Washington, DC–(ENEWSPF)–June 1, 2011 – 12:48 P.M. EDT
MR. CARNEY: Good afternoon, ladies and gentlemen. Thanks for being here. I know that there’s a lot of interest in a readout of the President’s meeting with House Republicans, which I will provide to you.
But first, if we could hold on that and questions about that, first I have with me today Ron Bloom. He is Assistant to the President for Manufacturing Policy. Many of you know him well. And he’s here to talk about a report issued today that we put out, which you should have by now, on the auto industry and where it stands now after the measures that were taken by the President two years ago.
So, without further ado I’ll turn it over to Ron. If you could — while he’s here, any questions you have regarding his report, regarding manufacturing, direct to him. I’ll call on you. And then we can let him go, I’ll come back, and we can deal with the other issues of the day.
MR. BLOOM: Thank you. Two years ago, General Motors filed for bankruptcy, and we thought this would be a good time to take stock of what’s happened since then, the difficult decisions the President made in the run-up to that period, the assistance that we did determine to provide to the automobile industry, and what’s happened since.
When the President took office, we had an automobile industry in absolute freefall. We had obviously an economy in great distress, but the automobile industry in some ways was falling faster than just about any other sector. The President faced very difficult decisions about what to do to deal with this critical part of the American economy.
The companies came forward very early, on February 17th of 2009, with plans that they believed justified additional taxpayer support; the President rejected those plans. He told them they needed to act more aggressively. They came back with much more robust plans that required substantial sacrifice from all their stakeholders. And on June 1st, in the context of the General Motors bankruptcy, substantial additional assistance was provided to GM, and a month earlier assistance was provided to Chrysler.
Since that time, I think we’ve seen some really positive and encouraging signs, and we think that at this two-year anniversary it’s reasonable to kind of take note and account of those things.
In the last year, the Detroit Three have all gained market share, they have all added jobs, and they’ve all shown the ability to make money. They’re all making substantial profit. Those three things together haven’t been true of the Detroit Three in a long, long time.
Now, the credit for that importantly goes to the men and women of those companies and their stakeholders, who all made very, very difficult decisions to come together. But we think that it is also worth noting that the courageous decision the President made to stand behind these companies — and this was not an easy call. In particular I think Chrysler was in fact a difficult call. Last year — last week Chrysler repaid all of the loans that had been made to them, but at the time the President chose to help Chrysler, at the time he chose to help General Motors, a lot of people said, you’re throwing good money after bad; you’ll never get out; these companies are not savable. But I think the President demonstrated both great political courage as well as great faith in the men and women who work at these companies and their stakeholders, and so far at least I think we’re seeing very good signs of progress. As I said, employment up — the industry has gained 115,000 jobs in the last year, fastest job growth in a long, long time; gaining share; making money.
The road ahead for these is not easy. It’s not simple. They live in a difficult environment of global competition. And so we by no means believe that their future is assured. On the other hand, we believe that the steps we took and the steps they took in partnership with us have positioned these companies to where they have a real chance of success.
And that’s important because these companies are not just the three companies themselves, or the two companies themselves. These companies, as the report documents, support a tremendous array of other businesses, workers, communities around them. On Friday, the President is going to be going to Toledo. He’s going to be meeting with workers at a Chrysler assembly plant. He’s going to be hearing from small businessmen and women in the community. Because these manufacturing employers, very importantly — and they’re not the only ones who do this — but very importantly, these manufacturing companies play a central role in their communities. They are, if you will, oftentimes the anchor tenet.
And so manufacturing, which is today in fact leading our recovery — 250,000 new jobs in manufacturing in the last year; faster GDP growth than the rest of the economy — demonstrating that it can still play a very, very important role in the American economy. So the automobile industry is a story of manufacturing, but there’s a broader manufacturing story as well that we think needs to be brought to attention.
So that’s what the report is about. Happy to answer questions.
MR. CARNEY: Yes, sir.
Q Thanks, Jay, and thanks, Ron. You said that we by no believe that their future is assured. Is it fair to say at this point that the — that their survival is assured?
MR. BLOOM: I don’t think anything in life is assured. The fate of these companies rests with the men and women who work there, the managers, the boards of directors, and many things in the external environment. When we made these investments, people said you will never get out of the car business. We are exiting, as we said we would, as soon as practical. We have now had all our money paid back from General Motors — sorry, from Chrysler; we’ve cut our stake in GM in half; and we have a small residual stake in Chrysler. We are pulling back from these companies, and so I won’t make any prediction about their ultimate fate.
What I will say is we believe that as they sit today, making the kind of cars Americans want to buy, making better cars, making more fuel-efficient cars, being able to be vigorous competitors in the marketplace, gaining market share, tells me that they have an opportunity to succeed. Whether or not they succeed will be up to them.
MR. CARNEY: Jake.
Q What money do we still — do taxpayers still have invested in these companies? And at what point will that be repaid, if ever?
MR. BLOOM: The total funds invested, including the prior administration, into the industry is roughly $80 billion. Roughly $40 billion has been returned to date. The remaining money is accounted for by stakes in General Motors — we’ve sold about half of what we own, but we still own the other half — a small equity stake in Chrysler; and a stake in Ally Financial, which is the old General Motors Acceptance Corporation.
How those stakes are realized is not yet determined. We are — as we have said repeatedly, we are determined to exit those stakes as soon as practical. And so what they fetch in the market will determine the full accounting of the remainder of the money.
Q So just to translate that — the moment that they’re worth what we paid for in terms of stock, equity, that’s when we will then sell it?
MR. BLOOM: Well, no, no. I don’t think we have a particular target price, because the President has made clear that he does not believe that it is the proper role of government in the long term to be an owner of a private corporation. And so we do not view ourselves as kind of market timing, looking for the absolute best opportunity to sell. So we have tried to walk a fine line. We said we’re not selling as soon as possible, meaning we’re not going to sell at a fire sale the first day we can. On the other hand, we’re not holding, waiting for a target price. So we will look to exit these things as soon as practical, and the price that they fetch in the market will be the price that they fetch.
We report periodically, and other oversight agencies report periodically, looking at the value of those stakes. And as we’ve pointed out, the loss, if you will, that’s been reported — that had been reported early, has come down substantially. The latest number from the CBO I think was a $14 billion loss, and that reflects market prices at the time they did it. The final number will be the final number.
