First on CNBC Interview: CNBC's Maria Bartiromo Speaks with Senator Barack Obama on CNBC's "Closing Bell" (Transcript Included)
MARIA BARTIROMO, host: Senator, thank you for joining us.
Senator BARACK OBAMA: Thank you so much for having me.
BARTIROMO: Nearly seven months before Election Day, we've got foreclosures on the rise...
Sen. OBAMA: Right.
BARTIROMO: ...we've got financial assets shrinking, gasoline above $3 a gallon. Detail for us your economic plan to take us higher.
Sen. OBAMA: Yeah. Well, it's going to start with dealing with the immediate crisis, both in the financial markets and in the housing market. And obviously, those things are connected.
On the housing market, to prevent foreclosures, I think it is important for us to create some bottom, some floor, give people some sense of where does this end. And so I am a strong proponent of the proposal that Chris Dodd and Barney Frank have put forward, having the FHA step in to help stabilize the market. It's not a bailout for borrowers or lenders, but what it says is we will rework some of these loan packages so that they're affordable. And, you know, everybody's going to have to take a haircut, the borrowers and the lenders, but it won't be as bad as if a foreclosure took place. So that'd be step number one.
Step number two, I think to stabilize and provide confidence in the financial markets it is appropriate for the Fed to take some of the actions that it has. But I think it is also important to make sure that we've coupled that with some new regulatory structures. If the Fed is going to be a lender of last resort to investment banks, then it is, I think, legitimate to make sure that those banks are subject to some sort of requirements, both in terms of liquidity and capital, to assure that we're not seeing excessive risks taken so that they get all the upside and the Fed gets all the downside. So that would be, I think, a second important step.
And then the third thing that I think is important for us to do is to understand that the economy long term has been out of balance for quite some time, even before this current crisis. I mean, we had high corporate profits, enormous rises in productivity over the last decade but wages and incomes have flatlined. And so you had a lot of concentrated wealth at the top, but ordinary folks were getting hammered with rising gas prices, rising costs of health care, rising costs of college tuition. And so creating a tax code that is more equitable and making sure that we're making investments in things like infrastructure and clean energy that can put us on a more stable long-term competitive footing, I think that has to be part of the package as well.
BARTIROMO: I want to ask you about the mortgage plan.
Sen. OBAMA: Sure.
BARTIROMO: But since you ended with taxes, let me pick up right there, for investors.
Sen. OBAMA: Yeah.
BARTIROMO: How do you plan to change the tax code when it comes to capital gains? How high will that 15 percent rate go?
Sen. OBAMA: Well, you know, I haven't given a firm number. Here's my belief, that we can't go back to some of the, you know, confiscatory rates that existed in the past that distorted sound economics. And I certainly would not go above what existed under Bill Clinton, which was the 28 percent. I would--and my guess would be it would be significantly lower than that. I think that we can have a capital gains rate that is higher than 15 percent. If it--and if it, you know--when I talk to people like Warren Buffet or others and I ask them, you know, what's--how much of a difference is it going to be if it's 20 or 25 percent, they say, look, if it's within that range then it's not going to distort, I think, economic decision making. On the other hand, what it will also do is first of all help out the federal treasury, which is running a credit card up with the bank of China and other countries. What it will also do, I think, is allow us to make investments in basic scientific research, in infrastructure, in broadband lines, in green energy and will allow us to give us--give some relief to middle class and working class families who have been driving this economy as consumers but have been doing it through credit cards and home equity loans. They're not going to be able to do that. And if we want the economy to continue to go strong, then we've got to make sure that they're getting a little relief as well.
BARTIROMO: But it's not just the Warren Buffets of the world who own stocks, so...
Sen. OBAMA: Of course not.
BARTIROMO: ...let's hypothetically say that...
Sen. OBAMA: Right.
BARTIROMO: ...cap gains tax goes from 15 percent to 25 percent.
Sen. OBAMA: Right.
BARTIROMO: You're impacting a lot of people.
Sen. OBAMA: Right.
BARTIROMO: A hundred million Americans own stocks today.
Sen. OBAMA: Absolutely.
BARTIROMO: So it's not just the rich.
Sen. OBAMA: No, no, no, absolutely. And that's why I think that it may be, for example, that you could structure something in which people with certain incomes were exempted from this increase and it would stay at 15. The broader principle that I'm interested in is just making sure that we've got a tax code that is fair for all Americans. And I think it is not unreasonable to say--you know, I know that we'll get some arguments from some folks on this, but it's not unreasonable to say that those of us in the upper brackets have benefited disproportionately from a globalized economy; that those benefits have been compounded by the Bush tax cuts and that for us to roll back some of those tax cuts and to put this economy on a more stable fiscal footing and to make investments in the American people so that they can afford a decent life, that that is actually good long term for our economy and also good for investors and Wall Street.
