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CNBC Exclusive: CNBC's Steve Liesman Sits Down with Three of the Bush Administrations Top Economic Advisors for CNBC's Exclusive White House Summit on CNBC's "Squawk on the Street" (Transcript Included)

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WHEN: Thursday, July 31st at 10AM ET
WHERE:CNBC's " Squawk on the Street "

Following is the unofficial transcript of the CNBC EXCLUSIVE White House Summit on CNBC's " Squawk on the Street ."

All references must be sourced to CNBC.

BURNETT : ALL RIGHT, RIGHT NOW, OUR SENIOR ECONOMICS REPORTER STEVE LIESMAN SITTING DOWN WITH THREE OF THE BUSH ADMINISTRATION'S TOP ECONOMIC ADVISORS FOR OUR "SQUAWK ON THE STREET" WHITE HOUSE ECONOMIC SUMMIT. TAKE IT AWAY, SIR STEVE.

LIESMAN :THANKS VERY MUCH, ERIN. YEAH, IT'S INTERESTING THAT WE ARE CELEBRATING THE ANNIVERSARY -- WE'RE NOT CELEBRATING, WE'RE MARKING, AS MARK SAID, THE ANNIVERSARY OF THE CREDIT CRUNCH HERE, AND WE HAVE THE TOP ECONOMIC TEAM HERE OF THE PRESIDENT. ON MY LEFT HERE, ED LAZEAR, CHAIRMAN OF THE COUNCIL OF ECONOMIC ADVISORS, JIM NUSSLE, THE NUMBERS, THE MONEY GUY, OFFICE OF THE BUDGET, AND THE DIRECTOR OF THE NATIONAL COUNCIL, KEITH HENNESSEY. LET ME START WITH YOU.THE GDP NUMBERS CAME OUT THIS MORNING.THEY WERE BETTER THAN THE FIRST QUARTER BUT NOT AS GOOD AS EXPECTED.GIVE US YOUR FIRST TAKE ON THOSE NUMBERS.

LAZEAR:WE'RE QUITE HAPPY WITH THE NUMBERS. THE 2%, ALMOST 2% GROWTH THAT WE GOT THIS QUARTER, IS, AS YOU MENTIONED, DOUBLE WHAT WE HAD IN THE FIRST QUARTER.IF YOU LOOK BACK TO WHERE WE WERE AT THE BEGINNING OF THIS QUARTER AND YOU LOOK AT CONSENSUS EXPECTATIONS, AT THAT TIME PEOPLE WERE TALKING ABOUT 0.1% GROWTH.THAT WAS AFTER THE STIMULUS PACKAGE HAD ALREADY BEEN ENACTED. SO, WE ARE UP WELL ABOVE THAT RIGHT NOW, AND I THINK WHAT THAT IS IS IT'S A SUGGESTION THAT THE ECONOMY IS RESILIENT EVEN IN THEFACE OF VERY STRONG SHOCK. WE'RE ALSO ENCOURAGED THAT EVIDENCE SUGGESTS THAT THE STIMULUS IS WORKING.WHAT WE'VE SEEN SO FAR IS PEOPLEARE SPENDING THE MONEY, BUT THERE'S ALSO MONEY LEFT TO BE SPENT, AND WE EXPECT THAT THAT WILL CONTINUE TO BOOST THE ECONOMY IN THE SUMMER QUARTER AND ALSO THROUGH THE NEXT QUARTER.

LIESMAN:JIM NUSSLE, DOES IT MEAN WE'VE AVOIDED RECESSION HERE?

NUSSLE:I THINK THE GOOD NEWS FOR ME, AT LEAST, IS THE GROWTH -- FIRSTOF ALL, GROWTH IS ALWAYS GOOD. GROWTH IS BETTER THAN THE NEGATIVE, THE PESSIMISM THAT WAS GOING ON THROUGHOUT THE MARKETPLACE, AND FOR THAT MATTER, THROUGHOUT WASHINGTON.GROWTH IS MUCH BETTER THAN A RECESSION.SO, I THINK WE HAVE AVOIDED A RECESSION, IT APPEARS, BUT THERE'S STILL CHALLENGES. WE KNOW THAT ENERGY IS A CHALLENGE, ONE THAT WE'RE CONSTANTLY WORKING ON, ONE THAT THE PRESIDENT HAS PUT OUT POLICYON, AND ONE THAT WE'RE CHALLENGING THE CONGRESS TO GET BUSY ON.