And look, there is no joy in having to announce — we’re not announcing anything today — but in recognizing that all of this money will not be returned. On the other hand, as we record what was lost, we need to also record what was saved. External experts have stated that over a million jobs were saved by the President’s actions, and other people have numbers substantially higher than that. The impact of the collapse of GM and Chrysler would not have been just the couple hundred thousand people who worked at these companies. Three times as many people worked in the supply base. Another three times as many worked in the suppliers, to say nothing of all the pizza parlors and all the dry cleaners and all the other people in these communities.
So while we are obviously extremely conscious of our obligation to get every penny we can for the taxpayer, we’re also not going to apologize for the fact that there are literally hundreds and hundreds of thousands of Americans who are working today for what — because of what happened, and that the — when the final accounting occurs, we’re quite confident it’s going to be a far smaller number than people predicted at the time we did it.
Q Can I follow on that? On the $14 billion, where does that number come from? Is that your number? Do you agree that that’s a reasonable number?
MR. BLOOM: I think that’s a reasonable number, and we do our own. And then the Treasury Department does their own accounting. Again, there’s been no attempt to not be transparent. You can look at what General Motors shares are trading for. You know how many we have. The other numbers are available. So again, there’s no view that this is not an important number to track and to acknowledge. On the other hand, as I said, I think there are two sides to this story.
Q Is there anything you can do to get that 14 down to zero? Or you just —
MR. BLOOM: Look, the stock market will do what it does. And again, that’s not what we’re trying to do. If we were a 100 percent private investor, we might consider taking certain kinds of steps to particularly enhance the value of these companies. But the President made a very conscious decision: We do not manage these companies. We put an extraordinary group of men and women — we did put them in as the initial board of directors, and then we have stepped back. So, no, I don’t anticipate there would be any particular action we would take. We will sell as soon as practical, but I do not think — in fact, I think you should not expect that we will make any kind of intervention.
We’re comfortable that the decision the President made, while very difficult at the time, was, in fact, the right decision. And we’re comfortable that our commitment to sell as soon as practical is a good decision, and the final accounting will be what it is.
Q Can you just clarify those numbers real quick? You said the $14 billion — that comes from CBO. And then you guys use the overall $80 billion as a total. But CBO uses $85 billion.
MR. BLOOM: Right. There’s a $5 billion on a supplier support program, which went in and out. So that we’ve returned all of.
Q Thanks. And then in terms of market share, how much of the increase of market share had to do with, A, supply disruptions from the earthquake, and then prior to that the Toyota braking scandal? I mean, how much of this is positive as opposed to negative?
MR. BLOOM: Right. The recent problems in Japan are quite recent, and so the gains in market share come before that. Obviously Toyota had some challenges last year, but that does not explain the entire gain in share of the Big Three. Look, the Big Three are making better cars and they’re making better, fuel-efficient cars. The Chevy Cruze is selling off the lot. The Ford Focus is a big seller. The Volt is the car of the year.
So obviously there are up and down numbers, and obviously some of the competitors have faced challenges. But I don’t think there’s any doubt that these three companies — Chrysler has gained market share, retail market share, 13 straight months. So I think all of these companies are moving forward in a positive way based on their own performance.
Q When you look at the three individual market shares, is it one lagging as opposed to others? It seems like Chrysler hasn’t moved as much as —
MR. BLOOM: Actually, Chrysler’s retail share has actually gone up quite a bit in the last year. So, no, I think there’s little puts and takes all over, but all three of them have gained share.
MR. CARNEY: Dan.
Q I realize that the government, the administration, doesn’t want to have a long-term position in these companies, in a private company, but why not have a timed strategy of exiting at the top of the market, because it’s a bigger investment? I mean, it’s prudent investment strategy for the taxpayers’ money.
MR. BLOOM: If you know when the top of the market is, you and I should have a conversation in the other room. (Laughter.)
Q Well, it’s not necessarily the top — it’s not necessarily timing it at the top of the market, but you watch it as it — the trends —
MR. BLOOM: No, but it’s an important point. We don’t know. Nobody — I mean, the —
Q But you follow trends.
MR. BLOOM: We do, and lots and lots of people in America think they know when the top of the market is. The decisions —
Q The weak spot of the market, not necessarily the top of the market.
MR. BLOOM: I don’t know what it is. I wish I did. And again, if you can tell me, I really do want to know, because I can stop having to do this. (Laughter.)
But look — but I want to make —
Q Stockbrokers do it all the time. You sell when you think it’s —
MR. BLOOM: And some are right and some are wrong.
Q And some are right, exactly. But what you’re saying is that there’s no strategy for that at all, you’re just going to sell whenever you want to sell.
MR. BLOOM: No, there’s not, but here’s why. No, I didn’t say we would sell whenever we wanted to sell. What I said was we would responsibly sell as soon as practical. That does not mean as soon as possible. Obviously tomorrow morning we could sell it all if we wanted. We’ve chosen not to.
But we have to be very careful here. The President made an extraordinary decision to intervene in the private economy. It was justified by the most severe economic downturn since the Great Depression. That is not the normal way that a government ought to behave toward private actors. And the longer you stay in, the longer you stay in, the more you signal to the market that the government intends to be in the business of owning companies. That is not a business the President wants to be in. He’s said many, many times, I did not run for office to be CEO of an automobile company.
So while it is hugely tempting to take the knowledge that we have — and again, I don’t happen to think we’re smarter than anybody else about this — but to take the knowledge we have and say, oh, if we just waited a little longer, a little longer, a little longer — the problem is, you start that, and then all of a sudden you wake up two, three, four, five years from now and you still own a big stake in a private company.
So I think our decision — which we set up long ago. And again, I think the most important thing you need to do in situations like this with markets is be transparent. So we told people what we were going to do. We said we will sell as soon as practical. Now, we didn’t say we’re selling on May 17th, but we gave a clear signal that we’re not going to be long-term investors. And if you look at the success of the General Motors IPO, which at the time, if you remember, was the largest IPO in the history of the New York Stock Exchange, one of the reasons that $23 billion of private capital showed up on that day back last fall was because they knew we weren’t going to market time, that we weren’t interested in being a long-term investor because I think if they had believed that, they would have been more cautious about becoming shareholders with us.
