"Face the Nation" transcript: August 7, 2011

US credit rating downgraded dollar bill george washington economy generic

Below is a rush transcript of "Face the Nation" on August 7, 2011, hosted by CBS News chief Washington correspondent Bob Schieffer. The guests are former White House adviser David Axelrod, former presidential candidate Howard Dean, and Senator Lindsey Graham, R-S.C.

You can watch the full show by clicking on the video player above.

Schieffer: Today on Face the Nation: Bad Just got worse. Now what? It is an embarrassment and that's just the half of it--US securities are no longer the safest place to invest your money. That's the immediate result of the downgrade of US credit by the leading rating agency Standard and Poor's. How will world markets react? Coming after an awful week on Wall Street what does it mean for you and the millions of Americans who are out of work?




But what is the path to better now? We'll ask the President's trusted strategist David Axelrod. And for context we'll check in with key players on the left and right--Howard Dean, former chairman of the Democratic Committee and Republican Senator Lindsey Graham of South Carolina. Its all ahead on Face the Nation.

Schieffer: And good morning again, David Axelrod is in Buchanan, Michigan this morning. Mr. Axelrod, welcome to the broadcast. For the first time in the long, proud history of America US securities are no longer considered the safest place to invest your money. I just want to ask you, what is the impact of that statement going to be on people who are turning on this broadcast this morning?

Axelrod: Well first of all lets see how the markets react, because I think there's a broad consensus that it's still the safest palce to put your money. And, you know we can debate the strength of the analysis that they did, the history of S&P and so on, they made an aggregious analytical error here, but there's was largely a political analysis and that's what we should focus on. Because what they were saying is, they want to see the political system work. They want to see a sense of compromise, they want to see the kind of solution that the Preisdent has been fighting for, a large solution that will deal with the problem, that will be balanced, that will include revneues, that will deal with some of our long-term issues. We still made some progress in the compromise that was struck on the debt, what they're saying is we have to make more progress and in fact, we do. And that's what the next few months is going to be all about.

Schieffer: Well, the president said we had to reach this agreement to get the debt limit raised to keep this from happening. Well, we got the agreement, and it happened. And as I understand the Standard and Poor analysis, it was, it was the way the Congress and the White House had to get together to finally get this done that has caused the downgrade. So what happens now?

Axelrod: First of all, there's no doubt that the brinksmanship that we saw was atrocious, and that contributed to their analysis. But, let's review exactly what happened .For months, the President was saying let's get together, let's compromise, let's do a 4 trillion dollar package that will really stabilize us and get us on the right path. Let's do it in a way that's fair to everyone, so that the wealthiest Americans are kicking in as well as the middle class and everyone else in the country, we close these egregious loopholes, we deal with some long-term structural issues, everybody giving up some of their sacred cows in order to achieve that result. And we thought we had such an arrangement with the Speaker of the House who showed interest in it, Mr. Boehner, and then he went back to his caucus and he had to yield to his - to the most strident voices in his party. And they played brinksmanship with the full faith and credit of the United States, and this was the result of that. So, you know there is a lesson in that. Compromise cannot be a dirty word. We have to work together to solve this problem and we have to do it in a way that's fair and balanced and meaningful.

Schieffer: well are you saying that the President bears no responsibility for this? That this was all the fault of the other side?

Axelrod: Listen Bob, what I'm saying is review the history of what happened here. I think first of all people are less concerned about that then where we go moving forward. But let's look at the history of this. The fact of the matter is that this is essentially a tea party downgrade. The Tea Party brought us to the brink of a default, and by the way, you said before - well the president said this wouldn't --- if we had defaulted on our debt the consequences would have been dramatic and lasting. And so it was the right thing to do to avoid that default. It was the wrong thing to do to push the country to that point. And it's something that should never had happened. And that clearly is on the backs of those who were willing to see the country default, those very strident voices in the Tea Party. And by the way Bob, let me say one other thing - not one of the Republican presidential candidates stood out in opposition to that. Not one of them said let's compromise and be responsible about this.

Schieffer: Well I believe John Huntsman did, just to be totally factual. I believe John Huntsman did.

Axelrod: Alright, but let's talk about the rest of them, including Mr. Romney, the frontrunner, who on the day that a compromise was reached that at least set - made some progress and set a process in motion to do the rest - he jumped in after ducking and dodging and evading and took a position against this, without any solution. These are, presidential races are tests. And this was a test of their presidential metal, and in this case he failed and most of those candidates failed.

Schieffer: I want to show you something. This is an interview that the President had with Matt Lauer of the Today program about a month after he took office in 2009. I just want you to listen to this.


