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THE SITUATION ROOM
Madoff Pleads Guilty; Obama Takes Questions From Business Leaders
Aired March 12, 2009 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WOLF BLITZER, HOST: Now behind bars, Bernard Madoff admits he's guilty and ashamed for stealing billions from investors, but his victims want more.
Will U.S. forces be dragged into Mexico's deadly drug war? President Obama considers sending troops to the border.
And Michelle Obama gives military families a shoulder to lean on. We're standing by to hear from the first lady live this hour. She makes her first solo trip outside Washington. I'm Wolf Blitzer. You're in THE SITUATION ROOM.
Two major stories unfolding right now. A symbol of Wall Street greed and corruption brought to justice and President Obama's fight to bring the economy back from ruin. Mr. Obama's about to take questions from business leaders. You're going to see it live right here in THE SITUATION ROOM.
But first, Bernard Madoff says he knew this day would come when he'd have to pay for his crimes. Our senior correspondent Alan Chernoff is over at the courthouse in New York City. Alan was there when he got word that he pleaded guilty to all 11 counts.
ALAN CHERNOFF, CNN CORRESPONDENT: That's right Wolf. The level of tension inside of the courtroom matched the magnitude of this crime. Bernard Madoff grimaced as he walked into the courtroom. That was pretty much the emotion that he showed all morning. I'm grateful, Madoff said, to publicly speak about my crimes for which I am so sorry and ashamed. That's an apology that in the courtroom, fell on deaf ears.
(BEGIN VIDEO CLIP)
BURT ROSS, SWINDLED BY MADOFF: Well, that wasn't an apology. That was a lawyer-written statement delivered in a monotone, without any feeling whatsoever. I think the only feeling he felt was when he explained that some of his businesses were legitimate and he doesn't get it. It's all about money. The only thing he's sorry about in my opinion is that he got caught.
(END VIDEO CLIP)
CHERNOFF: Madoff said what he did was actually deposit funds from clients into the Chase Manhattan bank when they thought he was investing in the stock market for them and when they wanted money, he would just take it out of that bank account, very simple, a Ponzi scheme that grew and grew and grew. Madoff said when it all started, he thought it would end quickly and he would be extricate himself, but he said he found that impossible. The judge went through the 11 criminal counts and each time, 11 times, Madoff proclaimed himself guilty. Shortly afterwards, the judge said he would be sentenced on June 16th. He sent him off to a correctional center. Back to you Wolf.
BLITZER: Alan, he spent last night in his luxury apartment in Manhattan, multi-million dollar apartment, said good-bye this morning. Is he now actually at that Manhattan correctional facility?
CHERNOFF: Correct. It is the Manhattan correctional facility and it's only a block away from where we're standing. So Mr. Madoff was simply led underground to that correctional center and that's where he is right now, in a very small cell. Quite a change from his luxury upper east side penthouse apartment where he was out on bail for three months.
BLITZER: And the assumption now is that, he's in jail. He'll be sentenced in June and go to another facility once he's sentenced and that's it. He's going to be spending the rest of his life behind bars. Is that right?
CHERNOFF: There's no doubt about that Wolf absolutely.
BLITZER: All right, so his last day of freedom was actually yesterday. Alan, thanks very much. We're going to be speaking to some of the victims of Bernard Madoff's scheme. That's coming up later right here in THE SITUATION ROOM, a lot more on this story.
But another big story we're following involves the president of the United States. President Obama is leaning harder than ever on state officials to make sure the economic stimulus money isn't wasted or abused. Let's go to our White House correspondent Dan Lothian. The administration turning up the heat on some of these state officials. What's going on Dan?
DAN LOTHIAN, CNN CORRESPONDENT: That's right, really turning up the heat. We saw the mayors first coming here to the White House last month, then followed shortly thereafter by the governors. They were put on notice. Now, it's the money people. These are the ones, the budget directors, the people who'll be watching over how the stimulus money is spent. And the White House is really laying it out there in plain English, saying watch how you spend this money because if you mess up, the Federal government may not be able to give you any additional money for a long time.
(BEGIN VIDEO TAPE)
LOTHIAN (voice-over): Top officials from every state but one getting another stern warning before billions in economic stimulus money start flowing their way.
VICE PRESIDENT JOE BIDEN: I want to be blunt with you off script here. The fact of the matter is, all that is legal is not acceptable, little hint, no swimming pools in this money. LOTHIAN: Everybody's going to be looking over your shoulders.
WAYNE TURNAGE, VIRGINIA GOV'S CHIEF OF STAFF: We're ready.
LOTHIAN: Wayne Turnage will help oversee how Virginia spends the Federal money it gets. He welcomes the scrutiny.
TURNAGE: We understand that just because you can do something, it may not be the appropriate thing to do.
LOTHIAN: As a safeguard, all the money won't come at once. For example, the Department of Energy is giving states $8 billion for weatherization and energy projects, but until states submit details on how they will spend the money, only $800 million will be handed out.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: You've got to go above and beyond what I think is the typical ways of doing business.
LOTHIAN: Virginia has already received money for some road projects and officials have big plans to fix bridges, sewer systems and rail infrastructure. They set up a website to harness ideas from the public and help them track every dime.
UNIDENTIFIED MALE: We have to be very transparent.
LOTHIAN: But some on Capitol Hill don't think all this is enough. Senate Minority Leader Mitch McConnell wrote a letter to the government's top investigative office demanding regular audits, saying the American taxpayer will benefit from full transparency at each step of the process as these funds are disbursed.
