CNBC Exclusive: CNBC's Chief Washington Correspondent John Harwood Sits Down with Presidential Candidate Senator Barack Obama (Transcript Included)
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Presidential Candidate Senator Barack Obama. Excerpts from the interview will air throughout CNBC's Business Day programming today, Tuesday, June 10th. The full interview will on tonight's live CNBC Special, "Your Money, Your Vote: McCain vs. Obama," at 8PM ET.
All references must be sourced to CNBC.
JOHN HARWOOD reporting: Senator, thanks so much for joining us.
Senator BARACK OBAMA: Thank you.
HARWOOD: As you know, gas prices now have hit a national average of over $4 a gallon. You have criticized the idea that John McCain has floated of a gas tax holiday as a gimmick. Is the reality of the situation for American consumers that there's nothing that you could do as president or anybody could do as president in the short term to relieve that pain?
Sen. OBAMA: What is true is that given the global price of oil right now, that we can't artificially lower gas prices. What we can do is provide people immediate relief through our tax code. And so I've proposed accelerating a second stimulus rebate to put hundreds of dollars into the pockets of families to offset some of these rising costs during the summer and into the fall. When I'm president next year, what I'd like to do is pass a middle class tax cut, $1,000 per family per year to offset higher prices in gas, food, medical care. Long-term, though, the only way we're going to deal with these high gas prices is if we change how we consume oil. And that means investing in alternative fuels, it means that we are raising fuel efficiency standards on cars, that we're helping the automakers retool. Obviously, consumers are changing their habits pretty rapidly. But our US automakers are going to need some help retooling. We should be encouraging that. And when we look at other ways that we're using energy, we have to adapt renewable, clear energies like solar, wind and biodiesel. And I've got an Apollo project, a Manhattan project, to embark upon that new energy future that we need.
HARWOOD: As difficult as this is for consumers right now, is, in fact, high gas prices what we need to let the market work, a line incentive so that we do shift to alternative means of energy?
Sen. OBAMA: Well, I think that we have been slow to move in a better direction when it comes to energy usage. And the president, frankly, hasn't had an energy policy. And as a consequence, we've been consuming energy as if it's infinite. We now know that our demand is badly outstripping supply with China and India growing as rapidly as they are. So...
HARWOOD: So could these high prices help us?
Sen. OBAMA: I think that I would have preferred a gradual adjustment. The fact that this is such a shock to American pocketbooks is not a good thing. But if we take some steps right now to help people make the adjustment, first of all by putting more money into their pockets, but also by encouraging the market to adapt to these new circumstances more quickly, particularly US automakers, then I think ultimately, we can come out of this stronger and have a more efficient energy policy than we do right now.
HARWOOD: A broader economic question. We now, for the first time in a long time, are facing the risk of both slow growth and renewed inflation at the same time. Which of those strikes you as the greater risk at this moment, and how would you balance those risks in applying policy?
Sen. OBAMA: Well, you know, I think that the big problem that we've got right now is that because of the housing crisis, because of the contraction of the financial markets, the economy is slowing down rapidly. At the same as we've got some shocks primarily having to do with oil and other commodities. If we can get the financial markets stabilized, if we can implement the kind of housing plan that I've called for where borrowers and lenders are both having to make some sacrifices, but we're keeping people in their homes and there's a bottom where the credit markets save, we know what we're investing, that, I think, can help businesses that have good business plans and are making good products and providing good services. That can get them back on their feet. If the credit markets are flowing, that puts less pressure on the Fed to constantly lower interest rates. And that in turn will allow us to not only see the dollar strengthened, but it can also make certain that over time, these inflationary pressures are ones that the Fed can deal with, and that's obviously been their primary job over the last several years.
HARWOOD: Taxes are clearly going to be a big issue in the campaign. McCain's attacked you on that front. You do have tax cuts that you've talked about for seniors.
Sen. OBAMA: Right.
HARWOOD: For homeowners and others.
Sen. OBAMA: Right.
HARWOOD: But you would, on net, raise taxes to improve the level of fiscal responsibilities you've talked about.
Sen. OBAMA: Right.
HARWOOD: Higher taxes for capital gains, for dividends, for carried interest, for high-income Americans. You embraced a lot of those policies when the economy was stronger than it is now.
Sen. OBAMA: Yeah, yeah.