So I agree with you, it is tempting. And obviously there’s a keen appreciation of the obligation to be stewards to the taxpayer, but we have a broader obligation to play a constructive role in the overall economy. And I think those two things have to be balanced. And the way we have balanced them — and we said this two years ago, and I think we’ve been extremely true to it — is to sell as soon as practical.
MR. CARNEY: Jackie.
Q How do you see — Ron, how do you see the high gas prices and the prospect that prices will continue to be high playing out in the future of the American auto companies?
MR. BLOOM: Well, look, I think, again, what is quite encouraging is that the companies are producing — it’s always true that when gas prices go up, people start buying smaller cars. I mean, that’s been true in every rise in gas prices in the last 30 years. The difference is that over the — most of the last 30 years, that activity meant the D3 lost share, because they did not have competitive smaller cars.
And so the fact that every time gas prices went up, it was — they were obviously in secular decline in share, but it accentuated their share loss.
Now what you have is in the case of GM and Ford, most assuredly, and Chrysler coming behind, particularly with the new Fiat technologies, all three of these companies are going to be able to offer Americans fuel-efficient cars. So the Cruze is selling off the lot; the Focus is doing well; the Volt is a big hit. So obviously nobody roots for high gas prices, but the reality is that the D3 in particular are able to address consumer demand in that context. And that I think is a very positive development.
MR. CARNEY: Caren.
Q What’s your current — what’s the government’s current stake in Chrysler in percent terms and dollar terms?
MR. BLOOM: Well, we own 6.6 percent of the common equity of the company, and it’s a private company so there’s not a stated number for the value of it.
Q And if you were to divest that now, could the company get by without it?
MR. BLOOM: It was — Fiat announced publicly, so this is not a new — this is not a piece of news, but Fiat who, as you know, was the entity that put in a lot of technology and recently invested $1.3 billion into Chrysler, had an option to purchase our stake. And last week, they notified us that they’re going to exercise that option. And so I think at some point — we don’t know when — but at some point, we will be winding up selling that stake to Fiat, not to Chrysler but to Fiat. And that will increase their share.
Q That will be before the IPO?
MR. BLOOM: Please?
Q That will be before the IPO?
MR. BLOOM: Whether or not Chrysler determines to undertake an IPO is going to be up to Chrysler. I mean, candidly, once we don’t own shares in it, it’s not something that we have an economic interest in. If the board of directors of Chrysler believes that an IPO is the proper course of action, then we obviously will wish them well in doing that.
MR. CARNEY: Let me go to Steve and then —
Q Still on manufacturing, can you comment on the ISM index figures this morning, which showed a slowdown last month? And is this just due to external factors? Or are there grounds for concern of a more prolonged slowdown?
MR. BLOOM: Well, look, I think it is worth noting that the index has 22 straight months of increase. As I pointed out earlier, 250,000 jobs in manufacturing. The recent month was obviously down a bit from the prior. It was still a growth month. As you know, indicators above 50 indicate growth, and so we still saw growth.
I think that most of that growth — most of that slowdown in growth is attributed to the situation in Japan because the way global supply chains work, you can’t finish a part if you can’t get the part. And so I think it is largely external factors.
Look, the long-term trend on manufacturing since the bottom of the recession is quite positive, and I think we remain optimistic that manufacturing has a good future.
Look, I think it’s worth noting in that regard in the last year there is a very different attitude both in the corporate sector, as well as in a lot of the academic and other people who follow manufacturing about the future of manufacturing in America.
You are now seeing sophisticated analysts’ reports talking about America as a very competitive place to manufacture. You’re seeing corporations talk about insourcing in a way they haven’t before.
So while I absolutely would expect month-to-month variations, I do think that we are in a good place. We’re not where we want to be yet. There’s obviously still a huge distance to go. But I think the trends in manufacturing remain good.
Q Why did that happen?
MR. BLOOM: Why did what happen?
Q Why are things suddenly looking good?
MR. BLOOM: Well, that’s something for academics to speculate on. I think part of what’s happened is that the American manufacturing economy has been revealed to be the most productive manufacturing economy in the world. And I think there’s just a growing recognition among corporations and among others as well that this is in fact a good place to make things.
And if you look at the data again, there are jobs being added — first time in a long time that absolute job growth in manufacturing is occurring. The American manufacturing economy has becoming — has been becoming more productive for a long time; has in fact been a leader in our economy in productivity.
But these trends are funny, and when they sort of appear to people and when they occur to people is hard to predict. But I think what you’re getting is a growing consensus not that we’re out of the woods, not that there aren’t enormous challenges, but people are taking a new kind of look at America as a place to make things than they were, say, five years ago.
Q You said the taxpayers will be repaid — $14 billion, it will be lower than that amount.
MR. BLOOM: No, I didn’t say that. I said we will get back what we get back when we sell the shares.
Q And you said you thought it would be smaller than $14 billion.
MR. BLOOM: I don’t think I said that.
Q Well, how much — what’s your best guess —
MR. BLOOM: I don’t have a best guess. I mean, I’m not going to make a prediction about that. It will be what it is and everyone will score it up when it happens.
Q And not to belabor the point, but you said we’ll know when —
MR. BLOOM: But you’re going to. (Laughter.)
Q What are the conditions when you think it will be right to resell? I mean, how do you define that?
MR. BLOOM: Again, I want to try — nobody likes this answer, but I’m afraid you’re not going to get a different one. We are committed to exiting these stakes. We’re not committed to exiting them at the absolute first opportunity. We’re committed to exiting as soon as practical.
You can watch our behavior and you can see what we did. In the case of General Motors, we and the company decided to undertake an IPO as soon as we believed the company was ready and would be well accepted in the market. At the time of the IPO, we sold half our stake, which was a huge IPO at the time. I think that tells you something about how we viewed when to do it and how to do it at the time.
When the IPO occurred, we agreed to something called a lock-up, which investors ask on behalf of selling shareholders that you not be back the next week selling. That lock-up has just recently expired, and so we’re going to look for opportunities when we think the market will be interested in purchasing additional shares. Exactly when that occurs, we’re not going to make a prediction today, and we will be — however, we will reveal it in the proper way through the Securities and Exchange Commission when the time is right.
MR. CARNEY: Let me do three more and then we’ll let Ron go. April, Toshi, and then in the back.
