Return to Transcripts main page
In the Arena
Barack Obama Attacked by Birthers, Former Supporters; Budget Battle; The No-Tax Solution
Aired April 12, 2011 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ELIOT SPITZER, CNN ANCHOR: Good evening. Welcome to the program. I'm Eliot Spitzer.
For President Obama, tomorrow is D-day. He'll be giving the speech we've all been waiting for, telling us how he plans to close the deficit. This is a crucial moment in his presidency. A chance finally to seize the mantle of leadership.
Tonight, a rare opportunity to find out more about the president's thinking. Just moments ago, I talked to one of his closest friends, Governor Deval Patrick of Massachusetts.
(BEGIN VIDEOTAPE)
SPITZER: Governor, thanks for joining us.
GOV. DEVAL PATRICK (D), MASSACHUSETTS: Good to see you, Eliot. Thank you for having me.
SPITZER: We've got to talk raw politics for a minute.
PATRICK: Yes.
SPITZER: The president's approval rating and it's so far out, I even hate to mention it, but it's a little bit below 50, never a good place for an incumbent to be. The attack from the other side has been vicious, malicious.
PATRICK: And persistent.
SPITZER: Factually -- persistent and factually obtuse in my view. But one of the things that continues to hang around is what I view is the idiocy of the birther question.
PATRICK: Yes.
SPITZER: Is this somehow a racist issue? What explains the persistence of this issue?
PATRICK: You're asking the wrong person to try to explain something as ridiculous as this.
SPITZER: Right. PATRICK: I mean, this is a -- this is a man who was born in the United States, he has a birth certificate to show for it, and there is something kind of perverse about the notion of calling into question his background because he has had the experience of living in the world.
And frankly, that is something we'd want, I think, all of our children to have in this increasingly global economy.
SPITZER: You are as talented a speaker as any I know so you avoided answering the question. Is there a racist element to it?
PATRICK: There might be. There may be. You know I think that there are people who are organizing around their anger rather than around particular issues.
SPITZER: Right.
PATRICK: And those -- and they come at it from all kinds of places. And anger and fear has been a tool used politically for a long time in the world and is being used, I think, by the national Republican Party today.
SPITZER: President Obama has had his ups and downs to say the least over the first 2 1/2 years of his first term. The harshest critique of him actually comes from his old supporters.
And I want to read you something that Jeff Sachs, brilliant economist, centrist kind of liberal, he said in the end we've gotten from President Obama what we feared from Senator McCain. An expanded war in Afghanistan, an extension of the Bush era tax cuts, sharp cuts in spending for communities and programs for the poor, continuation of Guantanamo and military tribunals, unchecked bankers' pay and bonuses, and enough loopholes to reduce corporate taxes to less than 2 percent of GDP.
That's harsh.
PATRICK: That's harsh.
SPITZER: What is it that has led the sort of foundation of his support? Jeff Sachs is, you know, a highly respected economist.
PATRICK: Sure.
SPITZER: To abandon him and say you've just gone over to the other side. Has he shown the backbone in negotiations with the Republicans that was necessary to stand up for the principles that he ran on?
PATRICK: Well, yes, there are some things I'd do differently and wish -- frankly, I wish that the president's staff who are wonderful, capable people who run to work every day were a little less timid. And let the president have --
SPITZER: Timid in terms of their rhetoric? PATRICK: I mean --
SPITZER: Or timid in terms of the policies?
PATRICK: I mean -- I think that the president's -- I think the president is a once-in-a-generation kind of leader, and that is something I've felt from the beginning. I don't say that as a friend, I say that as a citizen.
SPITZER: Right.
PATRICK: I think his ability to articulate what we are facing and to ask us to reach for a big, broad vision is unique in our time. And I think --
SPITZER: But let me take the other side for a minute.
PATRICK: No, let me just finish the point. He brought that to the campaign. He's brought it to the signature moments in his presidency. And I think a lot of us would like to see more of that.
SPITZER: OK. More of that being the rhetorical flourish --
PATRICK: No, the policies that are a part of it. Yes.
(CROSSTALK)
SPITZER: Right. Right. Flourish is perhaps a diminutive word. The rhetorical capacity to get the public to support what he's doing and what the vision is because he's playing defense right now.
PATRICK: I think that --
SPITZER: The cuts -- you have to acknowledge the cuts are in core areas of the social support safety net that many of us believe are the necessary investments for the future. In your own budget, which is reflective of the economic reality, you are cutting higher ed in order to maintain health care costs.
PATRICK: Well, not exactly. We are actually -- we've had to cut billions of dollars out of our -- because we have to balance our budget like most states do. But we have invested the highest level in the history of the Commonwealth in education.
SPITZER: Right. Look, I didn't mean to make this an attack on your budget.
PATRICK: No, no. But --
(CROSSTALK)
SPITZER: The point I'm making is the tradeoffs are tough tradeoffs.
PATRICK: And I've traded -- that's right. And the point I'm making is that in our budget in Massachusetts, and I think this is something the president is trying to face as well, we're making those tradeoffs according to our values.
SPITZER: It's five years to the day since Massachusetts passed health care reform.
PATRICK: Yes.
SPITZER: What was called Romney-care, Obamacare, whatever you call it depending on your politics. It included the individual mandate.
PATRICK: Right.
SPITZER: That controversial obligation that everybody participates. First question, has it worked?
PATRICK: It's been a huge success. We have over 98 percent of our residents with health insurance today, 99.8 percent of children. No other state can touch that.
SPITZER: Right.
PATRICK: More people are getting their initial care, their primary care in primary care settings, and not in expensive, you know, emergency room settings.
SPITZER: OK. Now I don't want to go off on a -- don't want to go off on a detour, but why is it so intensely unpopular in the rest of the country? Because just so it's clear to our viewers, the Massachusetts system was the model for the national system.