HARWOOD: Even if you think those are a good idea substantively, is there reason, because of the situation we're in, to delay the implementation of any of those to avoid having a negative effect on job creation?
Sen. OBAMA: Well, there's no doubt that any policies I implement are going to be based on the economic situation that I inherit from George Bush. You know, one of the things I believe in is a manager of the economy, is you should base your decisions on facts and not ideology. And so even if I'm predisposed to a certain set of policies, I'm going to want and see what's going on at the moment and ask a wide range of viewpoints from situations...
HARWOOD: So you can see the possibility of deferring some of those?
Sen. OBAMA: Some of those you could possibly defer. But I think the basic principle of restoring fairness to our economy and encouraging bottom up economic growth is important. So for--you know, here's what we know. We know that over the last decade or so, that more than half of the economic growth has been captured by the top 1 percent of US citizens. That means the other 99 percent have seen their effective incomes go down. That is not a recipe for long-term economic growth. And so if we, in fact, are putting more money into the pockets of the middle class, if consumers feel some confidence because their bills are actually adding up at the end of the month and they can pay for them, that's going to, over the long term, be good for business, that's going to be good for the markets, that's going to be good for Wall Street.
And I think that we've had an economy that's been out of balance for too long. So the general principle of raising taxes on higher income Americans, like myself, and providing relief to those who haven't benefitted as much from this new global economy, I think, is a sound one. And keep in mind on all of these proposals, that what I've said is let's make sure that we define the well off, so we're not hitting the middle class. You know, I generally define well off as people who are making $250,000 a year or more, and that means, for example if we raise the capital gains tax, I would exempt people who are essentially small investors and really capture those who have done very, very well over the last two decades.
HARWOOD: On your general approach to business, you have criticized trade deals as not in the interests of American workers. You've talked about Wall Street speculators tricking people out of their homes, you've hit corporations for outsourcing. Are you a populist, and do you have any concern that your agenda might end up doing some damage to a US and global economic system that, though it's struggling now, has delivered a lot of benefits to a lot of people over the last 25 years?
Sen. OBAMA: Look. I am a pro-growth, free market guy. I love the market. I think it is the best invention to allocate resources and produce enormous prosperity for America or the world that's ever been designed. As I said before, I think what's happened is that the market has gotten out of balance. This isn't the first time it happened. It happens often, particularly during periods of great technological and economic change. It happened, you know, when we moved from farms to factories. It happened when we shifted from factories to the information age. We're still in the process of adapting to this new environment. And there are those of us who have done very well in this new global economy. A lot of dislocations have taken place.
And all I've said is let's make sure that our economy takes into account not just the winners but also the losers in the economy. Let's make sure that the burdens and benefits of globalization are fairly distributed. Let's make sure that we are investing in what's required for long-term growth. And I don't think there's any market advocate who would suggest that if our schools are underperforming, if our investment in basic science and research is declining, if young people can't afford to go to college, if our health-care system is broken and more expensive delivering less in terms of quality care than any other advanced nation, that those are good things for the market, then, you know, we should go ahead and make those investments, make those changes, to make this marketplace work better. That's my basic philosophy.
And on trade deals, I believe in free trade. And as somebody who lived overseas, who has family overseas, I've seen what's happened in terms of rising living standards around the globe. And that's a good thing for America, it's good for our national security. But what I also believe is that if trade agreements are written only with corporate profits and Wall Street in mind and not with its possible effects on Main Street, then we're only seeing half of the equation, and we've got to take those into account.
HARWOOD: A lot of people look at the housing mess and say, what happened. When you think about it, is it principally a problem of speculators, or do you think that government may have played a role by elevating the goal of homeownership too broadly beyond the capacity of large numbers of people to handle it?
Sen. OBAMA: Well, I think that there were a combination of forces. Obviously, we've had very low interest rates for a long time, and rising, as a consequence, rising housing prices for a long time, which made people feel that housing prices can only go up and only--and never go down. And then that made everybody, consumers, lenders, all feel a little bit too complacent. We had a fundamental failure, though, in government regulation, and I think that was a real problem. We had a government that was not paying attention to loans that were being made on assets that were shaky. You know, you had mortgage lenders engaging in practices that were not sound but because they could immediately sell off those loans and bundle them, and you know, nobody was minding the store. The government should have, at a certain point, stepped in and said, `We've got to tighten up these lending standards or we're going to be building a house of cards.' And that sort of transparency and accountability in the marketplace, that's not anti-market, that's pro-market. One of the things that's always worked for us, it's been one of our competitive advantages, is people can trust that if they invest in our markets, that they know what they're getting. And in the housing market in this situation, that--our government didn't do its job.
