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Beth Goldman
Nancy Pelosi



Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Speaker of the House Nancy Pelosi airing tonight on CNBC’s “Prosperity and Power: Making Washington Work for You” at 8PM ET. Excerpts of the interview will run during CNBC’s Business Day programming today.

All references must be sourced to CNBC.

JOHN HARWOOD: Madam speaker, thanks so much for being with us.

SPEAKER PELOSI: My pleasure, congratulations to you on your new show.

JOHN HARWOOD: When we sat down in December in Copenhagen, the economy was weak, the voters were unhappy. You said: We spent all year baking the pie; now we're going to sell the pie. Looking at the polls now, sales job doesn't seem to be going so well. Why not?

SPEAKER PELOSI: Well, I think if you look at the polls in the individual districts, it's going better than what the Washington scene may decide to present as the picture. Our members have come back from the break. Over 2,000 town meetings or other public events about promoting Social Security, celebrating 75th anniversary, promoting tax cuts to the middle class and making it in America to have America be a great manufacturing giant it always has been and to enable people to make it in America. They've gotten a very positive response, fighting for the middle class, and they are the best salesperson in each of their districts, and that's where it counts.

JOHN HARWOOD: So unemployment is higher than anyone expected it to be at this point. Growth is slower. Do you accept any responsibility for the fact that maybe your recipe was off?

SPEAKER PELOSI: No, in the House of Representatives we passed job fair after job after job-- and the senators and everybody who held up these job -- that's really unfortunate, because the initiatives were necessary. I am pleased that the recovery package that Obama put forth saved or created 6.3 million jobs and other initiatives that the federal government took presented the loss of 8 and a half million more jobs. And the employment rate they tell us would be 14 and a half percent without these federal interventions. And don't take it from me. That's what the economists tell us. I think it important to note that in the first eight months of 2010, more private sector jobs have been created than in the eight years in the Bush administration. We had a big hole to dig our way out of and deep recession that the Bush administration took us in. We welcomed the challenge, and to keep momentum going in a positive direction.

JOHN HARWOOD: Let me as you about that. Do you actually make the case? Are you arguing that all the economic problems we face are the problems of George W. Bush --But they have to have opportunity. And eight years in the Bush administration, tax cuts at the high-end, two wars unpaid for, prescription drug bill that gave away the store of the pharmaceutical industry, took us deeply into debt on the fiscal side. On the recession side, the policies took us into deep recession. And, in fact, if we had not won re-election and intervened, we would be in a depression if those policies had continued. That was then, it is now, moving forward to fight for the middle class, and then to create prosperity where many more people participate in prosperity of our country instead of a system where privatize the gain, nationalize the risk, send the bill to the taxpayer if all of this doesn't work. I think we're very proud of what we have done on Wall Street reform. It's been decades since we've had such serious Wall Street reform. Very important. But it's also never before in history that we've had the consumer protections that are contained in that legislation, not to paint everyone with the same brush, but that recklessness on Wall Street, the in the industry, that can't happen again.

JOHN HARWOOD: You mentioned consumer protection. Are you happy with the position the White House is moving to, to take Elizabeth Warren, make her not the actual director of the agency but avoid a confirmation battle and make her the person setting up the agency, as assistant to the President?

SPEAKER PELOSI: Are you making news? I wasn't aware that had been announced by the White House. I don't know that that is the case. But I do know that Elizabeth Warren is a great consumer protection person. She's a professor at Harvard; she understands the issues and has a balanced view of what needs to be done, although there will be those who will paint her another way. But she has been a reasonable -- helping us, in fact on the Wall Street reform so that we achieve what we wanted to achieve without going too far in the other direction.

JOHN HARWOOD: But if the administration sidesteps a confirmation battle, is that a smart way to proceed?

SPEAKER PELOSI: I don't like to comment on something the White House may or may not do. All I can attest to is Elizabeth Warren would be a great appointment in anything that relates to. Protecting consumers in our country. Those who are fighting her nomination who are unhappy about the fact that that the playing field is being leveled more in favor than before for America's consumers.

JOHN HARWOOD: You mentioned a moment ago that the success of the economy flows from the American people. Let me ask you about the down side as well. I was talking to a Democrat economist, somebody that you worked with who said: Look, the reality is we've been living off beyond our means. People have been living off consumption off the value of their homes. We've got to learn to export besh and live with higher taxes, lower entitlements; that's the only way we can get ourselves together fiscally. Is that right?

SPEAKER PELOSI: Well, the President established a commission to look at all of these issues. One thing for sure, as you know, I'm a mother and grandmother many times over, and I don't want to be handing any bills to my children, personally or public. So we must address the deficit. We have to reduce spending. We have to do so in a way that honors the priorities of our country; that we make investments for the future, not give tax cuts to the high-end in our society so we can be further indebted to China, and the tax cut at the high-end that does not create jobs and only increases the deficit. So we have to have those priorities debate as we try to lower the deficit or reduce the deficit, lower taxes and create jobs.