(END VIDEO TAPE)
BLITZER: Dan Lothian reporting. The president now beginning his remarks to business leaders over at the White House. He's going to be answering their questions as well.
OBAMA: ... that centers on one key question. Does the greatest economic crisis in our lifetime warrant extraordinary action to deal with the array of challenges we face or should we limit our efforts and try to deal with them incrementally or one at a time? And let me say that it was not my preference believe it or not to launch my administration by passing the largest economic recovery plan in the nation's history or to face crisis in the financial market and the automobile industry. It was not ideal to take office in the midst of the worst job and growth numbers in decades, particularly since we're still in the midst of two wars, but that's the duty I signed on for. And although my administration did not create these problems, it's not only my responsibility, but my extraordinary privilege to help solve them.
It's my job to address every challenge that may threaten the strength and vitality of our families, our businesses and our entire nation now and in the future. We must move quickly and aggressively on the most immediate threats to our economy and financial stability, jobs, housing and credit. There's no debate about that. That's why we've already passed a recovery plan that will save and create 3.5 million jobs over the next two years, more than 90 percent of which will be located in the private sector. A plan that will also give 95 percent of working families a tax cut that begins by April 1st. That's why we've launched the housing plan that will help responsible families lower their monthly payments, a plan that's already helping responsible homeowners save money by refinancing their loans and that's why we forcefully attacked the credit lockdown that the housing crisis helped create.
As all of you know, credit is the life blood of a healthy economy. The inability of even credit worthy businesses and consumers to get loans today is a major roadblock to our recovery. To help get credit flowing again, we've created an unprecedented lending fund in partnership with the Federal Reserve that will help support up to a trillion dollars in auto loans, college loans and loans for the consumer, the consumers and entrepreneurs who keep this economy running. We'll soon be announcing more efforts to provide even more lending to small businesses which are being devastated by this credit crisis.
These are all important steps, but the only way we can truly unlock credit and heal our financial system for good is to address the state of our banking system. I know that this crisis is at the top of your list of immediate concerns and I promise you it is at the top of mine as well. We all know how we got here. A wave of complex and risky transactions around mortgages and other loans produced huge profits for financial institutions and those who run them until the housing bubble burst. And now some of the nation's largest banks are holding so-called toxic assets, problematic debt that are dragging down the balance sheets of these institutions with no real market in which to sell them and this has caused a slow down in lending. And since finance today is global, the virus has spread worldwide.
Now it's important to note there are thousands of banks large and small that have made sound decisions and are on solid footing. And all Americans need to know that their deposits are secure, but the weakened condition of some of our largest banks has implications for the entire system and those weaknesses must be addressed. Critical to that solution is an honest and forthright assessment of the true status of bank balance sheets, something that we've not yet had and that's why the Treasury has asked bank regulators to conduct intensive examinations or stress tests of each bank.
When that process is complete next month, we will act decisively to ensure that our major banks have enough money on hand to lend to people even in more difficult times and if we learn that such a bank has more serious problems, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets and ensure the continuity of a strong viable institution that can serve our people and our economy. I intend to hold these banks fully accountable for any assistance they'll receive and this time, they'll have to clearly demonstrate how taxpayer dollars result in more lending for the American taxpayer.
I also intend to enact tough common sense regulatory reforms equal to the challenges of the 21st century financial system so that a crisis like this never happens again. And when I meet with the leaders of the other G-20 nations next month, I'll ask them to join us in these actions because in an age when financial transactions often cross borders, global coordination is essential to safeguard against future crises. But the truth is that these problems in the financial market, as acute and urgent as they are, are only part of what threatens our economy and we must not use the need to confront them as an excuse to keep ignoring the long-term threats to our prosperity, the cost of our health care and our oil addiction, our education deficit and our fiscal deficit.
I'm not choosing to address these additional challenges just because I feel like it or because I'm a glutton for punishment. I'm doing so because they're fundamental to our economic growth and ensuring that we don't have more crises like this in the future. You see, we cannot go back to endless cycles of bubble and bust. We can't continue to base our economy on reckless speculation and spending beyond our means, on bad credit and inflated home prices and overleveraged banks. This crisis teaches us that such activity is not the creation of lasting wealth, it's the illusion of prosperity and it hurts us all in the end.
Instead, we must build this recovery on a foundation that lasts, on a 21st century infrastructure and a green economy with lower health care costs that create millions of new jobs and new industries, on schools that prepare our children to compete and thrive, on businesses that are free to invest in the next big idea or breakthrough discovery. We cannot wait to build this foundation. Putting off these investments for another four years or eight years or 12 years or 20 years, would be to continue the same irresponsibility that led us to this point. It would be exactly what Washington has done for decades and it will make our recovery more fragile and our future less secure and that's a future I don't accept, not for my children and not for yours.
I did not come here to pass our problems on to the next president or the next generation. I'm here to solve them. I'm here to start building an economy and a prosperity that lasts. Now, would I prefer to tackle these challenges without having inherited a trillion dollar deficit or a financial crisis? Absolutely. But that's a choice that we don't have. I don't like the idea of spending more government money, nor am I interested in expanding government's role. I've always been a strong believer in the power of the free market. It has been and will remain the very engine of America's progress, the source of a prosperity that has gone unmatched in human history.
I believe that jobs are best created not by government but by businesses and entrepreneurs like you who are willing to take risks on a good idea. I believe that our role as lawmakers is not to disparage wealth, but to expand its reach, not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still makes this nation the envy of the world.