LIESMAN: LET'S COME BACK TO ENERGY, AN EXCELLENT TOPIC, BUT LET ME THROW IT TO KEITH. THERE'S A LOT OF PEOPLE THAT SAYIT WAS ALL KIND OF REBATE DRIVEN, THERE'S STUFF IN THERE THAT MAKES THEM NERVOUS. WHEN I LOOK AT THE WALL STREET FORECAST FOR THE COMING QUARTERS, 3Q AND 4Q, I SEE SOME GUYS AT 0 OR MINUS .5 FOR THE FOURTH QUARTER.IS THERE REASON INSIDE THE NUMBER TODAY TO CHEER?

HENNESSEY:I THINK THERE IS. I THINK YOU CONTINUE TO HAVE MODEST CONSUMPTION GROWTH. 70% OF THE ECONOMY IS THE CONSUMER.THAT'S A GOOD THING. YOU'VE STILL GOT STRONG EXPORT GROWTH. YOU CAN SEE THE GLASS AS HALF EMPTY OR HALF FULL.WE LIKE TO SEE IT AS HALF FULL. EDDIE'S POINT -- DESPITE THE SHOCKS WE'VE GOT, WE'RE STILL GROWING 2%. WANT TO TALK ABOUT THE SECOND HALF AND WHAT IT LOOKS LIKE?

LAZEAR:AGAIN, I WOULD SAY THAT AS WE WENT INTO EACH QUARTER THIS YEAR, THE PESSIMISTS SEEM TO HAVE HAD US HAVING NEGATIVE GROWTH GOING INTO RECESSION. THE OPTIMISTS SEEM TO HAVE WON THE DAY ON THIS ONE. I THINK THEY'VE BEEN CLOSER TO RIGHT THAN THE PESSIMISTS, AND WE DO BELIEVE THAT THE EFFECTS THAT WE'VE SEEN IN TERMS OF THE STIMULUS WILL CONTINUE.

LIESMAN:SO, THEY KEEP GIVING -- I DID SOME WORK ON THIS, MR. LAZEAR, AND WHAT I FOUND IS IN PREVIOUS STIMULUS WE'VE GIVEN OUT, IT DOES KEEP GOING. A LOT OF PEOPLE WERE COUNTING ON JUST ONE QUARTER, BUT BACK IN 2001, IT BUILT UP OVER THE SECOND AND THIRD QUARTER.IS THAT BUILT INTO YOUR FORECAST?

LAZEAR:IT IS. WE DON'T KNOW SPECIFICALLY ON TIMING.PART OF IT IS WE GOT THE CHECKS OUT SOONER THAN ANTICIPATED.SO THE MONEY GOT OUT THERE AHEAD F SCHEDULE.THAT'S A GOOD THING. BVIOUSLY, IT MEANS WE GOT TO FEEL SOME OF THE POSITIVE EFFECTS IN THIS QUARTER, BUT IT DOESN'T ALL GET SPENT IN ONE QUARTER.WE KNOW THAT, BECAUSE WE KNOW THE AMOUNT THAT'S BEEN SPENT, APPROXIMATELY, AND WE KNOW THE AMOUNT THAT WENT OUT, AND THERE'S A LOT LEFT TO BE SPENT.AND SO, WE EXPECT THAT WILL PLAYOUT OVER THE NEXT HALF OF THE YEAR.

LIESMAN:JIM NUSSLE, DOES THAT TAKE THE SECOND STIMULUS CHECK OFF THE TABLE? IS THE PRESIDENT COMPLETELY AGAINST THAT?

NUSSLE:I THINK THE BEST REASON TO HAVE A SECOND STIMULUS IS BECAUSE WE'RE THREE MONTHS AWAY FROM AN ELECTION, NOT BECAUSE WE'VE GOT NEW ECONOMIC DATA.I MEAN, THAT'S WHAT'S GOING ON ON CAPITOL HILL.

