President Obama Gets His Way on the Massive Stimulus Bill

This is a rush transcript from "The Beltway Boys", February 14, 2009, that has been edited for clarity.

MORT KONDRACKE, FOX CO-HOST: Coming up on "The Beltway Boys," President Obama gets his way on the massive stimulus bill but it could come at a cost. We'll look at the big winners and losers.

FRED BARNES, FOX CO-HOST: Treasury Secretary Tim Geithner bombs with his rollout of a new bank bailout plan.

KONDRACKE: More Cabinet drama for team Obama as yet another nominee bows out.

BARNES: And hard-liners are poised for a comeback in Israel. We'll tell you how it complicates President Obama's efforts to reach out to Iran.

KONDRACKE: All that coming up on the "The Beltway Boys" right now!

BARNES: I'm Fred Barnes.

KONDRACKE: And I'm Mort Kondracke. We're "The Beltway Boys."

BARNES: Mort, hot story number one is jump start. Remember jump start? That's what Barack Obama said he'd do to the economy, jump start it. I think it's clear this $787 billion stimulus package that he'll sign at the White House next week is not going to exactly jump start the economy. It looks like it won't have much effect on 2009. That's the year we're in. Because when we have the recession, it won't have much effect this year and will really swing into action in 2010. At that moment, that year, is when the economy may already be recovering. This is what frequently happens in stimuli of economies.

Now, it is not just economists or free-market oriented who have become very dubious about the effects of this stimulus bill. Don't think it can do much for the economy. It will do a lot for building up debt. But many, many, many mainstream economists have come to the same conclusion, even ones who are in favor of a big stimulus package but not this one. They are dubious and so am I.

KONDRACKE: Well, this is a political victory for Barack Obama. He came in and said we have to do something big and we have to do something fast. He hasn't been in office a month and he's going to sign his bill.

You know, but it also makes him responsible for the economy. He says that it will create $3.5 million jobs. The consensus of economists is that it's two, two and a half million.

I think the test will be, does this prevent the unemployment rate from getting up to 11 percent? If it got to 11 percent, that would be over the all time post-World War II record. That was 10.8 in 1982. I think that's the test.

BARNES: You set the bar fairly low on that one, Mort. Most only get to about 9 percent.

KONDRACKE: This is the worst recession since the Great Depression.

BARNES: Not yet. 81-82 was worse.

Anyway, Mort, let's take a look at those who we think are the big winners and losers in this big stimulus fight, starting with a winner, President Obama. He got his stimulus bill and basically in the scope and form he wanted.

Here he is Friday.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We had a spirited debate about this plan over the last few weeks. Not everybody has shared the same view of how we should move forward. At times, our discussions have been contentious. But that's a good thing from my perspective. Diverse viewpoints are the life blood of our Democracy and debating is how we learn from each other's perspective and define our approaches.

(END VIDEO CLIP)

BARNES: Wasn't much of a debate, Mort, because he was ramming it through so fast. Which would have fine if it was just a stimulus package, but so much other stuff in it that will affect welfare reform passed in the '90s and health care and so many other things. As far as that goes, it wasn't much of a debate. There could have been one if you had the usual process of going through committees.

KONDRACKE: Obama always said this is part stimulus and part down payment on these future developments like health, IT and energy and renewals and stuff like that. But the biggest disappointment for me was $70 billion to fix the alternative minimum tax. It has zero, zero stimulative effect. Not any at all. And you can say $200 million for Filipino veterans of World War II is a waste of money, but at least it's not $70 billion.

BARNES: You took the words right out of my mouth. Loser bipartisanship. So much as changing the tone in Washington. Hasn't changed much, has it?

KONDRACKE: At least the Republicans and Democrats and the Obama administration at least are speaking nicely to one another. And I think Obama views this is as a long-term proposition to disagree agreeably instead of shouting at one another.

Now there was a big loss that Judd Gregg was going to be another Republican member of his Cabinet, Congress secretary, dropped out. We're going to talk about this later. But you're right. At the moment, bipartisanship is not as bad.

BARNES: Obama, you remember in his press conference a few days ago, I think he defined his definition of bipartisanship. It simply is this, I'll treat you civilly — to Republicans — I'll treat you civilly, I'll be nice to you. I'll even occasionally sit down with you. And then you're required to capitulate totally to whatever I want. Compromise is a different part of his idea of bipartisanship. and that's not the way it sounded during the campaign. That's not what you expected.

KONDRACKE: A work in progress.

BARNES: Winners, the Senate Minority Leader Mitch McConnell and House Minority Leader John Boehner. This fight with the White House has unified them.

