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YOUR BOTTOM LINE
The U.S. Debt and Deficit Problem; Interview with Arne Duncan; Interview with Bill Bennett
Aired September 1, 2012 - 09:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, HOST: Good morning, everyone. I'm Christine Romans. The Republican Party is obsessed with the mounting debt in this country. Call it the party's new religious right, getting religion on debt deficits after they spent years helping run them up.
Let's start with the fact that, yes, America has a debt problem. We all agree. One of the lasting images of the Republican National Convention, two giant clocks counting America's debt. One started tallying up the dollars since the convention began on Monday, and the other shows the total amount the government owes. That number is nearing an almost impossible $16 trillion.
What you won't hear is the Republican-backed policies that helped run up the clock. Now, here are official government statistics visualized by the Center on Budget and Policy Priorities. Take a look at this. If you look at what is in our huge mounting national debt, you can see broken out some of these different factors. For example, right here, these are tax cuts, Bush tax cuts. Right there, a huge chunk of our debt.
Take a look at this. Wars. This is the second layer on this cake right here. Right here this is the economic crisis, this blue wedge is how much the crisis has added to our national debt because the economy has stalled out.
You want to talk about bailouts, those hated bailouts? They are right here. This line. Freddie, Fannie and TARP are in there. These are rescue efforts, these are like stimulus right here, also hated by the GOP.
And this is the debt, 20 percent size of our economy, the debt before you put all those things on there.
If we do nothing, if we do nothing, the project is that by 2019, debt will account for more than 80 percent of our GDP, or nearly all the goods and services this country produces in one year.
Greg Valliere joins us now. He is the chief political strategist at Potomac Research Group. David Walker is also with us. He is the CEO of the Comeback America Initiative and a former U.S. comptroller general.
David, let's start with you. The GOP says the president has racked up an unforgivable almost $6 trillion in debt in just one term. That number is true, but is it all Obama's fault? DAVID WALKER, FORMER COMPTROLLER GENERAL OF THE U.S.: No. The truth is that George Walker Bush or 43 and President Obama have both been fiscally irresponsible. 2003 was the year that things started spinning out of control. But you know, the debt clock really lowballs our problem.
ROMANS: You said 2003. We haven't talked about Medicare Part D. That wasn't in my chart. That was something that both parties loved, Medicare Part D. David, was that the beginning, you think, of this debt explosion?
WALKER: Christine, three things happened in 2003. Individually they were irresponsible; in combination they were reprehensible. We had a second round of tax cuts we couldn't afford because we had already returned to deficits. We invaded a sovereign nation without declaring war and without paying for it called Iraq. And Medicare prescription drugs was passed that added $8 trillion in new unfunded promises when Medicare was already unfunded by abut $20 trillion.
ROMANS: You know, Greg Valliere, so he's talking all the way back in 2003. Do Republicans now have a short memory, or are they truly getting religion on debt here?
GREG VALLIERE, CHIEF POLITICAL STRATEGIST, POTOMAC RESEARCH GROUP: Well, they may have religion now, Christine, but their conversion has been awfully recent. On many issues like the bailout, the prescription drug benefit, most Republicans, including obviously Paul Ryan, have gone along.
Let me make one other point. In these 10 years that you cite, I've heard people for a decade say if we don't do anything about the deficit, interest rates will go straight up. For those 10 years, we didn't do anything about the deficit, and interest rates went straight down.
WALKER: Here is the problem. 70 percent of our new debt in the last year and a half has been purchased by the Federal Reserve. We are self-dealing in our own debt. We are artificially keeping down interest rates to pump up the economy to try to help the housing market. Most of the rest of our debt has been purchased by China and Japan because they have positive trade balances.
We are living on borrowed time. And our biggest problem is not what's on the balance sheet, it's what's off the balance sheet. Unfunded pensions, retiree health care, underfunded Social Security, Medicare promises. That's the problem. They are not deficits and debts today, but they will be tomorrow absent a change of course.
ROMANS: Greg, let me bring this in, because two clocks on the stage, I want to circle it back around to these two clocks on the stage at the RNC. Yet Governor Romney really focusing in his big speech about creating 12 million jobs, he says, in four years. Can he cut debt like the way he says he wants to and the party wants to and create so many jobs at the same time? I'm hearing so much more about debt -- I mean, hear debt and jobs at the same time, and I'm wondering if one is at cross purposes with the other. VALLIERE: We'll see. I mean, these concepts, I think we can all agree on. We'd like to have a lower deficit. We can use this money for more productive uses. We'll see if the Romney prescription will work. But then you look at the details, which are so difficult. This Congress cannot even reform the post office because they don't want to cut any local post offices in their home districts. So you can talk in a general way about cutting deficits. When you get to the details, people get cold feet.
