Charlie Rose: Tell Me Why You Think the Results of This Election Were As They Are
Charlie Rose - 1 - 11/16/2010
ALL EXCERPTS MUST CREDIT “CHARLIE ROSE”.
Charlie Rose: Tell me why you think the results of this election were as they are. Was it [spelled phonetically] in postmortem analysis produced the results we see?
Paul Ryan: It wasn't a valediction of Republicans. And we shouldn't disguise that. What I see was a repudiation of the direction the president and his party took the country. I just look at Wisconsin. Wisconsin won for Barack Obama by 13 points in 2008. Wisconsin, the state legislature was deeply controlled by Democrats. Five of the eight Congressional delegation were Democrats. And in Wisconsin we took the state legislature. Beatrice [spelled phonetically] Feingold took the governor and took two Congressional seats.
Charlie Rose: Well, was there a specific issue having to do with spending, was there a specific issue having to do with healthcare?
Paul Ryan: It was everything. It was everything. Healthcare was the straw that broke the camel's back. It was the direction the country has been taken. What I think it was is just all of the spending, all of the borrowing, all of the economics, it was not focused on jobs, the stimulus, everything stacked on top of each other gave people a sense that the government has become untethered toward our basically core founding principles and that we were running on an agenda that was unsustainable, borrowing, taxes, debt, deficits, and in our area where it's really a small business driven economy, the uncertainty was killing us. And so it's all this uncertainty from government which just gave us this tsunami of an election and so really I see this was -- I mean, statistically speaking it was the greatest repudiation in 72 years of a president in power. Now, the question is, is does the president and his party think they have a marketing problem or do they really realize that they have a substance and an ideological problem. And I don't know what the answer to that question is.
Charlie Rose: And how will you find out the answer?
Paul Ryan: Time, I mean, the way I hope this goes is the President will say, “All right, I agree with you Republicans on A, B, and C, so let's work together on those things, but on X, Y, and Z I don't agree with you, and on those issues we owe it to the country to give them a real choice, real alternatives, how we would do things differently, where we would take the country.” There's nothing short of debating what America's going to be for the next century. I mean, we're in a time in history where we're not talking small ball anymore. This is not school uniforms or prescription drugs. This is, you know, debt crisis, the economy. You know, is America going to be the leader in the 21st century or not? Are we going to have what I would call an opportunity society with this social safety net? Or
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 2 - 11/16/2010 are we going to go over and become a social democracy, a cradle to grave welfare state like a European kind of society? And the difference in the next few years will determine what that outcome will be.
Charlie Rose: Will it be different do you think in terms of the president if he is looking to and thinking about the 2012 election?
Paul Ryan: It will. If he's thinking 2012, he's thinking more contrast. He's thinking -- here's the problem that -- most of us don't know the president very well. So I always try to keep an open mind on these things as to what the approach of a person's going to be, but when he calls us "enemies," when he uses demagogic political rhetoric in the campaigns season -- you got to remember the campaign rhetoric in 2008 was very different than the campaign rhetoric in 2010. And in 2010 it gives us the impression that we're seen as enemies -- he goes to our districts and says that Republicans want the economy to fail so he fails politically, and that kind of talk, all these straw men and counterfactual arguments, does not make it easy to cooperate and come together on the big issues of the day.
Charlie Rose: But you'll grant me that, that's happened on both sides. [unintelligible]
[talking simultaneously]
Paul Ryan: Absolutely, I will grant you that. We don't have halos over our head either on this stuff. I think the big question of the day though is what is the vision for the country, and I do believe that the president is a fairly ideological guy. And I think his ideology --
Charlie Rose: Even though his friends and colleagues say he's essentially a pragmatic centrist?
Paul Ryan: His rhetoric doesn't show that. His policies don't show that. And his policies are in place right now so I don't see that, and plus they're reelecting the same Congressional leadership that they had in the last two years. So it's difficult to see a strong course correction. Triangulation, my guess, will be the exception, not the rule. Hopefully we can make a difference on a few things. And we got to get some things done. We can't do nothing for the next two years.