But I also know this. Throughout our history, there have been times when the market's fallen out of balance. There have been moments of economic transformation and upheaval when prosperity and even basic financial security have escaped far too many of our citizens. And at these moments, government has stepped in not to supplant private enterprise, but to catalyze it, to create the conditions for thousands of entrepreneurs and new businesses to adapt and ultimately to thrive.
That's why we laid down railroads and highways to spur commerce and industry, to stitch this nation together. That's why even in the midst of civil war, Lincoln launched a transcontinental railroad and land grant colleges and the National Academy of Sciences. That's why we initiated universal public high schools and passed a GI bill, to nurture the skills and talents of all our workers. That's why Eisenhower built an interstate highway system and Kennedy pointed us to the moon, knowing that the exploration would lead to unimagined innovations here on earth.
That's what we've done in the past and that's why I've chosen to address education, health care, energy and this budget because we can't wait to make the investments today that will lead to tomorrow's prosperity. Members of the Business Roundtable, you know how important this is when it comes to each one of these challenges. On education, I know that you just heard from Arne Duncan. You've all long understood that the success of your business ultimately depends on its ability to hire workers who have the skills and knowledge to compete with other workers and other companies all over the world.
You also know that America is increasingly falling behind in that competition. That's why it will be the goal of this administration to ensure that every child has access to a complete and competitive education from the day they are born to the day they begin their career. We've already dramatically expanded early childhood education and we will continue to improve the quality of these programs for as this organization knows, children who receive a quality early childhood education are more likely to attend college, more likely to hold a job and more likely to earn more in that job.
This budget also creates new rewards tied to teacher performance and pathways for advancement and rewards for success for those teachers and we're going to invest in innovative programs that are already helping schools meet high standards and close achievement gaps. We've urged states to lift the cap on the number of charter schools they built and I've asked every American to commit to at least one year or more of higher education or career training with the goal of having the highest proportion of college graduates in the world by the year 2020 and to meet that goal, we're investing $2.5 million to identify and support initiatives across the country that achieve results in helping students graduate and we'll also make sure that a higher education is affordable for every American who wants to go.
This budget also recognizes a reality that you understand as business leaders. In this economy, adults of all ages need opportunities to earn new degrees and skills. So we will work with our universities and community colleges to prepare workers for good jobs in high growth industries and to improve access to job training, not only for young people who are just starting their careers, but also for older workers who need new skills to change careers. That's how we will create a workforce that will help our businesses compete and win in the 21st century and that's how we'll create a workforce that is adaptable to a dynamic global capitalist system.
Even as we invest in our workers, we'll also need to create the jobs for them to fill. That's why the second major investment that our budget makes is in the jobs and industries of the future. The recovery plan we passed will ultimately leverage at least $175 billion in private sector investment, investment in areas like clean energy, small business development and school construction. This budget builds on that foundation by making historic investments in science and technology and infrastructure, by making permanent the research experimentation credit., by eliminating capital gains taxes for investments in small businesses and start ups and by providing the resources necessary to finally spark a clean energy revolution.
We all know that the country that harnesses the power of renewable energy will lead the 21st century and yet it's China that's launched the largest effort in history to make their economy energy efficient. We invented solar technology, but we've have fallen behind countries like Germany and Japan in producing it. New plug in hybrids will roll out of our assembly lines, but they are running on battery cells made in Korea.
I do not accept a future where the jobs and industries of tomorrow take root beyond our borders and I know you don't either. It's time for America to lead and to do this, you and I both know that we need ultimately to make clean, renewable energy the profitable kind of energy. We know that the best way to do that is through market-based caps on carbon pollution that drives the production of more renewable energy in America.
I understand that this will be a difficult transition for many businesses to make and that's why this budget does not account for such a cap until 2012, a time when this economy should be on the road to recovery. And to support this transition, we'll invest $15 billion a year to develop technologies like wind power and solar power, advanced biofuels, clean coal and more fuel efficient cars and trucks built right here in America.
The last major challenge we address in this budget is the threat not only of the well being of our families and the prosperity of our businesses, but to the very foundation of our economy and that's the exploding cost of health care in America and I know you had a session with Peter Orszag about this. For those who believe that this issue is somehow unrelated to our economic crisis, consider the fact that up to 1.5 million Americans could lose their homes this year just because of medical crises and as everybody in this room is painfully aware, the same soaring costs that are straining our family's budgets are also sinking some of our best businesses or putting enormous strain on your bottom line.
Today, too many small businesses can't even think about insuring their employees and major American corporations like yours are struggling to compete with foreign counterparts. Companies of all sizes are being forced to shift jobs overseas or shut their doors for good. Medicare costs are consuming our Federal budget. Medicaid is overwhelming our state budgets. At the fiscal summit we held in the White House a few weeks ago, the one thing on which everyone agreed was that the greatest threat to America's fiscal health is not the investments we've made to rescue our economy. It's the skyrocketing cost of our health care system. You understand this.
For years, the Business Roundtable has worked tirelessly to promote investments in electronic medical records with strict privacy standards that will help save money and lives, investments that we have now made in the recovery plan. You participated in last week's White House forum on health reform, proving that this time we find business and labor, medical professionals and patient advocates all on the side, same side of the issue, urging meaningful reform and you were one of the many organizations that urged us to include health care in this budget, which is why we've made a historic commitment to reform based on the principle that we must bring down crushing costs and provide quality affordable health care to every American.