ROMANS: This Congress couldn't agree on what kind of pizza to get for lunch, let's be honest, let alone -- honestly, let alone things that are going to matter to middle class families right away. Guys, thanks so much, come back. We'll keep talking about this, we've got, you know, not too much time before the election and the fiscal cliff looming. So we'll check with you again soon.
Coming up, President Obama is attacking Mitt Romney for saying that small classes in school don't guarantee student success. Problem is, those comments sound a lot like comments President Obama's education secretary made two years ago. We're going to ask Secretary Duncan if he stands by what he said. That's next on YOUR BOTTOM LINE.
ROMANS: When it comes to education, Governor Romney and President Obama agree on more than either side will probably admit. They want more charter schools. They want teacher compensation -- both of them want teacher compensation tied to performance, and they both supported extending low interest rates on Stafford loans that help pay for college.
Where they disagree is on the role of the federal government. Mitt Romney praises some aspects of the Obama's administration's race to the top program, but he says he would give more control to state and local governments. You know, the federal government pays just 12.5 percent of all elementary and secondary education, and conservatives say the federal government then imposes these sweeping mandates, but leaves others, everybody else to pay the bill.
In April, Mitt Romney said that if he becomes president, the Department of Education will be consolidated with another agency. It will be a heck of a lot smaller. Secretary of Education Arne Duncan leads that department. He joins me now. Welcome to the program.
You know, we haven't heard much about education on the campaign trail until this week. The president was campaigning in Iowa talking to students, and then the Romney campaign took out a full-page ad in the Iowa State Daily. We've got a part of it here. Mitt Romney says that under President Obama, it costs more to go to college. He says there are fewer opportunities once students graduate, they are less likely to be employed Half of them are unemployed or underemployed. So tell me, why would this get any better if President Obama has another four years?
ARNE DUNCAN, SECRETARY OF EDUCATION: What President Obama and I fundamentally believe is we have to educate our way to a better economy. And our children today aren't competing for jobs in their neighborhoods or in their districts or in their state. Our young people are competing for jobs with children in India, in Singapore, in South Korea, in Japan. And we have to have the most educated workforce in the world.
We're so proud to see college enrollment going up. We're trying to lead the world in college graduation rates again. We used to lead the world a generation ago. Today we're 16th. We have to invest. We're thrilled we have over -- about 10 million young people having access to Pell grants today. The other side, they would see a huge reduction in Pell grants, a less educated workforce. I don't think that's what individuals or families or the country needs. We have to educate our way to a better economy.
ROMANS: It's interesting these other countries in the world. They are doing it with larger class sizes and much fewer dollars per student. Why with how much money we're spending on education, why aren't we getting more for our money in public school education?
DUNCAN: We have to continue to invest, but we have to invest in reform, not in the status quo. We've been thrilled to see 46 states raise standards, huge leadership at the state level. College and career ready, internationally benchmark standards, no longer dummied down standards to make politicians look good, lie to children, lie to parents. We're trying to bring in next generation of extraordinary teachers. We're trying to invest in early childhood education. Rather than pointing fingers, all of us have to come to the table. We have to challenge students to take their own education very seriously. And we have to challenge parents to be a full and equal partner with their children's teachers.
My wife and I have two young children in public elementary school. And I hold ourselves accountable for making sure we're there in the evening, working with our children, doing homework, making sure we're a team, we're a partnership with our children's school.
ROMANS: Do you think teachers should be paid for tenure or paid for performance?
DUNCAN: I said repeatedly that we need to pay teachers a lot more money and teachers shouldn't -- no one signs up to go into education to make a million dollars, to get rich, but they shouldn't have to take a vow of poverty either. So we have to invest in our teacher, in our workforce. We're going to have about a million teachers retire. Our ability to attract and retain great talent over the next four to six years is going to shape public education for the next 30. It's a once in a generation opportunity. We've launched what we called the Respect Initiative to talk about how we collectively elevate and strengthen the teaching profession.
ROMANS: Let's talk about class size, because the campaign, the Obama campaign has been criticizing Mitt Romney over comments that he made on class size. Let's listen.
(BEGIN VIDEO CLIP) MITT ROMNEY, GOP PRESIDENTIAL CANDIDATE: The school district with the smallest classrooms, Cambridge, had students performing in the bottom 10 percent. So just getting smaller classrooms didn't seem to be the key.
(END VIDEO CLIP)
ROMANS: You know, Mr. Secretary, that sounds a little like something you said two years ago. You said that while small class sizes were beneficial for young students, in secondary schools district may be able to save money without hurting students while allowing modest but smartly targeted increases in class size. I don't see a lot of daylight, really, between your position and Mitt Romney's. Can you clear it up for me?
