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FIRST ON CNBC: CNBC TRANSCRIPT: LARRY SUMMERS, DIRECTOR OF WHITE HOUSE ECONOMIC COUNCIL SPEAKS WITH CNBC'S "SQUAWK ON THE STREET" TODAY

WHEN: TODAY, TUESDAY, FEBRUARY 9TH

WHERE: CNBC'S "SQUAWK ON THE STREET"

In a FIRST ON CNBC interview, CNBC's "Squawk on the Street" speaks with Larry Summers, Director of White House Economic Council, today, Tuesday, February 9th at 9:40AM ET.

All references must be sourced to CNBC.

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BURNETT: PRESIDENT OBAMA LOOKING FOR BIPARTISANSHIP SUPPORT ON JOBS IN THE ECONOMY TODAY. HE IS HOSTING DEMOCRATIC AND REPUBLICAN LEADERS FROM HOUSE AND SENATE SIDES AT THE WHITE HOUSE TO DISCUSS WORKING TOGETHER TO FIX THE UNEMPLOYMENT CRISIS. LARRY SUMMERS IS THE NATIONAL ECONOMIC COUNSEL DIRECTOR.HE'S LIVE AT THE WHITE HOUSE THIS MORNING.I KNOW, SIR, WE HAVE A LOT OF QUESTIONS FOR YOU. LET ME START WITH THIS. IN DAVOS, MR. SUMMERS, YOU SAID WE'RE IN THE MIST OF A HUMAN RECESSION, AND BY THAT YOU MEANT ONE IN FIVE MEN BETWEEN THE AGES OF 25 AND 54 IN AMERICA IS NOT WORKING. WE HAVE A STIMULUS PLAN AND NOW POTENTIALLY ANOTHER JOBS PLAN.IS ANY OF THIS GOING TO DO ANYTHING SPECIFICALLY TO SOLVE THIS PROBLEM?

SUMMERS: I THINK IT IS. I THINK IT ALSO HAS, ERIN. YOU KNOW, IF YOU LOOK AT A YEAR AGO, WE WERE ON THE BRINK OF DEPRESSION. LOOK AT GRAPHS OF EMPLOYMENT, OUTPUT, TRADE, ANYTHING. AND IT WAS FRANKLY TRACING THE PATH THAT YOU'D SEEN IN THE EARLY 1930s. BECAUSE OF THE RECOVERY ACT, BECAUSE OF THE EXTRAORDINARY STEPS THAT WERE TAKEN TO RESCUE THE FINANCIAL SYSTEM WE'RE IN A VERY DIFFERENT PLACE NOW.NO ONE IS TALKING ABOUT A HISTORIC DEPRESSION ANY MORE.NO ONE IS TALKING ABOUT THE BREAKDOWN OF THE PAYMENT SYSTEM, THE ECONOMY GREW AT NEARLY A 6% RATE IN THE FOURTH QUARTER. EMPLOYMENT STABILIZING, UNEMPLOYMENT DECLINED LAST MONTH. WE'VE GOT A LONG WAY TO GO, BUT THE FIRST THING WE HAD TO DO WAS AVERT THE COLLAPSE AND THE RECOVERY ACT HAS BEEN SUCCESSFUL IN DOING THAT. BUT CLEARLY, WE'VE GOT AN ECONOMY WITH A LARGE AMOUNT OF PEOPLE OUT OF WORK WITH LARGE AMOUNTS OF WORK THAT NEED TO BE DONE. AND THAT'S WHY THE PRESIDENT REGARDS IT IS SO IMPORTANT THAT WE SUPPORT BUSINESS, SUPPORT SMALL BUSINESS WITH TAX MEASURES THAT HE'S PROPOSED, FOR EXAMPLE, TO LET THEM WRITE OFF ALL THEIR INVESTMENTS, TO ELIMINATE CAPITAL GAINS TAX WITH CATEGORIES OF SMALL BUSINESS WOULD MORE BROADLY ALLOW SUBSTANTIAL FIRST-YEAR WRITE-OFFS OF INVESTMENT FOR SMALL BUSINESSES AND FOR LARGER BUSINESSES. BUT IT'S SO IMPORTANT THAT WE MAKE THE NECESSARY INVESTMENTS IN ENERGY EFFICIENCY.YOU KNOW, SOME OF THE HIGHEST RETURN INVESTMENTS IN OUR COUNTRY ARE RETROFITTING HOUSES, RETROFITTING BUILDINGS AND THOSE ARE INVESTMENTS THE PRESIDENT URGENTLY WANTS SUPPORTED.ANYONE WHO IS -- -- SEEN THE KIND OF PROBLEMS WE HAVE IN MANY SECTORS KNOWS THAT WE HAVE ROOM FOR SUBSTANTIAL INFRASTRUCTURE INVESTMENT --