LIESMAN:YOU DON'T THINK THERE'S A POLITICAL CHARACTER --

NUSSLE:NOT IN WASHINGTON, MY GOODNESS, OF COURSE NOT. I THINK THE POLITICIANS ARE MUCHMORE CONCERNED ABOUT THE POLLS THAN THE ECONOMIC DATA. THEY'RE MUCH MORE CONCERNED ABOUT THE FACT THAT THEY HAVEN'T DONE ANY APPROPRIATION BILLS THIS YEAR, THAT THEY HAVEN'T GOTTEN AN ENERGY STRATEGY THROUGH, THE TRADE LEGISLATION IS LANGUISHING ON THE HILL.THAT'S WHAT THEY'RE CONCERNED ABOUT.THEY'RE NOT CONCERNED ABOUT THE ECONOMY, BECAUSE WHAT THEY DID IN A BIPARTISAN WAY THIS YEAR, WITH THE PRESIDENT'S LEADERSHIP ON THE STIMULUS CHECKS HAS WORKED, CONTINUES TO WORK, AND WE SEE THAT IN THE DATA TODAY.SO, I THINK THE FIRST STIMULUS WAS DEFINITELY NECESSARY, WELL TIMED. A SECOND STIMULUS IS ALL ABOUT POLITICS AND THE ELECTION AND NOT REALLY ABOUT MAKING SURE THAT THE ECONOMY CONTINUES TO GROW.

LIESMAN: KEITH HENNESSEY, ARE YOU GOING TO REGRET THAT IF THOSE NUMBERS START COMING IN THIRD AND FOURTH QUARTER, 1.5% OR 0%, WHICH IS WHERE SOME OF THE PROJECTIONS ARE RIGHT NOW?IT WAS A WELL-TIMED STIMULUS CHECK, ALMOST EVERYONE AGREES, BUT IF YOU DON'T DO SOMETHING NOW, YOU'RE GOING TO MAYBE HAVE A DOWNTURN AT THE END OF THIS YEAR.

HENNESSEY:WHAT WE THINK WE'VE DONE -- THAT FIRST STIMULUS WAS BASIC FIRST-SEMESTER MACROECONOMICS.IT WAS INCREASING CONSUMPTION, LETTING PEOPLE KEEP MORE OF THEIR TAX REVENUES, INCREASING INVESTMENTS THROUGH LOWERING TAXINCENTIVES.WHAT CONGRESS NEEDS TO DO NOW IS ADDRESS SPECIFIC SECTORS OF THE ECONOMY WHERE YOU HAVE PROBLEMS -- ENERGY.WE NEED MORE ENERGY SUPPLY. HOUSING WE JUST DID. THOSE ARE THE AREAS WHERE THERE'S STILL PRODUCTIVE OPPORTUNITIES FOR THE CONGRESS TO GET SOMETHING DONE. WHAT CONGRESS IS LOOKING AT RIGHT NOW IS NOT BASIC MACROECONOMIC STIMULUS. IT'S CONSTITUENCY-BASED POLITICS WHERE THEY'RE SAYING, LET'S SPEND $200 MILLION ON HIGHWAYS AND $100 MILLION ON AMTRAK.THOSE KINDS OF THINGS -- LET ME JUST -- MAY BE CAPITAL SPENDING, BUT IT'S NOT MACRO --

LIESMAN:YOU SEEM TO NOT BE HAPPY ABOUT WHAT'S GOING ON WITH CONGRESS RIGHT NOW. I GET THAT FEELING.ED, LET ME TALK TO YOU.THERE HAS BEEN A LOT DONE. THERE'S BEEN A BIG RESCUE PACKAGE PASSED ON FANNIE MAE AND FREDDIE MAC.YOU LOOK BACK ON THE HISTORY OF THIS ADMINISTRATION AND YOU SAY FIVE YEARS FROM NOW, THESE GUYS -- WAS IT TOO MUCH GOVERNMENT INTRUSION INTO THE ECONOMY?ARE WE REMOVING THIS IDEA OF MORAL HAZARD THAT'S OUT THERE, ENCOURAGING MISTICKING WITH ALL THESE BAILOUTS GOING ON OUT THERE?

