CBS's Harry Smith on Face the Nation: No Time to 'Continue Cutting Taxes,' So 'What About, Say, Something Like a New WPA?'

All right. Laura Tyson, what about a more significant stimulus, beyond the things, these, you know, a block here, a block here, a block here, but another say couple hundred billion dollars, what about say something like a new WPA?

HARRY SMITH: Gretchen, let me ask you this. This whole idea of the President talking about moving in the right direction, wanting to pick up the pace. Is there a pre-dominant idea of what it is that is hindering the economy from catching fire?

GRETCHEN MORGENSON, NEW YORK TIMES: Definitely. It is debt. We had a debt binge the likes that we have hardly ever seen before. Frankly, Harry, it just takes a long, long time to get that out of the system. We're still really working down the debt that homeowners took on. And it's a difficult and really excruciating process. You can't do it overnight.

SMITH: Which brings up the whole idea, Gretchen, of this debate: Is now the time to continue cutting taxes if there is this overwhelming deficit out there?

MORGENSON: Well, I think what you have to worry about immediately is job creation and let's just forget about the deficit for the moment because when you have the unemployment rate where it is now and you have incomes really being stretched, I think that that is the key to any kind of activity and economic activity by consumers is an enormous part of our economy. That is really why we are in such dire straits.

SMITH: Which is maybe one of the ideas that has to be in play is do we have the wrong model to begin with? I want to get back to that in a second. First, though, I want to talk about the Bush tax cuts which are due to expire in January. Laura Tyson, should the Bush tax cuts stay in place for the middle class but be rescinded for the top wage earners?

LAURA TYSON: I think that is the right thing to do...

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SMITH, TO MARK ZANDI: Because you hear small business owners say if those tax cuts come back, I'm not going to hire a single person. I mean, that's anecdotal, but is that really the predominant feeling among small businessmen?

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SMITH: Gretchen Morgenson, I want to go back to the stimulus because as so many of these Congress folks are going back out of their districts and people complain about the size of government, they're complaining about the deficit, they're complaining about TARP and who knows what all else. As we're standing here looking at it right now, just if you can step away, was the stimulus big enough?

MORGENSON: The stimulus was not big enough...

SMITH: One of the things you write so much about for the Times is the housing market. One of the other ideas that's out this this week is this notion of giving people whose homes are underwater, mortgage holders whose homes are underwater, the opportunity to get out. People who are paying their mortgages, but to get out from underwater and basically handing the federal government the bill. In the short term, or even in the long term, Gretchen, does that seem like a viable option? And oh, by the way, we should say the government's efforts on some of these levels have not been particularly good in the last two years.

MORGENSON: That's right. I mean, I think that the devil is in the details. The HAMP program has been a big disappointment. That was the helping homeowners, the initial program that treasury put out there. It's been very disappointing. I think these matters are so complicated with so many different people and debt, second loans, first loans, it's really very complex. And I just don't see how it's going to provide immediate help, the kind that we really need.

SMITH: So is it time - it's crazy to even talk about - but there are plenty of economists out there, Mark Zandi, who say what's needed is is a second stimulus. Could those words cross your lips?

MARK ZANDI: Well, we are talking about other stimulus, right? I mean, An r&d tax credit, payroll tax holiday. Job tax credit. All these things are different forms of stimulus. In fact, the federal government has provided a couple hundred billions dollars in additional stimulus beyond the recovery act stimulus that we put in place a year-and-a-half ago. We are doing that. In my view the recovery needs more help. It would be prudent, I think, to provide some additional help through some of the things that we're talking about.

SMITH: All right. Laura Tyson, what about a more significant stimulus, beyond the things, these, you know, a block here, a block here, a block here, but another say couple hundred billion dollars, what about, say, something like a new WPA?

LAURA TYSON: Well I believe that we should look at infrastructure because we know before the recession, before the great recession, we know that we were vastly underspending on the nation's infrastructure. You can sort of, therefore, start with the notion that infrastructure spending is terrific in two ways. It creates demand right away when you go out and get the project start and get the worker started. It also creates the ability to grow and be productive in the future.

SMITH: Although Japan tried that and they don't have a lot to show for it.