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Raw Transcript of Furman, Holtz-Eakin Debate

Holtz-Eakin: Well, i'd say that americans are disappointed with the bush administration after eight years but they're equally troubled by a congress that cannot seem to take on great problems and what john mccain believes is it's time to have an effective government, one that will have a comprehensive energy strategy, take control of our future. Let's have a government that uses medicare and as a leverage to transform the health care sector so it's not a burden on small businesses, doesn't chew into everyone's wages. The let's take --

THE SAME POLICY ON TAXES, REGULATION, ROLE OF GOVERNMENT?

Holtz-Eakin: Those are big government roles and that's a place the government has failed for 30 years we have failed to take control in a bipartisan way over energy future. We used to import 30%. Now it's 60%. Time to change that. It is important to keep taxes low. There's no reason to raise taxes unnecessarily. It harms the economy. Even my opponent has acknowledged that to you. So that's still in place, a commitment to low taxes. Actually spending the taxpayers' money wisely, having an energy future we can count on. Those are big roles for the government.

JASON, LET ME CRY A MACRO QUESTION FOR YOU. I RECOGNIZE THAT BARACK OBAMA WANTS TO CUT TAXES FOR MOST AMERICANS. PEOPLE BELOW $250,000. HOWEVER, ON NET HIS PROPOSALS WOULD RAISE TAXES. $262 BILLION OVER TEN YEARS. IF YOU'VE GOT A SLOWING ECONOMY THAT IS SHEDDING JOBS, DOESN'T ECONOMICS 101 TELL YOU YOU DON'T RAISE TAXES ON NET?

Furman: we have a net tax cut. The tax policy center doesn't include the tax credit that senator obama has proposed to help make health care more affordable. And when you include those in it, those total more than the number you just said and make the proposal as a whole in that tax cut. But, more importantly, we're having a debate, and doug and i will have it over the next half an hour, about what we want to do with our country next year and we have very different economic philosophies and hopefully your viewers will get to understand those. But in the meantime we've lost 438,000 jobs in the last six months. We would be in much worse shape if we hadn't had that first stimulus bill in february, something barack obama called for as early as the beginning of january. But a bunch of that stimulus was taken away by the increase in oil prices that no one anticipated which is why we really need another round, $50 billion of stimulus, rebates in the pockets of families that they can use to help pay their energy costs, money directly to them so they know for sure they're getting it plus foreclosure relief to deal with our housing situation. Fiscal relief. What we need to be doing this year is putting more money in the pockets of families and not having doug and i debate it and john mccain and barack obama debate it but actually doing it because we just can't wait six more months to stimulate the economy.

DOUG, WAS THE FACT THAT BARACK OBAMA WAS QUICK OUT OF THE GATE WITH A SUPPORTING A STIMULUS WHICH PRESIDENT BUSH AND THE CONGRESS EVENTUALLY CAME AROUND TO, JOHN McCAIN WAS NOT IN FAVOR OF STIMULUS. IN ONE OF THE DEBATES HE SAID -- WHEN HE WAS ASKED WHAT HE WOULD DO, HE SAID CUT SPENDING WHICH SOUNDS LIKE THE OPPOSITE OF STIMULUS. DOES THAT TELL US BARACK OBAMA HAS BETTER INSTINCTS ON THE ECONOMY THAN JOHN McCAIN?

Holtz-Eakin: No, john mccain voted for the stimulus package. Senator obama did not. John mccain has been watching the evolution of the economy over the past year and a half and, no, our problems are in housing. He proposed a plan where you could get a refinance, a workout on your mortgage, fha fixed rate mortgage if you have the financial wherewithal to be in the home. Our problems are with energy. We can lower the energy costs in the united states. One people don't talk enough about is natural gas. The home heating season is going to be hard on families. That's a domestic market. We don't have the big international market like oil. We need to expand domestic production and take policies that strengthen the dollar. That would have an impact on t dollar and translate into things at the pump. The ones that threaten international investors.

AND THIS RELATES TO THE REBATE PERHAPS. WAL-MART HAD THESE REALLY GOOD NUMBERS. 5.8%. THE STREET WAS ONLY LOOKING FOR A GAIN OF.3.8%.