PATRICK: That's exactly right. That's exactly right.
SPITZER: And you know, put aside the fact that Governor Romney, your predecessor, has been running away from it politically, it seems to have worked. Why is it so unpopular?
PATRICK: I don't exactly know the answer to that. I mean at home, national health care reform is not so scary to us because we've been doing a version of this --
SPITZER: Right.
PATRICK: -- as you've said for the last -- for the last five years. I think that frankly the right has done a better job characterizing it than we who support it have done. But that'll come around.
Look, this is giving security to people around their -- around their health needs. And at a time of tremendous uncertainty in the economy, why wouldn't it? This is really about the kind of country you want to live in.
SPITZER: Let's be very frank. The president, whom you're very, very close with, you've been referred to as his closest friend in both politics and in many certain respects at a personal level as well, has not sold the public on this notion. Why is that? PATRICK: I think you know when you consider the fact that he's been dealing with two wars and now a third -- a third military action and an economy that was on the brink of collapse that has been dragging back off the edge of the cliff, there's been a lot on his mind and a lot on his plate.
But -- and I'm sorry to go on, I do think that those who are trying today to repeal national health care reform need to know that this president and the rest of us are preparing and they ought to prepare for the fight of their lives.
SPITZER: I've got to ask, we don't have a whole lot of time left. You wrote a marvelous book.
PATRICK: Thanks.
SPITZER: "A Reason to Believe," it's an autobiography. And I read -- I can't pretend I read every page. But I turn the pages. But at the beginning, there's a marvelous story that I want you to tell about getting on a bus as a kid.
PATRICK: Yes. Well, I write about being home on a school vacation. I had grown up on the south side of Chicago most of that time on welfare, and I got a break in 1970 when I was 14 years old, Eliot, to go to Milton Academy, which for me was like landing on a different planet.
SPITZER: Right.
PATRICK: And I was home on a school vacation, 15, 16 years old, and I was late to meet someone elsewhere in the city. I ran to get a bus. And I got to the bus stop just as the bus was coming up, jumped on the bus and we started to move, and I stood there at the coin box. They still had coin boxes then.
SPITZER: Right. Right.
PATRICK: And realized only then I didn't have enough money for the fare. And I stood there looking ridiculous and the driver looked at me and said, sit down, son, and he pointed to a seat close to the door. And I knew I was going to get it, that he was going to give me a round scolding and put me off at the next stop. And I stood up again. And I said, sir, I'm sorry, I've been away, I didn't realize that the fare had changed and I was in a hurry.
And he turned from the road, looked me and turned -- looked back at the road, just sized me up the way people in public life -- in public service can do. And he said -- he said just pass it on, son. Just pass it on.
SPITZER: Right. And that's what you've been doing?
PATRICK: And that's what I've been trying to do. And that's what the book is about. Passing on some of those lessons of grace and kindness and magnanimity which have made such a difference for me.
SPITZER: Right. Well, it is a marvelous tale. All right. Governor Deval Patrick, it is a joy to have you.
PATRICK: Great to see you.
SPITZER: Other than the fact that you're a Red Sox fan, you're one heck of a guy.
(LAUGHTER)
PATRICK: Thanks so much.
SPITZER: So great to see you.
PATRICK: Great to see you, Eliot.
SPITZER: Thank you.
PATRICK: Thank you.
(END VIDEOTAPE)
SPITZER: Patrick isn't the only person close to Obama weighing in on the birther issue. We'll hear from the president's sister later in the show. Piers Morgan will be here to share his interview with Maya Soetoro-Ng who has some very strong things to say about the political slings and arrows aimed at her brother.
But before we get to that, read his lips, no new taxes. The country's staunchest anti-tax activist is simply wrong, and I'll tell him why. Don't go away.
(COMMERCIAL BREAK)
SPITZER: We finally got a first look at the spending plan that the president and lawmakers agreed to on Friday and exactly where those cuts will come from.
Senior congressional correspondent Dana Bash has been following this story closely. She joins us now from Capitol Hill.
Dana, take us through some of these cuts.
DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: I want to give you some examples of where the cuts are and how they fall into where each side compromised, Eliot.
Let's start with community health centers. $600 million in cuts there. That is something that was a tough cut to swallow for Democrats. And there are a lot of cuts like this across this spending plan.
So let me give you another example, food safety inspection, $10 million in cuts. That's not a small amount, but, but it's a lot less than what Republicans had wanted, $88 million in cuts. And this is an example of how Democrats were able to get Republicans to compromise. Some of the cuts that they had put in are not as steep as they'd originally planned. But because of this, you and I talked last week about the fact that a lot of the debate internally in the negotiation is over what to cut because Democrats got some of those programs that they really like back on the page. They -- I think the best way to describe this is some creative accounting, Eliot.
Let me give you an example of that. Health care co-ops. This is something that is part of the health care bill, $2.5 billion in cuts. But reality check here, the program doesn't start, doesn't even kick in until 2014. So there's an example of something that they were able to get on paper, to get to that top line number of nearly $40 billion, which may not affect people because it doesn't really exist yet.
SPITZER: So Dana, it sounds kind of like the same old smoke and mirrors. These aren't really cuts. And again, to put it in context, the $38 billion and change in cuts isn't even a drop in the bucket compared to real fights that we're going to have down the road.
BASH: Exactly.
SPITZER: But let me ask you this. Is it fair -- look, around the sort of chattering class, there are a lot of people saying the president has become the conceder in chief. The guy who just keeps giving, giving, giving.
Is it fair to say who got the better of this negotiation? Who gave more to get across the finish line here?
BASH: I honestly think that they both did give a lot. When you look at some of those policy riders that you and I talked about last week, the Republicans gave up a lot of them. Planned Parenthood, they planned to cut that money, that's not there. Some others riders that they really wanted are not in this -- in this bill.
