CNBC - Transcript

Interview

MS. BURNETT: Now, when we talk about how to avoid a potential recession, the topic today on Capitol Hill is all about potential tax cuts, rebates, something for Americans.

Senator Charles Schumer convened the Joint Economic Committee for a hearing on stimulating the economy today, and he joins us now, first on CNBC. Senator Schumer, a great pleasure as always to be speaking with you today.

SEN. SCHUMER: Good afternoon, Erin.

MS. BURNETT: Now, a lot of headlines have been crossing about your committee, about some conversations that you've had. Let me ask about one of them that has gotten a lot of discussion, at least when I was on the floor of the stock exchange this morning. You apparently spoke to Ben Bernanke --

SEN. SCHUMER: Yes.

MS. BURNETT: -- and he said he thinks we do need fiscal stimulus. What -- was he more specific?

SEN. SCHUMER: Ben Bernanke said we did need fiscal stimulus. He was concerned, of course, about the economy, and felt that monetary policy, while very important, couldn't do the job alone. It's his tradition not to get into specifics, although he did say that the number one watch word that would make this effective is getting the money out quickly; in other words, the worry is Congress will spend a lot of time arguing back and forth, dithering, and not do anything till June or July, and that may be too late.

And in fact, at our hearing today that was a consensus, too. We had Larry Summers, who's a mainstream Democrat. We had Professor Mishel, who is a little more liberal. And then we had a gentleman from the American Enterprise Institute, conservative. And while they had some differences about what kind of stimulus, everyone agreed we ought to do it quickly and that it was needed.

MS. BURNETT: So it seems -- I mean, it seems that -- you said conservatives, liberals, Democrats, Republicans, everyone appears to believe that we need stimulus. The sticking point right now appears to be whether in that stimulus, the short-term stimulus, we include a decision on whether to extend the Bush tax cuts that are set to expire in 2010.

SEN. SCHUMER: Yeah, I don't think that has much to do with stimulus. As you said, they don't even take effect till 2011. And the idea that -- you know, the idea that there would be more tax cuts in 2011 is not going to have much bang for the buck in terms of stimulating the economy today. In fact, Larry Summers thought it would make things worse because it would raise greater fears of inflation and raise interest rates.

So I think if you talk to most economists, they would say that while the president's tax cuts are a legitimate issue for Congress to discuss, they are not really part of a stimulus package. And I think an attempt to insist they be part of a stimulus package could scuttle that package.

MS. BURNETT: So that's my question. I mean, obviously a lot of Republicans are speaking about extending those tax cuts needs to be part of this plan. You're saying if it was included it would scuttle it. Is it possible we don't get any stimulus out of Washington at all due to that fight?

SEN. SCHUMER: Well, no, because I think cooler heads in the administration and elsewhere will prevail. I've spoken to a good number of people in the administration, and they realize that the extension of the Bush tax cuts in 2011 doesn't really affect the economy right now, and would cause such a firefight that it would risk the speed of the stimulus. It's certainly a legitimate issue that should be debated, but not attached to the stimulus because it would bog it down and slow it down. It would be like Democrats saying we have to have more spending on health care right now as part of the stimulus. Everyone should put their ideological baggage aside, right and left, and try to sort of pump some money into the economy to get things going.

MS. BURNETT: So let's talk about a couple of the issues here. You said Ben Bernanke said quickly; Democrats, Republicans alike seem to believe this needs to happen quickly. What is "quickly" in Washington? When will we get a bill signed, ready, going to the American people?

SEN. SCHUMER: Well, we still have to find the president's attitude on this. I have spoken with a good number of people in the administration who feel we need this, but the president hasn't weighed. He's coming back I think it is today or tomorrow from the Middle East. And so that's the first step.

Once he says we need some kind of stimulus, I think the basic parameters of a stimulus are pretty much clear: a tax cut, a rebate aimed at average Americans, putting ($)250, ($)300, even $500 immediately in their pockets; I think some kind of increased spending, but of existing programs, not of new programs -- extending unemployment insurance is the lead one; and then different people have different ideas outside of that. Probably some business tax cuts as well, but those that would be spent quickly by business.

MS. BURNETT: Okay. Thank you. And we appreciate your lining some of these up. I'm just taking notes.

Let me ask you a quick question here also, though. And we have a picture here. I don't know if you read the Daily News here in New York. It's part of my news package. I noticed the headline "America for Sale."

SEN. SCHUMER: I saw it. I saw it. (Chuckles.)

MS. BURNETT: "Humiliation as U.S. begs for billions in bailouts from foreign countries." Twenty-one-and-a-half billion dollars, money, from Asia and Arabia coming into just Merrill Lynch and Citigroup just yesterday. You've been a supporter of this capital coming in. Are we reaching a tipping point, though?

SEN. SCHUMER: Okay, well, you know, we're not in a good situation with a lot of our banks and securities firms. They've made some bad bets. And so you're not in a good situation. And the choice is whether they should dramatically cut back on their activities and lay off people or get an infusion of capital from abroad, since right now because the economy, the way it is here, you're not going to get that much of it domestically. And I think it's clear to most people that, given those two alternatives, neither of which is the best alternative, but it's the boat that these companies lie in, getting an infusion of capital from abroad makes the most sense.

The one thing you have to watch is, could nongovernment -- non- economic entities -- i.e., governments -- exert control or undue influence. The two that were announced yesterday, because things were chopped up in so many different pieces, I don't think any one entity would have undue influence, and so they seemed okay. But it's something that Congress will have to keep its eye on. It's something the country should keep its eye on. Even very measured economists like Larry Summers say be careful; you don't want governmental agencies that have a political and not an economic agenda having real control here. We're not up to that yet, but it's something to keep an eye on.

MS. BURNETT: Senator Schumer, thank you very much.

SEN. SCHUMER: Thanks, Erin.

MS. BURNETT: We appreciate your joining us. And an interesting way of looking at it; maybe neither alternative is the best, but we have to pick between one of them at this time.

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