JASON, THAT'S CLOSE TO A NEW HIGH. THERE'S A PRODUCER, NOT JASON, I HAVE TWO GOING HERE. THAT IS CLOSE TO A 52 HAD BEEN WEEK HIGH AND IF YOU WERE WATCHING SOME OF THE COMMENTS AT THE BOTTOM THAT WE RAN, ENTERTAINMENT SALES WERE STRONG.

THEY WENT OUT AND BOUGHT BIG SCREEN TVs.

I HEARD IT WENT TO PAY DOWN DEBT AND TO PAY OFF CREDIT CARDS SO IT WASN'T THAT STIMULATIVE. I DON'T KNOW. I GUESS SOME OF IT'S FOUND ITS WAY INTO DVD SALES AT WAL-MART, I GUESS.

Holtz-Eakin: Evidently. One of the remarkable parts of that episode is the tax relief was targeted. It had included relief for families, investment incentives, and there wasn't a lot of wasteful spending in it. That's the recipe the senator wanted to see. He's open to watching the economy. If there are more measures needed, want to do it and do it quickly. We have a housing bill in congress.

ARE YOU SAYING HE MIGHT SUPPORT THAT $50 BILLION ADDITIONAL STIMULUS BARACK OBAMA IS CALLING FOR?

Holtz-Eakin: There was no reason to be against stronger economic growth. What we've seen in this year is small businesses says they created 233,000 jobs in this economy. Let's take care of the environment for those small businesses, make sure their markets are strong. Don't burden them with health care costs, energy costs, taxes, regulation. That's a recipe to get through and have strong growth.

TO THAT POINT IF YOU SAW CONSUMER SPENDING DROP OFF DRASTICALLY. IF YOU SAW SAME STORE SALES DROP OFF DRASTICALLY, WOULD YOUR CANDIDATE RECONSIDER?

Holtz-Eakin: Oh, he certainly is always keeping an eye on the economy and if that's the right thing to do and if we can do it the way last time, not a lot of wasteful spending, done quickly by washington standards, that's a recipe for good support.

JASON, WE HAVE HAD BUSINESS LEADERS -- SOME PRETTY SMART ONES, THAT WHEN WE ASKED THE SINGLE -- THE THING THAT THEY FEAR MOST, THE MOST IMPORTANT THING WE DO TO TRY TO STEM THIS RECESSION IS TO KEEP THE TAX CUTS. ARE YOU TYING THE BUSH TAX CUTS TO THE MALAISE WE'RE IN RIGHT NOW IN TERMS OF WHAT'S HAPPENING IN THE JOB MARKET BECAUSE MANY WOULD SAY IT WAS DUE TO A HOUSING BUBBLE AND CREDIT BUBBLE THAT WAS REALLY GLOBAL AND THAT THE TAX CUTS ACTUALLY HELPED US WITH THE LAST RECESSION TO COME OUT OF THAT SOONER THAN WE'D HAVE THOUGHT. ARE YOU SURE THE TAX CUTS WERE HELPFUL TO THE ECONOMIC SITUATION?

Furman: First of all, for the vast majority, almost all small businesses, they would keep the tax cuts under bush and a lot of them -- they've gotten the last 7 1/2 years and a lot of them would get more tax cuts, tax cuts for capital gains, tax cuts for a portion of the employees side of the payroll tax and people reduceing health costs with a program that makes significant upfront investments as well as reensuring to make that actually a reality for those small businesses. But to come back to your question what our problem is with the last 7 1/2 years is really the fiscal mismanagement. If you look at the laws signed by president bush, not what's happened in the economy, up, down, what have you, just the laws signed by him, the total cost over the last eight years according to the congressional budget office is exactly $4 thrillion. That's iraq, tax cuts, medicare prescription drug benefits, everything else he's signed. We think that does put the economy in a much more vulnerable position than it needs to be and it's something that we need to turn around and change as we move forward.

NOW, JASON, YOU DON'T WANT TO GET RID OF THAT DRUG BENEFIT, DO YOU?

Furman: Absolutely not. But what we do want to do as we strengthen medicare we also want to pay for the ways in which we strengthen medicare and a very good example of that was yesterday but john mccain and barack obama agreed that you shouldn't be cutting physician payments within medicare. The question -- the debate between them is whether you should pay for it and barack obama cast a vote for it.