And Democrats, from their perspective, there were some cuts, a lot of cuts that Democrats here on the Hill do not like and will cause them to vote against this. But the Democratic negotiators were definitely able to put a lot of the money back in for the priorities, they say. Most important especially for those they say that really helped low-income Americans and people who need it the most out there.
SPITZER: Look, Dana, we -- I think we all know that the real fight is just beginning. It's over raising the debt ceiling and then the 2012 budget which comes up in a couple of months. But really the debt ceiling debate which is beginning right now and is something we've got to deal with in the next five or six weeks, this is hugely important. This is critical.
John Boehner today said no new taxes. He said taxes are off the table. That's drawing a pretty hard line in the sand. That's a tough way to start this negotiating process.
Have you heard a response from everybody on the Democratic side saying, boy, don't be so tough because this is one where we need -- we all need to compromise? BASH: Not yet, and what was interesting about John Boehner's statement, Eliot, is that it was a prebuttal, if you will, to the president's big speech that he's going to have tomorrow. He's going to give a speech where he is supposedly going to lay out his vision, maybe even a plan, for deficit reduction.
So that's what this is about, saying, Mr. President, if you want to lower the deficit, that's great, we're with you, but don't say anything about -- talk about cutting taxes. This when you're talking about the whole discussion, the dialogue about deficit reduction, this is perhaps one of the biggest divides, Eliot.
Paul Ryan, the House budget chairman, he put out his budget and made it very clear -- I asked him in a press conference, you know, he lowered taxes, didn't raise taxes, and I said, well, just to play the devil's advocate, couldn't you actually even help to get rid of the deficit even more if you just didn't lower those taxes? And he said, no, that's -- as you well know that is not Republican credo.
On the Democratic side, they believe and the president has made clear that he believes that one of the best ways to deal with deficit reduction is to raise taxes back to where they were before President Bush was in office. That is where a major dividing line is going to be, and already is.
SPITZER: You know, Dana, sometimes I feel the best way to begin this debate would be at least to get people to agree that two plus two still equals four.
BASH: Good luck.
SPITZER: Keep it at a greater arithmetic in Washington. All right. More on this later, Dana. Thanks for joining us.
In this complicated budget battler, Grover Norquist has the same message as John Boehner, no new taxes. He even got 40 Republican senators and 235 Republican congressmen to sign a taxpayer protection pledge.
Is this promise going to solve the budget crisis or kill off any real solution?
Grover Norquist is the president of Americans for Tax Reform.
(BEGIN VIDEOTAPE)
SPITZER: Welcome, Grover, thank you for being here.
GROVER NORQUIST, PRESIDENT, AMERICAN FOR TAX REFORM: Good to be with you.
SPITZER: Before we even start, I want you to hear what two of the staunchest conservatives have said about this no new taxes idea. Here is Alan Simpson, a very conservative former senator from Wyoming. Take a listen.
(BEGIN VIDEO CLIP)
ALAN SIMPSON, CO-CHAIR, PRESIDENT'S DEFICIT COMMISSION: You can't get there. You can't -- you can't say we're just going to touch spending and not revenue. That -- have a drink, you can't get there, you'd cripple the United States. You can't say we're going to tax everybody up to the rim. You can't do that or you'll cripple everybody in the United States.
(END OF VIDEO CLIP)
SPITZER: And here's David Stockman, the budget director for one of your heroes, Ronald Reagan, listen to this.
(BEGIN VIDEO CLIP)
DAVID STOCKMAN, FORMER BUDGET DIRECTOR UNDER RONALD REAGAN: Both parties continue to insist that we don't need to bite the bullet on these big issues. We have to raise taxes. The president hasn't said anything about that --
SPITZER: OK. David --
STOCKMAN: -- other than a few loopholes.
SPITZER: Say that again. I want to hear -- I want to -- the world to hear President Reagan's budget director, a conservative, somebody who is as conservative as they come. I don't think I'm saying that critically.
STOCKMAN: No.
SPITZER: You said we have to raise taxes?
STOCKMAN: Absolutely. There is no way around the revenue shortfall that we have given the massive size of government that neither party wants to cut.
(END OF VIDEO CLIP)
SPITZER: All right, Grover, now here's the thing. I'm not setting these guys out as being my political allies. Just the opposite. They're the other end of the spectrum, but there does seem to be an emerging consensus, yes, you've got to cut dramatically. That's where -- what you love to talk about. But you've also got to raise some revenue. And isn't that necessarily how this compromise will play out?
NORQUIST: No.
SPITZER: Right. Tell me --
NORQUIST: And point of fact, look, if you say taxes are on the table -- Ronald Reagan did in 1982. They took the taxes. He never got the spending cuts. Spending increased more rapidly after the '82 deal than it was scheduled to before. In '90, the Democrats went to Bush. He was a cheaper date. He got $2 of phony -- spending cuts for every dollar of real tax increase. Reagan was promised $3. And spending went up more rapidly after.
Tax increases are what Democrats do instead of spending cuts. Only if you take taxes off the table do you get to the spending cuts.
SPITZER: OK. You're talking tactics, I'm talking the actual substantive outcome.
NORQUIST: Yes. So am I.
SPITZER: I'm not talking about how you negotiate it.
NORQUIST: So am I.
SPITZER: Are you saying as a matter of philosophy, as a matter of economics, you think any revenue tax increase is wrong as matter of economics at this point in time?
NORQUIST: It's wrong as economics, it's wrong for growth, it's wrong tactically and strategically.
SPITZER: OK. Let's take this one-by-one.
NORQUIST: Sure.
SPITZER: We can agree that during the Clinton presidency we had a higher marginal rate, taxes were higher on the wealthy. When we cut those taxes during the Bush era -- I'm not suggesting single causation here, but job creation collapsed. This is a simple fact that we have to deal with.