BURNETT: OKAY.

SUMMERS: SO THE PRESIDENT -- THE. -- DOES WANT A VERY DIRECT, VERY IMMEDIATE FOCUS.

BURNETT: OKAY.

SUMMERS: -- ON JOBS.

BURNETT: OKAY. SO LET ME GET IN HERE. AGAIN, YOU DID A GOOD JOB THERE, I HAVE TO SAY.YOU GOT ALL THE WAY THROUGH WITH THE WHOLE LIST OF EVERYTHING.WE EACH WANT TO GET A COUPLE QUESTIONS IN, THOUGH. ALAN GREENSPAN SAID WEEKEND, TO DAVID GREGORY ON MEET THE PRESS THAT WE HAVE GOTTEN TO A POINT IN THIS COUNTRY WHERE SPENDING IS UNTOUCHABLE. I WANTED TO ASK YOU YOUR BIG PICTURE VIEW OF THIS. I KNOW SHORT-TERM YOU'RE TRYING TO DEAL WITH FIXING THE CRISIS. BUT IN THE LONGER TERM, ARE YOU WILLING TO STAND UP AND SAY, HEY, AMERICA, YOUR PENSIONS ARE GOING TO BE SMALLER, YOUR MEDICARE BENEFITS ARE GOING TO BE LOWER, YOUR SOCIAL SECURITY RETIREMENT AGE IS GOING TO GO WAY UP AND YOUR BENEFITS ARE GOING TO GO LOWER EVEN IF YOU PAID IN? ARE WE AT THE POINT WHERE THE GOVERNMENT HAS TO SAY, THESE ARE PAINFUL FACTS, AND WE MIGHT LOSE RE-ELECTION BY TELLING YOU, BUT WE'RE GOING TO TELLING YOU THE TRUTH.

SUMMER: ERIN LISTENING TO YOU, IT SOUNDS LIKE IT'S AN EXERCISE IN SADISM, WHO CAN CAUSE THE MOST PAIN. BUT I WILL TELL YOU THIS, THE PRESIDENT'S HEALTH CARE REFORM CONTAINS THE LARGEST HEALTH CARE COST REDUCTION IN THE HISTORY OF THE COUNTRY. THE PRESIDENT HAS PROPOSED THE FIRST MULTI-YEAR BUDGET FREEZE ON DISCRETIONARY SPENDING THAN ANY PRESIDENT HAS IN THE LAST HALF CENTURY.THE PRESIDENT'S BUDGET INCLUDES THE ELIMINATION OF 17 PROGRAMS. SO THERE'S A LOT WE CAN DO TO MAKE GOVERNMENT MORE EFFICIENT.THERE ARE THINGS THAT NO LONGER NEED TO BE DONE. THERE ARE PROGRAMS THAT ARE NOT WORKING.AND WE ARE GOING AFTER THOSE PROGRAMS.ABSOLUTELY. THAT IS WHY THE PRESIDENT CAMPAIGNED ON AND DIRECTOR PETER ORZAG HAS CAMPAIGNED ON THE IDEA AND DIRECTOR PETER ORZAG HAS CARRIED THAT WHEN YOU GO THROUGH THE FEDERAL BUDGET LINE BY LINE AND PAGE BY PAGE.