Holtz-Eakin: You proposed to fill in the doughnut hole in medicare you're going to put $60 billion in the government's books. You have a new government insurance program when medicare's already broke and you're going to build a big health bureaucracy.

Furman: Doug, we have a very simple commitment which is within medicare we're going to pay for everything we do. We believe we can reform medicare and the vote we cast yesterday was when it came down to it --

Holtz-Eakin: That spent more.

Furman: Something That Is --

Holtz-Eakin: Right?

Furman: A substantial number, when it came down to casting a vote to improve medicare without increasing the cost for the government as a whole by reforming it, by taking some of the private fee for service, don't have to have networks of doctors, one of the most effective ways, we showed you can cast a vote to improve medicare without increasing total spending.

Holtz-Eakin: I want to understand this. What i hear your candidate saying is everyone should have health insurance as good as congress and now what i hear you saying, we only have a half an hour, what he's now saying is everyone should be covered. Well, at 50 million uninsured and $12,000 a possible that's $600 billion. Where's the money, jason?

GUYS, WE'RE GOING TO HAVE A SEPARATE DEBATE ON HEALTH CARE. I WANT TO PLAY A SOUND BITE. WE HAVE JOHN McCAIN ON HOUSING AND I'LL TALK TO YOU BOTH ABOUT IT ON THE OTHER SIDE.

AS LATE AS DECEMBER, JOHN McCAIN TOLD A UP IN NEWSPAPER IN NEW HAMPSHIRE HE'D LIKE TO OFFER A SUGGESTION FOR THE HEALTH CARE CRISIS BUT HE JUST DIDN'T HAVE ONE. IT TOOK HIM THREE DIFFERENT TRIES TO FIGURE IT OUT. AND IN THE END HIS PLAN DOES NOTHING TO HELP 1.5 MILLION HOMEOWNERS WHO ARE FACING FORECLOSURE. EVEN AS HE SUPPORTED SPENDING BILLIONS TO BAIL OUT WALL STREET.

ALL RIGHT. NOW JOHN McCAIN, THE SOUND BITE WE MIGHT PLAY LATER ON, JOHN McCAIN WAS TALKING ABOUT HOW HE DOESN'T THINK WE SHOULD BAIL OUT SPECULATORS BUT SHOULD HELP SOME PEOPLE WHO DO NEED HELP WHOSE MORTGAGES ARE UNDERWATER. IN THE END JOHN McCAIN AND CHA SEUNG BAEK GOT TO THE SAME PLACE CON ACCEPT ACTUALLY SAYING SOME LENDERS NEED TO TAKE A HAIRCUT AND TO WRITE DOWN MORTGAGES FOR PEOPLE WHO ARE UNDERWATER. THE DIFFERENCE IS BARACK OBAMA WOULD HELP A LOT MORE PEOPLE. JOHN McCAIN FEWER PEOPLE. JASON, IF FISCAL MANAGEMENT IS THE ISSUE, WHY ISN'T JOHN McCAIN'S APPROACH THE MORE PRUDENT APPROACH TO SAY, YES, WE'LL HELP SOME PEOPLE BUT WE'RE NOT GOING TO OPEN THE SPIGOT AND BAIL OUT THOSE WHO ARE ON THE MARGINS. WHAT'S THE ANSWER TO THAT?

Furman: I think we can't afford not to do something about our housing market. I think it's the main cause of the financial turmoil that we're seeing in this country. It's the main cause if you're worried about what low interest rates do to inflation. If you're worried about the dollar, worried about any of these things you need to go to the core of the problem. Let's look at what we've called for. Contrasted $4 trillion. It's a bad idea to add to the deficit versus a one-time $10 billion investment in helping families who through no fault of their own are in a position that no one anticipated. It's a once in a century occurrence in housing and critical investment for our economy as well.

DOUG, WHAT DO YOU SAY?

Something we can afford to do.

John mccain came up with his own plan. Barack obama has supported whatever is going through the congress.

That's not true.

Holtz-Eakin: The same characteristics with the difference that it is targeted on homeowners. The homeowner says i can be in this home. I want to stay in this home. They then approach the government. You do a workout. You have to take a haircut. There's no way around the economics on that. And you affect about 300,000, 400,000 people. We get the right people, these broader pictures say take the worst loans i've got and we'll hold on to the things that have any hope. It's a matter of making government effective, targeting the relief. The relief is necessary. There's no question about that. And that's what john mccain has chosen to do.