So it is -- can't you acknowledge that tax marginal rates is not the only key to job creation?
NORQUIST: It's not the only key. Government spending is another one. During the Bush years, he spent too much, he got us involved in occupying two foreign countries, it cost a great deal of money. And -- so what the Republicans are doing -- and this is where Paul Ryan, the Republican congressman from Wisconsin, has put forward a plan to reduce $6 trillion in spending from the Obama spending --
SPITZER: We'll get to Ryan in one second.
NORQUIST: -- $6 trillion.
SPITZER: OK. We'll get to Ryan in a second. I'll give you a fair --
NORQUIST: Not a single tax increase.
SPITZER: OK. And we'll get -- it's smoke and mirrors, but we'll get to that in a minute.
NORQUIST: OK.
SPITZER: Can we agree there are four large causes to our deficits right now? One, the recession, which cut revenue to government dramatically because the economy collapsed. Right? We agree on that?
NORQUIST: Yes.
SPITZER: Two, tax cuts eliminated revenue that otherwise simply would have been in government coffers, across the board.
NORQUIST: Not necessarily. I think some of those tax cuts help you with growth.
SPITZER: OK. Tax cuts eliminate revenue so that adds to deficits. That's just simple arithmetic, right?
NORQUIST: Except that there are incentive effects to tax increases.
(CROSSTALK)
SPITZER: OK --
NORQUIST: Disincentive effects.
SPITZER: OK. You're wrong.
NORQUIST: We can disagree.
SPITZER: OK. Three, the wars. You and I agree.
NORQUIST: They're expensive.
SPITZER: Enormous expensive wars that we have not generated revenue for. And four, entitlement programs.
NORQUIST: Yes.
SPITZER: OK. Those are the big tickets. You want to focus exclusively on the entitlements to solve this problem.
NORQUIST: Not me. I'm in favor of reducing both domestic discretionary spending, which is what the little fights we've been having --
SPITZER: But that's 12 percent of the budget, that's not meaningful.
NORQUIST: Yes.
SPITZER: It really is.
NORQUIST: But you never pass up an opportunity.
SPITZER: But it's not where the heavy duty dollars are.
NORQUIST: It is the broken windows of the budget mess.
SPITZER: OK.
NORQUIST: If you're not picking up the little stuff, you're not going to get to the big stuff.
SPITZER: OK.
NORQUIST: So let's do that.
SPITZER: But you can argue it's not the big stuff. OK. Can we come back for a moment, though, to the issue of the tax code?
NORQUIST: Sure.
SPITZER: Which Bowles/Simpson and even Paul Ryan said something very important. Let us lower marginal rates by closing loopholes.
NORQUIST: Let us do both. There's a difference. Ryan wants a revenue neutral, pro-growth policy, reduced rates, broaden the base. Simpson/Bowles wants to increase taxes, $1 or $2 trillion, over the next decade by eliminating taxes and credits.
SPITZER: We agree about that factual description. What Bowles/Simpson, the bipartisan plan, said was we will close this gap, $1 of tax increases for $2 of spending cuts, right? Paul Ryan agreed. He said on one element of this, he said lower marginal rates by closing loopholes.
NORQUIST: Yes, I'm for that, too.
SPITZER: OK. So let's go through the loopholes we can agree we should cut, because what Bowles/Simpson said was that we will do away to a great extent with the mortgage tax deduction. Do you agree with that?
NORQUIST: OK, look, you're coming at it backwards.
SPITZER: Why?
NORQUIST: I'm interested in reducing the rates. And then we can look at the various deductions and see what you --
SPITZER: You can't reduce the rates unless you -- unless you somehow close the loopholes to give you the revenue, otherwise you're increasing the deficit.
NORQUIST: OK.
(CROSSTALK)
SPITZER: Wait. Can we agree on this? This is math.
NORQUIST: Yes -- no. If we take the top corporate rate from 35 to 25, we would have more jobs, more opportunities. That is just a job killer in this country. 35 percent --
SPITZER: OK. That's -- OK. That's -- you're flat wrong. Do you know that the --
NORQUIST: What's the European average? SPITZER: How much did you --
NORQUIST: Twenty-five percent. European average.
SPITZER: You're using -- well, you're using meaningless silly numbers. Nobody pays that number. How much did GE pay last year?
NORQUIST: OK.
SPITZER: A big fat zero, right? Zero. We now that.
Can we put up the chart about how much, what percentage of the government's revenue has come from corporate tax, personal tax, payroll tax over time? The government's bill is being paid by regressive payroll taxes and by the individual income tax, which is basically a flat tax now in terms of proportion out.
The corporate tax is not paid by big corporations. You agree with that.
NORQUIST: No --
SPITZER: GE doesn't pay 35 percent.
NORQUIST: On the margin, they end up paying 35.
SPITZER: Take a look at this chart. Take a look at this chart.
NORQUIST: That's why --
SPITZER: No, they don't. Take a look at this chart.
NORQUIST: No, not General --
SPITZER: No, GE paid zero. Big fat zero. Look at this chart there, you will see payroll taxes regressive, the poor pay that, and the middle class pays that. The enormous increases in payroll taxes. Corporate tax is the one that's disappearing. Corporations game the system.
Don't talk to me about corporations paying at the marginal rate, they don't. GE paid zero. Can we agree --
NORQUIST: The reason GE is a scandal is it's --
SPITZER: You agree it's a scandal?
NORQUIST: Yes, of course.
SPITZER: And if you saw --
(CROSSTALK)
NORQUIST: The marginal tax --
SPITZER: You agree it's corrupt? NORQUIST: Look, this -- we need to have lower marginal tax --
SPITZER: Are you willing to say it's corrupt?
NORQUIST: Well, it was done politically but the --
SPITZER: So it's corrupt?