BARTIROMO: So what about the top marginal rate for ordinary income? Who ought to pay more and who should pay less?
Sen. OBAMA: Well, you know, what I've said is that we should go back to probably a top marginal rate of 39 percent what it was before the Bush tax cuts. So I would roll back those Bush tax cuts, I would not increase taxes for middle class Americans and in fact I want to provide a tax cut for people who are making $75,000 a year or less. For those folks, I want an offset on the payroll tax that would be worth as much as $1,000 for a family. Senior citizens who are bringing in less than $50,000 a year in income, I don't want them to have to pay income tax on their Social Security. And as part of my overall approach to housing, I actually want to provide an additional 10 percent mortgage deduction, a credit, mortgage interest credit, for those who currently don't itemize. Because if you live in a house that's pretty expensive, like I do, and I itemize, I get a pretty big break from Uncle Sam. If you own a $100,000 house and you're making 65, $75,000 a year, you're not getting that same deduction. I think that they deserve a break as well. That will actually help relieve some of the pressure on homeowners.
BARTIROMO: But can you really look at this sort of like an umbrella standpoint? I mean, we are in very, very unique times right now.
Sen. OBAMA: Yes.
BARTIROMO: Why raise taxes at all in an economic slowdown? Isn't that going to put a further strain on people?
Sen. OBAMA: Well, look, there's no doubt that anything I do is going to be premised on what the economic situation is when I take office. I'm going to be sworn in in January, we don't know what the economy's going to look like at that point. And, you know, the thing you can--you can be assured of is that I'm not going to making these decisions based on ideology. I'm not a dogmatist. I know that some, you know, my opponents to the right would like to paint me as this wooly-eyed, you know, liberal or wild-eyed...
BARTIROMO: You're not a liberal?
Sen. OBAMA: The--but my attitude is that I believe in the market, I believe in entrepreneurship, I believe in opportunity, I believe in capitalism and I want to do what works. But what I want to make sure of is it works for all America and not just a small sliver of America. And if it turns out--if somebody can make a persuasive argument to me that, you know what, what we need at this juncture, at this particular point in time is a different set of policies than some of the ones that I've proposed, I'm always going to listen to people. Because I think one of the problems, in fact, with the Bush administration has been its rigidness when it comes to economic policy. I mean, you ask them any question, they'll say tax cuts. It doesn't matter what the problem is, if it's, you know, our trade deficit: tax cuts. If it's, you know, slowdown in manufacturing: tax cuts. You know, at a certain point, you know, if you've only got one arrow in the quiver, then you're going to have problems.
BARTIROMO: Let me move on from taxes. I don't want to spend all the time there. Let's talk about small business. This is the one area of the economy that really is creating jobs, small business.
Sen. OBAMA: Yes, absolutely.
BARTIROMO: You want to index the minimum wage to inflation, we'll see the minimum wage go up every year. You are looking to strengthen the unions. Basically, making costs go up for small business. Why put a further strain of expenses, higher expenses, on the one place in the economy that's actually creating jobs?
Sen. OBAMA: Well, actually, you know, that's not entirely true. It is true that I think that having the minimum wage go up every 10 years is a bad idea and it's not good for small businesses, because they get socked with sudden jumps as opposed to something more gradual that they can build into their cost structures. It is true that I think that unions are a useful thing. But generally that's not affecting the average small business, that is typically much more targeted at large companies who, again, wages and incomes have not gone up for the average worker over the last seven years. There's a reason for that, and that's a problem. I actually want to provide more tax breaks to small businesses, because I think they are the primary generator of income.
And one of the areas that I want to help small businesses on is their health care costs, which are crushing them. And if you talk to a lot of small business owners, not only are they having problems if they provide health care to their employees, but they're also having problems paying health care for themselves. And if we can provide them significant relief there, then I think that there are going to be a whole bunch of small businesses who are going to be much more successful in building their businesses and expanding it over time.
BARTIROMO: But you say that, but we've had small businesses on, they're terrified. They feel that their costs are about to soar.
Sen. OBAMA: I know. Small businesses often get terrified because people ramp up. The chambers of commerce, anytime you talk about the minimum wage, the sky is falling. The sky doesn't fall. And as I said, the--what is important is making sure that this happens over a gradual period of time. Instead of us lurching back and forth, what I want to do is to create a climate for sustained economic growth. Small businesses are going to be the heart of that, and that's why we're going to give a large amount of support to small businesses in the form of tax breaks for investment and in making sure that their health care costs are dealt with.
BARTIROMO: Let's talk about spending. You've got a $400-plus billion deficit. How do you plan to pay for the new health, education, you mentioned green technology, social programs...
Sen. OBAMA: Right.
BARTIROMO: ...in the middle of a recession?
Sen. OBAMA: Well, I tell you what...
BARTIROMO: Away from tax cuts?