It's a commitment that's paid for in part by efficiencies in the system that are long overdue and we will need your help to sure that it is included in the final budget. Let me just give you one example, Medicare. For years, we've been paying Medicare advantage plans 14 percent more than it would cost for the traditional Medicare plan. In this budget, we had a simple idea. Instead of the government setting prices for our seniors, why not have private plans bid for Medicare's business? This competitive bidding is good for businesses. It's good for our seniors and it's good for taxpayers because it saves us $177 billion over 10 years.
We've undertaken an unprecedented effort to find savings just like this in every corner of this budget because with the deficit we inherited, the cost of the recession we face and the long-term challenges we have to meet, it's never been more important to ensure that as the economy recovers, we do what it takes to cut this deficit in half by the end of my first term in office.
Now I that know some have questioned this commitment and I want you to know that I understand the skepticism because we've heard promises like this before and it's true that this crisis has compelled us to add to our deficit in the short term. But I ask all of you to look at this budget. Already, we've identified $2 trillion in deficit reductions over the next decade. We've announced procurement reform that will save the government $40 billion by greatly reducing no-bid contracts.
We're going to end education programs that don't work. We will eliminate direct payments to agri businesses that don't need them. We'll root out even more waste, fraud and abuse in our Medicare program. So all together, this budget cuts spending by $1 trillion over the next decade, $1 trillion from where it would be if we just kept on going on our current path and that will reduce discretionary spending for domestic programs as a share of the economy by more than 10 percent over the next decade.
It will be at the lowest level in nearly half a century, lowest level in nearly half a century. Now if we wanted to, we could have painted a sunnier fiscal picture in this budget. We could have relied on some of the same gimmicks that our government has used for the last eight years, gimmicks that would hide spending on things like Iraq and Afghanistan, gimmicks like assuming that there's never a natural disaster anywhere in the country over the course of a year.
Our deficit would appear $2.7 trillion better had we used those gimmicks over the next decade, but I told my team, we're not going to do that. We're not just suffering from a deficit of dollars in this government. We're suffering from a deficit of trust and I believe that restoring that trust begins by restoring a sense of honesty and accountability to our budget.
Now while we're being honest, let's also talk about taxes always a favorite subject. I said in my address to Congress that this is the one issue that always falls victim to the same political scare tactics we've seen for decades. So let me be very clear. If this budget is passed, not one American will see their taxes raised a single dime between now and the end of 2010. So for the next two years, you're taxes aren't going up, nobody.
At that point, at the end of 2010, 97 percent of all taxpayers and 97 percent of all small business will still not see a tax increase. 97 percent. In fact, 95 percent of all working families will receive a tax cut so they can buy some of the wonderful products that you make. For the top 3 percent of all taxpayers and I'm just going to take a shot in the dark and guess that that includes some of the people in this room, the top tax rate across the board will still be lower than they were during the prosperity of the 1990s, still be lower than they were during the Clinton era. You will pay a tax rate on capital gains and dividends that is also lower than it was during most of the 1990s. And the revenue that results from these changes will reduce the deficit by $750 billion over the next 10 years.
Now there's no doubt that we've had to make some tough choices in this budget and we're likely to have to make more in the days and months ahead and you and I won't always agree on every decision or every issue, but I do believe that we know what needs to be done to build an economy that's not just revived from a crisis, but rebuilt for the future, to secure prosperity that no longer rests on a bubble, but on a firm foundation that will make this country strong and competitive in the 21st century. That kind of economy, an economy with workers who are highly skilled and highly educated, with a health care system that is efficient and affordable, with energy that is clean and renewable, with entrepreneurs who are free to invest in the next big idea. That's an economy that's built to last. That's a future that's good for business.
This is a country that will lead and prosper for generations to come and I look forward to your continued cooperation in building that country because I have absolute faith that we can get there together. Thank you very much.
I -- I asked my team for some extra time to make sure that I was able to answer as many questions as possible. Mr. Chairman of the Roundtable? Do you want to start us off?
HAROLD McGRAW III, CHAIRMAN, BUSINESS ROUNDTABLE: Thank you very much and Mr. President, we really appreciate you taking time to be with us and to give us access to so much of your team throughout the day. The business community is committed to be a part of this solution and those millions of jobs that you talked about, you know, that largely as you say, are coming from businesses and therefore, we want to partner with you in terms of one, ending this economic crisis, increasingly liquidity and getting smart regulation. We're with you and Secretary Duncan on the education agenda, workforce development, personal training, vocational training. We're for affordable and quality health care costs and access to that for everyone. We certainly want to be able to create that energy independence that you've talked about and we want to be in a position where we can have the kind of investment in our community by keeping our markets open and having access to markets. So we're committed to being able to do all that and working with you.
During the campaign, you talked often about having an open administration and you were going to push very, very hard for that. There's a misperception I think in some peoples' minds that the relationship between business and the Obama administration is like well, oil and vinegar, in that way. Well, I would like to tell you that from our standpoint, that couldn't be farther from the truth. Everybody in this room is anxious to see you succeed and wants to be a part of that. In that end, you know, we have the same common goals right now of jobs, growth, recovery, competitiveness and as such, the ask that I would have for you is that if you would allow us to set up a regular schedule such that the expertise of the chief executives here could work with whoever you designate to be a sounding board pushing back and helping to form those kinds of opinions and thank you again for coming.
