Transcript: Advice for the next President

In order to do that, I want to recount a story. Elaine Kamarck was at the center — as was Karen — at the center of the 2000 campaign, which as we know was hard fought, very close. And Elaine and I both have offices at the Harvard Kennedy School. And so when I’m really stressed, I go up there and she tells me war stories.

And my favorite one was how she and Donna Brazil used to sit around and fantasize about what diseases they could get so they’d have to actually leave the campaign, but they wouldn’t die. (Laughter.)

So I want to start, Karen, with you. You took office — you went into the White House with President Bush during a very, very divided time. The Florida recount — we don’t have to recount this — but it was a very divisive and hard-fought election and there were a lot of bad feelings going into the White House. Given that, what was your game plan then and what would you advise either president to do now?

KAREN HUGHES: Well, the country was, obviously, extremely polarized and from the very beginning, literally from the first day that President Bush won the presidency (laughter) we knew we had to embark on a plan to reach out to Democrats. And so that night he spoke to the nation for the first time from the House of Representatives in the Texas State Capitol, controlled by Democrats, was introduced by the Democratic House Speaker Pete Laney, because he’s worked on bi-partisan legislation in Texas.

Invited Democrats to the White House. He invited Ted Kennedy to come to dinner and watch a movie, sort of the ultimate familiar, great experience at the White House to watch the movie of the Cuban missile crisis. I was there, it was a great evening, and we began working with him on education reform and continue the spirit of deliberate strategic outreach to Democrats.

And at the end of the first 100 days, he didn’t want to make it about him. He wanted to share credit. And so he actually invited the entire Congress to come to a picnic on the White House lawn and say, “This is about all of us, it’s not about me.” And it was actually effective at the time. His approval rating was 63 percent after the first 100 days.

But I was thinking about it, Nina, and I don’t think it would be enough now. The situation in Washington is so dysfunctional and so polarized and I think only the president can rise above it and break through it. Members of Congress are worried about their districts and getting challenged in the primary. The president can go above them to the country at large.

If I were the next president, I would get in my limo almost every day if necessary and I would go down Pennsylvania Avenue to Capitol Hill and I would meet with members of my party, of the other party, I would try to start rebuilding some trust. And I’d start small. If you can get agreement on a big spending package, then get agreement on a trade deal if you’re the Democrat, President Obama, work with Republicans who want a trade deal. If you’re Mitt Romney, get a deal to extend insurance even though you’re going to repeal the healthcare law. Get a deal to provide insurance benefits to young people under 26.

So start to rebuild that trust. Every CEO who is here would not allow this dysfunction to continue in their company. They would go to the scene of the crime, and I think that’s what the next president has to do, and only the president is big enough.

NINA EASTON: So, Elaine, given that, what are some ideas to kickstart the economy that either president could pursue that could conceivably bring both sides together?

ELAINE KAMARCK: Well, following up on Karen’s idea, there is actually an idea out there in the middle of this incredibly polarized town that both parties agree on, and which I suspect may have some interest here in this room: Cut the corporate tax rate. As of April, the United States has the highest corporate tax rate in the world. Our trading partners in other countries are rapidly trying to cut their taxes. We’ve got the danger of headquarters of companies moving overseas. Cut the tax rate, pay for it by getting rid of the loop holes. And I do understand that one person’s loophole is sacred and the other person think it’s a horrible waste of taxpayer money. But cut the loopholes, cut the corporate tax rate.

Second thing I’d say is have a look at carbon tax as a way of raising revenue. The time has come to wean off of fossil fuels for a whole variety of reasons.

And the third thing I’d say is take a very cautious, but deliberate approach to the entitlement reform. On social security, there’s a lot that can be done with just small adjustments in the formula for payouts, which yields lots of money over time.

And, finally, on Medicare, I would say to the new president, whoever he is, the reelected one or the new one, if somebody comes into your office with a great big scheme to do something about Medicare, get behind your desk, find that panic button, press it, get the Secret Service in, take that guy or gal out to Pennsylvania Avenue and dump them and don’t ever let them in the building again. (Laughter.) Medicare is the rock of the American middle class, it has intra-generational benefits.

And for some reason, I have a feeling lots of professors at the Kennedy School have probably considered this, for some reason, everybody in both parties has these grand schemes on Medicare. My reaction is, historically, everybody who touches Medicare gets the equivalent of being dumped on Pennsylvania Avenue, don’t go there.