Q Can you define “as soon as practical”? You keep saying that. Just please give a definition.
MR. BLOOM: Potter Stewart come to mind? (Laughter.) You’ve got as much out of me on this one as you’re going to get.
Q No, but I mean, you keep saying “as soon as practical” and then — in a —
MR. BLOOM: Judge us by our action. Look at what we did in the GM IPO. We sold half our stake in the largest IPO in the history of the New York Stock Exchange. I think what that tells you is we’re quite forward leaning in trying to get out. We agreed to a six-month lock-up; that lock-up has now expired. We’re going to analyze markets — the people at the Treasury are going to analyze markets. They’re going to look at opportunities. They’re going to see what investor sentiment is, and they’re going to make a judgment.
Q You touched on disruption of supply chain by the Japan earthquake. What’s your latest assessment on the situation? Is it the situation is improving? And what would be the impact on the U.S. economy and world economy going forward? What’s your latest —
MR. BLOOM: I’m not going to make a comment about the broader impact of what’s going on in Japan on the United States economy. You can hit him with that one.
MR. CARNEY: Okay. In the back, last one.
Q Does the President feel it would be unethical or opportunistic to sell the stock at or close to the top?
MR. BLOOM: I’m sorry, say it again.
Q Does the President feel it would be unethical or opportunistic to sell the stock at or close to the top?
MR. BLOOM: No, I don’t think that’s it at all. I think we just don’t think we know when the top is. No, I don’t think it’s a question of ethics or anything. I think it’s a question of a principle that we’ve adopted that we don’t think we should be a permanent or long-term player in the private economy, and we’re trying to be true to that principle.
MR. CARNEY: Thanks very much. Appreciate it. Toshi, in answer to your question, I think we have a lot of faith that Japan will rebound and rebuild, which we’ve said before. But we obviously don’t have a time frame or an economic analysis to provide to quantify that. But we’re very confident in Japan’s resiliency and remain so.
I’ll start with a brief readout of the President’s meeting earlier today with the House Republican caucus — or conference, rather. The meeting lasted about 75 minutes. It was held in the East Room, and I think the President’s assessment of the meeting echoes the assessments provided by a couple members of the House Republican leadership. Conference chairman Representative Hensarling said, “Any day Republicans and Democrats are actually having a dialogue, this is a good day.” The President would agree with that, and that’s why looked forward to and enjoyed and thought was productive the meeting he held today with House Republicans, just as he felt that way about the meeting he had with Senate Republicans.
Speaker Boehner also said, “We had a very frank conversation. I thought it was productive, and I’m looking forward to more serious conversations about how we reduce the deficit and the debt, and to get our economy going and creating jobs.”
Again, the President agrees with that assessment of the meeting, and also of the need in future conversations to move forward with a plan to significantly reduce the deficit, address our long-term debt, get our economy going and create jobs.
That is why he has asked the Vice President to lead the Blair House negotiations. Those negotiations, as I’ve noted before, the President believes have been making progress. The participants in those negotiations believe the same thing. And we are optimistic that it will produce — those talks will produce an agreement, a bipartisan agreement, that will reduce the deficit and — in a bipartisan way because participants will find common ground.
I can announce also that the next round of those negotiations will take place on Thursday, June 9th.
MR. CARNEY: Probably the Blair House, but as you know, the scheduling — apparently on the Hill — they’re going to be on the Hill. So we move them around to keep you guessing.
And with that, I’ll take your questions. Yes, sir.
Q Thanks, Jay. I heard the comments of the lawmakers out there and your comments on that from the President about the meeting, and I guess I’m still wondering whether any specific, concrete progress came out of this meeting today. And I ask in particular because it seems like both sides went in with philosophical differences about how to reduce the debt, and came out with those same stands. So was there any specific progress?
MR. CARNEY: Well, two points. One, this is a large meeting and this was not the forum for specific advances in the negotiations that have been conducted by the Vice President with members of both parties and both houses.
And yet it was productive for the reason that I think I mentioned before and that the conference chairman mentioned, which is that it is always good in Washington, in this day and age, when Republicans and Democrats sit down and listen to each other in a constructive environment, a non-confrontational environment. And I think that’s a good thing.
Obviously there are long-term disagreements between Republicans and Democrats, between this President and Republicans, on the ideas about how we should address our long-term deficit problems and debt problems. And those — all of those disagreements will not be resolved in the next several weeks as these negotiations move forward.
But there is common ground, and more common ground can be found to significantly reduce our deficits. And the President believes that with both sides negotiating in good faith, that a compromise can be achieved, and that’s what the American people want.
So, again, I think this is part of a process that’s very productive and helps reduce I think some of the confrontational atmosphere that surrounds some of these discussions. It doesn’t mean that we don’t disagree on some fundamental issues. Of course we do. And we’ve been very clear and we haven’t papered over our differences, and neither have they.
But I think the American people understand that we have differences and yet they still expect us to get things done.
Q I understand the point about reducing the temperature, the value of that, but do you think a discussion like this actually helps the two sides get any closer on those substantive differences?
MR. CARNEY: I think it helps in that it allows everyone in the room to look each other in the eye as one member makes a case for the Republican position and the President answers questions, to understand that each side holds very strong opinions about certain issues, that there’s a lot of overlap in terms of what the goals are here, and that there’s overlap in terms of what some of the solutions are. And sometimes you miss that when you only hear the monologue that passes as a dialogue when each side is talking to each other through the press. So the President feels very strongly that this was a useful thing to do.
Q One last question. Representative Ryan said he made the case in his terms for his Medicare plan, and he doesn’t want the President to be mis-describing it — as I believe he put it — is that what the President thinks he’s doing? Is he mis-describing his plan?
MR. CARNEY: No, no, he doesn’t. And look, as I said, there’s no question that there are differences. There’s no question that on the issue of Medicare, we have significant differences. And what the President has made clear is that he doesn’t believe that we need to end Medicare as we know it, to dismantle the program as it currently exists, in order to achieve significant deficit reduction.
He believes that Congressman Ryan as the author of the plan and the members who voted for it are sincere in believing that they think it’s — that that is a preferred solution. We simply disagree. And we don’t think that’s a matter of demagoguery, it’s a matter of fundamental differences of opinion and a different assessment of the facts.