Charlie Rose: Let's talk about things that might get done. You're a member of the Bipartisan Deficit Commission.
Paul Ryan: Right.
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 3 - 11/16/2010
Charlie Rose: What do you think of what we now know about it, and what’s going to happen between now and December 1 and then into the future?
Paul Ryan: All right, so first of all I think we should commend Erskine Bowles [spelled phonetically] and Allen Simpson [spelled phonetically] for putting a plan on the table. I mean, as the person who had the only plan out there for a number of years, I’m really happy somebody else put something on the table so we could start talking about.
Charlie Rose: Exactly. And well in fact the president complimented you for having a plan.
Paul Ryan: He, did, he did, and so it’s a serious and impressive plan what Erskine and Allen did. It’s just the two chairs, put that out there, they themselves, the rest of the people weren’t involved in that. There’s some things in it I like, there’s some things in it I don’t like, but getting something passed through Congress by December 1 into law isn’t going to happen. Just logistically speaking it’s pretty much impossible, the way the Senate works and the way procedures work, that you're not going to get some big bargain passed into law in this lame duck session, that's just not going to happen. And I don't mean that from a partisan standpoint. I mean that just from a logistical standpoint. So the question is, is will this Commission advance some ideas that then can be picked up by the next Congress to be advanced. And that's my hope.
Charlie Rose: So the point of the Commission is to start the debate.
Paul Ryan: Yeah, I think that's --
Charlie Rose: [unintelligible] information we now know.
Paul Ryan: I think that's what's going to become the point of the Commission. The original idea of the Commission was to actually have a plan and pass into lame duck. That's just not really feasible from a logistical standpoint. I don't think you can write legislation or score it fast enough, let alone get through all the hurdles in the Senate, to pass something even if you could get 14 of the 18 Commissioners to vote for something.
Charlie Rose: And what about the up and down vote?
Paul Ryan:
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 4 - 11/16/2010
That's what I don't think you're going to have. I don't think you're going to have that.
Charlie Rose: When you look at what the Commission said so far, what those two co-chairs said, what you like and don't like, you --
Paul Ryan: Well, okay so what I like is the fact that you have the president's people that he put in charge of this, Erskine Bowles who's a great very conscientious Democrat saying that for America to be competitive in the 21st century we need to lower tax rates, we need a lower corporate rate, we need a territorial tax system which is very important for our competitiveness, and to lower tax rates on individuals. So they're basically talking about broadening the tax base, lowering the rates. That's good. They're also going after spending. Now, there's some things I would do and some things I wouldn't do but they're going after spending. What they didn't do in this plan which I think was a mistake is they didn't go after fixing healthcare. They pretty much skirted it on the edge which --
Charlie Rose: Why not?
Paul Ryan: Because I think they wanted to accept the premise of Obama-care. They wanted to accept the structure and the architecture of Obama-care which obviously I have a huge problem with.
Charlie Rose: Was there serious conversation about doing something about healthcare --
Paul Ryan: There is.
Charlie Rose: -- in the Deficit Commission --
Paul Ryan: There is and there will continue to be. Alice Riddlin [spelled phonetically] and I plan on putting out our own plan on healthcare hopefully this week.
Charlie Rose: And what would that say?
Paul Ryan: Well, she and I are still talking about it so I don't want to get ahead of myself but --
Charlie Rose: Just give us a hint.
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Paul Ryan: But we need to deal with Medicare. Medicare has a multi-trillion dollar unfunded liability. That wasn't really addressed in this plan, very, very little. And so I think you need to address Medicare and Medicaid if you're going to deal with this. Of the GAOs, unfettered [spelled phonetically] liability, figure which is $76 trillion figure, almost all of that is healthcare. You cannot preempt a debt crisis, get this fiscal house in order, without dealing with healthcare. And I do not believe that this healthcare law does that. Not only do I not believe that. The actuary age adjust tells us the deficit will go up with Obama-care, healthcare costs and spending will go up with Obama-care. So --
Charlie Rose: What does the Congressional Budgeting Office say though?