LAZEAR:WELL, WE'RE CERTAINLY CONCERNED ABOUT ANY LONG-TERM IMPLICATIONS OF ACTIONS WE TAKE RIGHT NOW.THE MAIN CONCERN, THOUGH, I THINK IS MAKING SURE THE MACRO ECONOMY CONTINUES TO GROW. WHAT OUR PRIMARY ISSUE IS, IS MAKING SURE THAT THERE IS NO SYSTEMIC RISK THAT PASSES THROUGH THE SYSTEM. AS YOU KNOW, FANNIE AND FREDDIE SECURITIZE ABOUT 70% OF THE MORTGAGES RIGHT NOW. THE HOUSING MARKET HAS BEEN A CONTINUING DRAG ON THE ECONOMY FOR EIGHT, NINE QUARTERS, AND WE HAVE TO MAKE SURE THAT HOUSING DOES NOT CONTINUE TO CAUSE PROBLEMS FOR US. THE LAST THING WE NEED RIGHT NOW IS TO HAVE A SITUATION WHERE WE CAN'T SECURITIZE MORTGAGES AND WHERE WE CAN'T GO FORWARD AND GET HOUSES BOUGHT AND REDUCE THAT INVENTORY.THE INVENTORY SITUATION IN THE HOUSING MARKET IS STILL PROBLEMATIC. WE'VE GOT TO GET RID OF THOSE HOUSES.WE'VE GOT TO MAKE SURE THAT THOSE GET SOLD, AND IT WILL TAKESOME TIME TO DO THAT.WE CAN'T SLOW THAT DOWN. THAT'S THE MAJOR CONCERN.

HENNESSEY:CAN I ADD ON THAT POINT?

LIESMAN:YES, SIR.

HENNESSEY: THIS BILL HAD AN URGENT COMPONENT AND AN IMPORTANT COMPONENT.THE URGENT COMPONENT ARE OF COURSE THE BACKUP AUTHORITIES THAT HANK PAULSON NOW HAS, THE BACKUP LINE OF CREDIT, THE EQUITY PROVISION.PROBABLY THE MOST IMPORTANT REFORMS IN THERE ARE THE LONG-TERM REFORMS, GIVING THE REGULATOR THE AUTHORITY TO RAISE MINIMUM CAPITAL STANDARDS, RISK-BASED CAPITAL STANDARDS, ADDRESS THE SIZE OF THEIR PORTFOLIOS, THE POSSIBILITY FOR RECEIVERSHIP. THOSE ARE THE KINDS OF THINGS YOU NEED TO DO TO REDUCE THE PROBABILITY THAT THESE KINDS OF PROBLEMS HAPPEN IN THE FUTURE.

LIESMAN:WE TALKED ABOUT DEFICITS AND SOME OF THE NUMBERS THAT JUST CAME OUT OF THE OFFICE OF MANAGEMENT BUDGET, THE PRESIDENT'S MIDSESSION REVIEW. DEFICITS ARE ON THE WAY UP. WHAT HAPPENS TO THOSE NUMBERS IF THE GOVERNMENT HAS TO STEP IN AND HELP RESCUE FANNIE AND FREDDIE?

NUSSLE:WELL, YOU KNOW, THE LINE OF CREDIT THAT WAS ESTABLISHED, WE DON'T BELIEVE WE'RE GOING TO HAVE TO USE.I MEAN, THAT'S WHAT SECRETARY PAULSON HAS SAID. WE AGREE. WE HOPE WE DON'T HAVE TO USE THAT, SO THAT'S ON THE FIRST HAND.ON THE SECOND, WE KNEW THAT WE WERE GOING TO SACRIFICE A LITTLE BIT OF SHORT-TERM BUMP IN THE DEFICIT AS A RESULT OF MAKING THE DECISION TO PUT OUT THE STIMULUS CHECKS, AND I THINK IT'S WORKED.IT WAS WELL-TIMED, IT WAS DONE IN A BIPARTISAN WAYI REALIZE PEOPLE ARE GOING TO BANTER BACK AND FORTH ABOUT WHO'S AT FAULT FOR THE DEFICIT AND THAT, BUT EVERYONE JOINED HANDS EARLIER THIS YEAR AND SAIDWE'RE GOING TO SET ASIDE DEFICIT REDUCTION IN ORDER TO MAKE SURE THAT PEOPLE CAN KEEP MORE MONEY IN THEIR POCKET SO THAT WE CAN INCREASE CONSUMPTION.IT WAS THE RIGHT THING TO DO AT THE RIGHT TIME. IT WAS DONE IN A BIPARTISAN WAY. AND THE FACT THAT THE DEFICIT WENT UP IN THE SHORT-TERM DOESN'T MEAN THAT WE CAN'T CONTINUE TO CONTROL SPENDING AND KEEP ON THE PATH TOWARD A BALANCED BUDGET WITHIN THE NEXT THREE OR FOUR YEARS.