PRESIDENT OBAMA: Look, I'm at the start of my administration. One nice thing about - the situation I find myself in is that I will be held accountable. You know, I've got four years. And -

MATT LAUER: You're gonna know quickly how people feel -

PRESIDENT OBAMA: - and - and -

MATT LAUER: - about what -

PRESIDENT OBAMA: that's exactly right. And - and, you know, a year from now I think people - are gonna see that - we're starting to make some progress. But there's still gonna be some pain out there. If I don't have this done in three years, then there's gonna be a one-term proposition.


Schieffer: So there you are, Mr. Axelrod, that was the President at the start. We're getting right up to that three year point. Is this going to be a one-term presidency?

Axelrod: I think the question is what this election...first of all, let's certify that we have, we're in a different place then we were on the day he did that interview.

Schieffer: Well we are, things are worse.

Axelrod: And we were losing 750,000 jobs a month. We've had job growth for 17 months, we have to do much, much better, the President has proposed a series of steps that he thinks we should take, including extending the payroll tax cut, including extending unemployment insurance, an infrastructure bank to get construction workers back rebuilding this country, trade treaties that will expand our exports, patent reform so that our entrepreneurs can bring their products to market faster - we've got a three-year back log for people to bring their inventions and their products to market because of the patent law. There are things we can do to move this country forward. What we need is cooperation and action on the part of the Congress. We're going to come out, when they get back from their vacation, and ask them to take action and action swiftly to move this country forward. But at the end of the day, Bob, this election isn't just going to be about the President. It's going to be about what direction we want to take as a country, and this debate we just had, Bob, this debate we've just had is kind of a microcosm of that larger discussion we're about to have. Do we want to invest in education and training, research and development, infrastructure - the kinds of things that will grow our economy, create middle class jobs - or do we want to spend that money on tax cuts for the very wealthy, on tax cuts for the oil industry that's making money hand over fist already and really doesn't need the help, on other tax loopholes. Are we going to have a country where hard work pays and responsibility is rewarded, or the schemers are the ones who get rewarded? And we have great imbalance in our country...

Schieffer: Well let me ask you this, Mr. Axelrod...

Axelrod: ...that is what this election is going to be about

Schieffer: Well let's stop talking about, if I can say with respect, let's stop talking about what the election is going to be about. What's...

Axelrod: Well you asked me...

Schieffer: I understand that, but what...

Axelrod: ...okay I'm just responding...

Schieffer: ...and you made an extended response, which I asked you the question, but let's talk about what happens before the election. What's going to happen between now and the election? Do you see any, any indication that things are going to get any better? I mean every forecast is that unemployment is going to be pretty close to 9 percent when we get to the election. I don't see any indication that anything very much is going to change here. You tell me I'm wrong.

Axelrod: Bob, well we have an opportunity to impact on that. I think you are wrong, if we act. I just laid out five things that we can do right away that would have a positive impact on the economy. This committee that is meeting to deal with the long-term debt issue can have an impact on the economy. There are things that we can do, if we live up to our responsibility to work together to solve these problems, and that's the - that is on all of us in public life to do. And it's going to take all of us to do it. You know we're mourning the loss of these 30 splendid young Americans who died over the weekend in Afghanistan, and it struck me: these guys were probably Democrats and Republicans and came from all kinds of backgrounds, but they were united in their love of their country. And they were willing to give their life for their country. We should honor their memory by doing our duty as well, and taking the steps that are necessary to move this country forward.

Schieffer: I guess the question I would have is: I don't disagree with what you're saying about what we could do, but we've been unable to do it. Is there anything different that the President can do to get this thing back on track? Because frankly, I don't see - I agree with you about things that need to be done, but how are you going to get them done?

Axelrod: Bob, as I said, if we...there are specific steps that we can take to move this economy forward, to accelerate that. As part of this debt process, reforming our tax system which is complicated, unfair, burdensome is something that we could do, and should do. So there are a series of things we can do. I don't think it's a question of whether there are things we can do. There are obviously things we can do. The question is whether we have the will to do it, and whether we can lay the politics aside and work together, Republicans and Democrats, to do it. Your next guest Lindsey Graham in the past has been someone who has been very ,very good at that. But he, like most Republicans, are now having to respond to this very strident group that is pulling them away and believes that compromise is a dirty word. That is a prescription for failure.

Schieffer: Alright, well Mr. Axelrod I want to thank you. These are not easy problems, I think everybody can agree on that.


Schieffer: And we're back now with two key players in their respective parties, Senator Lindsey Graham. He joins us from Hilton Head, and former Vermont Governor Howard Dean, he's in Culpeper, Virginia this morning. I want to start with you Senator Graham. You just heard David Axelrod basically what he's saying is you can blame it on the tea party. Do you agree with that?

