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WALLACE: And hello again, from Fox News in Washington.
President Obama was out campaigning this week, pushing his plan to boost the economy buy helping the middle class, and attacking Washington as too focused on, quote, "phony scandals." Republicans say they have heard it all before.
On Friday, I sat down with Treasury Secretary Jack Lew.
WALLACE: Secretary Lew, welcome back to "Fox News Sunday."
TREASURY SECRETARY JACK LEW: Good to be with you, Chris.
WALLACE: President Obama keeps calling for more spending to pay for infrastructure, to pay for education, to pay for clean energy -- all things he's been pushing for almost two years and all things that Republicans have repeatedly rejected. The president says that the GOP's attempts to repeal ObamaCare over and over again are meaningless. Isn't this just as meaningless?
LEW: You know, Chris, I think what the president has been talking about this week, what' he's going to be talking about in the coming weeks is what we need to do to build a better future for America's middle class, how to have a future of better opportunity for jobs, how to have security in education for your children, and health care, and retirement security, how to be secure in your home. These are the things that the American middle class worry about, and it's what they want us in Washington to worry about.
So, we will keep talking about these things because it's what the American people need for us to do.
WALLACE: But isn't it just as meaningless as -- because it's been rejected, whether it's good ideas or not, as the Republican continue to talk about repealing ObamaCare. That's not going to happen either.
LEW: I have worked in Washington for quite a few decades. I don't know a lot of people on either side of the aisle who don't believe in infrastructure. And I don't know a lot of people on either side of aisle who don't believe in educating the next generation.
WALLACE: But they think that we have a deficit problem and that we can't afford to spend more money.
LEW: Chris, I think that if you look at where we are today, you have to realize we're not where we were in 2011. We've actually worked together, it's been a messy process, but we've worked together and we've reduced the deficit considerably. In the Budget Control Act, we reduced the deficit on the discretionary spending side. This year, at the beginning of the year, we enacted some tax legislation that raised the tax rate of the very top for the highest income.
We still have more work to do and the across-the-board cuts that kicked in are not good policy, we think they should be replaced by sensible alternative entitlement and tax reforms, but we've actually accomplished roughly the amount of deficit reduction we all set out to accomplish a few years ago. We're now arguing about the composition.
We need to get on with the business of the American people who don't want us arguing about the numbers. They want us to build a better future for the American middle class.
WALLACE: Let's talk, though, about the budget because the government runs out of money on September 30th, which raises the possibility of still another drama and another government shutdown. And while the president talks about higher taxes and more spending or investment as he puts it, the GOP says that the sequester must stay in place, $109 billion in the next fiscal year, starting in October, maybe reconfigured, but $109 billions, plus billions of dollars more in spending cuts. They say cut spending.
Other than the Republicans surrendering, what's your plan to avoid a government shutdown?
LEW: You know, Chris, if you look at what's going on right now, in terms of our deficit, we are reducing the deficit at the fastest rate since the demobilization after World War II we need to talk about growth. We need to talk about how do we build that better future for America's middle class.
WALLACE: So, are you saying we don't have a deficit problem anymore? We're $16 trillion in debt, sir.
LEW: Well, I'm telling you that we have a set of short term and long term challenges. And the short term, if you look at the amount of deficit reduction we're doing, we're just criticized by the IMF for doing too much too soon, that we should do more later and less now. In the international community -- I just came back from meeting with finance ministers around the world -- there's I think a consensus in the world community that we need to focus on growth, that you cannot just cut your way to growth. You need to have policies in the short term, which help the economy grow, and medium and long-term reforms that put things in the right place for the long-term.
WALLACE: Well, Republicans would agree that you need more growth. They'd say the way to do it is to lower taxes and to reduce the regulatory burden.
Let me ask you a specific question --
LEW: We have seen the result of both approaches. That approach did not work.
WALLACE: Well, we'll talk about the Obama approach and how much that's worked in a moment.
But, the Republicans say, we want the sequester. That was part of the deal of the Budget Control Act that you talked about, the response in 2011 -- $109 billion in spending cuts in the next fiscal year starting in October.
Will the president sign a government bill, a funding bill, a continuing resolution or some kind of budget bill that includes $109 billion in spending cuts even if it's configured?
LEW: Chris, the president has made clear, he's told Congress he will not sign a bill, if it fixes defense at the expense of domestic spending. I think we've seen in the House, the Republicans have been writing bills that do exactly that. They don't -- I think they have a way to solve their own problems without that and I don't think that they could even pass the bills that would result in terms of the cuts to education, to health, to all the things the American people care about.
WALLACE: So, are you saying that the president would veto a bill, a resolution to the budget shut down, the budget crisis, at the end of September that included $100 billion in new spending cuts?
