CNBC "Squawk Box" - Transcript

Interview

Maryland Congressman Chris Van Hollen, Ranking Member of the House Budget Committee, today appeared on CNBC's Squawk Box to discuss the Joint Select Committee on Deficit Reduction.

JOHN HARWOOD, CNBC: Let's ask Congressman Chris Van Hollen. Thanks for being with us.

REP. CHRIS VAN HOLLEN: Good to be with you.

HARWOOD: Let me ask you a question that we spoke about in the previous hour and that is how quickly is the political system moving from an austerity deficit reduction discussion to a jobs discussion given the way everybody is downgrading their forecast of economic growth and how fast unemployment will come down?

VAN HOLLEN: I think people recognize that the most important thing that we need to do now is to get the economy moving and get people back to work. Not only to provide more economic security to American families but also as the first step in a long-term deficit reduction plan. That needs to be coupled with a long-term plan that addresses the out year deficit issue but in the short-term, it's very important that the priority be jobs, getting the economy moving again, because if we don't do that, not only will the American people be hurting but obviously that will compound the deficit problem in the out years.

HARWOOD: How big a stimulus and what should be in it?

VAN HOLLEN: Those are the questions that are going to be debated. The White House, of course, and the President will put forward a proposal. I hope it will be a significant proposal in terms of a payroll tax holiday. I think they should even consider enlarging it. I think infrastructure investments need to be very important component of that. If we do what the House Republican budget would do -- which is to cut the infrastructure investment by one-third this year compared to just last year -- that would be a terrible thing to do right now in the economy. Obviously extension of unemployment benefits will help those who are still looking for work and can't find it so they can go out and make sure they can put food on the table and go to their local grocery stores to keep the economy moving. So those are some of the steps but I think the infrastructure package will be very important.

HARWOOD: Some people say you're never going to get the economy on a firmer footing unless you do something about housing. Doug Dachille is on with us. He's making the argument that forget the trash talk about Fannie and Freddie and forget concern about what would happen to investors, you need to do something right now to let people who are locked in underwater mortgages refinance to take advantage of lower rates. Nothing that's been done on housing over the last couple of years appears to have had much effect. What do you want to do?

VAN HOLLEN: I agree with that assessment. I don't think any of the initiatives have been very successful. At the end of the day the only way to address that issue is, as suggested, to find a way to allow people to refinance and it would be best if you could begin by also writing down some of the principle payments. Obviously there are going to be a lot of financial institutions out there that have concerns with that. How you --

DOUG DACHILLE, GUEST: There is a bill out there which is helping responsible homeowners -- the Boxer bill -- which is not about trying to give people reduction in principal. It's all about just getting them a market rate on their mortgage. They have a 6% mortgage right now outstanding or 5.5% mortgage outstanding and the idea there -- the market rate is four. How can you get the person's mortgage from six to four? That's the issue. When these are people who are already paying, they are not delinquent. These are people who have paid. There's almost $1.6 trillion of people who are paying their mortgage and have a well above market rate mortgage right now.

HARWOOD: Congressman, does the Boxer bill stand any chance of passing?

VAN HOLLEN: I don't know the answer to that right now. I think it's going to be a big part of the discussion going back, however. The question is how you can use the leverage of the federal government to try and make sure that people can refinance. Exactly what was said. These are folks, many of them, who are making their payments on time.

DACHILLE: The government actually has a program and we were talking about this during the break. There's a program out there that allows for -- I mean the biggest constraint against refinancing is your house is under water. That you have a loan-to-value where the house is now worth less than the loan. And that creates problems. But the government already has a program called TARP which would allow people to refinance with a LTV above that. You know why that's not happening? The problem is the concern is that the originator who will do the refinancing there runs the risk that if all of the sudden -- this is a performing loan that's been performing for many, many years, we're doing a refinance, it's already on the agency books and guaranteed -- the concern is that a new originator comes in and refinances that, and the concern is that if that guy defaults after the ReFi, Fannie and Freddie will then put that loan back to the new originator under that program. And that's the concern, it's the shifting of loss.