NINA EASTON: Okay. I’m going to text that to Paul Ryan right now. (Laughter.) And I would also add the corporate tax reform, both sides have agreed to it we might add. And the other thing about the gas tax, carbon tax, which is interesting, there are some conservatives, including Greg Mankiw at Harvard who is a Romney advisor, who supports it. So it’s interesting there is some give on that side.

PARTICIPANT: But I have to say, if Paul Ryan were here, he would say, yes, Medicare is so important that we have to save it and we have to fix it and we have to think boldly about it in order so that future generations can depend on it.

NINA EASTON: Yes. Mellody, let me ask you a President Obama question. I think both sides agree that there’s been a lack of trust from the business community, and there have been kind of rough relations with the business community. What does he need to do to repair that?

MELLODY HOBSON: I think there are three things he can do. I think, one, I’d start off by saying I think the intention is there. So I don’t think this is one of these things where there’s a line in the sand and it’s an “us or them” kind of mindset. I think there’s some frustration that I have sensed from people that I’ve talked to inside the White House about the business community and some very genuine questions that have been asked of me.

You know, what are people saying? What do you think, et cetera? Which I appreciate.

NINA EASTON: And what are they saying?

MELLODY HOBSON: Well, I think that what I have said is that, one, I think that everyone doesn’t feel that they have been — that there’s been enough outreach. Let me put it that way. So that in some ways, the president needs to go retail again, and retail with CEOs. Because I think that what they realize — and both sides realize — they’re in this together and they need each other. You can’t draw lines in the sand. This isn’t my way or the highway. Because in order to have a thriving economy, the business community must feel heard and that they have the opportunity to grow their businesses. And in order to have a functioning political system, we need a thriving economy. So this is a chicken and the egg situation.

So the one thing I think is the outreach needs to step up dramatically. And that’s not to say that it hasn’t been there, but I would do — you know, they always talk about the fact that the president has lunch with the vice president every week. If I were the president, I’d have lunch with six CEOs every single week. It would be a standing thing. And instead of saying “can you come on this day” and have these global CEOs who are running around the world say, “I’m in India, on that day.” You’d say, “This I have scheduled for the next six weeks, the next eight weeks, the next 12 weeks, pick the day that you can come to have a real discussion with us about what you’re seeing and hearing.” So that’s one thing I think would be very helpful.

Two, I think we all agree more business people inside of the administration would be helpful. And Sheila and I were talking about this for a minute. It’s not — you can’t have hard-liners who are maybe people who are ending their career who can — the bias is off and they can be objective about the opportunities, but also draw upon their experience in a way that can help make our country better.

I think Hank Paulson was an excellent example of that type of individual and leader that we need to have inside the White House. I remember thinking inside of Treasury when he was there, in the middle of the financial crisis when he was standing in front of the camera, I knew that he knew what was going on. And that was, as a business person and someone who is in the financial markets every single day, extraordinarily reassuring.

So those two things I think would make a difference. And then, lastly, I think the rhetoric on all sides. You know, you’ve got to call a truce. You’ve got to say — one CEO said something to me that I thought was really actually quite insightful. He said Lincoln knew he had to put Humpty Dumpty back together again. I think that’s a profound statement.

And after hearing that, I thought to myself, there’s something to think about. And you think about the rhetoric and the conversation that you have, you just become very, very disciplined about what you say. And that is not being critical, it’s just being incredibly precise in your communications.

NINA EASTON: That’s an excellent point. Sheila, one of the things that any president will need to do is restore trust in financial institutions. What would be the highlights of what you would do?

SHEILA BAIR: Well, I think people will feel better about financial institutions if they feel better about the regulatory structure. The regulatory structure, we have independent regulators who are devising regulations that are effective, that are simple, that are easy to understand, and that fix the problems that were problems during the crisis.

So I think by appointing strong, independent people to serve in regulatory roles, that also helps the industry. And I think the industry can help itself by being, as I said earlier, constructive in that process as well as putting a premium on where they have interfaces with customers, really, people don’t lump all banks together, they don’t lump all financial institutions together. How is your relationship different? Make judgments based on your own personal experiences.

This situation, this continued turmoil, the complex regulations, the process that just drags out forever, this is not restoring confidence. This is making people feel more cynical that we don’t have people that can stand up to the large financial institutions. And I really see some of the toughest regulators really are people who were in the industry, but they’re at the end of their career. But they know when the industry is coming in with a legitimate beef, or when they’re being gamed. They know. They can make those independent judgments.

So I think that is a good reservoir of talent that the president should draw from. But effective regulation and regulation of integrity that people perceive is independent and working for their interests is the best antidote for this.

NINA EASTON: Elaine, you had some thoughts on now Treasury personnel should look.