AND, JASON IS OBAMA TAKING THE POSITION IT'S MORE ECONOMICALLY POPULAR? DO YOU HAVE PEOPLE WHO ARE GOING TO HELP WITH THAT?

Furman: Absolutely not. Barack obama has been a leader, two years ago on predator lending and stop the practice that is got us into this problem in the first place before we were in the situation we're in. Last year sending a letter to secretary paulson on the topic and last fall on the campaign trail outlining a housing proposal, strengthening that proposal again in december or january. When chris dodd came out with his approach, absolutely barack obama supported it because that was something moving through congress and it's a good way to proceed on housing but the compromise we have in the senate isn't enough. We want to go forward on it with some of the ideas he's been outlining the last two years before anyone else was really focused on this and understood how big a problem it was for our economy economy.

OKAY. GENTLEMEN, WE HAVE MUCH MORE TO COME. WE ARE GOING TO CONTINUE THIS DEBATE RIGHT AFTER THE BREAK. WE'LL BE TALKING MORE ABOUT THE NATION'S HOUSING SITUATION, MORE ABOUT JOBS. WE'LL ALSO TAKE A LOOK AT WAL-MART'S SHARES PUSHING THE DOW FUTURES HIGHER AFTER THE DOW COMPONENT IS ACTUALLY RAISING ODAY.

THIS IS MAYBE A BETTER POLL THAN A GALLUP OR A -- HOW DO YOU SAY THAT? QUINN QUINNPIAC?

HIS CHANCES ARE INCREASING 18% WHILE JOHN McCAIN'S ODDS HAVE FALLEN BY 22%. IT'S NOT A SCIENTIFIC POLL AND IT'S NOT THE MOST LIQUID BUT PEOPLE DO HAVE MONEY IN THE GAME WHICH PEOPLE TALK TO GALLUP OR WHATEVER DON'T HAVE MONEY. THAT MAY MAKE A DIFFERENCE. IF YOU'RE JUST TUNING IN, THIS IS A SPECIAL EDITION OF "SQUAWK BOX," YOUR MONEY, YOUR VOTE. THE SQUAWK DEBATE, THE PRESIDENTIAL CANDIDATES' SENIOR ADVISERS SQUARING OFF ON JOBS AND THE ECONOMY. IT'S A FIVE-PART SERIES OVER THE NEXT FIVE WEEKS PROFILING WHERE THE CANDIDATES STAND ON YOUR MONEY. DOUGLAS HOLTZ-EAKIN IS HERE AND JASON FUHRMAN FOR BARACK OBAMA AND MAYBE, MORE IMPORTANTLY, WE HAVE JOHN HARWOOD HERE, TOO, ALL THE WAY UP FROM WASHINGTON, WHICH IS GREAT. I THINK WE'RE GOING TO START WITH A SOT YOU RAN.

I WANT TO TEE UP THE NEXT DEBATE, A DISCUSSION ABOUT TAXES, BUSINESS TAXES, BUT IT'S ALSO ABOUT WALL STREET AND THE RELATIONSHIP TO WASHINGTON. LET'S PLAY JOHN McCAIN ON BUSINESS TAXES.

WE CAN NO LONGER AFFORD NOSTALGIA FOR PASTIMES WHEN AMERICAN BUSINESS FACED LITTLE SERIOUS COMPETITION IN THE WORLD. I PROPOSE TO REDUCE THE BUSINESS TAX RATE FROM 35% TO 25%.

JASON, YOUR CANDIDATE IN AN INTERVIEW SAID THAT IF WE CAN CUT SOME CORPORATE LOOPHOLES THAT MAYBE WE SHOULD CUT THE CORPORATE TAX RATES. HE'S OPEN TO THAT. IS THAT A CONCESSION BY BARACK OBAMA THAT ON THIS BASIC POINT JOHN McCAIN'S RIGHT AND THE ONLY QUESTION IS HOW YOU PAY FOR IT?