Here's McConnell Thursday.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL, (R), SENATE MINORITY LEADER: Everyone wants to help Americans get back on their feet, but we need to do it smartly. In my view and in the view of my Republican colleagues, this is not a smart approach. Taxpayers of today and tomorrow will be left to clean up the mess.

(END VIDEO CLIP)

BARNES: Who would have thought there was someone out there who could unify Republicans after these two bad elections they've had and they're all blaming each other and so on. Yet, that person's out there. It's Barack Obama, who has unified them mainly with his stimulus package. Republicans now are more energetic, more agreeable with each other. And that's a big achievement in a short period of time.

And in the latest generic ballot test, that is an unnamed Republican against an unnamed Democrat, look where Republicans come out. They come out 1 point behind the Democrats. The Democrats have only a 1-point lead. Last November, it was a 6-point lead.

Look, the election's 20 months away but this is a lot better off than I thought Republicans would be at this point.

KONDRACKE: Yes, look, Republicans have made a big wager that the Obama economic plan is going to fail. And, you know, I hope for the sake of the country that they're wrong. The country certainly is rooting at the moment for Obama.

The recent Gallup poll found a whopping 67 percent approve of the way opening is handle efforts to pass the stimulus bill. Forty-eight percent approve of the way the Democrats are doing it, but 58 of those polls disapprove of the way the Republicans are acting. Thirty-one percent that approve of Republicans, it is that bedrock conservative base and nothing more.

BARNES: Mort, you picked out an outlier of polls. Forty-nine percent in another poll — think 49 percent of Americans think they have a better idea for improving the economy than Barack Obama does, much less you.

Our next winners in the stimulus fight, Republican moderates, Senators Olympia Snowe and Susan Collins of Maine and Republican Senator Arlen Specter of Pennsylvania.

KONDRACKE: The joke going around Capitol Hill is that the two ladies from Maine is so powerful because they're going to be the swing votes in practically everything in the Senate. That if they wanted to transfer the Atlanta fleet from Norfolk, Virginia, to Portland, Maine, they could do it. Fortunately, they don't want to do that.

BARNES: Good. The fact that Specter is voting with the Democrats on this, no surprise at all. People knew weeks ahead of time that they'd always get some Republican votes and these were the likely ones.

Why do they do it? Olympia Snowe complains about the deficit, that tax cuts are going to drive up the deficit. But she always votes for the spending, which also drives up the deficit. Specter always goes with what organized labor wants. With labor's backing, he gets reelected. He's up next year. Susan Collins, you don't want to get between her and a TV camera, believe me.

KONDRACKE: Susan Collins is a great person.

BARNES: Oh, please. And the losers. Senate Majority leader Harry Reid and House Speaker Nancy Pelosi. I know this is a little counterintuitive but they jammed the bill through both houses, but there were complaints aplenty about the 2 "P"s: pork and process.

Here's Pelosi Thursday congratulating herself. Watch.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, (D), SPEAKER OF THE HOUSE: There was a great deal of excitement over the country about this. I don't know how much you travel, but you go to the store or the dry cleaners or go to the hairdresser, as I have from time to time done, you will find that people who have nothing to do with what we do, are very excited and optimistic.

(END VIDEO CLIP)

KONDRACKE: I don't know her beauty parlor is exactly a representative sample. But my favorite single item in this entire package is the MAGLIV (ph) train, costing something like $8 billion, that's going to run from Las Vegas, where Harry Reid presides, to Disneyland in California. No earmarks in this bill.

BARNES: You're on to something, Mort.

Coming up, more on President Obama's cabinet drama. But first, is Treasury Secretary Tim Geithner really the man to lead the country out of the fiscal crisis? We'll explain next.

(COMMERCIAL BREAK)

(FOX NEWS BREAK)

(BEGIN VIDEO CLIP)

TIMOTHY GEITHNER, SECRETARY OF THE TREASURY: We are going to have to adapt our program as conditions change. We'll have to try things we never tried before. We will make mistakes.

(END VIDEO CLIP)

KONDRACKE: Welcome back to the "The Beltway Boys."

Top story number two, firing blanks. That was a mistake. This was Tim Geithner's big moment when he was going to announce his plan to bail out the banks which are — or rescue the banks, which have still deathly ill, and help homeowners keep their houses. His announcement bombed and the market, you know, cratered by almost 400 points.

The economists of London said about this — his performance, his to-do list was dispiritingly inadequate on some of the thorniest problems, such as nationalizing insolvent banks and dealing with toxic assets and failing mortgages.

Then he went up to Capitol Hill where he got blasted by Lindsay Graham. Watch this exchange.

(BEGIN VIDEO CLIP)

SEN. LINDSEY GRAHAM, (R), SOUTH CAROLINA: On a scale of one to ten — one, you won't need any money, ten, you're likely to need more money to fix housing.