ELAINE KAMARCK: Yeah. I think we really need to get a little bit better team at Treasury. And I’m referring to both administrations in this. I think that we have not had Treasury leadership that has been up to the crisis here. And I think we see that all over the place. I think that the absence of leadership from Treasury, the absence of a clear message and clear accountability is actually increasing cynicism in the public and anger in the public.

And I think that we’ve got to — I hope that President Obama will be reelected, but I hope that in this second term there’s a Treasury team that works harder to restore faith in the financial system because it really — if I had to grade them, I’d give them about a C-minus for the first term.

NINA EASTON: Well, you also think of it as a boys’ club, with the exception —

ELAINE KAMARCK: I mean, the exception of the military, that’s the other place — you know, the U.S. federal government is really a remarkable place for women. There are tons of women running huge agencies and making important policy decisions all over the place.

There are two holdouts, however, for the boys’ club. One is, of course, the Pentagon, and particularly acquisition, which is where all the money is. And the second place is Treasury and the financial institutions. And I think that both of them could use a strong dose of more women in the policy-making roles.

MELLODY HOBSON: I just want to say, gender aside inside of Treasury, which I can’t comment on, the one thing I do think having sort of lived through the day to day of, again, being in the financial markets during the most significant collapse of a generation, I think it’s easier said than done. And I think the leadership actually, given the situation and the hands that they were dealt, they did some things that were truly remarkable.

And I think in hindsight it’s easy to look back, but I have to say, both sides, looking at Hank Paulson, looking at Geithner, really trying to assess when they were out in front of the television cameras talking about the situation as it was unfolding, I have to say, I give them high marks for staying calm in that situation.

KAREN HUGHES: Well, if you go back to TARP, and frankly, it cost some Republicans their careers in elected office. It was a bold, courageous thing that President Bush and Secretary Paulson did, yet it prevented the world economy from going into a really, really bad situation.

But I wanted to make a larger point. The next president, I think, has to address the climate of uncertainty. It’s really the problem with the business community because you can’t plan. You’re uncertain. What’s going to happen? What are my taxes going to be? Are we falling off this fiscal cliff at the end of the year? And it’s made the Americans — it’s deeply corrosive to the American people.

Frankly, starting 9/11 when we were attacked, that created a sense of great anxiety. The crash of 2008 deepened it. And I believe that’s one of the reasons that healthcare was of such concern to the American people. It’s not that they don’t want healthcare, but I think it exacerbated the anxiety at a time when people felt very anxious.

MELLODY HOBSON: But it’s interesting, there’s one thing about that, which is the uncertainty issue, and not to, you know, say too much, but I’m on four corporate boards, and we’ve never talked about tax uncertainty in our board room. In four companies. It’s never come up — Starbucks, Estee Lauder, Dreamworks.

NINA EASTON: We’re running short of time, I’m going to do a polling question. We had a quick polling question. Who will you vote for in the upcoming election? A for Obama, B for Romney, and C for undecided. And then the same A, B, C, who do you think will win the presidential election? Obama, Romney, or unsure?

We are really short on time. We’re going to do a lightning round. There’s a debate tonight. Hopefully everybody’s going to be watching and interested and engaged in it.

I’m going to go lightning round, right down here, starting with Elaine, quick advice.

ELAINE KAMARCK: Mitt Romney has to be a likeable person with a plan or else the election is over.

NINA EASTON: Karen?

KAREN HUGHES: I think Mitt Romney has to share personal stories and connect the dots for why — people know things aren’t good now, but he has to connect the dots as to why his policies will make things better.

PARTICIPANT: I think President Obama needs to be succinct and I think he needs to be also personal.

SHEILA BAIR: I would say Romney needs to betray his class. I think he needs to embrace the fact that he pays 13 percent in income taxes. Most people who have earned income pay over double that. And he needs to understand that and embrace it about the inherent unfairness and articulate specific tax policies to address that.

With Obama, I think he probably should just not make any mistakes. It looks at this point that it’s trending in his direction. I would also say that he has a problem in terms of some may say that he’s betraying his own class because the reality is income inequality has gotten a lot worse under this administration. I do think economic policies, yes, there have been people with good intentions, but the policies have been very insular from the perspective of the large financial institutions. And that’s not consistent with our broader economic interests, and I think it’s showing in the recovery.

NINA EASTON: So results of the poll. Obama is the winner on both scores. I wish we could continue this conversation, it’s fascinating.

(Break for direction.)

NINA EASTON: Thank you all. I really appreciate it. I’m sorry it was short, but it was great. Thank you. (Applause.)

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