And we think the facts in this case are on our side. And one of the reasons is that — the problems we have with it is that in order to achieve the reductions that they seek in the House Republican plan, and to pay for the extensive tax cuts for the wealthy that that plan calls for, they need to do things to Medicare that aren’t necessary. And it produces an unbalanced plan, puts too much of the burden of deficit reduction on the shoulders of seniors, of low-income children and the disabled. And the President just feels that that’s unacceptable.
Q What specifically did the President tell the Republicans about the debt limit? And Republicans who came out of meetings said it was discussed at the beginning of the meeting; it didn’t necessarily take up a lot of time.
MR. CARNEY: That’s accurate. It did not take up much time at all. The President made clear that he believes that there is no margin here for in any way casting doubt on the possibility that the debt ceiling would be raised, that the effect of even suggesting that it won’t happen could be highly negative and could have dire consequences for our economy and the global economy. But it is accurate to say that that was not a focus of the discussion.
Q And I understand that Secretary Geithner was in the meeting. I don’t think he said anything — at least that’s what I heard.
MR. CARNEY: My understanding is that — I know he was in the meeting. My understanding is the President did most of the talking for the White House, for the administration.
Q And Secretary Geithner is going to Capitol Hill tomorrow. Does that indicate that you’re worried the message isn’t getting across to Republicans about the debt limit?
MR. CARNEY: I think it indicates how seriously we take this issue, and that the Treasury Secretary in particular can address the particulars and the substance of why it is so essential to raise the debt ceiling, the consequences of not doing it, and the impact it would have on global markets, on interest rates, on economic growth and job creation. So I think that we — as I do consistently from here and others do from other venues — need to simply reiterate the absolute necessity of making that vote and raising the debt ceiling so that we do not reverse the very important and substantial progress that’s been made since we emerged from the worst recession since the Great Depression.
Q A number of Republicans, though, argue they’re not unwilling to raise the debt limit, they agree that it needs to be raised, but that there needs to be an agreement on how to cut the debt. And they think it’s unhelpful for the administration to keep saying it would be calamitous, that it would be better to focus on the cuts and how to get the debt down.
MR. CARNEY: Well, what we’ve said is that we’re doing both. And I think that the President’s leadership on this is very clear. Not only did he lay out his plan and his vision for how to achieve $4 trillion in deficit reduction over 10 to 12 years, he then tasked the Vice President of the United States to lead these very serious and so far productive negotiations with Congress — with both parties in both houses — to achieve a compromise on significant deficit reduction, within the same timeframe that we need to address the vote on raising the debt ceiling. I think that demonstrates his commitment to both necessities.
What we have said all along is that it sends the wrong signal and it would be a mistake to directly link, tie, or hold hostage one to the other because of the absolute necessity of raising the debt ceiling. It is not an option if you want to maintain full faith and credit of the United States and you don’t want to send this economy back into recession.
Q Congressman Ryan, in the meeting today, according to attendees and according to Ryan at the stakeout camera, made the point to the President that, as Ben mentioned, that demagogueing the Ryan plan for Medicare is not helpful to this process. And while I understand the President doesn’t believe that he has done so, does he think that the Democratic Party has done so? Has he seen the ads showing a Paul Ryan look-a-like pushing grandma off a cliff? Has he seen any of these ways Democrats are using the Ryan plan to win elections and score political points, and does he have any issue with that?
MR. CARNEY: I don’t know what ads he may or may not have seen, Jake. What I will say is that the substantive differences over Medicare are real. And the facts about whatever you call the system that is in the House Republican proposal — premium support or privatization or voucherization of the program — it has the impact of shifting the cost burden for ever-growing medical costs onto beneficiaries in large, large numbers — $6,400 per senior. That’s just an inescapable fact. And our argument is, you don’t need to do that. You can find savings in Medicare and entitlements, as the President has already through the Affordable Care Act, and as he has proposed further in his future-oriented proposal. And you can get at waste, fraud, and abuse, and you can reduce the cost of medical care while still protecting our seniors. That’s what he believes we have to do.
And one of the fundamental problems — and I think why people around the country have reacted poorly to the Republican proposal — is that it not only eliminates or changes the Medicare program to the point where it is no longer the program we know and does not provide the guarantees that it used to, but it does so, in part, in order to fund tax cuts for wealthy Americans who have already benefited significantly at a time when the middle class and others have been squeezed so tightly.
So those are just — that’s an assessment of priority.
Q Have you seen grandma going over the cliff, Jay?
MR. CARNEY: I haven’t, no.
Q Is that — I understand that there is a philosophical — legitimate, philosophical difference the President has. Is it —
MR. CARNEY: Look, the President fundamentally believes that it does not — that we need a bipartisan solution, that we need to work together and find common ground. And —
Q So does his party running ads showing Paul Ryan pushing grandma over a cliff help that bipartisan process?
MR. CARNEY: I think that the decisions and the negotiations that will produce a result and demonstrate this President’s commitment to significant deficit reduction, as well as Democrats in Congress and Republicans in Congress, occur in the — occur here in Washington. And the fact is, is that we can achieve that in a way that the American people can feel that each side moved off its starting position, accepted that it wasn’t going to get 100 percent of what it wanted, that no absolutist positions prevail in Washington — that’s the nature of our system. And he feels that he has demonstrated his commitment to that, his commitment to taking positions that often are at odds with members of his own party repeatedly. And he’s been willing to do that in the past and he’s willing to do that in the future, because he’s committed to finding solutions that work for the American people.
Q So should the Democratic Party stop running those ads?
MR. CARNEY: Jake, I’ve answered that question.
Q But you haven’t answered the question. You’ve said that the President is conducting himself in an appropriate way, but you haven’t addressed the question of whether or not his party is.
MR. CARNEY: Look, I think — if you’re asking me if there’s been a negative reaction to aspects of the Republican plan, I think it’s because of the incontrovertible facts about what’s in the plan. And our opposition to those elements of the House Republican proposal have, we have not at all papered over.
But we’re not doing — we are interested in bipartisan compromise. This President has made that clear again and again, and he’s walked the walk, not just talked the talk, when it comes to making those tough choices, and he’s shown his willingness to do that.
Q Can I ask a question about Libya?