LIESMAN:KEITH, DO YOU AGREE WITH THAT?

HENNESSEY:ABSOLUTELY.

LIESMAN:IT'S GOING TO HAPPEN? I MEAN, DOES IT INCLUDE THE TAX CUTS BEING MADE PERMANENT?

HENNESSEY:WE THINK IT HAS TO. TAXES ARE, IN FACT, ABOVE THEIR HISTORIC AVERAGE.I THINK THERE'S A LOT OF FOCUS ON THE DEFICIT.YOU ALSO NEED TO FOCUS ON THE LEVEL OF SPENDING AND THE LEVEL OF TAXATION, AND WHAT WE'RE NOT TALKING ABOUT REALLY -- WE'RE NOT TALKING ABOUT FUTURE TAX CUTS. THE QUESTION IS, WILL THE NEXT CONGRESS, WILL THE NEXT PRESIDENT PREVENT FUTURE TAX INCREASES?

LIESMAN:LEAVE IT RIGHT THERE.

NUSSLE:IT'S CREATED 8 MILLION JOBS, LET'S REMEMBER.

LIESMAN: LET'S COME BACK AND TALK ABOUT TAX CUTS, DEFICITS, ENERGYPRICES.THERE'S A LOT MORE ON THE AGENDA HERE AT THE CNBC WHITE HOUSE ECONOMIC SUMMIT.

LIESMAN:WELCOME BACK TO THE CNBC EXCLUSIVE WHITE HOUSE ECONOMIC SUMMIT WITH THE PRESIDENT'S TOP ECONOMIC ADVISERS, ED LAZEAR FROM THE CEA, JIM NUSSLE FROM OMB, AND KEITH HENNESSEY FROM THE NEC. I'LL TELL YOU WHAT THOSE ARE LATER.WE'LL DO THAT.JIM, BEFORE WE WENT TO BREAK, WEWERE TALKING ABOUT THE DEFICIT.A BIG NUMBER YOU GUYS PUT OUT.I WONDERED, DO YOU STEP BACK ANDSAY, YOU KNOW WHAT, OVER THE COURSE OF THIS ADMINISTRATION, WE CUT TAXES, BUT WE ALSO KEPT SPENDING HIGH.WAS THERE A MISTAKE THERE THAT WAS MADE?

NUSSLE:ACTUALLY, SPENDING HAS COME DOWN EVERY SINGLE YEAR DURING THIS ADMINISTRATION.WE STARTED DURING A TIME AND INHERITED A SPENDING BUDGET OF 16% GROWTH AND WE'RE NOW DOWN TO 1% GROWTH. SO I THINK WE'VE SEEN A GOOD CURTAILING OF SPENDING FROM THE ADMINISTRATION'S STANDPOINT. WHAT WE'RE CONCERNED ABOUT IS THAT THE CONGRESS WANTS TO SPENDALMOST $209 BILLION IN THEIR BUDGET MORE THAN WHAT THE PRESIDENT WANTS TO DO JUST UNTILTHE NEXT FIVE YEARS ALONE.SO I THINK THAT'S THE PRESSURE POINT.THE OTHER CONCERN, TOO, IS THAT WHEN YOU THROW AROUND THESE BIG NUMBERS, THEY MEAN NOTHING UNLESS YOU CAN COMPARE THEM TO SOMETHING, WHICH IS WHY WE COMPARE THEM TO THE ECONOMY.AND WHEN YOU DO, WHEN YOU COMPARE THESE DEFICIT NUMBERS TO GDP, WE ACTUALLY SEE THESE NUMBERS VERY MANAGEABLE AND POSSIBLY TEMPORARY IF WE CAN KEEP SPENDING UNDER CONTROL AND GROWTH IN THE ECONOMY STRONG.