Furman: It's not a concession of anything. This is what he, barack obama, believes. And we basically have two problems in our corporate tax system. Number one, it's incredibly complicate kd. It's filled with loopholes. It has enormous numbers of distortion and just to give you one example, if you finance your corporate investment through debt, you pay a negative 6% tax rate. You get a subsidy. You finance it through equity, pay 36% tax rate. Very different tax rates on corporate form and noncorporate form if you're in manufacturing or mining. All of these tax rates are all over the place. That creates distortion in the decisions that businesses make and wastes time to try to sort through that and make their investments in a way that minimizes their taxes rather than maximizes productivity. So what barack obama wants to do is harmonize the tax rates on different forms of investment, on different ways of making the investment, simplify the corporate tax code, cut through a lot of that clutter and if we do all of that, then absolutely we can put some of that money back into lowering the rates, creating more incentives for companies to create jobs in america through a better corporate tax cut. If all you do is cut the corporate rate, you end up costing over a trillion dollars. You hurt the economy with the debt and you don't do anything about the real underlying distortion in our corporate tax code creating the problems for our businesses.

DOES THAT MAKE BARACK OBAMA THE FRIEND OF BUSINESS IN THIS RACE? YOU LOOK AT THE DONATIONS, IT LOOKS LIKE BUSINESSES SUPPORTED BARACK OBAMA PRETTY STRONGLY.

Holtz-Eakin: Barack obama is not the friend of business. John mccain has a strategy to make this economy grow. It involves keeping the top rate at 35%, keeping the top rate on dividends and capital gains at 15%. No tax cut there but let's not damage the economy. Change the corporate tax structure. Let's have investment incentives. A permanent r&d credit done on work in the united states. For those jobs that stay in america, that have health and retirement benefits. And that's a package that produces 2 million more jobs than barack obama. $6,000 per household. Growth, strong dollar, take care of business. I'm mystified by jason's comments on philosophy. He has a set of tax proposals that have the biggest distortions i've ever seen. Your taxes go way up. Under the barack obama --

Furman: That's not true.

Holtz-Eakin: You make $40,000 --

Furman: Doug --

Holtz-Eakin: Let me finish. If you exempt people under $ 50,000 and not over --

Furman: We're talking about taking the top two rates and restoring them to where they were under clinton.

Holtz-Eakin: Exempt someone under $250,000, how does it work?

Furman: It's simple. You have a new capital gains rate.

Holtz-Eakin: So it goes up?

Furman: Be a at the margin --

Holtz-Eakin: It's zero for a startup. Something else for someone above. Look at what you've done -- look, you have someone making $40,000 -- that guy has a 35% margin rate like the top rate now. You go to $45,000, that person has a top rate that's $42. You go to $115,000, they're up at almost 45%. There's all sorts of distortions in your proposals and no incentive to move up. This is all mobility. Our big problem in america is having people move ahead and your tax policies erect wall after wall for people who want to make themselves better off.

Furman: I think moving ahead is the right point. One of the most effective ways to move ahead, and you want to look across the income spectrum. Most of the most effective ways to move ahead is something ronald reagan put into the forum of today, the earned income tax credit. Barack obama has chosen to expand that, bring new people into the labor force and reward their work. For other families they're not getting rewarded for the work they do today. This is a pro work ib sentive. It encourages them to work and to get jobs but does it from the bottom up. It puts money in the pacts of people who drive the economy.

WE'RE DOING THIS NEXT WEEK. THE SAME TWO GUYS?

WE'RE GOING TO TRY TO GET JASON TO HOP ON A PLANE.

AND, DOUG, THANKS TO BOTH OF YOU. JASON, NEXT TIME I HOPE YOU'RE HERE IN THE STUDIO THOUGH YOU CAN'T REALLY TELL ON THE TWO SHOTS. LIGHTING IS GOOD IN BOTH PLACES. THE DEBATE -- THANK GOD FOR ME AND SOME PEOPLE WHO HAVE POOR MAKEUP ARTISTS. THE DEBATE SERIES FOCUSES ON TAXES NEXT WEEK. WE'D LIKE TO POINT OUT WE HAVE AN OPEN INVITATION TO BARACK OBAMA AND JOHN McCAIN. IF YOU GUYS WANT TO TALK ECONOMY, IT'S PROBABLY THE BEST PLACE TO DO IT. AN AUDIENCE THAT YOU DEFINITELY ARE GOING TO WANT. NOT JUST WHEN THEY VOTE BUT FOR FUND-RAISING AS WELL. YOU HAVE AN OPEN INVITATION.

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