MR. CARNEY: Yes, but then let’s move on so that others —
Q Quick, let me just — the question is that there’s a resolution being offered by Congressman Dennis Kucinich that would stop U.S. military intervention in Libya. And there are House Democrat and House Republican leaders who are concerned that it actually could pass because there are enough House Republicans who are frustrated with the consultation process and with what’s going on. Is the White House aware of this? Is the White House doing anything about it? Is it concerned?
MR. CARNEY: Well, we’re obviously aware of what happens on Capitol Hill and are aware of this in particular. But as I’ve said before, we feel strongly that the President has acted in a way that is consistent with the War Powers resolution. He looks forward to and would be happy with support, demonstrations of support by Congress and — similar to the Kerry-McCain proposal that has been put forward. And we’ll wait to see whatever action Congress takes.
In the meantime, we are — we welcome the announcement today by NATO that it will extend its mission in Libya for 90 days. We feel that mission has been successful thus far and — in protecting — in its mandate of protecting Libyans from attacks by the Qaddafi regime. And we continue to participate in that mission.
Q I just wanted to go back to the tone of the meeting today. Was it at times confrontational? Were there sharp exchanges? And were Republicans challenging the President directly?
MR. CARNEY: I think it was a very frank discussion, Dan, but I would not say it was confrontational. In fact, I think it was productive, and while nobody hid from the fact that there are differences, that it was a useful conversation. And I think that’s what I heard when I watched some of the Republican members go out to the stakeout after the meeting, and we agree with that.
It doesn’t mean we don’t have differences, but it means that we can as — or they can as elected officials sent here by their constituents to represent them in Washington — can have conversations. If they’re Republicans, they can have conversations with Democrats, and if they’re Democrats, they can have conversations with Republicans. And out of that dialogue comes agreement — not on every issue, but on a substantial areas — on substantial areas that can allow us to move forward. And I think that’s what the American people expect out of us.
Q And beyond the fact that everyone was quite pleased that all sides are sitting down and talking, that there is this dialogue, was there any real movement beyond the starting point, as you pointed out?
MR. CARNEY: Well, again — I think I was asked this before — this was not the forum, with that many people in the room, to put out proposals and spreadsheets and start negotiating details. That is happening in the negotiations led by the Vice President. But it was an excellent opportunity for the President to hear from House Republicans and for the House Republicans to hear from the President. And I think that is a useful exercise almost on any occasion, but in particular on this occasion.
Q Jay, House Speaker Boehner, as a matter of principle, has said that the cuts that are agreed to ought to be at least as big as the cut — as the raising of the debt limit. Is that — just as a matter of pure principle, is that something the White House can go along with?
MR. CARNEY: I don’t really have a reaction to that as a matter of principle. I think that the details of the size of a deficit-reduction package are being worked out by the bipartisan group that is meeting with the Vice President. And I don’t want to get ahead of them.
And then the — I think the Treasury Secretary is our lead on what we think the debt ceiling vote should look like and the size of it, so I don’t want to — and we think they are distinct and separate issues.
Q I haven’t heard any principle from the White House that that would violate, right? So just a question of where you fit —
MR. CARNEY: Again, we think they are — we understand that there is linkage in the sense that some members have insisted that there be deficit reduction. We agree with the sentiment that we need to seriously attack our deficits, but we also think it’s an absolute necessity to raise the debt ceiling. And we — again, you’re not going to hear us link them in that way because we think they should not be linked directly.
We believe that we can take action — positive action on both within the same time period, but again, we’re not going to link them directly in that way.
MR. CARNEY: Yes, Chip. Sorry.
Q How hard did the President push on the need for revenues as part of this package?
MR. CARNEY: The President made clear what his positions are, as he did in his speech at George Washington University and as he has repeatedly since then, and as other members of his team have.
Again, there’s not going to be agreement on everything. There will be disputes on budget matters between Democrats and Republicans next year and the year after and probably the year after that. I can guarantee that. But there is room for compromise on a number of areas that will allow us to reduce the deficit significantly and move this process forward.
Q In the end, will revenues be part of this deal?
MR. CARNEY: Look, we obviously feel strongly that you need to take a balanced approach if you’re going to come up with significant — in our proposal — $4 trillion of deficit reduction over 10 to 12 years. That would have to include addressing spending in the tax code. It would have to include the issues the President has laid out. But we —
Q Will he draw a line in the sand —
MR. CARNEY: But we understand — we understand —
Q — on revenues?
MR. CARNEY: No, there were no lines drawn in the sand and —
Q Even on revenues?
MR. CARNEY: There were no lines drawn in the sand. The process for negotiating the particulars takes place in the conversations being led by the Vice President.
Our position is well known; the President’s position is well known. Obviously the Republicans — some of them, anyway — have made their position well known in terms of what’s on the table. What stays on the table depends on the progress being made in those negotiations.
Q Do you have any reaction to this letter that Speaker Boehner produced, signed by more than 150 economists, calling for spending cuts that exceed the debt limit increase? You touched on it a little bit, but the specific letter, any reaction to that?
MR. CARNEY: Again, I think that that’s a — these are two important goals that need to be achieved. One is significant deficit reduction. We agree with Republicans and Democrats that that needs to be done. That’s why the President put forward a plan that has $4 trillion in reductions. That’s why he asked the Vice President to lead these negotiations, which have been, we feel, productive thus far.
He thinks it’s an absolute necessity that the debt ceiling be raised and he — you know, I can pull out letters also and read one yesterday from President Reagan to the Senate Majority Leader. There is a vast array of evidence and a vast number of experts who can testify to the fact that playing chicken with the full faith and credit of the United States government is a bad idea.
So that is certainly the President’s position.
Q You mentioned the next meeting is scheduled for June 9th. Is there — the clock is ticking. Do you guys feel like maybe you need to move the timetable up a little, have more frequent meetings?
MR. CARNEY: Well, you can be sure that the conversations don’t stop just because there aren’t the formal meetings between the participants, and the conversations continue regularly between staff and also sometimes between participants. So that is simply the next full meeting of the group of negotiators.
We are obviously very aware of the need to move quickly, and I think that we’ve moved quite aggressively on this, working with members of Congress and their schedule to make these meetings happen.
Q Last one. You said today’s meeting was not confrontational. We heard that at least one of the members challenged the President to lead on this issue. Does that bother the President?