OBAMA: Absolutely. That's exactly the kind of partnership that we seek. And as I said, there are actually a lot of people in this room who our team has consulted with on a regular basis and we hope to do more of that in the future. And I know that John has attended a number of the summits that we've been putting in place. I think that you will find that this is actually an administration that also wants you to succeed in the same way that you want us to succeed. As I said before, I am a strong believer in the ability of the free market to generate wealth and prosperity that's shared across the board.
I think there are times where sometimes our economy gets out of balance. This is obviously one of those times. And so government has to intervene in a crisis, but the goal should always be to right the ship and let private enterprise do its magic.
There are going to be a series of fairly complex issues around regulation and the financial markets, which we believe is necessary. I think we've got -- and I assume that many of the people here agree that we've got to update the regulatory framework that was created in the '30s for global markets, where trillions of dollars are spinning around the globe with the press of a button.
But we are also very mindful that we've got to do those regulatory reforms in a way that doesn't strangle innovation and creativity and entrepreneurship, but deals with the systemic risks that, obviously, we were unprepared to deal with when this latest crisis occurred.
With respect to tax policy, again, we want to consult with you, because our belief is that we've got to have a stable system that closes the structural deficit that right now is built into -- into the federal government. And it's an unsustainable deficit. If we keep on going down this path, at some point folks who've been financing our ways are going to say, "Enough. We don't want to buy any more T- bills," and then we've got some problems.
So we're going to need to work with you on that. We need to do it in a way that encourages work, encourages investment, encourages savings, and makes sure that we're financing what we need out of government, but no more than what we need.
So on a whole host of these issues, we are going to be actively soliciting your advice and your input. And our expectation is that we can use this moment to create a stronger free-market system, one that's more stable, one that's more profitable over the long term.
But I think, as everybody here recognizes, because you're all thinking about it with respect to your own businesses, this is going to take some time. I mean, we were engaging in an unsustainable model for a very long time. And, you know, the -- the bill is now due for a lot of bad habits and bad practices that were built up over the course of many years. It is complicated, and it is international.
And so our focus right now is to stabilize the financial system, get credit flowing again, to project a budget that allows in future years for us to start tackling these very big problems, but we've got to get started now if we're actually going to get there on health care, on energy and education, and that's what we're trying to accomplish.
Let's see. Sam?
QUESTION: Thank you, Mr. President. First of all, we're very encouraged...
OBAMA: Here. We've got a mike right behind you.
QUESTION: On behalf of everyone in the business community, we're very, very encouraged with your words and your support. You've always said that you were committed to the competitiveness of American business; you've always said you're committed to the competitiveness of our country. And it really -- we really appreciate it. We are in tough times.
I also want to thank you for all the support in the stimulus package. And when we met, you listened to us, and you implemented many of our ideas, and your leadership made a difference. So, again, we appreciate it.
OBAMA: Thank you. QUESTION: There's one thing that I would like to mention in that construct of working together and your reaching out, and that is this: how tax structures are used around the world for economic development.
All of our trading partners have done this for many, many years. That's part of their industrial policy. We all understand that. You've argued for a fair playing field. We appreciate that.
But what's happened in the past is that there was a thing called the deferral, and the deferral was put in place to normalize all these anomalies. They're all different; they're not the same. So, it was put in place for that purpose, so there's a normalization, to help American competitiveness.
As you know, in the current proposed budget, there's a consideration around the deferral. We all accept we need to deal with the deficit. I mean, nobody in this room is going to argue we want big deficits. They hurt business, as you know. They squeeze capital out of the private sector.
But at the same time, the deferral has been very, very important to this normalization that allowed us to compete. So what we really are just asking for -- and we mentioned this to Tim earlier today -- is just an open dialogue to engage, to give you all the facts that we know on why it's so important to us, so just to kind of reach out and take you up on your offer...
QUESTION: ... and listen to our point of view.
OBAMA: Good. The -- I will certainly listen to your point of view, because I want American businesses to be competitive. And by the way, at some point, -- this isn't reflected in our current budget, because we've already got a lot on our plate -- but my interest over time in potentially lowering corporate rates in exchange for closing a lot of the loopholes that make the tax system so complex, that's a very appealing conversation to me, and I would like to pursue it.
With respect to the specific issue of the deferrals, look, it is difficult for, I think, the average American if they feel as if businesses investing here are paying a higher tax rate than if they're investing overseas. It's just counterintuitive. I think people generally feel like, "Let's encourage and motivate corporations to invest here at home, particularly at a time when there's been significant job loss."
I'm appreciative of the fact that, if you are a multinational operation, that you've got all sorts of tax rates that create a lot of headaches and you don't want to end up double-paying where you can help it.
So some of this stuff gets pretty technical. Let's make sure that you and others, representatives of the Business Roundtable, are working with Treasury to find out if we can find that right balance. I want you to be competitive. I don't want you to be placed at a competitive disadvantage with other countries -- or companies from other countries. We also want to make sure that -- not just from a revenue perspective, but also from the perspective of job creation here at home, that we've got a tax code that reflects those values.
Ann? Where is Ann? There you are. Good. I have got a little list of a couple of the people here.
QUESTION: Mr. President, thanks for engaging with us this afternoon. It's actually been a very productive day.
You know, on that theme of global companies -- and I think lots of us are witnessing further deterioration around the world, and it's -- it's worrying, in terms of the business community.
In a few weeks, you're going to meet with G-20 leaders and, you know, an ability to -- to coordinate, to have a set of actions that, you know, really are aligned, I think, is important, you know, for the health of the -- of the world right now. What's your -- what are your expectations? And how feasible is it to have an aligned agenda?