NORQUIST: Most things done politically are corrupt.
SPITZER: You still haven't given me one loophole you want to close up.
NORQUIST: I'm not -- OK. I'm in favor of reducing the rates. We can have a conversation about --
(CROSSTALK)
SPITZER: But Grover. Listen, you --
NORQUIST: Loopholes in credits.
SPITZER: We reduce the rates by getting revenue from some place else, otherwise you're simply increasing the deficit.
NORQUIST: OK. First of all, I reject the idea that if you take the top rate from 35 to 25 on the corporate rate that you'd actually lose revenue.
SPITZER: Can I tell you something?
NORQUIST: We're losing --
SPITZER: Even Paul Ryan doesn't agree with you on this. Even Paul Ryan doesn't agree with you on this.
NORQUIST: I'm not sure that he would disagree with that at all.
SPITZER: He says, as clear as day in his plan, the way you can reduce rates is by closing loopholes.
NORQUIST: Yes. If -- to make it revenue neutral if you wish to do that.
SPITZER: Yes.
NORQUIST: OK.
SPITZER: So otherwise it wouldn't be revenue neutral. So you're proving my point. It would have a negative impact on revenue, correct?
NORQUIST: He has --
SPITZER: Isn't that what you just said?
NORQUIST: He has to score things.
SPITZER: Did you just say to make revenue neutral you have to close loopholes?
NORQUIST: According -- according to the --
SPITZER: Did you just say that?
NORQUIST: OK. You've got to add one in there.
SPITZER: And Paul Ryan agreed with that?
NORQUIST: Yes. According to the CBO --
SPITZER: Stop. In order for it to be --
(CROSSTALK)
NORQUIST: It can only --
SPITZER: I just want to repeat what you said.
NORQUIST: Yes.
SPITZER: In order for it to be revenue neutral, which is what --
NORQUIST: According to the CBO, Congressional Budget Office.
SPITZER: No, no, which is what you said you wanted it to be, you have to close loopholes.
NORQUIST: According to the CBO. They don't do dynamic scoring.
SPITZER: Is the CBO wrong? Is the CBO wrong?
NORQUIST: It has been historically. They don't understand --
SPITZER: OK. Let's move on. OK.
NORQUIST: If you cut capital tax gains, you actually get more money.
SPITZER: OK. Next, Grover, I love you dearly, but you're wrong.
NORQUIST: You can disagree.
SPITZER: All right, Grover, it's always fun to chat with you.
NORQUIST: Good to see you.
SPITZER: Thank you.
(END VIDEOTAPE)
SPITZER: All right. That was a good time. Next, the president's place of birth continues to be a political football. When we come back, Piers Morgan's exclusive interview on that subject with the president's sister. Don't go away.
(COMMERCIAL BREAK)
SPITZER: As Republican candidates step into the 2012 election fray, White House hopeful Donald Trump refuses to let go of a defining issue from the 2008 election.
I'm talking about the birther controversy and who better to respond to it than the president's own family. I spoke to Piers Morgan about his rare interview with Obama's sister Maya Soetoro-Ng.
(BEGIN VIDEOTAPE)
SPITZER: Piers joins me now at a preview.
Piers, what did she tell you?
PIERS MORGAN, HOST, PIERS MORGAN TONIGHT: It was a fascinating interview, Eliot, in many ways. I've never spoken to the president's half sister before, Maya. She's very intelligent, very composed. But quite clearly getting pretty cheesed off with this whole debate about where Barack Obama was born.
Let's take a little look at a clip from the show tonight.
(BEGIN VIDEO CLIP)
MORGAN: There's this whole, I think, ridiculous debate about whether he was born in America. What do you think of that?
MAYA SOETORO-NG, PRESIDENT BARACK OBAMA'S SISTER: I think it's unfortunate. He was born in Hawaii. There is a tremendous amount of proof that has already been presented. The then Republican governor and head of the department of -- you know, in Hawaii even attested to the fact that the birth certificate that they inspected was, in fact, valid. It's in the newspapers on the day of his birth. So I think that it is time for people to put that to bed, put it to rest, completely and focus on what they can do to help, to build. I love that part of his inaugural speech. We are measured by the things that we build rather than what we tear down or endeavor to destroy.
MORGAN: What do you think of Donald Trump banging on about this every day at the moment?
SOETORO-NG: Well, I think it's a shame. And I think that my brother should definitely be president for a second term. And that's really all I have to say about it.
(END VIDEO CLIP)
MORGAN: I mean, pretty interesting stuff there. I think what's very striking is that everyone's now speculating why Donald Trump is pushing this so hard. And it seems pretty obvious to me that it's clearly resonating. If you look at his poll racing at the moment, he's nearly the front runner for Republicans. It's clearly hitting the heartland pretty successfully on the Republican side.
SPITZER: You know, Piers, there's no question it is working as an introductory issue for Donald Trump. I think the question is, can he ride this much further? Or will he need to if he's serious about this presidential campaign begin to broaden the spectrum of issues he talks about? You know, that only time will tell. But here's a different question. Did the president's sister indicate whether she will go out into the general public? Will she campaign with him and say, guys, cut this out? She's a very appealing figure, somebody who is very articulate clearly. Will she get out into the general public and say stop this silliness?
MORGAN: Yes, I think she's going to definitely go and campaign for him. She was very impressive. I liked her very much. She was a very warm person to meet behind the scenes. She was amusing. She told me how she beats the president at Scrabble, which is no bad boast to have as a little sister. But I think, yes, I think she takes the duties that he has very seriously.