HAINES: MR. SUMMERS, THIS WILL BE A LENGTHY QUESTION, I APOLOGIZE.BUT I WANT TO SET THE STAGE. LONG, LONG AGO IN A GALAXY FAR, FAR AWAY, THE UNITED STATES ECONOMY RELIED ON MAKING STUFF, BUILDING STUFF AND SELLING THAT STUFF. THEN, OF COURSE, STARTED TRANSITIONING TO A SERVICE ECONOMY. AND SINCE 1999, WHEN GLASS STEAGALL WAS REVIEWED, WE SEEM TO HAVE TRANSITIONED YET AGAIN INTO A FINANCIAL SERVICES ECONOMY. IS THAT A GOOD THING? BECAUSE IT DOESN'T SEEM LIKE IT.

SUMMERS: LOOK, ANY HEALTHY ECONOMY HAS TO REST ON MANY PILLARS AND THERE IS NO QUESTION THAT GOING FORWARD OUR ECONOMY IS GOING TO HAVE TO BASED MORE ON THE PRIVATE SECTOR. IT'S GOING TO HAVE TO BE BASED MORE ON KNOWLEDGE AND INNOVATION AND NEW PRODUCTS THAN IT HAS BEEN HISTORICALLY. THE PRESIDENT HAS BEEN EMPHATIC ON WHAT HAS BEEN THE EXCESSES OF THE FINANCIAL SECTOR. IRRESPONSIBILITY, INNOVATION THAT SERVED NO REAL PURPOSE, EXCEPT THE EXPLOITATION OF CUSTOMERS. AND THAT IS WHY THE PRESIDENT HAS PUSHED SO HARD FOR STRENGTH IN FINANCIAL REGULATION. LOOK, A HEALTHY FINANCIAL SYSTEM IS CRUCIAL TO A HEALTHY ECONOMY.BUT WE DON'T NEED --

HAINES: BUT NOT A DOMINANT FINANCIAL SYSTEM.

SUMMERS: BUT WE DON'T NEED THE KIND OF HYPER TROPHY THAT WE'VE SEEN IN THE FINANCIAL SYSTEM IN RECENT YEARS.AND THAT IS WHY THE REGULATORY AGENDA THAT HAS AT ITS HEART DELEVERAGING, REDUCING THE PRECARIOUSNESS, REDUCING THE EXPANSION WITHOUT FOUNDATION, THAT IS WHY THAT REGULATORY LEGISLATION IS SO VERY IMPORTANT.

HAINES: WELL, YOU KNOW, YOU SAID AT DAVOS, THE U.S. IS EXPERIENCING A STATISTICAL RECOVERY BUT A HUMAN RECESSION.AND I CAN'T HELP BUT WONDER, THE LAST RECOVERY WE HAD DID NOT GENERATE JOBS FOR A LONG TIME. AND, IN FACT, WE WOUND UP WITH THAT LOSS OF JOBS OVER THE ENTIRE DECADE. AND I'M WONDERING WHETHER THIS EMPHASIS ON FINANCIAL SERVICES, THE BANKERS BEING THE KING OF THE WORLD, MORE OR LESS ENSURES THAT WE'RE NOT GOING TO HAVE THE KIND OF ECONOMY WE USED TO HAVE WITH LOTS OF NEW JOBS BEING GENERATED.