OBAMA: Well, I actually think that it's very feasible. We're actively pursuing it. And I'm having meetings and conversations ahead of the G-20. I already had a meeting with Gordon Brown. I will be meeting with people like Kevin Rudd from Australia. I have met with the Chinese foreign minister today in preparations for a meeting with President Hu in London when we get -- when we arrive.
I think there are a couple of broad principles that we'd like to see emerging out of the G-20. Number one, that the stimulus efforts of all countries are sufficiently robust to deal with the decline in demand. We think that's important.
And countries like China, for example, are doing that. And we want to make sure that everybody is mindful that -- that the decline in global demand is enormous and now's a time for us to provide some ballast.
Number two, financial regulation. We think that it's very important that there is coordination, not necessarily a super regulator, but that there's coordination and effort so that, if we are doing some things that are increasing transparency, openness, trust on Wall Street, that London's doing the same thing and that, you know, other financial markets are doing the same things so that we don't start seeing a race to the bottom, but rather we see a race to the top where we've got a stable, global financial system.
Third thing that we have to pay attention to is the situation in emerging markets. We've got some very big problems potentially there, and that is something that the Europeans, for example, should be very interested in because their banks have enormous exposure to those countries.
We've got to pay a lot of attention to it, not only for economic reasons, but also for national security reasons.
I mean, if you start seeing a lot of emerging markets collapse, it's bad for business, but it also creates a dangerous international environment, so that to that end the idea of wealthier countries or countries that are running surpluses have decent foreign -- foreign reserves -- foreign currency reserves being able to work with the international financial institutions to provide some help in propping up those economies as we climb out of this recession, I think is going to be very important.
And I just want to make sure that I'm -- I'm doing this off the top of my head. The last thing I think that we have to pay some attention to is making sure that we're not dropping back into protectionism. I mean, I think everybody understands sort of the history of the Great Depression.
So far, at least, you know, we're seeing some movement to -- to -- to contain protectionist sentiments in these various domestic markets, but we have to build on that. And I think having a strong statement that encourages trade and making sure that there are -- there are sufficient credit lines for trade, because that's one of the big problems that we've seen right now in terms -- in terms of world trade is, it's just very hard to -- to -- the traditional mechanisms for lending that facilitate trade have -- have really contracted.
So those are all areas that we've got to spend a lot of time focused on. I'm confident, actually, that interests will be aligned here more than they have been in the past. OK?
Let's see. How about Bill Green? Bill's over here. Do we have a mike?
QUESTION: Thank you, Mr. President. And thank you, also, for your comments on education over the last several days. It gave us a lot of clarity, and Secretary Duncan did a terrific job of -- I think it's one thing that we're very much aligned on, because we realize that a competitive country needs competitive companies. And in order to do that, we have to have a competitive work force.
There is something that I think it's important that you know. We are launching tomorrow the Springboard Project, which is organized by the Business Roundtable. And what it's focused on, really, is sort of three charges.
The first one is about making sure the education system produces the skills that we need for today's and tomorrow's markets.
The second thing is we need to institutionalize lifelong learning. It's absolutely true. We can see that all now. And it needs to be an individual and a -- and a collective imperative for our country. And I think all of our -- all of our citizens and all of our work force needs to understand that.
And the third is for a problem that's here and now is we need to facilitate workers in gaining new skills that have been displaced by economic dislocation and other changes in the market, which are going to be a natural occurrence over time.
QUESTION: And we need to work forward on that.
QUESTION: So we're just looking forward to working closely with your team to make sure we can tackle those. Thank you.
OBAMA: Well, I -- I look forward to that. And you're exactly right, that we are going to continue to be the most dynamic economy in the world, and one of our strengths is our dynamism, the fact that we adapt quickly.
We've got risk-takers in this country. That means that sometimes we have higher failure rates, but it also means that we've got greater flexibility and we pursue opportunity. That is part of the American character that we want to retain.
And -- and so I'm amused sometimes when I read sort of this talk of, well, you know, the Obama administration wants to get government in everybody's business. I don't; I want you guys to do your thing.
What is true, though, is that, in the current global, highly competitive environment, that the burdens and benefits, the dislocations of that dynamism are disproportionately borne by workers in certain sectors, in certain regions, and that creates great pain. It creates great hardship.
And so part of what we want to figure out is, how do we make sure that the burdens and benefits of this dynamic economy are spread in a way that maintains strong political and social support for that dynamism?
You know, so for those of you who are concerned about protectionism, the best way to ensure that we're not seeing protectionist tendencies in this country is to make sure that workers are benefiting from trade. And some sectors are, but some sectors may not be.
If we are retraining them, if we're investing in their futures, if -- when, you know, there are new opportunities in green energy, companies are saying, you know what?
Let's go to Michigan or let's go to Ohio where you've seen a huge exodus of -- of jobs. Let's go in there and work on, you know, developing the new battery or the new solar panel or, you know, the new technology that is going to help launch new industries.
You know, that is going to be something that I think benefits everybody and benefits your businesses most of all, so I'm excited about the prospect. That's part of what we've already done in -- in our recovery package, in the recovery and reinvestment package.
Carol is going to be talking to you about some of the stuff we're doing on energy. We've got to train people. Something like the smart grid, which could create huge efficiencies for your businesses, as well as individual families, there are a bunch of bottlenecks. Some of it has to do with local siting issues, but some of it just has to do with the fact that finding enough trained electricians to lay -- to these -- these lines, right now, we don't have enough, at a time when we've got huge unemployment out there.