LEW: Chris, what I'm saying is that Congress has to write bills that meet the challenge that that the president sets forth, to start investing in our future. And Congress cannot steal from the domestic priorities to fix problems that across the board cuts have caused in defense. I think the right solution would be to get together and have a sensible set of alternatives to replace across the board cuts that were never meant to take effect. They were meant to be bad policy that would drive Congress to do its work and adopt sensible policy.
WALLACE: Will the president veto a bill that House --
LEW: The surprising thing is, that, you know, a couple of years after, everyone agreed this was bad policy, there are people who are now claiming credit for things that were designed to be bad policy and senseless across the board cuts. That's truly surprising.
I think if you look at the way Congress has been dealing with these across the board cuts, it reflects a substantial division even on the Republican side. You see senators like John McCain and Kelly Ayotte and Lindsey Graham, who think it's terrible for our national defense to leave those across the board cuts in place.
WALLACE: All right. Let's --
LEW: There's a better alternative.
WALLACE: Let's switch to the debt limit.
House Speaker Boehner said no increase in the debt limit without an equal or a greater amount in spending cuts. When, first of all, are we going to hit the deadline? I know you are shifting money around.
And secondly, short of a Republican surrender, are you going to make a deal to how do you avoid going into default?
LEW: Chris, to be clear, we hit the debt limit in May. We have been using what are called extraordinary measures. Since then, to pay our bills --
WALLACE: And when do you hit the deadline.
LEW: Congress needs to do its work. It has to stop looking for what's the last possible moment. No one can predict with absolute accuracy and they can't take a risk of making a mistake. They should get back after they take their time off in August, and they should finish their work and get it done, so that there's no uncertainty about America's ability to pay its bills.
I've got to tell you --
WALLACE: What's your plan to avoid the default -- what's you plan to avoid the default when Speaker Boehner said there got to be spending cuts?
LEW: And 2011 was the first time in American history that you had one side arguing that default was an option. It was not an option and cannot ever be an option. They may know that. They have to do their work. They have to pass it.
The president has made clear: we cannot negotiate about whether or not the government of the United States would default. It was a mistake in 2011 to have that debate. It's hurt the economy. And I think Congress knows that it has to deal with this.
WALLACE: But, Secretary Lew, this idea of a clean debt limit bill is not written in stone. The fact is when you were deputy director of OMB, back in 1997, that Bill Clinton signed an increase in the debt limit that was tied to balancing the budget, a deal with Congress.
So, it happened. It was good enough for Bill Clinton. Why can't Barack Obama make the same deal?
LEW: You know, Chris, things changed in 2011. In the 1990s, in 1980s, all the previous debt limit debates, there were discussions about what should be done as the debt limit is resolved. 2011 was the first time there was debate about whether or not to default, where there was actually one side arguing that default could be managed.
That is just wrong. It would be terrible for the U.S. economy. It would be terrible for the world economy. It's irresponsible. And I think Congress learned that lesson in 2011.
WALLACE: All right. You talked about the economy and you talked about the president. I want to put a couple of statistics up here.
First of all, let's look at growth. Growth in the fourth quarter of last year was 0.4 percent. It was 1.8 percent in the first quarter of 2013. There's a lot -- a lot of people believe it's going to be less than that close to 1 percent in the second quarter of 2013.
I also want to put -- because the president talked a lot about inequality. I want to put up some statistics about the middle class and how it's done under President Obama. Let's put those on the screen.
Medium, real household income is down 5 percent. That's $2,718 a year on average since the recession ended in June of 2009. So, in the recovery, medium real household income is going down. The percentage of Americans in the workforces has dropped from 65.7 percent to 65.3 percent, again, since the recession.
Quite of all this, a lot of numbers, the middle class has fallen behind -- for all this talk of equality, the middle class has fallen behind under President Obama.
LEW: So, Chris, you just made the case as to why the things the president was talking about this week are so important. We need to focus together in a bipartisan way on the things we can do to help America's middle class.
The truth is the core of the economy is strong, it's resilient, and we've been growing. We've been growing for 40 months. We've seen job growth for 40 mounts, GDP growth, economy growth for four years.
It's not fast enough. We want to do everything we can to speed the pace of economic growth and job creation. That means we need to address the issues that the president laid out this week. We need to do things to help build the foundation for better jobs.
WALLACE: Let me ask you one question. If you're so interested in creating more jobs, why not approve the Keystone pipeline which would concrete tens of thousands of jobs, sir?
LEW: Chris, I think, as you know, the Keystone pipeline is being reviewed. It's been in the process that was slow down because --
WALLACE: Several years it's being reviewed. I think, what, three, four years.
LEW: It was -- there were some political games that were played that took it off the trail, past its completion. When Republicans put it out there as something that was put on a timetable where it could not be resolved, it caused a delay. We are getting to the end of the review, and we'll have to see where that review is.
But I think playing political games with something like this is a mistake.
WALLACE: I want to ask you about what other part of President Obama's speech this week. Take a look.