DUNCAN: Absolutely. Particularly in the early grades where we're teaching young children how to read, particularly disadvantaged communities, having smaller class sizes is really important. We also want to make sure there is a great teacher in every single classroom. Great teachers make a huge difference in students' lives. As students get older, there can be more flexibility there. But anyone who says we need less teachers in the classroom or we need less music or art or extracurriculars, I think fundamentally doesn't get how important a well-rounded world-class education is.
ROMANS: Let's talk about one more point of disagreement, vouchers. Let's listen to something Mitt Romney says about that.
(BEGIN VIDEO CLIP)
ROMNEY: I'm going to expand parental choice in an unprecedented way. Too many of our kids are trapped in schools that are failing or simply don't meet their needs. And for too long we've merely talked about the virtue of school choice without really doing something about it.
(END VIDEO CLIP)
ROMANS: So parents are getting kind of impatient because the kind of public school education you get depends on where you live, it depends on your zip code. What's wrong with letting parents take their federal dollars and choose their kids' school?
DUNCAN: Our goal is to make every single public school a great, great public school. The overwhelming majority of children in this country, 90, 95 percent, are always going to go to public schools. And so we have to make sure they have a chance to go to a great school.
We've been very impatient with the status quo. We had a number of schools around the country that were not high performing. Some were dropout factories. We are turning around 1,300 schools around the country with tremendous parental participation. Just in the first year or two, all these schools have a long way to go. Huge steps in the right direction. Huge increases in student achievement. Increases in graduation rates, reductions in dropout rates. The challenge and the opportunity is to make every single public school a great, great school for their community. ROMANS: And if Congress doesn't act, sir, the U.S. is going to fall over this fiscal cliff. That's tax increases and budget cuts that hit at the beginning of the year. The NEA, the country's, as you know, largest teachers union, they say that will mean 8 percent spending cuts for education, 80,500 job losses. What's your contingency plan? What happens to the Department of Education and to public school education if we go over the fiscal cliff?
DUNCAN: It's very simple. Children will get hurt. There's no upside to having many less children have access to Head Start. There's no upside in investing less in poor children, in children with -- in students with disabilities. There's no upside to seeing class size explode. There's no upside to less extracurriculars, there's no upside to less young people having access to Pell grants so they can go to a community college, or a four-year college and get a great job and be a productive citizen and participate in the economy. And so we have to do the right thing. We just fundamentally think of education as an investment, not as expense. We have to invest in reform, not in the status quo.
ROMANS: Would you think there's a risk we really go off the fiscal cliff? Do you think we'll really see Congress have just massive, across the board spending cuts?
DUNCAN: I really hope that doesn't happen. And again, sequestration was set up sort of for mutual self-destruction. There's no upside there. And again, other countries are doubling down on education. Other countries aren't cutting back. Our children are as smart, as talented, as creative, as entrepreneurial as children anywhere in the world. We just have to give them a chance to compete on a level playing field. And so for all the dysfunction you're seeing in Congress, I have to believe at the end of the day, congressional leaders will come together and do the right thing for our nation's children, for our country and for our country's economy.
ROMANS: All right, Arne Duncan, education secretary, thank you.
DUNCAN: Thank you so much for the opportunity.
ROMANS: Coming up, Mitt Romney talks a lot about school choice and vouchers. But only a fraction of our children are enrolled in private schools. We'll ask whether former Education Secretary Bill Bennett, what a Romney administration would mean for America's public schools.
ROMANS: So, you heard from the man at the top of President Obama's Education Department. Now I want to introduce you to Bill Bennett. He was the man at the top of President Reagan's Education Department. You've seen him on the show before. He's a CNN political analyst. Welcome to the program.
BILL BENNETT, FORMER EDUCATION SECRETARY: Thank you.
ROMANS: Great to see you, Bill. You know Paul Ryan. I'm told he used to write some of your speeches -- BENNETT: Great to be here.
ROMANS: I want you to listen to what Paul Ryan said at the Republican National Convention.
(BEGIN VIDEO CLIP)
REP. PAUL D. RYAN, R-WIS.: College graduates should not have to live out their 20s in their childhood bedrooms, staring up at fading Obama posters and wondering when they can move out and get going with life!
(END VIDEO CLIP)
ROMANS: Bill, is Paul Ryan, vice presidential candidate Ryan, is he really trying to tell young people it's the president's fault they're living at home?
BENNETT: Yes. Look, we know half of our college graduates are either unemployed or underemployed. That's a fact about the economy. What the president does or doesn't do has something to do with the economy. So, yes. He's obviously not the only factor, but we had a rule in American politics since Ronald Reagan -- what happens on your watch, you're responsible for, you know? Are you better off or are you worse off? And when it comes to college graduates and the economy, boy, are they worse off.