And so figuring out how we're training people for the right jobs, that requires consultation with business. You guys can help us identify, what are the particular skill sets that people are going to need so that, working with community colleges, universities, vocational programs, apprenticeship programs, we are teeing that up. OK? Is Ivan here? Go ahead.
QUESTION: Mr. President, how are you?
OBAMA: I'm doing well. Thank you.
QUESTION: OK, good. And, again, on behalf of all of us, thank you so much for being with us today and the energy you're putting into all these issues. It's -- it's really encouraging.
Health care, your comments on health care were terrific and very enlightening. I think we're all pretty much focused and agree that the costs of health care are way out of line and we need to do something to -- to bring them in line.
We at the BRT have been working on a model, working on a framework to how we move ahead with reform. I would just like to point out a couple of things to you, get your reaction to it.
QUESTION: We agreed that the goal is to not only broaden access but to lower the cost and improve the quality for everybody, so we start with employer-based health care. We think today most people get health care from their businesses; 180 million Americans do.
We can provide not only the current need for their families, but also create the kind of incentives for future well-being and make sure they have good behaviors and deal with all of the kinds of things that create healthy employees not just today, but for a long time. We can work with the insurance carriers to provide the robust policies and plans that would be out in the marketplace, so it's really important that we start with that framework.
Second thing is to make sure that we have some individual participation. I think it's very important that we don't have a government plan competing with a private plan and finding out that our employees or the citizens in general could go to a plan that doesn't have the same incentives and requirements and behavioral characteristics to make sure that they -- they do the right things long term.
I think the last thing is the thing that you've mentioned with respect to health I.T. There are at least two or three dozen things we can do right now to begin driving costs out. I think the initiative that you approved on health I.T. is terrific. The quicker we get the systems built and the data collected, we can start changing the system.
But we can do more. We can do more with medical reform, medical liability reform. We -- we can do more with, in effect, Medicare and review the -- and change the payment systems.
So I think health care reform really is -- the devil's in the details. And I think, if we get the model working correctly, we could make a significant impact on the things that you've articulated today. Thank you.
OBAMA: Absolutely. I think you make a couple of terrific points, so -- so let me just amplify a few.
Number one, I think we have a moral obligation to make sure that, in a country this wealthy, you don't have single moms not able to send their kids to a doctor because they just can't afford it and they don't have insurance on their job.
So I think there's a powerful moral element to health care. I get 10 letters sent to me -- out of the 40,000 that are sent to me every day -- to read every night just so that I'm attuned to what's happening outside my bubble, although somebody pointed out the other day it's a very nice bubble, but it is a bubble.
OBAMA: And I would say at least half of them in some ways relate to an individual family crisis with health care, and they're heartbreaking. It has to be dealt with.
But, having said that, I also just have a very hard-headed analysis about this which is that the path we're on is unsustainable. If you have 6 percent, 8 percent, 10 percent health care inflation every single year, at some point, we are all broke. Businesses are broke or you stop providing health care to your employees. The federal government is way broke with Medicare and Medicaid. State -- state governments are groaning under the weight of this stuff. It's consuming everything.
So what that also means, though -- and this is something I have tried to emphasize to my more progressive friends -- we can't simply just add on a whole bunch of people to a broken system, because that's also unsustainable. I mean, you can't just take people who are currently uninsured, plop them onto a system that is generating those kinds of costs, not dig in to the engine and try to figure out how to make the thing run more efficiently, because then you'll just be broke that much faster. And at some point, you start making very draconian decisions about people losing benefits.
So the cost thing is the thing that we actually think is the big driver in this whole debate. And that's why -- I know you heard from Peter Orszag. Things like comparative effectiveness, health I.T., prevention, you know, figuring out how our reimbursement structures are designed under Medicare and Medicaid, medical liability issues. I mean, I think all those things have to be on the table.
And I won't lie to you. Everybody agrees in this theoretically until you start getting to the specifics. And oftentimes, though, Ivan, one of the things I will -- I will note is the resistance is not based on evidence. It's based on peoples' interests. You know? Everybody's kind of dug in. They know that the system doesn't work, but at least it kind of works for them in one particular aspect.
And part of the reason that we did not simply design our own plan and try to jam it down the throats of Congress is, we want them to see some of the contradictions in their own positions and over time, you know, sort through some of those tensions, make some tough choices, working with us, but we think that we've got to get this done now. This is a window.
Not everything's going to be implemented now. And this, by the way, goes to a broader issue with respect to our budget, because I think there's some people, when we issued the budget, they said, "Boy, these Obama people, they're really ambitious. They're taking on health care; they're taking on energy; they're taking on education. Don't they know that there's this bank crisis right now? We've got to do one thing at a time."
Look, the budget document that we put forward is a 10-year document. We are like any organization. Just like all of yours, we have to do long-term planning even as we're addressing short-term issues. If we don't do the long-term planning, then we end up having more short-term issues again and again and again and again.
So we don't anticipate that every piece of health care is done this year. We think that we've got to get the process and get in place a structure and a framework and a funding approach and work out a lot of these details, but it's going to be implemented over time. We're not going to have instant health I.T., all next year.
The same is true on the energy front. You know, under the cap proposal we have, it wouldn't even start until 2012, where we're going to be out of this recession, or you will have somebody else speaking to you in 2013.
OBAMA: But, if we don't start now, if we until -- to have the debate in 2012, and, then, suddenly, it turns out that oil is at 4150 a barrel again, and we say, oh, you know, why is it that we didn't start thinking about this than and making some steps now to figure this out?