TIM GEITHNER, TREASURY SECRETARY: For housing?

GRAHAM: Yes.

GEITHNER: I can't tell you that at this point, but if we think there's a good case to do, it we're going to come tell you how we're going to do it.

GRAHAM: OK, good. So you have no clue?

GEITHNER: No, that's not fair, Senator.

(END VIDEO CLIP)

KONDRACKE: He went on to say that he didn't want to make mistakes like Hank Paulson did with the first run of the TARP.

Barney Frank, who was at a breakfast, the chairman of the House Financial Services, said that he will have a plan for dealing with the housing crisis but Geithner still doesn't know how to value these toxic assets killing the banks.

BARNES: He better have a clue because that was the big problem when he made this big announcement. Why come up with a big announcement, get everybody in financial markets all over the world will be watching, and come out with, as the economists say, a concept and not a plan. You have no details. You can't fill in the blanks. I mean, I can't say, in the early administration, particularly at a time of dire economics, someone doing this poorly. Remember, this was the guy that was supposed to be indispensable. Forget about his tax cheating, he's indispensable. He has to save the economy. Baloney!

Here's what former Reagan economic advisor and syndicated columnist, Larry Kudlow wrote this week, "Geithner would have been better off not giving a speech until he could put real meat on the bones. What he pulled Tuesday was a classic rookie move that will further erode the public's trust in his capabilities. Following the controversy over his late payment of taxes, this bank plan blunder could be another nail in his coffin. Apparently, Tim Geithner is not ready for prime time."

He tried rather than give confidence and certainly to Wall Street and financial markets about what the administration was going to do, he just sowed further confusion.

KONDRACKE: I agree.

Coming up, we'll read the tea leaves from this week's Israeli elections. And another nominee bites the dust. President Obama runs into another roadblock in building his cabinet.

(COMMERCIAL BREAK)

BARNES: Welcome back to the "The Beltway Boys." And it's "Up and Down" time.

Down Judd Gregg, the Republican Senator abruptly withdrew his name for consideration as President Obama's commerce secretary, after realizing — gasp — his views were incompatible with the president's.

Here's Gregg on Thursday.

(BEGIN VIDEO CLIP)

SEN. JUDD GREGG, (R), NEW HAMPSHIRE: The bottom line is this was simply a bridge to far for me. The president asked me to do it, I said yes. That was my mistake, not his. But it was my mistake obviously to say yes because it wasn't my personality. After 30 years of being myself, it would have been hard to assume another role.

(END VIDEO CLIP)

KONDRACKE: Gregg is a serious person and Obama was lucky to persuade him to be commerce secretary but what was Gregg ever thinking as a conservative Republican, how was going to fit in to a liberal administration on economic policy. It was never meant to be.

BARNES: I never understood why he was taking that job. We talked about it at the time why in the world is here taking the job. Particularly, since he's pretty conservative, but particularly on issues of fiscal matters. Very conservative. So even at the time when he agreed to take the job, he knew there was going to be this spending explosion with Obama's fiscal stimulus bill.

But he did do one thing that I thought was very gracious. And he took the blame, he said it was my mistake, I shouldn't have taken this job. And what was the White House response, Mort? They trashed him. So much for the new tone in Washington, huh?

KONDRACKE: It's a work in progress, as I said.

Down, bank CEO's. They got a smack down from lawmakers this week who demanded answers on where all that bailout money went.

Some accused the bankers of lining their own pockets with big bonuses and not lending to consumers. Watch.

(BEGIN VIDEO CLIP)

REP. MICHAEL CAPUANO, (D), MASSACHUSSETS: Basically, you come to us today on your bicycles after buying Girl Scout cookies and helping out Mother Theresa, telling us, we're sorry, we didn't mean it, we won't do it again, trust us. The problem I have is that, honestly, none of us — America doesn't trust you anymore.

(END VIDEO CLIP)

KONDRACKE: Well, the worst is Merrill Lynch, which gave — handed out $3.6 billion in bonuses after losing $15 billion. And just before they closed the deal to be bought by Bank of America, which was a recipient of something like $45 billion in TARP money. The question is, did Bank of America know that Merrill Lynch was going to hand out these bonuses? That is being investigated by Andrew Cuomo the attorney general of New York.

BARNES: Bank of America wanted to get out of the deal with Merrill Lynch. And the Obama administration would not let them. So they're stuck with Merrill Lynch.