LIESMAN:WHEN WE RUN A DEFICIT, AS YOUKNOW IT ACCUMULATES.

NUSSLE:SURE.

LIESMAN:IT ACCUMULATES INTO THE NATIONAL DEBT, WHICH IS UP SOME $4 TRILLION OR $5 TRILLION.THIS IS THE DEMOCRATIC ARGUMENT HERE OVER THE COURSE OF THE ADMINISTRATION WE HAVE ALMOST DOUBLED THE NATIONAL DEBT OUT THERE, APPROACHING $9 TRILLION.SHOULD YOU CUT TAXES AND NOT CUT SPENDING? SHOULD YOU HAVE A WAR AND NOT PAY FOR IT AND THEN HAVE STIMULUS AND STUFF LIKE THAT? WAS THAT A MISTAKE ON THE PART OF THE BUSH ADMINISTRATION?

NUSSLE:WELL, NO, IT'S NOT A MISTAKE EVER TO LET PEOPLE KEEP THEIR OWN MONEY --

LIESMAN:ARE YOU BEING SARCASTIC AGAIN?

NUSSLE:NO, I'M NOT, BECAUSE THERE ARE PEOPLE HERE IN WASHINGTON THAT BELIEVE THAT THE MONEY BELONGS TO THE GOVERNMENT, AND THERE'S A BIG DIFFERENCE. THIS ADMINISTRATION BELIEVES THAT THE MONEY BELONGS TO YOU AND THE PEOPLE WHO ACTUALLY EARN THE MONEY.AND WHEN YOU HAVE THAT KIND OF MINDSET AND YOU SAY WHO IS BEST TO SPEND THAT MONEY ON BEHALF OFTHEMSELVES --

LIESMAN: I UNDERSTAND THAT.I DON'T MEAN TO BE ARGUMENTIVE, BUT FINE, YOU'RE LETTING ME KEEP MY MONEY, BUT THEN YOU SPEND IT ANYWAY, WHICH IS WHAT THE DEFICIT SPENDING REALLY IS.

LAZEAR:WELL, IF YOU LOOK AT THE NUMBERS -- AND YOU MENTIONED TH DEBT -- THE NUMBER WE LOOK AT ISTHE PUBLIC DEBT. PUBLIC DEBT.THE PUBLIC DEBT IS AROUND 37%.THAT'S DOWN TO ABOUT THE LEVEL THAT IT'S BEEN HISTORICALLY. IT'S NOT HIGH BY HISTORIC STANDARDS, NOR IS IT HIGH, BY THE WAY, IF YOU COMPARE IT TO OTHER DEVELOPED COUNTRIES. SO, WE NEVER LIKE TO RUN THE DEBT UP, BUT THE WAY YOU CAN ALWAYS TELL WHETHER WE'RE RUNNING TOO HIGH A DEBT OR NOT IS WE LOOK AT INTEREST RATES. IF WE'RE SPENDING TOO MUCH, IF WE'RE BORROWING TOO MUCH, WHAT TENDS TO HAPPEN IS WE PUT UPWARD PRESSURE ON INTEREST RATES, AND YOU SEE THAT.TO THE EXTENT THAT THIS IS A COUNTRY THAT PEOPLE WANT TO INVEST IN, NOT ONLY AMERICANS, BUT PEOPLE FROM AROUND THE WORLDWANT TO INVEST IN, THEY HAVE BEEN WILLING TO GIVE US MONEY, TO LEND US MONEY THAT'S HELPED OUR ECONOMY, IT'S HELPED US GROW, AND BECAUSE OF OUR OPENNESS, WE HAVE BEEN ABLE TO SUSTAIN LONG-TERM ECONOMIC GROWTH.

LIESMAN:KEITH?