SUMMERS: WE'RE CERTAINLY EMPHASIZING REGULATING THE BANKERS NOW, NOT SUPPORTING THE KIND OF IRRESPONSIBLE GROWTH THAT WE SAW HISTORICALLY. BUT WE'VE LEARNED FROM THE EXPERIENCE OF THE LAST RECESSION. THAT'S WHY THE PRESIDENT THINKS IT'S SO IMPORTANT THAT WE HAVE JOBS LEGISLATION, THAT WE MAKE THE KIND OF INVESTMENTS IN ENERGY EFFICIENCY, THE KIND OF INVESTMENTS IN INFRASTRUCTURE, THE KIND OF STEPS TO SUPPORT SMALL BUSINESS THAT WE DIDN'T MAKE AFTER THE LAST RECESSION AND AS A CONSEQUENCE, WE DIDN'T SEE THE KIND OF GROWTH IN JOBS AND THE KIND OF GROWTH IN MIDDLE INCOME FAMILIES. WHEN THE PRESIDENT TALKS, AS HE OFTEN HAS, ABOUT A NEW FOUNDATION, HE'S TALKING ABOUT EXACTLY THE ISSUES THAT ARE OF CONCERN TO YOU, NOT HAVING A FINANCIAL SYSTEM THAT IS BASED ON MASSIVE BORROWING, INTERMEDIATED THROUGH A BLOATED FINANCIAL SYSTEM IN ORDER TO SUPPORT EXCESSIVE CONSUMPTION. BUT INSTEAD, AN ECONOMY THAT'S BASED ON INVESTMENT, THAT'S BASED ON EXPORTS, THAT'S BASED ON SAVINGS.THAT IS WHAT THE THRUST OF ALL THE POLICIES WE'RE PURSUING IS ABOUT. PEOPLE WILL DISAGREE, WHETHER WE'VE GOT EXACTLY THE RIGHT MEASURES AND THAT'S FINE. BUT I WOULD HOPE THAT ALL AMERICANS OF BOTH PARTIES COULD AGREE ON THE IMPORTANCE OF PUTTING PEOPLE BACK TO WORK. PUTTING THEM BACK TO WORK AS PRODUCTIVELY AS POSSIBLE AND REDUCING OUR DEPENDENCE ON DEBT.

BURNETT: DAVID FABER.

FABER: MR. SUMMERS, THERE IS DAVID FABER ON THE SUBJECT OF ECONOMIC GROWTH, CHAIRMAN GREENSPAN AND A NUMBER OF OTHERS HAVE LOAD AT THAT OUTSIZED 5.7% GDP NUMBER FOR THE FOURTH QUARTER AND WONDERED WHETHER WE AREN'T, IN FACT, BORROWING FROM FUTURE QUARTERS, PERHAPS PREDICTING LOWER GROWTH THIS YEAR THAN HAD BEEN ANTICIPATED. DO YOU AGREE WITH THAT?

SUMMERS: LOOK, THERE'S NO QUESTION THAT THE GROWTH RATE WILL FLUCTUATE FROM QUARTER TO QUARTER AND I THINK EVERYONE HAS RECOGNIZED THAT THERE WERE SOME SPECIAL FACTORS IN THIS FOURTH QUARTER. AT THE SAME TIME, YOU HAVE TO LOOK AT ANY MEASURE, WHETHER IT'S GDP OR FINAL SALES, LOOK AT WHERE IT IS. LOOK AT WHERE IT'S BEEN.AND THINK WE'RE IN A QUITE DIFFERENT PLACE.BUT AT THE SAME TIME, THAT DOESN'T MEAN WE'RE IN ANY POSITION TO POP CHAMPAGNE CORKS, IN ANY POSITION TO SAY THAT THE PROBLEMS ARE SOLVED.WE'VE GOT A LOT OF WORK TO DO, WHICH IS WHY THE PRESIDENT IS EAGER TO TAKE A BIPARTISAN APPROACH AND TAKE IT TO THE CRUCIAL QUESTION OF JOBS.

FABER: ON THE SUBJECT OF WORK TO DO,DO YOU THINK YOU'RE GOING TO GET FINANCIAL REGULATION?DO YOU SUPPORT THE PROPOSALS THAT CAME FROM MR. VOLCKER?

SUMMER: OF COURSE I SUPPORT THE PROPOSALS THAT THE PRESIDENT HAS PUT FORTH WITH RESPECT TO CONTROLLING THE EXCESSIVE RISK TAKING. THAT GOES VERY MUCH TO WHAT THE PREVIOUS QUESTION WAS ABOUT. I EXPECT THAT CONGRESS WILL DO THE RIGHT THING BECAUSE I DON'T THINK THERE'S ANY QUESTION ON THE PART OF ANY SERIOUS OBSERVER THAT IF YOU LOOK AT THE EXCESSES OF RECENT YEARS, THAT WE NEED TO APPROACH FINANCIAL REGULATION IN A DIFFERENT WAY THAN WE HAVE HISTORICALLY.

BURNETT: MR. SUMMERS THANK YOU VERY MUCH. WE APPRECIATE IT.

SUMMERS: GOOD TO BE WITH YOU.

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