TYLER MATHISEN, CNBC: Congressman, can I steer us back to something that I think Americans will be very, very interested in. I sense from some of what you've said in the pre-interview notes that I have that one of the things you would like the supercommittee to tackle is jobs, and finding ways to do that. But my understanding of what the mission of that supercommittee was, was that it had nothing to do with stimulating job growth. It had everything to do with finding budget cuts and if you don't find budget cuts that seven of you can agree on then there will be automatic cuts across the board in defense and Medicare. Am I misunderstanding something there? Why would a jobs program be part of a supercommittee whose mission was simply to, as I understood it, was really to cut spending?

VAN HOLLEN: Well I thought I was very clear that we would have to couple any effort to try and get the economy moving in the short-term with a deficit reduction plan. Of course that's the charge of the committee. We're supposed to try to find at least $1.2 trillion to $1.5 trillion in deficit reduction over ten years. I hope we can actually do better than that. I think a lot of the proposals that were put on the table during the last round provide a guide for getting farther. But the point is, if you want to reduce the deficit over the long-term, one of the things you need to do is get the economy out of stall. The longer that we're in stall mode, the more deficits grow. With respect to housing stuff, look, the President is going to put a plan on the table. I hope that's part of the plan he puts forward.

MATHISEN:Can I play a tape from one of the last times you were on CNBC with you and Congressman Jeb Hensarling? Jeb Hensarling is also on the supercommittee, and it goes to something that I think a lot of Americans also are interested in. Go ahead, roll the tape.

FOOTAGE FROM CNBC'S THE KUDLOW REPORT, 7/28/2011

VAN HOLLEN: For the first time ever when the Republicans brought their clean debt ceiling bill to the floor of the House, they inserted totally false and inaccurate language. It was a political stunt. Here's what they said -- Jeb, you put in the bill that we're having to raise the debt ceiling because of President Obama's policies. Straightly untrue. And you know that we're having to lift the debt ceiling because of lots of past decisions made by the congress most of which you voted for and that's what's driving the cost. When you guys put in that political ploy this is because of President Obama's budget, that was wrong and that was politics.

REP. JEB HENSARLING: I didn't vote for the trillion dollar stimulus plan.

MATHISEN:Now you have to work together, Congressman Van Hollen. Can you?

VAN HOLLEN: I think we can. Jeb and I enjoy getting together from time to time on this show. We obviously have differences of opinion on how to address some of these issues. I think speaking for myself and I know Jeb is entering these talks in this spirit, we hope to be able to find some common ground and more importantly -- where there's no common ground there is going to have to be compromise and that's going to be the big question. Whether or not people are willing to give and not just take.

MICHELLE CARUSO-CABRERA, CNBC: Congressman, you wouldn't have to do any short-term cuts if you just dealt with one major entitlement that's the big problem with the budget which is Medicare. If you guys just dealt with Medicare, I said yesterday, you can have 20,000 Keynesian bridges, you can do whatever you want in the short-term.

VAN HOLLEN: Look, the reality is if Congress just packed its bags and went away, we would also be able to deal with it over ten years on revenue side because you have $4 trillion. The reality is that you can't deal with this with just one part alone. If you were to do it on the Medicare side, it would take just a total whack out of Medicare and it would require a lot of seniors to have to shoulder huge additional costs.

CARUSO-CABRERA:Not in the short-term. You could be transformative about Medicare and change the incentive structure and young people would know they would have a very different plan. You wouldn't have to do anything with people who are on the verge of retirement.

VAN HOLLEN: We do need to modernize Medicare, there's no doubt about it. But if you look at it over the next ten years, you're not going to get significant savings out of Medicare. You need to take the longer view and take the action today. But the reason every bipartisan commission that has looked at this issue -- from Simpson-Bowles to Rivlin-Domenici -- have approached this from a balanced perspective saying you need to deal with issues like modernizing Medicare but also by revenue is because you can't do it with just one part alone without imposing significant, significant pain. Not just a change in reform, but by totally upending those systems. That's why the balanced approach is necessary.

HARWOOD: Congressman, we'll have to leave it there. Appreciate you taking time on your break to come in.

VAN HOLLEN: Good to be with you guys.

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