Let's remember they shared a mother who died in her early '50s, which was a terrible tragedy for both of them. And she said that she sees in Barack Obama a lot of the values that their mother stood for. Particularly, it was quite interesting, I thought, in terms of diplomacy. Apparently the mother was always asking them to be diplomatic with people, to bring people together, not to be divisive. And when you see how Barack Obama is behaving, for example, in places like Libya and the Middle East generally, you know, rather rampaging in with ground troops and doing perhaps what previous administrations may have intended to do, you see a guy who perhaps is following that yardstick that was drummed into him by his mother, trying not to be too dictatorial and be a little bit more diplomatic here.
SPITZER: You know, that's exactly right. You see in his sister the same sort of composure and demeanor that at times the public has loved to see in him because it spoke during the campaign. Remember, to the coolness the people wanted. On the other hand, at a moment of crisis in Libya, people wanted to see the sense of urgency and the cowboy, and so there are complaints as there always are. But you're right, this is very much a personality trait that he seems based on that clip to share with his sister. It's going to be fascinating to watch to see whether she can persuade the public and he perhaps stays above the fray.
I'm with you, this kind of silly issue. Totally silly issue that the birthers keep raising day in and day out.
MORGAN: Yes, it was interesting. I think the birther issue will come and go, and it will move on. I think Donald Trump has used it quite deliberately, and you have to say quite effectively to get his ratings up early on, to make a noise and to make himself an increasingly credible candidate when nobody thought that he was.
It's interesting another part of the interview when II asked about what it's like when your brother becomes president. You know, I mean --
SPITZER: Right.
MORGAN: -- what are the things that she thought that he missed most. And she said you know what it is? It's the simple things. It's like not being able to go for a walk in Central Park anymore. The realization you can never really do that again. And I could see that as his little sister she felt really quite sad for President Obama. It's those things. It's the loss of anonymity, the loss of normality, which is the great cost that you pay when you take on these big jobs. And I think that as politics gets increasingly rough and tumble in the election campaign, sometimes not a bad thing for commentators like us in their ivory towers to sit back and count our blessings, that we're still able to walk in Central Park and, you know, we don't have that kind of duty and responsibility.
SPITZER: Yes. Piers, excellent point. It seems like a fascinating interview. We look forward to watching the whole interview tonight on your show. Thanks for joining us.
MORGAN: Thanks, Eliot. Take care.
SPITZER: You too.
SPITZER: Somehow I do not think the birther issue is going away any time shortly. When we come back, E.D. Hill on the grim picture of the catastrophe in Japan -- E.D.
E.D. HILL, CNN CONTRIBUTOR: Well, you know, something that just doesn't make any sense to me. About a month ago, the Japanese officials got the official readings from the nuclear reactor there. Yet based on those readings, it's only today that they jacked up the rating to a level seven, the most serious. So do we have any idea really how bad it is there? We're going to talk to our in-house expert, Jim Walsh, about that.
SPITZER: Right. The news keeps getting worse, unfortunately. All right. Fascinating stuff.
Stay right there. We'll be right back.
(COMMERCIAL BREAK)
HILL: You wonder when it's going to stop. Northeastern Japan hit by more earthquakes today. One is powerful as magnitude 6.3. In fact, there have been more than 400 big aftershocks since March 11th.
Joining us from Watertown, Massachusetts, is Jim Walsh, CNN contributor and international security analyst at MIT.
Jim, good to have you back with us.
JIM WALSH, CNN CONTRIBUTOR: Good to see you, E.D.
HILL: Explain to me what's going on over there. Because we find out today -- I know, it's hard. We find out today that they've raised the threat level. It's a level seven nuclear disaster here. Based on information, data they've had for almost a month, why would it take so long to have the data and not be able to tell us how severe this is? And where people should be evacuated to and what the risks are from a health perspective? Why so long?
WALSH: Sure, it's a good question. Because as you rightly point out, we're not at the -- you know, we've been at this a month, a month. And I think this was a natural question.
Well, there are two points of view here. You know, one point of view is that the utility has been suppressing the information. They have been reluctant to say that the accident was as bad as it was and that they have dragged their feet and that they have a history of this. Now, we don't have any direct evidence of that so I'm not inclined to sort of adopt that as an explanation even though folks do wonder a lot about that. But I think there's no doubt that whether by intention or by default, they were slow.
They were slow to tell the government what was happening. They were slow to ask for outside help. They were slow to bring additional workers in. They were slow to put up monitoring stations to collect this data. Maybe they didn't want to see it, but to collect this data that would tell us that things were as bad as they were at the time. And so, they issued this report today. The government, not the utility, the government issues a report to say looking back, not forward, not now, back looking back. Actually there was quite a bit of radiation released and it qualifies as the second worse nuclear incident in the history of the nuclear age.
HILL: And, in fact, on Wolf Blitzer's program earlier today, one person said it's Chernobyl in slow motion. That it may not have been as bad as quickly, but over the period of time that this will last, it will get to that level and perhaps surpass it. Do you think that?
WALSH: Well, I'm going to withhold judgment on that. To date, it's released about 10 percent of the radiation that Chernobyl released.
HILL: I'll stop you there. Do we know that?
WALSH: Yes.
HILL: Because this is -- this is a point of contention, I think, for a lot of folks because they don't believe that the Soviets actually released the real numbers. Do we know what the actual numbers are?
WALSH: Yes, it's a great -- yes, it's a great question. And for both. But, you know, the numbers on the Soviet's side and the Japanese side. And my own view is we have a pretty good idea about the Chernobyl numbers because there was an international investigation. This quickly got out beyond the Soviet hands and into international investigations. And we've had years to sort of look at the data.
But on the Japanese question, you know, I don't think we still know the full story here. And we still don't have comprehensive monitoring. And so we may have a change going forward. But, where we stand right now, you know, there are lots of unknowns, but where we stand right now, what's been released is only a fraction, about 10 percent of what was released in Chernobyl. These -- remember, these reactors have a containment vessel, the sort of last line of defense. The Chernobyl reactor did not have a containment vessel. But I also don't think that, you know -- remember, early on E.D., we were talking about this and people were saying, oh, you're being alarmists. You're exaggerating the situation.