Graham: Well if we'd listened to the tea party we'd have $4 trillion reductions in debt over time and not been downgraded. No, the tea party has come to Washington talking about reducing spending. Thank God they're here. This is the first time we've ever raised the debt ceiling, where we tried to actually reduce spending. That's a good thing, but we're woefully short. The agreement fell well short of what the ratings agencies were looking at. The tea party hasn't destroyed Washington, Washington was destroyed before the tea party got there. The hope is that the tea party and middle of the road people can find common ground to turn this country around before we become Greece. I hope we can.

Schieffer: Well, Howard Dean, I want to ask you what's your take on what David Axelrod just said?

Dean: Well, look, I think the Standard & Poor's downgrade is a good thing because it underlines the fact that you can't get out of this without raising revenues. Sixty percent of the deficit is due to the Bush tax cuts. That's CBO saying that not me. You cannot get out of this without raising revenues. It is impossible and the vast majority of the American people want us to raise revenues, particularly on all those gazillionaires the republican tax cuts mostly benefited. So let's do the right thing. Let's everybody put something into the pot. Now there are some things you can't put into the pot. If Medicare eligibility goes up to 67 percent, you're going to see people running against democrats in primaries. We're not going to penalize old people. We're not going to penalize middle class people anymore while we let all these billionaires get through, and corporations, fifty three billion dollars going to oil companies on our tax payers' money. Why can't we start fixing the economy?

Schieffer: Governor Dean let me ask you this...

Dean: This is ridiculous what's going on here.

Schieffer: Let me ask you this, isn't the President going to have to share some of the responsibility for this. I mean, as I heard David Axelrod this morning, the President's done everything he can do and its all the fault of the other guys. Isn't this a shared responsibility here?

Dean: Well, here's the deal here. I happen to agree with David, I think this is a tea party problem, I think they are totally unreasonable, and doctrinaire and not founded in reality, I think they've been smoking some of that tea and not just drinking it, but the fact of the matter is, the President is going to get the blame and the credit for what goes right whether he deserves or not. That's what Presidents do. So, sure if he going to get some of the blame for this, yes, this is a serious thing, if you look at the Standard and Poor's report, three times they mentioned that our unwillingness to raise revenues was going to make it impossible for us to regain our credit rating. That's a pretty clear signal. The American people are there, the Democrats are there, a lot of reasonable Republicans are there, but they are terrified of these right wing splinter groups, the radical right, because they are so powerful in the primaries.

Schieffer: So what about that Senator Graham, aren't Republicans going to have to share responsibility just as the Democrats are going to have to as Governor Dean concedes?

Graham: Well you can't be fourteen trillion dollars in debt unless both parties are working together to get you there. And the tea party is a result of what's wrong in Washington. They didn't create all this mess. It was an energy created by people seeing the country slipping away and wanting to do something about it. The tea party's for a balanced budget amendment to the Constitution, so am I. I don't have any faith that either party is going to change things until they are made to do so, we need a balanced budget amendment. The truth of the matter is if President Obama, if he was in the Southeastern Conference, he'd be fired as a coach. He would not have his contract renewed. Everything is worse. Unemployment is up by 18 percent. Gas prices are up by 93 percent. Everything, housing prices are down by 12 percent, he's had a chance, we're three years into this and he's failing. It's not the tea Party's fault, what was hope and Change is despair and confusion. People are not creating jobs in this country because they think Howard Dean is going to raise their taxes. If you want to create job, don't raise anybody's taxes. Try to lower spending like the tea party and other people up here want. So the tea party is not the problem, Washington was broken before they got here. I hope they can help us fix it.

Schieffer: Governor Dean, do you think the President's in trouble politically? Is it now an uphill fight for him to be reelected?

Dean: I don't think so, and the reason is: there's a choice here in this election. The choice is between President Obama and the people who got us into this mess in the first place. The fact is that these deficits were created by George Bush's ridiculous tax policies, which some Democrats voted for I have to say. So I do believe everybody has responsibility for this. We got into this together, we need to get out of this together. And that means everybody has to sacrifice. I like Lindsey Graham, and I think he's a positive force in the United States Senate, and a reasonable person. But I could not disagree with him more on this issue of the Tea Party's contribution. The fact of the matter is, and the American people believe this by an overwhelming margin, is everybody has to put something into the pot here to get us out of this. And that includes all those wealthy bankers and corporations that the Republican tax breaks went to ten years ago. We've got to all put something into the pot. It is unfair and unreasonable to ask middle class people and seniors on Medicare to take a big hit, when bankers and oil companies continue to take our taxpayers' money. That is not right, it's not fair, and I don't care how vociferous the Tea Party is, that's not a winning strategy for elections or for the country.

Schieffer: Well let me ask you this, Governor Dean. There's no question that the president has moved more to the center in an effort to resolve this and find compromise. Did he make a mistake doing that? I mean if you were president right now, what would be your tack from here on? To try to get some of the things that Axelrod says need to get done.