JOHN HARWOOD: If we do that, though, doesn't that mean the American people are going to have to live with less, and that they're going to be in a bad mood not just in this election, but form elections heading into the future?

SPEAKER PELOSI: Well, I think they're in a bad mood because of the unemployment rate in our country, as I say, would be 14 and a half percent absent the interventions that the federal government has made since President Obama became President and Congress has acted upon his agenda. So the public is in a bad mood because of the jobs issue. But no, I think everybody has recognized that there has to be a -- there has to be a nest egg and everybody scrambled that egg already, as they have responded to the deep recession that we were in coming out of the last eight years.

JOHN HARWOOD: What role do you think the relationship between Washington and the business community has in effect right now that business is sitting on a lot of cash, not investment?

JOHN HARWOOD: Well, let me say that I think it is an important relationship, a relationship between Washington and the business community. The business community, if you're a job creator, wealth creator, helps us with innovation so we can be number one competitively, internationally. The public sector has its role to educate a workforce for the 21st Century, to provide opportunity for product to get to market and back or whatever. The goal of the public sector is well-known: the court system, the transportation system and the rest. And so we have to recognize what both contribute to the economic well-being of our country. We do not want to support a system where we create tax incentives for businesses to be created and turn an idea into a product and then have the scaling up of the workforce overseas. So we have to give incentives to that workforce.

JOHN HARWOOD: You say the relationship with business is important. I think a lot of people watching this interview think you just don't like the business community very much.

SPEAKER PELOSI: No, actually, if I were not in politics, I would probably be in the business community. No, I love the markets, since I was a teenager, I'm fascinated by it and -- it's a force. And our economy. I don't know if you're thinking of someone else --

JOHN HARWOOD: Thinking of someone --

SPEAKER PELOSI: For an asset that has held for a short period of time. Take that all the way down. The -- then I think we have to address and our tax code and all of these on the table and certainly among them is the corporate rate. But again, fighting for the new policy so we don't increase the deficit when we do so.

JOHN HARWOOD: Obviously there is a huge controversy.

SPEAKER PELOSI: On that subject. People need to pay their taxes too. If you look at some of the taxes that corporate America pays, it's stunning to see.

JOHN HARWOOD: By the way, you've consistently mentioned the need to improve manufacturing in the United States, make our products more competitive. Whose fault is it that American business is not as competitive in manufacturing as we used to be?

SPEAKER PELOSI: Well, it's eroded over time. We've eroded our manufacturing and industrial and technical base.

JOHN HARWOOD: Is that business's fault or government policy's fault?

SPEAKER PELOSI: Well, I think the scaling up overseas, the business system has contributed to it. But I have fought for this over 20 years I've been in the Congress to say that having a strong still manufacturing base is a national security issue. We have to be able to produce what we need to protect our country. And one strong piece of that industrial base is of course the auto industry, so when that was at risk it was important for it to survive because it's an important part of our industrial base. It's not about one company; it's about an industry in our country. But it is very important for us to make a decision as a country that we will make it in America. It doesn't need to be protectionist, it's a bad thing -- WTO compliant. But we have to be able to restore and strengthen our industrial base in our own country. It's a national security issue; it's an economic issue.

JOHN HARWOOD: As you know there's a lot of controversy about the value of China's currency. And there is a bill pending in the house that may or may not get a vote. Given the assessment of the administration about what's happened to the value of China's currency since they pledged to let it rise, do you support bringing that bill to the vote, and do you think that this Congress can pass legislation making it easier to challenge China in international trade forms?

SPEAKER PELOSI: I will respond in the following way: I certainly respect the enthusiasm that exists in the house and it's bipartisan. I got a letter today from over 100 members of Congress, a third of them Republicans, asking to bring the Currency Manipulation Bill to the floor. I wouldn't bring the bill to the floor unless it were WTO compliant, and that's what we're testing to see if it is. I think passing something like that in a bad place in the house would increase the leverage of the administration and in negotiation with the Chinese.

JOHN HARWOOD: Would you expect the bill found to be WTO compliant and have a vote?

SPEAKER PELOSI: I think it would have to be for us to bring. But there's another approach too, and they're not mutually exclusive. But another approach is to include -- in Super 301 to include currency as one of the elements that you judge as to whether you're going to have to take action against a country for violating the 301, exercise. So there are two approaches, they are not mutually exclusive. There is a brand on this Currency Manipulation Bill, the bill, Tim Ryan of Ohio. He has great support in a bipartisan way. 145 people are on the bill and people who were on the letter and not on the bill are enthusiastic about it. So we'll see. We just have to see to make a judgment. I'm waiting to hear from the Ways and Means Committee about the WTO compliance and what the other options are. But I think it would strengthen the President's hand. We have said over and over again we're going to do something about it. Even President Reagan way back when said we must, in our international trade, we have to all abide by the rules. At that time he was talking about Japan.

