he announced the steps -- it's not a deathbed conversion. There have been a series of tax cuts for businesses. But in looking at the pace of the recovery, thank goodness we're not shrinking, we're growing. But the president is going to address additional steps to get us growing again.

The politics will take care of themselves on this. The issue is we've got an economy that was shrinking that's now growing. What can we do to accelerate the pace of growth?

WALLACE: You say it's not deathbed conversion, but the fact is it is going to take place in September, less than two months before the election. It sure feels like this is more about the election than about the economy.

KAINE: Well, here's why I'd argue with that. You'd call it a deathbed conversion if the president...

WALLACE: I didn't.

KAINE: Yeah, or somebody would.

WALLACE: Senator McCain did.

KAINE: ... if the president had not been doing targeted tax credits to help small businesses from the first day he was in office. So there have been eight tax cuts already that have helped small business, going directly to small businesses. The HIRE Act was the most recent one last spring.

And the folks on the team have charted the GDP shrinking, losing 750,000 jobs a month. Now it's turned around to positive. But we all agree that we want it to be positive with more acceleration. And so at every step along the way, we're going to look to see what we can do more that will be smart to juice this innovation economy that is why America...


WALLACE: You just heard John McCain's position -- you're quite right it has changed from 2001 and 2003 -- on the Bush tax cuts for the wealthy. The fact is a growing number of Democrats agree with Republicans it would be a mistake to raise taxes on anyone in the middle of this weak recovery.

You're going to be campaigning today with Congressman Gerry Connolly of Virginia.

KAINE: Over in Fairfax, Virginia.

WALLACE: Here's what he says.


REP. GERRY CONNOLLY, D-VA.: Raising taxes right now, which is effectively what you do when you allow the tax cuts to expire, I think does real damage to a very fragile economic recovery.


WALLACE: Here is Democratic Congressman Gerry Connolly. As you say, you're going to be campaigning with him today.

KAINE: Gerry's a good friend.

WALLACE: Well, he says the Democratic leadership in the White House and in Congress -- dead wrong.

KAINE: Well, here's how I heard that quote. Letting all the tax cuts expire might be a problem. That is not what the Democrats want to do. They don't want to just let everything expire. They want to let the Bush- designed tax cuts expire and -- but then put new tax cuts in place that are targeted for the middle class and small business.

WALLACE: He was talking specifically about the tax cuts on the wealthy.

KAINE: Right. But again, it's not just letting tax cuts expire that the Democrats and the White House are talking about. We are talking about doing additional tax cuts, as we've already done, for individuals and small businesses but just targeting them.

And, Chris, you know the economic argument on this is tax cuts to the middle class and small businesses are the dollars that are most likely to be spent and create economic activity. Tax cuts to the wealthiest might add to savings, which is good in some ways, but they're not going to be spent in a way that will...

WALLACE: But you know that -- I think it's...

KAINE: ... address a recovery...


WALLACE: ... I think that it's a very large percentage -- over 50 percent of all small business income is taxed in those higher personal income rates.

KAINE: Well, the figure that I have heard -- and you know, so -- and I'm not sitting here with facts and figures -- is about 3 percent of American small businesses...

WALLACE: Three percent of...

KAINE: ... would be subject -- of the number of the small business...

WALLACE: ... of the number of businesses, but 50 percent of the small business income. We can get in the weeds here.

KAINE: Yeah.

WALLACE: But one could argue that when you raise taxes on those upper income brackets you're raising taxes on small business income.

KAINE: Well, that's why I don't think the debate should be about expire or no. They should be about we let them expire but then we put targeted tax cuts in place. And if Republicans have ideas about, you know, ways to come forward to help small businesses, we'd love to hear them.

But here's what I know right now. There is a bill spending in the Senate to help small businesses that has the support of the U.S. Chamber of Commerce, the NFIB, the National Association of Small Businesses, and the national association representing community banks. Republicans are filibustering that bill.

We can do that right away because the House has already passed it. That will be tax credit for capital gains and it will help small businesses succeed.

WALLACE: OK. I want to put up something that you said last month about Democrats running away from the Democratic Party. Here it is.


WALLACE: "Democrats who kind of are afraid to be who they are or are pushing back on the leaders -- I think they're crazy."