HARWOOD: Speaking of regulation, some people have called for a broad rewrite of the way the financial system is regulated.
Sen. OBAMA: Right.
HARWOOD: Including a shift toward oversight by the Federal Reserve rather than the SEC, which some have criticized for not having been up to the job.
Sen. OBAMA: Right.
HARWOOD: Do you agree with that, and do you see a much larger role for the Fed in overseeing the financial system?
Sen. OBAMA: I'm not sure it's a larger role. I think that we have to be smarter. We've got a lot of agencies who were originally formed for--in one market environment. That market environment has changed entirely. We now have a global economic system. There are a lot of financial instruments that are falling through the cracks because nobody's sure who has jurisdiction. In some cases, it would probably be possible for us to shift from very strict rules to a more standards based system when it came to regulating certain financial instruments. In some situations, we need to increase disclosure and transparency.
So what I want to do is bring together experts in these fields and say, `What's going to work to make sure that people know what they're getting, that those who are investing in the marketplace can have confidence and for example, the rating agencies, which appear to have been engaging in some, at least potential conflicts of interest, particularly around the housing market, and let's figure out which agencies are best equipped, actually, to carry these out. And it may be that, you know, we consolidate some agencies, give them a clearer mandate. If we do that, then I think that we can continue to have the best financial markets in the world. But we have to understand, we've got some fierce competition. London has done some very smart things, and as a consequence, are encroaching on a lot of what has traditionally been the province of Wall Street.
HARWOOD: Two more questions and I'll let you go. The first is one thing you share in common with John McCain is that neither of you have a lot of experience in the private sector or experience managing large organizations. What are you going to do to prepare yourself to manage the US economy to satisfy yourself that you're ready...
Sen. OBAMA: Right.
HARWOOD: ...and to also reassure the American people that you're up to that job?
Sen. OBAMA: Well, you know, I think that the president's role is to bring the best people together and work as a team to manage the economy. This economy is too big for any one person to wrap their heads around. But, you know, if you look at the people who have endorsed by candidacy, who I seek counsel and advice from, there's some pretty able folks. Paul Volcker, Warren Buffett, you know, there are CEOs from all across the country who feel confident about the kind of economic team that I've put together. So, you know, I would say that by the time voters go into the polling place in November, they will see that the kind of economic team that we have is as good as they've ever seen. And these are going to be people who have worked with me, who have worked with each other, are working well as a team. And the overarching philosophy is going to be how do we create a pro-growth environment, how we create opportunity, how do we expand innovation, but how do we make sure that economic growth is happening from the bottom up, and that ordinary Americans can continue to live out their dreams.
HARWOOD: Let me close with a question about the markets. A lot of Americans, of course, own stock, as you know.
Sen. OBAMA: Right.
HARWOOD: More than ever have in the past. It's been a very up and down year on Wall Street. Dollar's weak. Do you think investors are right to be nervous right now?
Sen. OBAMA: Well, I think it would be naive to say that we don't have some big problems in the economy. And I think investors understand that. I think if we can get the housing market stabilized, and people have a sense that all the excesses have been wrung out of the economy, and we've hit bottom, then we can start building confidence back up. There's still an awful lot of good things about this economy. We've still got the most entrepreneurial, most creative, most dynamic people involved in the economy, We've got terrific workers who understand that we're in a more competitive environment. They want to work hard. We've still got the best universities in the world. We've got a lot of assets to build off of. And we've still got the best financial system in the world, and, you know, capital is generally available to finance good ideas. And there's a lot or risk-taking in America. So if you combine all those factors, we have reason to be optimistic. But frankly, we've got to get a Washington that sufficiently attuned to this new global economy and stops bickering for awhile, gets some fundamentals right, and if we do that, then I'm confident that over the long term, the prospects for the United States are very bright.
HARWOOD: Senator, thanks so much. Appreciate it.
Sen. OBAMA: I enjoyed it. Thank you.
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