JOHN HARWOOD: Is your bottom-line expectation that the bill will be found compliant and it will come to a vote?

SPEAKER PELOSI: Well, it won't come to a vote unless it is compliant. Let me say it that way. And we won't make a judgment about it. We will take it one step at a time and weigh the options. It's not really so much about signing a bill into law; it's about giving the President most leverage, his administration most leverage and negotiating. Because it's important to know that the Currency Manipulation is a substitute to China's products coming into the United States. That's really an unfair trade practice. That is not WTO compliant.

JOHN HARWOOD: We talked about capital gains taxes and corporate income taxes. Obviously income tax rates are a huge controversy right now. You've made the case, the President's made the case that we're going to let those cuts expire for people at the top end. Let me play you a sound byte from a handyman, not a millionaire, and see what he says about the extension of tax cuts. (Video: The government thinks they can spend my money better than I can spend my money. (video).

JOHN HARWOOD: The handyman -- he's a handyman that we interviewed out in the country, as we interviewed. If people like that think the tax cuts ought to be extended across the board, what's the disconnect between your position and the and American people?

SPEAKER PELOSI: With all due respect to that and in preparations where I grew up in Congress, needs to say the pleural that is anecdote is not data, and the fact is that all the measures of public opinion show that if this is 50 some to 30 some, the American people support extending the tax cut for the middle class, not for the high-end and using money to reduce the deficit. That is very strong among many people in our country as measured in interpreters of public opinion. I'm sure we can have handymen on the other side of this, with all due respect to that gentleman, God bless him for his interest in public policy in this country. It's a wonderful thing in America, everybody thinks they're going to be a millionaire. The fact is, when we talk about this tax cut for the middle class, it's a tax cut for everyone. People making over $250,000 get the tax cut too, but it stops at 250.

JOHN HARWOOD: You mentioned millionaires. In your press conference a moment ago you said 80 percent of the benefits of the tax cuts go for millionaires.


JOHN HARWOOD: You also said that there would be discussion about thresholds. Could you see a compromise where you set the threshold at a million dollars, get 80 percent of the revenue and allow those top tax cuts to proceed for those earning between 250 and a million dollars?

SPEAKER PELOSI: Let me clarify what I said. I said there have been suggestions. People say if you listen to somebody else, then you must be open to a compromise. No, we always listen and we build consensus. We've said there are those who talked about a higher threshold. There are those that talked about indexing. There are those that talked about a different time period. There are many, not necessarily advocacy for it, but what about would you consider this? I myself, as speaker, have been thoroughly agnostic about it all, put it all on the table. And on the table, what we see is that the best thing for our economy for fighting for our cause is that tax cuts for the middle class are not extended beyond 250. Because to do that, we have to borrow again for the Chinese to subsidize a tax cut for those at the high-end because 80 percent of that tax cut goes to people making over 1 million dollars a year. I don't think I want to put my grandchildren and this country into debt to give a tax cut to that tune at that level.

JOHN HARWOOD: Last question before I let you go. You've served for many years with Mike Castle from Delaware. What did he tell you about the Republican party today, that Mike Castle was defeated in his primary by the Tea Party candidate, Christine O'Donnell, who's had members of her own party say very harsh things about her qualification for office.

SPEAKER PELOSI: Let me say that it's been an honor to call Mike Castle colleague. We disagree on almost all issues. That's why it's interesting. Voted -- by and large he's vote right down the Republican line. But he is a moderate. He is open, he does listen. I heard on election night complete misrepresentations of his positions that were put out there by his opponent. That's hard to fight unless you're really ready for it. So I think he's a great public servant. I'm sorry that he's not going to continue in the electoral process from the standpoint of the Democrats, but that's good news, because he's a formidable opponent.

JOHN HARWOOD: Well, kept saying to the Republican --

SPEAKER PELOSI: You know what? I don't make evaluations about the Republican party. What it says, though, about the campaigns is you have to be ready. And Democrats are ready to, once again, win this Congress to fight for the middle class, to take us in a new direction to preserve Social Security, tax cuts for the middle class, and to make it in America.

JOHN HARWOOD: Do you think the Republican party is being taken over in these primaries by people you would regard as kooks? Because some of you might have to serve with.

SPEAKER PELOSI: Well, I think we have to be more respectful of people who put themselves before the public. Win elections, win, nominations. So don't put me in a category of characterizing people any way. But the Republican party is going to have to come to its own terms about how they catered morning and night to the special interests, over the people's interests. And that's part of the reason I think -- I believe the tea party people have with the Republican party. It's part of the disagreement that the Democrats have with the Republicans. They're here for the people's interests, we're here for the special interests, and that is what separates us as parties.

JOHN HARWOOD: Madam Speaker, thank you so much for being with us.

SPEAKER PELOSI: My pleasure, congratulations and best wishes. Thank you, John.

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