MR. CARNEY: Look, I think that’s — what you’re talking about is something we’ve heard before and I think the President has clearly led in this. He established the fiscal Bowles commission — the fiscal commission — I mean, the Simpson-Bowles commission, the fiscal commission that, because Congress would not, he established. And those recommendations helped guide him as he drew up his proposal that he put forward in the speech at GW.
He demonstrated his willingness to accept spending cuts that were not ideal from his perspective, but were necessary in order to achieve the agreement that he reached with Republicans to fully fund fiscal year 2011. And he demonstrated by appointing the Vice President to lead these talks that he is very serious about leading this process to a conclusion that produces serious deficit reduction.
Q Did he offer anything new on Medicare himself, or does he plan to?
MR. CARNEY: Well, I don’t want to get ahead of the negotiations. He did not offer any new proposals today. His proposal is out there and I think pretty extensive.
Q So Medicare is on the table in these negotiations?
MR. CARNEY: Well, what is on the table is serious deficit reduction. The President, as you know, Mike, had reductions — had savings out of entitlements, including health care entitlements, in the Affordable Care Act. He had savings, additional savings, out of entitlements in his vision for future deficit reduction.
Our beef, if you will, with the Republican proposal is not that you can’t find some savings. It’s that you do not have to undermine the fundamental guarantee of Medicare, undermine the Medicare program, essentially end it as we know it, in order to get substantial savings, in part to pay for a tax cut for the wealthy. We just don’t think that’s the right arrangement of priorities.
Q So there’s no linkage and there’s no grand bargain, but how soon does the President believe that Medicare needs to be reformed? I mean, the life expectancy of Medicare, if you will, was recently downgraded by six years.
MR. CARNEY: I think you’re forgetting, I assume, that there was significant Medicare reforms in the Affordable Care Act, and in fact —
Q No, I know, but even given that, after —
MR. CARNEY: — the only aspects of the Affordable Care Act that Congressman Ryan in his plan retained — not the protections it offered, but were the savings in Medicare and Medicaid that are put forward in that. So — and again, the President has put forward other reforms. We believe in making a stronger — making sure that guarantee exists for seniors in the future, and that involves some reform and finding of savings. But it does not involve ending the program as we know it.
Q Finally, Secretary Geithner has said, and I think you have said or other administration officials have said, that they’ve been assured by Republican leaders in the past that there would be a debt ceiling — the debt ceiling would be raised. Did the Speaker reiterate that assurance today?
MR. CARNEY: I don’t want to speak for the Speaker, but my understanding is the President addressed this issue. I don’t know that there was a further conversation. It is true, as mentioned earlier, that it was not much of a topic of today’s conversation.
Q Given the vote yesterday in the House, do you believe that that assurance in still operative?
MR. CARNEY: Well, I believe that the leaders in Congress of both parties understand fully that it would be extremely dangerous and would have highly negative impacts on our economy if we were not to raise the debt ceiling. So, yes, we believe Congress will act, and we believe it’s important that no one cast doubt on the — or create doubt about the possibility that Congress will act.
Q Congressman McCarthy said he wanted something more specific from the President on deficit reduction that doesn’t have to be scored by the Congressional Budget Office. Is that something the President intends to do?
MR. CARNEY: Well, the President put forth I think a robust and comprehensive proposal in his speech at George Washington University. I think we are now in a situation where in the negotiations being led by the Vice President, they are getting into specifics, and we do not need another proposal out there. Our ideas, their ideas, ideas of others are known and out there and available for discussion in these negotiations. I think slowing down the process is not in anybody’s interest.
Q And just more broadly on the economy, I mean, we’ve seen the housing market is struggling again. You’ve got the manufacturing numbers and other indicators that the recovery is not going as well as maybe it was. Has that had any impact on the deficit talks that the Vice President is holding? Does it make the President rethink, perhaps, spending cuts or his position on tax increases?
MR. CARNEY: Well, I think we addressed this a little bit yesterday. Obviously everyone is there, we believe, in these negotiations, because the end goal here is a stronger economy and greater job creation. The President’s view is that we should do nothing in these talks that undermines some of the foundation that we have to have in order to grow in the 21st century. And that’s why he feels very strongly we need to protect investments in education, research and development, and infrastructure.
It is also true that he believes that we need to reduce our deficit, we need to get our fiscal house in order as an economic imperative. But you need to do it in a balanced way, so that you don’t upset the recovery that we’ve been undergoing and you don’t put a halt to the kind of growth that we’ve seen.
We’re obviously still in a situation where we’re emerging from the worst recession since the Great Depression, where there’s a lot of positive indicators, including the substantial private sector job growth that we’ve seen, including the sustained period of economic growth that we’ve seen, but we have a lot more distance to travel before we get to where we need to be.
And so I think all of this is about making sure that we ensure growth and job creation.
Q None of these things have given him any — have caused him to rethink about the way that he’s approaching this? Or —
MR. CARNEY: No, because I think his approach has always been driven in part by a concern that we not do anything that would reverse the progress that we’ve made.
Q Jay, did the President, in fact, reference that Reagan letter in the meeting today?
MR. CARNEY: Not that I’m aware of.
Q Did he compare himself to Reagan? That’s what some of the members are saying.
MR. CARNEY: Not that I’m aware of.
Q Were you there?
Q Another question — another question on the meeting, do you feel that it’s any breach of the closed nature of this meeting for a congressman to sit in there and send out a constant stream of twit pics of the meeting while it’s in progress?
MR. CARNEY: We obviously closed it to the press because we felt that would be more conducive to having a useful conversation. We feel that it was a useful conversation. What individual members did is obviously up to them.
Q It doesn’t bother you that Issa did that?
MR. CARNEY: I’m fine. (Laughter.)
Q We’re glad you’re fine. Is the President fine with it?
MR. CARNEY: Ann.
Q You mentioned Congressman Ryan. Will the President stop calling his plan a voucher plan for Medicare?
MR. CARNEY: Well, like I said, what you call it doesn’t change what it does and what it is. It is a voucher plan. If you’re basically giving a subsidy of a set dollar figure that’s limited in terms of its growth and that won’t stay up with the growth in medical costs, I mean, that’s — you’re basically getting a certain amount of money to put towards buying insurance. They may not get a voucher in the mail, but that is what it is.