ROMANS: You know, I'm going to push back a little there, Bill. Tuition is up 300 percent since the 1980s. I'm not going to blame you because you were the education secretary or Ronald Reagan because tuition was rising in their tenure. Why are you blaming Obama?
BENNETT: Well, you can't blame me, because I was trying to get it under control, and I'm the one who came up with what's now known as the Bennett hypothesis, which is the availability of money increases the price of higher education, and I think it's been proven now by the scholars.
The higher amount you put into higher education, at the federal level particularly, the more the price of higher education rises. It's the dog that never catches its tail. You increase student loans, you increase grants, you increase Pell grants, Stafford loans, and what happens? They raise the price.
ROMANS: It's like the housing bubble --
ROMANS: The more money that's available for the housing market, the more money that's available in the housing market, leads to a bubble in prices, and at some point that has to pop. You're saying education's like that, too.
BENNETT: Very similar. And the reason there's a difference in the administrations, you can say that Republicans have their ties and their people with whom they're close. But the higher education lobby, the education lobbies in general, are lockstep with the Democrats and the liberals on this, and it's not a good combination. It hasn't been good for students at the elementary and secondary level, and it hasn't been good for students at the higher education level. But try to introduce serious reform into this area, and you will get mowed down by the Democrats who have been--
ROMANS: We can all agree on reform and improvements to public education, but what kind of reform? Reform is a very subjective thing when you start digging into education. You know, and I hear a lot from Mitt Romney about school choice. That's red meat for the base, of course, but you know, 90 percent of American kids go to a public school. Public schools are losing teachers, Bill, they're losing music programs. Middle class families are paying for their kids to be in sports.
BENNETT: I know.
ROMANS: Classes are bigger. How would Romney's policies benefit the vast majority of these students who are in public schools? If you focus on choice, are you neglecting the fact that we need to fix the public schools?
BENNETT: No, we do need to fix the public schools, but I think the best way to fix them is through competition. There's been too much emphasis on the schools, not enough on the students, and therefore, we've thought about the resources schools have as the primary concern rather than whether students are learning.
If you take -- not to get overly complicated, but if you take Title I, Chapter One, which is one of the largest single education programs. It helps kids who are way behind in math and reading. You strap the money to the back of the children, let them go where they want to go, most of them will end up going to public schools, but they will choose their public schools. It's just like the charter school movement, and that would be a very good thing.
ROMANS: All right, Bill Bennett, stick with me. Because coming up, Mitt Romney says he wants American students to be ready for the 21st century, for 21st-century jobs, but to reform the school system, he is going to need the support of a group that's backing his opponent.
ROMANS: America's the world's biggest economy and still the leading superpower, but it won't stay that way if the quality of a public school education depends on your zip code. Former Education Secretary Bill Bennett is back with me. Bill, New Jersey's governor, Chris Christie, he's taking on the teachers unions. Here he is at the Republican National Convention.
(BEGIN VIDEO CLIP)
GOV. CHRIS CHRISTIE, R-N.J.: We believe that the majority of teachers in America know our system must be reformed, to put students first so that America can compete. They believe in teachers unions. We believe in teachers.
(END VIDEO CLIP)
ROMANS: The they, of course, he's talking about there, Obama administration officials. Bill, does a Romney administration have any shot at genuine school reform if it antagonizes union leaders?
BENNETT: Yes, it does, not if it antagonizes all the teachers, but that's the distinction that Chris Christie's making. And increasingly, Christine, that's the distinction the public's making, between teachers who can be good or bad or in the middle, and teachers unions, which for the most part have been inhibiting any serious kind of education reform.
Ronald Reagan won a majority of teachers. More teachers voted for Ronald Reagan than Walter Mondale, and this could happen again if people see the future of education in somewhat different and unconventional terms. It does require a change. It does require reform. But I think it's an appealing reform.
There are states, like New Jersey, where let's give Chris Christie credit, but let's give some of the union leadership credit, too, where they came to the table, they worked things out. Nothing's going to happen if both sides are intransigent, and the unions will not cooperate. You will see them lose more and more members, as they are doing, and more and more students.
Bill Bennett, thanks so much for being here today, and we'll talk to you again very soon. We're going to keep talking about public schools, teachers' unions, teacher reform, this administration, and what a Romney administration would look like.
If your child is in public school, there is a pretty good chance that the teacher in front of the class is a member of the NEA. It has 3.2 million members. It's by far the largest teachers' union in the country. Next week we'll speak to the man in charge of that, Dennis van Roekel, and ask him why he's so scared of a Romney administration.
In the meantime, tell me what you think. Who has the better education plan, President Obama or Mitt Romney? My Twitter handle is @christineromans, and christineromansCNN on Facebook. Back now to "CNN SATURDAY" for the latest headlines. Have a great weekend!