HENNESSEY:WE HAVE A DEFICIT PROBLEM, A VERY SERIOUS ONE IT IS A LONG-TERM, FUTURE PROBLEM DRIVEN BY SPENDING TRENDS IN ENTITLEMENT PROGRAMS -- SOCIAL SECURITY, MEDICARE, MEDICAID.THAT IS THE SERIOUS DEFICIT PROBLEM THAT THE CONGRESS NEEDS TO ADDRESS. IT'S ABOUT AGING, IT'S ABOUT THE DEMOGRAPHICS OF THE BABY BOOM, IT'S ABOUT PEOPLE LIVING LONGER AND IT'S ABOUT GROWING HEALTH CARE COSTS.THAT'S THE REAL DEFICIT PROBLEM.

LIESMAN:SO YOU SEE WHAT'S HAPPENING RIGHT NOW AS BEING RELATIVELY MANAGEABLE, AND IT'S THE LONGER TERM THAT'S THE REAL SITUATION WE'RE IN HERE?

HENNESSEY:SURE, ABSOLUTELY.

LIESMAN:LET ME TURN NOW TO THE ENERGYPOLICY KEITH, I ASSUME YOU WORK WITH CONGRESS A BIT.ANY HOPE OF GETTING CONGRESS TO LIFT THAT OFFSHORE DRILLING BAN?

HENNESSEY:WE THINK THERE IS. WE HAVE SEEN CHANGES AMONG ELECTED OFFICIALS OVER THE PAST COUPLE MONTHS SINCE THE PRESIDENT STARTED TALKING ABOUT IT. WE ARE SEEING PEOPLE WHO LIVE ON COAST WHO ARE ALL OF A SUDDEN WILLING TO DISCUSS THE POSSIBILITY OF OPENING UP THOSE RESOURCES --

LIESMAN:GIVE US SOME NAMES HERE.ARE YOU TALKING ABOUT THE DEMOCRATIC LEADERSHIP MAKING A MOVE TOWARDS BEGINNING TO SUPPORT OFFSHORE DRILLING?

HENNESSEY:WHAT WE'RE SEEING FROM THE DEMOCRATIC LEADERSHIP IS SEEING THEM SAY, YES, WE SHOULD INCREASE SUPPLY, JUST NOT INCREASE THE TOTAL AMOUNT OF SUPPLY.THEY'RE SAYING WE SHOULD INCREASE SUPPLY IN AREAS WHERE THEY'RE ALREADY ALLOWED TO INCREASE SUPPLY OR WE SHOULD INCREASE SUPPLY BY TAKING IT FROM THE STRATEGIC RESERVE.SO, THEY HAVE CONCEDED THE POINT THAT AMERICA NEEDS MORE OIL. WHAT THEY HAVEN'T CONCEDED IS THE POINT THAT AMERICA NEEDS MORE OIL PRODUCTION.

LIESMAN: WHAT ABOUT, JIM NUSSLE, THE ARGUMENT FROM BARACK OBAMA, THATTHE OIL COMPANIES HAVE MILLIONS OF ACRES OF LEACHES THEY HAVE NOT USED ALREADY.WHY OPEN UP NEW ACREAGE?

NUSSLE:RIGHT NOW WE'RE HOPING THAT THE CONGRESS RECOGNIZE THAT THI IS NOT ONLY A SHORT-TERM CHALLENGE, BUT A LONG-TERM ONE, AND ONE THAT WE WANT THEM TO OPEN UP THE OFFSHORE AND THE OUTER CONTINENTAL SHELF.WE SAW THE FIRST STIMULUS PACKAGE COME OUT YESTERDAY FROM CHAIRMAN BYRD. THERE WAS NOTHING IN THERE ABOUTTHE OUTER CONTINENTAL SHELF, NOTHING AT ALL.THAT WOULD BE THE MOST STIMULATIVE THING THAT WE COULD DO FOR THE ECONOMY RIGHT NOW IS TO DEAL WITH OUR LONG-TERM ENERGY STRATEGY.AND INSTEAD, WHAT THEY'RE DOING IS, YEAH, THEY'RE TALKING ABOUT WHAT'S ALREADY AVAILABLE.WE NEED MORE SUPPLY, MORE PRODUCTION AVAILABLE, AND THAT'S NOT WHAT THEY'RE WILLING TO DO.

HENNESSEY:STEVE, I THINK THE VOTES HAVECHANGED.I THINK A MAJORITY OF THE HOUSE AND THE SENATE WOULD SUPPORT OFFSHORE DRILLING, BUT WHAT YOU HAVE RIGHT NOW ARE LEADERS IN THE DEMOCRATICALLY CONTROLLED CONGRESS SAYING WE'RE NOT GOING TO ALLOW THAT TO COME UP FOR A VOTE.