And — but the issue isn’t what you call it, it’s the impact that it would have on seniors, an impact that we think is unnecessary. Not only is it the wrong thing to do, we think, because it’s important to maintain that guarantee that we’ve provided for seniors since Medicare was created, but it’s also unnecessary because it’s — the cuts are so deep in part because the need to restructure that program and to end its guarantee that it used to have is driven by the need to fund these tax cuts that we don’t think are necessary, especially when we’re trying to get our fiscal house in order. I mean, it just defies logic as far as we see it.
Mara. Then I’ll —
Q You keep on saying there’s been common ground and there’s plenty of overlap, but listening to the House Republicans reiterate their basic positions — no tax increases, substantial cuts in Medicare, $2 trillion in cuts over 10 years — can you give us any specific examples of common ground that’s been found so far?
MR. CARNEY: What I can tell you is that the negotiations the Vice President has been leading continue. We have another meeting scheduled. They’ve been productive and I think the participants in those meetings feel that they’ve been productive and useful, and that they are leading to an agreement. And it would not — it is not useful to the hope of having an outcome that’s positive to give it a play-by-play as they’re making progress.
So, again, this was not a forum for negotiating those details.
Q Right. I’m asking about the Biden talks, not so much this meeting. But I guess my question is, I understand why it’s in everybody’s interests to not spook the markets and make the markets think that you’re moving toward an agreement, but —
MR. CARNEY: Well, I don’t know that that would spook the markets, would it?
Q To say that those talks are falling apart?
MR. CARNEY: Well, no, I — first of all, they’re not, and I’m not —
Q Right, but what I’m saying is, other than the need to say that they’re productive, you can’t point to any specific example of how they’re productive? I’m not asking you to negotiate in public, but it just seems that there’s no sign of overlap. You keep on saying there is, but —
MR. CARNEY: But, again, the sign of overlap is that there — we share the same goal, roughly $4 trillion over 10 to 12 years. Backing up, we have identified the problem and agree on what the problem is — the need to reduce our deficits and our debt and on the broad goal of what the solution is, $4 trillion.
In getting to that $4 trillion, there are — there is common ground — maybe not all of it. As I said, there’s no doubt in my mind and I’m sure no doubt in yours that Republicans and Democrats will continue to disagree and have disagreements on substantive issues about budgeting and the economy for years to come. But there is enough common ground, especially if each side is willing to move off its starting position, to achieve significant deficit reduction. And I know that it’s — you can be skeptical about it, as people were skeptical about the potential for compromise in December and skeptical about the potential for compromise during the CR discussions. And it doesn’t guarantee that there will be a positive outcome if you’re optimistic about it, but we think there’s reason to be optimistic not just because we’re optimistic by nature but because we feel that the negotiations have been productive.
Q Okay. One other question about the Medicare controversy. The President has reportedly said the demagoguery comes from both sides. It sounds like he’s referencing the 2010 campaign when Republicans accused you of cutting Medicare. Now you guys are doing the same thing to them.
MR. CARNEY: Well, I’m not going to get into a back-and-forth about who said what and who said this and that, but I will say that —
Q Well, I mean, is that the President’s view?
MR. CARNEY: I think it’s a general statement of fact that —
Q That both sides are demagogueing?
MR. CARNEY: — politics can get —
Q But it sounds like he’s acknowledging that both sides are demagogueing —
MR. CARNEY: No. Again, I’m not going to comment on what he may or may not have said in terms of the dialogue in each sense. I think that the President made clear that he’s committed to trying to find common ground; that there is no way to get a solution that’s not a bipartisan solution, and so that requires an atmosphere where Republicans and Democrats who are in the room negotiating have a certain level of trust. And he’s committed to that process.
So beyond that, I’ll leave it.
Q John Brennan has gone to Sudan and he’s going to Saudi Arabia. What’s his assessment of the situation in Sudan and what progress do you believe was made there? And how urgent is the situation between the U.S. and Saudi Arabia? What do you hope will be accomplished in those meetings?
MR. CARNEY: Well, first of all, you’re right that he’s making these trips. I mean, we’ve made our views known on Sudan and our concern about what’s happening there very clear. And Mr. Brennan is there to assess the situation there. And in terms of — Saudi Arabia is an important partner and we are in regular contact at a variety of levels with the Saudi government, and I think that this is just part of that sort of continued contact.
Q Thanks, Jay.
MR. CARNEY: I’ll take one more from Jackie.
Q Separate from all the talk about the long-term budget cutting, Mr. Cantor indicated there was talk that the Republicans are opposed to any sort of further stimulus for the economy. What was the President’s response to that, given that we have job numbers coming out this week, unemployment is at the highest level since the Depression? What does he feel about the current economy and going forward?
MR. CARNEY: The President feels, as you know, that we need to further the growth in the economy and the growth in job creation that we’ve seen in the past several months and quarters.
Q What did he say to them?
MR. CARNEY: I don’t have a specific readout in terms of — because this discussion wasn’t about stimulus. It was about the overall economy and specifically about deficit and debt reduction. The President feels that we need to make — as I’ve mentioned before, precisely for the reasons that you’ve mentioned — we need to continue to make key investments to undergird our economy that allow us to grow in those sectors that are so vital to sort of future competitiveness. And he made that point very clearly today.
Q Well, the quote from Cantor was, “The discussion really focused on the philosophical difference on whether Washington should continue to pump money into the economy or we should provide an incentive for entrepreneurs and small businesses to grow.” The President talked about a need for us to continue to ‘invest’ from Washington’s standpoint. And for a lot of us, that’s code for more Washington spending.”
MR. CARNEY: Well, the investments that the President was referring to are the investments I just mentioned. And in terms of encouraging private sector job creation, I would note the rather strong private sector job creation we’ve seen recently, including 750,000 over three months. The President has taken dramatic action — 17 I think, or maybe more, small business tax cuts designed specifically for that purpose.
And the Republicans also talked a lot about regulation, and I think those of you who were here last week saw the significant action that we’ve taken, charging agencies to review all the regulations under their control to find ones that are no longer efficient, are overly burdensome, and to report out on those so that they can be changed.
So we’ve taken a very aggressive approach to reducing or eliminating the regulations that are no longer necessary that in any way impede economic growth. So I think we agree on the need to create jobs and to grow the economy.
1:54 P.M. EDT