OTR Interviews

The 16T national debt: A record Obama can't afford to run on

As the national debt hits $16 trillion and with a looming jobs report after his address, what is the president's best argument for re-election?


This is a rush transcript from "On the Record," September 4, 2012. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: We're back live in Charlotte, and tonight the Democratic National Convention opening. Just as the U.S. national debt tops $16 trillion. Republicans are blasting President Obama for the out-of-control debt. Here is vice presidential nominee, Paul Ryan, at an Iowa rally today.


REP. PAUL RYAN, GOP VICE PRESIDENTIAL CANDIDATE: We just heard about an hour ago that our government eclipsed the $16 trillion mark in our national debt.


RYAN: This is a serious threat to our economy. Of all the broken promises from President Obama, this is probably the worst one. Because this debt is threatening jobs today, it's threatening prosperity today, and it is guaranteeing that our children and grandchildren get a diminished future.

We have a debt clock at the convention last week. I don't see the debt clock at the convention this week.


RYAN: The problem is the president keeps kicking the can down the road. No leadership on this issue. The Senate hasn't even passed a budget in three years.


RYAN: We have a very clear choice ahead of us. Are we going to stick with the same path, a nation in debt, a nation in doubt, a nation decline? Are we going to elect Mitt Romney president and get this thing turned around, cut spending, balance the budget and create jobs?


RYAN: That's what we're going to do.


VAN SUSTEREN: Austan Goolsbee is a the former chairman of President Obama's Council of Economic Advisors. He joins us.

Nice to see you.


VAN SUSTEREN: OK, explain to me, (INAUDIBLE) to the economists. President Obama has piled up more debt, $5.4 trillion in three and a half years, and that's more than twice what President Bush did in two terms. Why the difference?

GOOLSBEE: I mean, obviously the main reason the deficit exploded is that we went into the worst downturn in 75 years. So before there ever even is an Obama administration, in January, of 2009, the Congressional Budget Office forecasts the deficit is going to be $1.3 trillion. That's based just on how economic conditions are operating.

So it's quite important that we separate what the true fiscal challenge facing the country that we've known about for 40 years and is rooted in the aging of the population and the rise of health care costs and the choices we made about tax policy, and separate that from the part that comes from the business cycle, and I would point out the decisions we made at the end of 2010 in a bipartisan basis.

The last bipartisan thing we did was everyone agreed to extend the tax cuts and then discovered that the deficit was larger than what's forecast after they passed the tax cuts.

VAN SUSTEREN: All right, well, I tried to just go through some economic indicators to find out really how the -- how the country has fared under President Obama. Especially with this latest discussion about whether or not you're better off now than you were four years ago.

Unemployment is 8.3 percent. Of course that's much higher than projected by one of your colleagues very early on which I think everyone agreed was a huge misstep. Continued weakness in manufacturing acivity. It's the lowest since July 2009. That just came out Friday.

Interest rates short and long term at historic lows yet the economy is in a rut even though money is -- money would in theory be cheap to borrow. We have of course the $16 trillion debt. The economy has slowed. The growth was 4.1 percent the last quarter of last year, 2011, first quarter is 2.0, that's down and then declined again in the second quarter, 1.7.

We have 46 million on food stamps which is a rise, business uncertainty. Chairman Bernanke describes the economy just last week as far from satisfactory. And the president grades himself as incomplete.

None of those are particularly appealing and sort of inspiring indicators. Do you have something to make me feel more inspired?.

GOOLSBEE: Well, I would say it seems like you rather selectively chose some of those --

VAN SUSTEREN: OK, so give me -- give me some. I mean I'm open. I'm open.

GOOLSBEE: I would agree with what Chairman Bernanke said. We're far from satisfactory. And we've got a long way to go. But anybody who would rather be in this situation in January, 2009, versus where we are now, was asleep during January, 2009. That was one of the most harrowing scary months in the economic history of this country.

We lost 800,000 jobs in a single month. We had just gone through the worst financial crisis in almost a century. Net worths had fallen 40, 50 percent. My colleagues are calling me up -- people in the economic profession saying this is exactly how the great depression began. And what you better figure out is how you're going to get out of the depression that is about to start.

So we absolutely are better off than that situation. That doesn't mean that we're in a good spot right now. We're obviously trying to work our way out of it. The growth rates that we have had have been modest. And I would highlight --

VAN SUSTEREN: Modest is -- I mean, and lousy --

GOOLSBEE: Two percent --

VAN SUSTEREN: Lousy might be a fair way to describe it. I mean you say modest. But I might say lousy.

GOOLSBEE: They're the fastest in the advanced world. Let's start with that. What I was going say --


GOOLSBEE: As much as we have struggled, if you look at Germany, the UK, Japan, throughout Europe, throughout the advanced world, we're getting no support from any other part of the world. So are the growth of our exports is just through the sweat of our brow. There is no obvious massive growth engine that's driving to help us.

And I would say the second thing is remember in 2004, when George Bush runs for reelection. They say, quite rightly, he came in a recession that he did not create. That was a bubble.

VAN SUSTEREN: He got a surplus. He got a surplus. But --

GOOLSBEE: What I'm saying ,to George Bush's credit he said we didn't create this recession and we have created a million jobs in the last year, that's what he ran on in 2004.

VAN SUSTEREN: And I've got --

GOOLSBEE: We've got more than four million created.

VAN SUSTEREN: And I've got to a hard break and I hate to do it to you. Austin, you have to come back. Thank you very much.

GOOLSBEE: Any time, Greta.