HILL: I know.
WALSH: You know, that's not true either. This is -- it's not Chernobyl, but it's still only, you know, in decades, the only level seven nuclear accident of its kind. So here's what I think. I think, you know, right now it doesn't look as bad as Chernobyl. It looks like things have stabilized, but that could change tomorrow.
We don't have an end game here. We still don't know how this is going to finally be resolved. They're still pouring tons of water, especially into that spent fuel pond in unit four, which I'm concerned about. And so we're going forward. It looks like it's going to be managed, but this is going to go on for a while. And we don't know how it's going to end. But in all likelihood, it's bad, but it will not be as bad as Chernobyl.
HILL: But we're waiting for the Japanese officials to tell us this. You know, I've got one of these husbands that needs to get slapped upside the head with a two by four occasionally because he just does things that make no sense. One of them was he's going to go to Japan after this occurred. And I said you go there, you come back and you're in a dog house. He didn't go. But this just jumped out at me today.
Japanese official, reported by the "New York Times" here, saying that foreigners fled the country even when there was little risk. And the reason this person said that they didn't raise it to a level seven immediately was that, quote, "it could have triggered a panicked reaction." Now, to me, that sounds like it's pretty cold-hearted. And they're thinking we don't want investments and people and money to flee the country so we're not going to raise it up right now. We're going to wait for a while. Am I just being, you know, I guess hard on the Japanese? Or could that possibly be a real concern here?
WALSH: Yes.
HILL: That they simply chose not to tell the truth?
WALSH: Well, you know, I read that same article. And it's one possibility. But we don't have evidence that that's the case.
HILL: But that's what the Japanese officials are saying.
WALSH: Yes. Well, you know, someone who studies these sorts of things, you know, you go and find out 20 years later when the archives finally open up and you get the documents that show what the conversations were like. I, you know, I, again, I would be cautious about this. It may be that they didn't want to cause panic. But if that's true, it was misguided. And this is a typical misunderstanding, I think, on the part of politicians.
HILL: Yes.
WALSH: When you look back at the history of disasters, politicians often overestimate the degree to which the public will panic. Panic is actually psychologically speaking a very narrow, narrow behavior and it relates to feeling trapped. That's when you panic. These folks weren't going to be trapped.
HILL: You feel trapped when you feel you're not getting the correct information so that you can make the best judgment call for yourself and for your family. That's when I think people feel trapped.
Jim, we've got to end it there.
WALSH: Yes.
HILL: But I know we will continue talking about this. It's always great to have you with us. Thank you.
WALSH: Thank you, E.D.
HILL: When we return, Hosni Mubarak hospitalized today, two days after Egypt's chief prosecutor summoned him for questioning. Eliot will take a look at the timing and the grand tradition of ex-dictators getting a note from the doctor. Stay tuned.
(COMMERCIAL BREAK)
SPITZER: Being a dictator can be hazardous to your health. Take deposed Egyptian President Hosni Mubarak. He had a heart attack today and is said to be stable at a hospital in the resort town of Sharm-el- Sheikh. Some reports say the heart attack happened while prosecutors were questioning him on corruption charges.
Was the timing convenient? Maybe. But the man is 82 years old with a history of medical problems. In recent years, he's flown to Germany for gallbladder surgery and other procedures. Then again, Mubarak wouldn't be the first ex-strongman to use his health to avoid prosecution.
Slobodan Milosevic, remember him? The former president of Serbia complained about his health for years and was able to delay his trial on charges of war crimes. But he must have been really sick since he died in his jail cell just before a verdict was rendered.
After his overthrown, the shah of Iran went from country to country seeking asylum and medical care. Eventually, he was admitted to the U.S. and treated at New York hospital. But he was sick too. He died in Egypt after his spleen was removed.
And then there's General Pinochet of Chile. Forced out of office, he spent the rest of his life staying one step ahead of the law. Wanted for human rights abuses, he avoided trial by claiming dementia and other health issues. How much is real? How much is concocted? When it comes to aging bad guys, it's hard to say. We'll keep checking on Hosni Mubarak and let you know. We'll be right back.
(COMMERCIAL BREAK)
SPITZER: Great vampire squid. No, we're not talking about a horror movie. We're talking about something much scarier, Goldman Sachs. As writer Matt Taibbi now famously put it, Goldman Sachs is, and I quote, "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
Wow, what a vision. Here with a closer, perhaps more subtle look at Goldman Sachs is Bill Cohan, author of the new book "Money and Power: How Goldman Sachs Came to Rule the World."
Bill, look, you were on Wall Street for 17 years in the M & A business, you know these banks inside and out. You've also written about most of the major banks. Having studied Goldman to this depth, what is the single most important fascinating revelation about them?
WILLIAM COHAN, AUTHOR, "MONEY AND POWER": Eliot, the thing they like me talking about the least is the fact that starting in December of 2006, they made a huge proprietary bet against the mortgage market. They bet that the mortgage market would fail. They turned out to be right. They didn't tell anybody. They didn't tell their clients. They didn't tell regulators. They didn't warn anybody. They made this bet on their own. Everyone else was on the other side of that trade except for John Paulson, the big hedge fund manager. They made billions while everybody else lost money.
SPITZER: OK. So we will concede they are incredibly smart.
COHAN: Yes.
SPITZER: We will concede they work unbelievably hard. They will concede they make gobs of money, ungodly gobs of money. But here's the thing you just said that's hugely important, they figured this out and said we know there's going to be a crisis and they didn't even tell their clients.
COHAN: They didn't tell their clients. They didn't mention it to regulators. They could have been wrong. It's true they could have been wrong.
SPITZER: Wait a minute. Here's the thing. Goldman Sachs says to the world we have this greater public purpose.