I have no sympathy for these Wall Street bankers and bankers from other places as well. I mean, they have showed, demonstrated great concern for their shareholders, not much for their depositors and the rest of the country. But when you listen to some of the questions and the grandstanding, particularly by that guy from Massachusetts we just saw, of the members of the panel, the House members, then you worry for the country that these people may have some impact on our lives and our economy. Geez! I trust the bankers more than I trust them, which — and I don't trust the bankers at all.

All right. Up, Benjamin Netanyahu, the former prime minister, narrowly lost Tuesday's parliamentary vote to Foreign Minister Tzipi Livni. But the election boosted several right-leaning partners that Netanyahu can tap as partners in a ruling coalition.

He's really in the driver's seat, BB Netanyahu is, because Livni's a lot farther ideologically from these right-wing parties than BB is. He's attracted them before when he was prime minister. And he's going to be the next prime minister. But maybe he will, Livni will join, then you have the grand coalition.

KONDRACKE: Grand coalition.

BARNES: Or a government of national immunity or something like that.

Either way there are going to be problems for Netanyahu and the new Obama administration. Netanyahu knows there's no chance of a settlement with the Palestinians now. The Palestinians and the rest of the Arab world still won't accept Israel's right to exist as a Jewish state. And secondly he ran on what issue? Iran as the chief malefactor in the Middle East. and Obama's trying to make friends with the Iranians if he can.

KONDRACKE: My guess is that Obama will continue trying to talk to the Iranians. The Iranians will not respond. That will develop into nothing.

Meanwhile, if George Mitchell is smart, he will go slow on the Palestinian front and try to work out a deal between Netanyahu and Syria. There may be business to be done there.

Down, Democratic Congressman Jack Murtha. There's real concern among top Democrats that the Feds could be closing in on him. Three defense-related firms, all with ties to Murtha, have been raided by the FBI in recent months. Now Murtha says that he has not been contacted by the FBI. But the fact is that these three firms are the beneficiaries, or their clients are the beneficiaries. of millions of dollars in Murtha earmarks. and Murtha's the beneficiary of tens or hundreds of thousands of dollars in campaign contributions from them. I don't know how it fits together but it looks dangerous for Murtha.

BARNES: I'm not holding my breath. We've heard these things about Murtha before. Remember last fall, some Republican candidate was going to knock off Murtha because he had such a bad reputation. He has a bad reputation everywhere except in his own district.

Look, Republicans have no chance of taking that district until Murtha's gone one way or another. And I think it will be when he leaves the House. If you're holding your breath for an indictment, don't.

KONDRACKE: OK, I won't.

BARNES: Don't go anywhere. "The Buzz" is coming up next.

(COMMERCIAL BREAK)

BARNES: Mort, what's "The Buzz"?

KONDRACKE: Our friend, Mark Kirk, the congressman from Illinois, says what Obama and Tim Geithner ought look to the depression era Homeowner's Loan Corporation as the model for both how to rescue homeowners who are under water with their mortgages, and also to value the mortgages when it comes to trying to bail out the banks. There was a method that was in between the market value, which is zero, for these assets and, you know, whatever the banks might want for them. It's the salvage value of the Houses and the land which is worth something, worth more than zero that the bonds are currently worth.

BARNES: Mort, that's a pretty good idea.

KONDRACKE: Yes.

BARNES: You know, Mark Kirk, is he going to run in Illinois as a Republican.

KONDRACKE: It partly depends on who the Democrats nominate.

BARNES: Look, I've talked to a lot of Illinois Republicans. They think no matter who runs on the Democrat side, he would be the best Republican candidate.

KONDRACKE: I think he would.

BARNES: All right, Abraham Lincoln, it was his 200th anniversary on February 12th.

KONDRACKE: I'm glad you pointed this out.

BARNES: Well, I'm a great Lincoln fan.

KONDRACKE: Me too.

BARNES: Not only was he America's greatest president, I think he was America's greatest political leader. He was so incredibly shrewd.

Well, Obama has made — he was from Illinois and Lincoln was from Illinois and that's fine.

But in some ways, you know what was more like Lincoln in his presidency? George W. Bush. I talked about this with Bush — I had a lunch with him shortly before he left. And Bush always says, whenever he talks about Lincoln, he says, look, I'm not comparing myself to Lincoln, he was great, I'm not doing that. But he said, at the worst moment in Lincoln's presidency, which I guess was — there were several, but any case, who stuck, who still supported him, the military and the huge Christian evangelical community. And they stuck with Lincoln and they stuck with Bush.

Now, there's one other thing. Bush didn't fire his general soon enough and neither did Lincoln.

KONDRACKE: All right. That's all for "The Beltway Boys" for this week. Join us next week when the boys will be back in town!

Watch "The Beltway Boys" Saturday at 6 p.m. ET and Sunday at 1 and 6 a.m. ET

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