LIESMAN:YOU'RE SAYING IF IT WOULD COME UP FOR A VOTE, IT WOULD PASS?

HENNESSEY:I THINK IT WOULD.

LIESMAN:LET ME TURN TO GOOD NEWS IN THE GDP REPORT THIS MORNING AND GIVE ED LAZEAR A CHANCE TO STRUT.THE EXPORT NUMBERS WERE OFF THE CHARTS. 9.2%, IS THAT THE RIGHT NUMBER FOR THE PERCENTAGE GAINED IN EXPORTS? WHAT IS HAPPENING AND HOW IS IT FILTERING DOWN TO MAIN STREET?

LAZEAR:I THINK TWO THINGS ARE GOING ON. ONE THING IS THAT THE WORLD ECONOMY HAS CONTINUED TO BE STRONG, AND WHAT WE KNOW IS THAT OUR EXPORTS ARE DIRECTLY RELATED TO ECONOMIC GROWTH AMONG OUR TRADING PARTNERS. BUT MORE THAN THAT, WITHIN THE UNITED STATES, WE HAVE MAINTAINED HIGH PRODUCTIVITY GROWTH. WHEN WE HAVE HIGH PRODUCTIVITY GROWTH, IT MEANS OUR COSTS COME DOWN, AND IT MAKES US VERY COMPETITIVE, VIS-A-VIS, THE RESTOF THE WORLD. SO, WHAT'S HAPPENED IS AMERICA HAS BECOME COMPETITIVE, INCREASINGLY SO, AND AS A RESULT, WE'VE SEEN EXPORTS RISE. NOW, I THINK WHAT THIS POINTS OUT -- AND THE POINT THAT YOU MADE, STEVE, IS PARTICULARLY IMPORTANT HERE -- BECAUSE WHAT THIS POINTS OUT IS THE SIGNIFICANCE OF OPEN MARKETS AND TRADE TO OUR ECONOMY.I THINK, YOU KNOW WHEN YOU LOOK AT THE CURRENT SITUATION AND SAYWHERE WOULD WE BE BUT FOR EXPORTS? RIGHT NOW THAT'S DRIVING A SIGNIFICANT FRACTION OF ECONOMICGROWTH, AND WE NEED TO MAKE SURETHAT WE MAINTAIN AN ENVIRONMENT THAT IS PRETTY CONDUCIVE TO THAT.

LIESMAN:I'M GOING TO RUN OUT OF TIME, BUT KEITH, REAL QUICKLY, IT'S BEEN HELPED BY THE WEAK DOLLAR.DOES THAT MEAN THAT IF THE DOLLAR WERE TO STRENGTHEN AGAIN,WE'D BE WORRIED ABOUT OUR EXPORTS?

HENNESSEY: WELL, THERE ARE TWO PEOPLE WHO TALK ABOUT THE DOLLAR, AND UNFORTUNATELY FOR YOU, NEITHER ARE ON THE SHOW.

LIESMAN:JIM NUSSLE, LAST WORD TO YOU IN TERMS OF THE ECONOMIC OUTLOOK.DO YOU SEE BETTER TIMES AHEAD?

NUSSLE:I DO, BUT WE HAVE TO KEEP ON TRACK OF MAKING SURE WE HAVE AN ENERGY STRATEGY, WE NEED TO OPENMORE TRADE THROUGH THE KOREAN AND COLOMBIA TRADE AGREEMENTS THAT ARE ON THE HILL, AND WE NEED TO CONTROL SPENDING SO WE DON'T RUIN ANY OPPORTUNITIES BY CONGRESS RUNNING UP THE DEFICIT.

LIESMAN:GENTLEMEN, AN ABSOLUTE PLEASURE IT'S TOO BAD IT'S NOT TWICE AS LONG.ED LAZEAR, JIM NUSSLE AND KEITH HENNESSEYTHAT'S THE CNBC EXCLUSIVE WHITE HOUSE ECONOMIC SUMMIT. THROW IT BACK TO MARK AND ERIN.




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