Dean: There are some bottom lines. Everybody has to have bottom lines. Can we limit the outlay on social security, yes, but can we take away people's benefits? I don't think so. Can we limit the outflow on Medicare? Yes, by using a payment system that encourages wellness not sicknesses. But you cannot eliminate people from Medicare. You cannot raise the age of Medicare to 67%. That's unfair and outrageous. People wait to get on Medicare because their private insurance is so lousy when they're under 65. So you've got to pick and choose what you can do. We can compromise with reasonable Republicans about restricting entitlements. We are not interested in compromising unless everybody bears their share. And that includes the wealthiest people in America, who by the way lead us into this mess with the outrageous behavior of the major banks.

Schieffer: Senator Graham, are Republicans interesting in resolving this? Or would it be better politically if it didn't get resolved for Republicans?

Graham: Well, it's one thing to talk on TV, it's another thing to produce a budget. Paul Ryan produced a budget, people don't like parts of it, but he had the courage to do it. I respect that. Democrat controlled Senate has never produced a budget in 830 days. The President of the United States produced a budget, it got zero votes in the United States Senate. The President's biggest problem is he's not leading. He's a casual observer at a time when he needs to be fully engaged. Speaker Boehner tried to do a 4 trillion dollar deal, they had $800 billion in revenue on the table, Speaker Boehner put revenue on the table, when he went back to close the deal it was now $1.2 trillion he needed. So at the end of the day, this joint committee should look at what President Obama and Speaker Boehner tried to do to cut $4 trillion in deficits and get their ideas and try to see if we can find a bipartisan way forward. But Obama healthcare wasn't passed by the Tea Party. The Tea Party didn't increase the debts by 35%. The Tea Party is not the problem here. This President has failed to lead and any other private sector enterprise he would be fired. If he was asking to be re-upped to run a football team they wouldn't hire him. If he was trying to be a CEO for a second contract he wouldn't be hired. We've got a chance to win as Republicans but Howard Dean is right: we have to be for things. I'm for a balanced budget amendment that would require both parties to do what we should have done a long time ago. I am for adjusting entitlements and for closing loopholes in deductions, bringing the money back into the treasury, paying down debt. I'm not for raising taxes at a time when we've got 9.2% unemployment. So this president hasn't led, and the tale of the tape is in. Statistically this has been a lousy presidency, only getting worse.

Dean: I actually have a question for Senator Graham. Where are you on Paul Ryan's Medicare plan? Do you want to privatize Medicare like Paul Ryan does?

Graham: Medicare would be saved under Paul Ryan's plan, but if you've got a better idea, put it down in your budget and send it over to me.

Dean: Medicare would be destroyed under...Medicare wouldn't exist under Paul Ryan's plan.

Graham: Hey Howard, have your party lead. Put together a budget for the Senate. Have the Senate Democrats put together a budget and show us what they would do.

Dean: We do that, but you all filibuster the budget and we can't get anything done...

Graham: Have the President do a budget to get at least one, one vote. You haven't put your own budget together. You're sitting on the sidelines blaming others. The truth of the matter, Howard, the reason this Administration is failing...

Dean: You said President Obama would be fired...the truth is if this was a private corporation, President Obama would fire you all.

Schieffer: Gentlemen, I'm very sorry, just when it's getting good, just when it's getting good here, we have to say the clock ran out. Thanks to both of you for being with us this morning. Back with a final thought in a minute.


Schieffer: As I was reading about the disgraceful political debacle that led to the downgrade of the nation's credit rating in the New York Times, I saw on a back page that Elmer Staats died last week. He was 97. Elmer Staats. What a perfect name for the Comptroller General, the official who once headed the GAO-the Government Accountability Office as its now called---the independent agency that collects all the stats and analyzes how the government spends tax dollars. Staats ran it for what seemed like forever-from Lyndon Johnson's time through the Nixon, Ford and Carter. His name was as familiar as a Washington landmark-like one of those places you hear on the radio traffic reports, as in "traffic is backed up all the way to the Occoquan." It was years before I knew the Occoquan was a river. All I knew was it was somewhere traffic backed up. Same with Elmer Staats. His name was on so many reports that people who didn't know what he did, knew his name. And those who did know, knew you could take what his agency reported to the bank-its facts were seldom disputed, its neutrality never challenged, his political affiliation never known. The Times noted that visitors to his office sofa could rest on a pillow that had a donkey on one side, an elephant on the other. Staats came from a different Washington in another and better time. Somehow, I'm glad he didn't know about the partisan bungling that brought the embarrassing downgrade of our credit rating. He might have found that hard to take. That's it for us today...I'll be on vacation the next couple of weeks and our Chief White House Correspondent Norah O'Donnell will be sitting in. Next week she'll take Face the Nation to Ames, Iowa, site of the Iowa Republican Straw Poll where her guests will include Presidential Candidate Michelle Bachmann. Thanks for watching, See you soon.