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OBAMA: With this endless parade of distractions and political posturing and phony scandals, Washington is taking its eye off the ball. And I'm here to say, this needs to stop.
(END VIDEO CLIP)
WALLACE: Question, does the president think that the IRS targeting of conservative groups is a phony scandal?
LEW: The president has made clear, I have made clear, that the mistakes that were made in judgment, very bad judgment, managing the 501(c)4 program were unacceptable and they had to be fixed.
WALLACE: That was not a phony scandal?
LEW: Well, he appointed an acting IRS commissioner, who has taken decisive action, clearing out all the people who had supervisorial responsibility for any of the decisions leading up to that. He's put in place methods to make sure it doesn't happen again.
I think that we have to like look at the facts. There had been a lot of investigations. There had been a lot of hearings, I.G.s, the Justice Department. There's no evidence of any political decision maker who was involved in any of those decisions. And I think the attempt to try to keep finding that evidence is creating the kind of sense of a phony scandal that was being referred to there.
WALLACE: Let me --
LEW: There was a problem. The problem has been addressed and there was no political involvement that there's any evidence of.
WALLACE: Well, let talk about that. On May 15th, the president directed you to investigate the IRS scandal. Again, take a look.
(BEGIN VIDEO CLIP)
OBAMA: I directed Secretary Lew to follow-up on the I.G. audit to see how this happened and who was responsible and to make sure that we understand all the facts.
(END VIDEO CLIP)
WALLACE: So, if this is supposedly behind us. It's been more two months since he directed you lead the investigation, explain to me how it was that conservative groups were targeted by the IRS.
LEW: Now, look, first of all, Chris, what we found out as we went through to find the facts is that there was equal opportunity and bad judgment. It was conservative groups. It was progressive groups.
WALLACE: At equal numbers or not -- grossly disproportionate conservative groups over progressive?
LEW: There aren't equal number of groups. The bad judgment was equal opportunity.
WALLACE: But not the number of groups.
LEW: No, but it was --
WALLACE: It was over a hundred compared to a dozen.
LEW: You have to look at how many cases of each there were.
WALLACE: And who were responsible for it, sir?
LEW: Look, there were a number of supervisors of course, all career, who exercised bad judgment, who were relieved of their responsibilities. I think what happened there is unjustifiable. It is not acceptable to have the kinds of screening, left or right, liberal or conservative, where you are targeted in any ways for your views. There's no political official who condoned it or authorized it. WALLACE: Well, let me ask you about that, because an IRS official, Carter Hull, told Congress this week, that he was ordered to send applications from two Tea Party groups, for tax exempt status, to send them to the IRS chief counsel's office. That's William Wilkins, who was a political appointee. As a political appointee, he reports to you, to your office.
Have you asked William Wilkins, the IRS chief council appointed by President Obama, what involvement he or his office had in all of this?
LEW: Chris, to be clear -- there's 1600 lawyers in the chief council's office, and there was no suggestion that this went to the one political person in that office. There's no evidence of it. There has been no evidence of it.
WALLACE: Well, wait a minute, have you asked him?
LEW: Chris, I'm leaving the investigation to the proper people who do investigations. I don't think it's appropriate for me to do the investigation.
WALLACE: Has somebody in the Treasury Department asked William Wilkins what he knew about this?
LEW: Chris, there is no evidence that this went to any political official.
WALLACE: Well, there hasn't been an investigation. The Justice Department investigation isn't complete. The inspector general never conducted an investigation. He conducted an audit.
So, who -- where is the investigation --
LEW: An awful lot of time has gone into asking a lot of questions of a lot of people. I'm not saying it's done, and we will cooperate with all of the ongoing investigations. We have and will. I'm just challenging your assertion that something has been show, when no evidence has been produced to show it.
WALLACE: I'm just wondering the questions haven't been asked.
LEW: Well, you have to look at evidence that comes forward and respond to it.
WALLACE: Finally, on a different note -- when you were nominated as treasury secretary, and let's put this up on the screen. Your signature, that's the upper one, and it got a lot of kidding, in fact from the president who said it looked like the icing on a Hostess cup cake, below is the signature that's going to start appearing this fall on money, because you're as a treasury secretary, it appears on money, that that's going to be on the $5 bill, and it looks different now.
So, the questions I have are: one, why did you change your signature? And two, how did you change your signature?
LEW: Chris, I have been working on my handwriting for many decades, and I obviously still have some more work to do.
WALLACE: But, I mean -- did you decide that isn't going to do for the currency of the United States, I've got to have a different signature?
LEW: Chris, I will confess to having a challenge with penmanship and I always do my best.
WALLACE: Mr. Secretary, thank you. Thanks for coming in. We very much appreciate it. Please come back. Always a pleasure, sir.
LEW: Good to be with you, Chris. Thanks.
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