Well, that's what Washington does. You guys could not run your business that way. And, so, you know, the -- the notion that we are doing some long-term planning now and trying to get this town to think long-term, that somehow that's a distraction, just defies every -- every sound management practice that -- that I have ever heard of. And -- and, so, we have got some immediate stuff that we have got to deal with now. What this budget does is, it reflects a vision about where we need to go. And I think it's the right vision.
BLITZER: All right, so the president of the United States clearly spending nearly an hour speaking and answering questions from CEOs and other members of the Business Roundtable.
Let's digest what we have just heard.
Joining us now, the Democratic strategist Jamal Simmons, the former Bush White House Press Secretary Ari Fleischer, and our own chief business correspondent, Ali Velshi.
Ali, there's no doubt that he was trying to reassure these CEOs that they're on the same page, as far as moving down the road.
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: And Terry McGraw, the chairman there, when he first came to speak to the president, said the same thing, reassuring the president that, for those people who think the business community and the administration are at loggerheads, he wanted to say, that's not the case.
So, it was a -- a very warm conversation between the two of those groups, and probably a very important conversation right now, because, at this depth of a recession, Wolf, we always talk about how this -- this economy is based on the consumer, and two-thirds of spending is driven by the consumer, but, ultimately, it is these businesses that have been laying people off and shuttering their operations.
So, the idea that the president and the business community are at least saying that they're on the same side is very, very helpful.
BLITZER: And he said, Ari Fleischer, that there's not going to be any tax increases for the wealthiest 2 percent or 3 percent of the population, at least for two years. Starting in 2011, they will revert back to where they were during the Clinton administration in the '90s, a time of prosperity.
Is that likely to reassure the -- the business community?
ARI FLEISCHER, FORMER WHITE HOUSE PRESS SECRETARY: No, I don't think so, Wolf.
I think, actually, when you look at some of the things he said, and then you examine the specifics, he said no tax hikes for anybody who makes less than $250,000 a year. And then we learn that it's really $125,000 a year, when you take a look at his proposal to eliminate deductions for charitable deductions and for housing deductions.
So, there's still a lot of skepticism. But the bigger issue is, will it do any good? Will it get the economy back on track? BLITZER: What do you think, Jamal? What did you think of that message that he delivered, specifically something that some Democrats might not like? He said he's not going to go with any protectionist policies. He wants free trade, because that would be a huge blunder, to go back to the tariffs and the trade protection that occurred in -- in the '20s and '30s that exacerbated the Depression then.
JAMAL SIMMONS, ADVISER, DEMOCRATIC NATIONAL COMMITTEE: Yes, I -- I think that's right.
What this administration has talked about when it comes to trade is not so much having a free trade, but open trade, trying to open markets for American workers, open markets for American goods, and make sure we can continue to sell those, our products, abroad, and, at the same time, encouraging business here at home.
And to get back to Ari's point, will it work? I absolutely do think that it has -- stands a pretty good chance of it working. What the president has done is, he has talked to a wide variety of people. They have talked to some economists. They have done a good job.
They have put this -- they have put a stimulus package in place. They -- they have got a budget in place, he says, both focusing on the short-term and the long-term. And whatever's happening certainly is going to be better than what Ari's...
BLITZER: All right.
SIMMONS: ... Ari's boss did over the last eight years. And I think it will do fine.
BLITZER: All right, Ari -- let's let Ari Fleischer respond to that.
FLEISCHER: Well, I was struck, at the end, when the president said that this defies sound business practices.
But, you know, he just was pushing for a budget that increased spending by 8 percent, after a stimulus that had a whopping, huge increase in spending.
No business can do that. Everybody in America now is cutting back, except the federal government. This is the fundamental issue, Wolf, is, all this Washington borrowing and spending and taxing going to get the economy going again?
If it does, we're all going to be better off. I don't think it will, though. I think you really are seeing a division here between a return to the old liberal tax-and-spend ways, and a president we hoped would have done differently and would have had new ideas. This is really a return to a lot of old ideas that didn't work in the '70s, when Jimmy Carter tried them.
(CROSSTALK) BLITZER: All right, guys, stand by. Hold on, guys.
SIMMONS: Wolf, I find -- I find it amazing, because George Bush cut taxes and continued spending. And we had a deficit go -- a debt go from $5.6 trillion to $10.7 trillion under his watch. And now the Republicans want to complain about spending. It's amazing.
FLEISCHER: No, I -- I have to remind you, George Bush is not the president. Barack Obama is the president. And now this is his economy.
FLEISCHER: He did inherit a recession, just like George Bush inherited a recession.
The issue is, will his policies help get us out of it? And I think people are increasingly disappointed in those presidency. It still is an open issue, whether or not they're going to work. Nobody knows.
But nobody knew this would be the Barack Obama we elected. This was not what he campaigned on or ran on. Certainly, an 8 percent increase in spending that he signed yesterday, with all the earmarks in it, he said he was against earmarks, and then he signed earmarks. This is the troublesome factor here.
SIMMONS: ... like some consistency out of the Republican side.
BLITZER: All right, make a final point. Jamal, go ahead.
SIMMONS: I would just like to see some consistency out of the Republican side.
We have got to join together and make this work. They can't just criticize President Obama.
BLITZER: All right.
SIMMONS: They have got to work with him.
BLITZER: We're going to leave it right there, but we're going to continue this conversation -- the president of the United States trying to reassure the business community over at the White House.