What Would Bill Do?

The 42nd President talked with TIME’s managing editor, Rick Stengel.

So what has happened to the economy and the U.S. over the past 30 years?

We face more intense competition from around the world, and at the same time we have adopted this antigovernment philosophy, which has mostly been antitax and antiregulation, so that we’ve dramatically increased the national debt. So we have to figure out a way to put the country in the future business. We have to get a hold of the long-term debt problem, and we have to revitalize the private sector. And you can’t do it with an antigovernment strategy. You have to have a smart government and a strong economy.

What is it that Democrats and Republicans don’t understand about how to make the economy work again?

Republicans believe that if you cut taxes, especially for upper-income people, that’s always going to work, no matter what it does to the deficit and to our investment in the future. What the Democrats have to understand is, if they want to preserve a health care program for people who need it and the benefits of Medicare, we have to be willing to change the delivery system. We’re spending too much on the way we finance health care and the way we pay for it. The Republicans can’t be completely allergic to taxes. The Democrats can’t be completely allergic to changes in health care delivery.

Why are banks and corporations sitting on so much cash?

Well, the banks have about $2 trillion in cash uncommitted to loans. They could loan in theory, at conservative ratios of 10 to 1, $20 trillion. Obviously, if that happened, the recession would be over in 15 seconds. Pepperdine did a study showing that 40% of the small businesses said they would expand their operations and hire more people if they could get credit, and they can’t get credit. We’ve got to clean these bank books up. Right now, everybody’s frozen. And by far the biggest thing we could do is to have a more aggressive move on the home-mortgage problem.

What else will make banks start spending cash?

You’ve got a lot of cash being held overseas. So what we should do now is say, You bring this money back while we’re debating the corporate-tax reform for free if you can prove you increase net employment. For everybody you increase net employment on, you get that much credit for free. If you want to spend it on whatever you want, pay the long-term capital gains rate, 15%.

It seems almost impossible to get Congress to approve anything in any kind of bipartisan way.

If [the President] can’t get Congress to act, he’s got to do everything he can by Executive Order. I understand why he’s frustrated, because a lot of these proposals that he’s made are ideas that were first proposed by Republicans, who are all of a sudden now against them and seem to be against them just because [Democrats are] for them. But he ought to keep fighting for his ideas in Congress. These kinds of financial/housing crises, if you go back hundreds of years, tend to take five to 10 years to get over.

How can President Obama get re-elected with an unemployment rate hovering around 9%?

I think the President will be able to rely on the fact that he has tried to come up with a serious and comprehensive plan. The question is, Will they behave the way voters typically behave in these circumstances? Or will they understand that this was a different sort of recession and then evaluate the competing candidates in terms of whether their ideas are more or less likely to get us out of the fix we’re in? You know, I think people are pretty smart once they understand the deal.

You balanced the budget and cut the size of the government. How come you’re not a hero of the Tea Party?

I thought I should’ve been their favorite politician. I think because I didn’t do it according to the ideology. I raised taxes and cut spending. I did it with a mix of policies that also left us money to invest in our future and in our quality of life.