COHAN: Yes.
SPITZER: Yes, we make money, but we have this great image of ourselves as the people --
COHAN: The Goldman way. They have 14 (ph) principles. SPITZER: So they, having figured this out, didn't send an e- mail, a letter, a smoke signal, nothing, to their alumni who run the world down in Washington to say, guys, take a look at this, there's a problem. Nothing, radio silence.
COHAN: Their former CEO, Hank Paulson, was treasury secretary. He'd been treasury secretary for six months when they made this decision to go short, not in a little way, Eliot, a massive way against the mortgage. They never told anyone.
SPITZER: Now, look, I'm not saying they have an obligation to disclose their trades, obviously.
COHAN: Yes.
SPITZER: But if they figured out there was a crisis on the horizon --
COHAN: And betting if there would be a crisis.
SPITZER: Let's come back to betting against their clients. They got jammed up for that. And doesn't this go to the heart of what is wrong with Wall Street?
COHAN: Well, it goes to the heart of what Goldman says is one of its strengths, which is managing conflicts of interest. Frankly, here's a situation where they thought they were going to manage this conflict. They were out -- they outsmarted themselves.
SPITZER: Wait a minute.
COHAN: Too smart for their own --
SPITZER: They did manage it. They managed it the way they do.
COHAN: For themselves.
SPITZER: Exactly, they made money.
COHAN: Look, they made money.
SPITZER: This goes back to what Jack Grubman (ph), one of my favorite Wall Street guys said. What used to be called a conflict of interest is now called a synergy. In other words, we make money on it, you don't.
COHAN: And the Goldman version of that is if you have a conflict, we have an interest.
SPITZER: That's right.
COHAN: That's what Goldman's own traders told me.
SPITZER: All right. Now, so explain to me, this is the structure of the business now.
COHAN: Yes.
SPITZER: Let's put aside the sins of the past. Has anything changed as we go forward after this cataclysm we all live through?
COHAN: Eliot, you're pitching me a softball on this one.
SPITZER: I want to get the answer.
COHAN: You know how I feel about this. I don't think even though there's 2,300 pages of Dodd/Frank law now, the regulations haven't been written.
SPITZER: OK.
COHAN: Nothing has changed. Until you change the incentive system on Wall Street, you're not going to change people's behaviors.
SPITZER: OK. How do you change the incentive system?
COHAN: Having them have skin in the game again. We've talked about this before. They do not have any skin in the game. They are accountability-free. They can take risks with our money. They can count on getting bailed out, and then they don't have the personal liability.
SPITZER: They have our skin in the game?
COHAN: They have our skin in the game.
SPITZER: This is still a system where as it has now been reported over and over, and nothing has changed. When there are profits to be made, they keep them. When there's downside risk, we're there to buffer the fall.
COHAN: The old privatizing the benefits and socializing the risk.
SPITZER: OK.
COHAN: They couldn't have predicted something that good would happen.
SPITZER: Look, part of this book is history. It's a fascinating history. It goes back to the genesis of, literally, of a bank that now has the sort of unique position in the world of finance. Was Goldman over the past 50 years central to the system the way it is today?
COHAN: Goldman has always been a powerful force on Wall Street in the last 100 years. I couldn't believe that Henry Goldman, one of the main former partners of the firm had a seat at the table when they created the Federal Reserve system, the Federal Reserve banks. He was having a conversation with the secretary of the treasury that I thought could have been Lloyd Blankfein and Hank Paulson having it 100 years later, about the role of the Federal Reserve, the role that banks tapping into that Federal Reserve system needed to have the quiet -- they needed to come over when they tried to do something like that. Goldman has been in and out of trouble its whole --
SPITZER: And just to show you how this web is woven, one of the former Goldman chairman picked the chairman of the New York Fed who was their regulator who bailed them out when they needed money.
COHAN: At the same time that their former CEO was the secretary of the treasury.
SPITZER: That's right.
COHAN: And the former partner was chief of staff to Bush.
SPITZER: And then, so this just keeps getting more and more interesting (ph) and nothing has changed.
Give people a sense of scale. What is the average salary? You know, from the secretary up to the chairman of the board, what does that average person --
COHAN: There are 30,000 people at Goldman now. They're probably making an average of $500,000 to $600,000 each. And that's an average, Eliot.
SPITZER: In other words --
COHAN: Obviously, the top partners are making tens of millions.
SPITZER: OK.
COHAN: The secretaries --
SPITZER: So the average person makes half a million bucks. And the person at the top, there's nothing wrong with that, they're making money.
COHAN: They're making money.
SPITZER: But these conflicts that are the genesis of it, that are the foundation for it that should bother people.
COHAN: Well, and the fact that they're not admitting that they knew that they were short big time and they continue to underwrite mortgage --
SPITZER: They deny that fact?
COHAN: They like to pretend as they did a year ago in front of the Levin (ph) Committee. They like to pretend that they were not smarter than everyone else. They like to pretend they were just as dumb as everyone else and they, in fact, made billions of dollars betting against the mortgage market the same time that they were long involved.
SPITZER: -- that dumb. Let me ask you a question. In 10 seconds, have they learned anything? Have they and writ large, has the investment banking sector learned anything from the crises of the past?
COHAN: I don't think so, Eliot. I think maybe Goldman Sachs is slightly more contrite than they were two years ago but it's hard to say.
SPITZER: OK. Bill, I actually disagree with you on that. They've learned something critically important. When there's a problem, we'll bail them out. They keep the upside and it's going to always be that way until there's something fundamentally different.
COHAN: I hope you're wrong.
SPITZER: All right. Thanks, Bill. Amazing book. Everybody should go out and read it.
Thanks so much for joining us IN THE ARENA tonight. Good night from New York.
"PIERS MORGAN TONIGHT" starts right now.