But, Governor, I want to show you what some Democratic congressmen are putting in their TV ads running for re-election right now.


JOE DONNELLY: That may not be what the Washington crowd wants, but I don't work for them. I work for you.



MIKE MCINTYRE: I don't work for Nancy Pelosi or Harry Reid or anyone else. I work for you.


WALLACE: Are those Democratic congressmen crazy?

KAINE: I'm going to stick with what I said earlier. I think if you run away from who you are, that you're a Democrat and you're proud to be a Democrat, it's foolish. And the reason it's foolish is you've got a lot to be proud of. This...

WALLACE: So when they sit there and they say, "I'm not working for Harry Reid..."

KAINE: Well, that...

WALLACE: "... and Pelosi and Obama..."

KAINE: I think -- I think...

WALLACE: ... they're crazy?

KAINE: I think it's OK to say, "My first obligation is to you."

WALLACE: Well, that's not what they're saying.

KAINE: Well, but "I work for you" is what they're saying. And that's fine. And that -- everybody who runs, that's -- that ought to be their attitude, that they work for their constituents.

But people ought to be proud to be Democrats right now. You know, we're a happy warrior party. And this Congress has every reason to be very, very proud of the heavy lifting that they have done.

John McCain's chief economics advisor, Mark Zandi -- he and Alan Blinder did a report a month ago talking about how the combination of the steps taken to stabilize the financial system and to bring about economic recovery have done amazing good in taking what was going to be a second depression and got us to growth.

And admittedly, it's not where we want to be yet. But I think Dems should be proud of it. I think they should be proud of health care. They should be proud of 2 women on the Supreme Court and 4 million more American kids with health insurance.

WALLACE: Most Americans, incidentally, are opposed to health care reform now, according to the polls.

You're launching a new campaign push in a speech on Wednesday saying that Americans turn to Democrats in tough times.

KAINE: Right.

WALLACE: You're going to look at the historical record. But let's look at the poll numbers right now. The latest Gallup poll shows Republicans with their biggest lead ever in the generic question, who are you going to vote for for Congress....

KAINE: Right.

WALLACE: ... 51 percent to 41 percent.

Gallup also found Republicans are now twice as likely to be very enthusiastic about voting in November than Democrats are.

Do you really think -- and I know you're going to do this on Wednesday -- talking about George W. Bush or Herbert Hoover is going to overcome what people feel?

KAINE: Well, most of what I'm going to be talking about is what the Democrats have done in the last two years and what they plan to do going forward and contrasting it with what the Republicans have said they will do.

So it's not a backward-looking speech. It's primarily a forward- looking one, because Americans have a choice to make in November, and they can -- they can pick the team that is doing the heavy lifting at tough times to take a shrinking economy and get it growing again, or they can pick a team that has been standing in the way and that is pledging to do things, you know -- Social Security is a Ponzi scheme.

There's probably 10 to 15 marquee candidates on the Republican side who are running who are using exactly that phrase. They're not all thinking of it on their own. There is a concerted effort on the other side to try -- you know, take the underpinnings out of that critical part of the safety net for American seniors.

WALLACE: But in 30 seconds...

KAINE: We're going to point that -- we're going to point that out.

WALLACE: ... 30 seconds, you're a smart politician. We've talked a lot over the...

KAINE: I don't know about that, but thank you.

WALLACE: ... the last few years. When you see a 10-point gap in the generic poll, a two to one gap in the enthusiasm poll...

KAINE: Here's -- there was a Wall Street...

WALLACE: ... you're in trouble.

KAINE: There was a Wall Street Journal poll the week before that showed Democrats up in the generic poll.

I will admit to you the polls are challenging right now. You know, they've been challenging for other Democratic leaders in the past. We believe if you just do the right things over time, they're going to work.

And I also know, as I travel around the country and go race to race, generic is one thing. Race to race, the Republicans are putting up candidates that are quite far out of the mainstream in terms of should we have passed the Civil Rights Act or does Social Security need to exist. We're going to win some surprising races, Chris, because of who the other guys have put up. It's going to be challenging out there, but it's on the field where we win races. And we feel good about it.


WALLACE: Governor Kaine, we want to thank you so much for coming in...

KAINE: Absolutely.

WALLACE: ... especially on this holiday weekend. Please come back, sir.

KAINE: I will.

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