Paul Ryan: Same thing. I mean, when you take away some of the smoke and mirrors that were in the scoring that they had to score, it's a big budget buster.
Charlie Rose: But when does the budget busting take place?
Paul Ryan: Now and into the future, so --
Charlie Rose: So it starts [unintelligible] --
Paul Ryan: [unintelligible] because you have a lot of discretionary spending that you had to implement in Obama-care that was not factored into it. Plus what they did with Obama- care is they did six years of spending all paid for by 10 years of Medicare benefit costs and tax increases. Once you get farther down that budget window, the uglier the score gets.
Charlie Rose: The president says it's okay to talk about his healthcare reform proposal that was passed by the Congress at the edges, but at the core --
Paul Ryan: Yeah, see that's where we have a huge disagreement. That's why on the X, Y, Z category that's where we're just not going to agree with the president on it. And that's where we're going to have very difficult chance to come together. We're going to have big philosophical disagreements on that.
Charlie Rose: That's really going to be where the debate is, isn't it?
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 6 - 11/16/2010
Paul Ryan: [assent], I think that's going to be a big part of it, yes.
Charlie Rose: Yeah, rather than on tax cuts.
Paul Ryan: Yeah, hopefully the tax cuts are going to get settled in a lame duck. That would be really ugly for the economy, for investors, entrepreneurs, and small businesses if this tax fight spills over to next year. That really in my opinion needs to be done in lame duck. And I think and hope it will be. We get mixed messages from the White House so I can’t really tell you exactly what [unintelligible]
Charlie Rose: So the White House is prepared to extend the tax cuts, both of them.
Paul Ryan: Yes.
Charlie Rose: Middle class and upper income.
Paul Ryan: Right.
Charlie Rose: For two years. You got a deal. That’s a deal.
Paul Ryan: Well see, they control it all. The Democrats control everything in a lame duck. My guess is that they will extend it for a temporary period of time and the timeline will be their choice.
Charlie Rose: Right. So would you like to see that happen in the lame duck session?
Paul Ryan: Yeah, I --
Charlie Rose: An extension for two years and come back and revisit tax cuts in two years.
Paul Ryan: Right, so permanent is important and I subscribe to [unintelligible] income effect.
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Charlie Rose: [unintelligible] two year extension.
Paul Ryan: But I realize we’re not going to get permanent but I think these rights should not be decoupled so therefore it will probably be a temporary extension.
Charlie Rose: Not be decoupled under no circumstances [unintelligible].
Paul Ryan: That’s a bad idea.
Charlie Rose: Why?
Paul Ryan: Because it sends signals to businesses that their tax rates are going to go up. We already have a big tax increase coming in 2013 as well. You understand, this tax increase, they say it only applies to two percent of the wealthiest of Americans. That’s of filers. It applies to 50 percent of small business income. If you drive around the state of Wisconsin, at the outskirt of every one of our towns is an industrial park, where most of the jobs are, with 50 to 250 employees; they all are sub-S corporations; they’re partnerships.
Paul Ryan: I don’t look at the tax code as a tool of social engineering and wealth redistribution. I see the tax code as something that’s necessary to raise proper revenue for the government. We should do it as efficiently as possible so that we can maximize economic growth. I’m not a big income redistributionist. I believe in a safety net and I believe we have to watch this because going to the debt crisis, if we don’t get this taken care of, we will shred the safety net itself. So I believe in a society where we help people who cannot help themselves. We help people when they’re down on their luck. And we have an incentive based system where people want to get up and make the most of their lives, for themselves and their kids. We don’t want to turn this safety net into a hammock that ends up lulling people in their lives into dependency and complacency. That’s the big debate we’re having right now. So --
Charlie Rose: Suppose I said to you --
Paul Ryan: Tax policy is a big part of this as well.
Charlie Rose:
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 8 - 11/16/2010
Agreed. Suppose I said to you, “I can imagine the president would agree with everything you just said. He doesn’t want to be a redistribution system.”
Paul Ryan: I don’t think that’s right.
Charlie Rose: But suppose he says it.
Paul Ryan: Okay.
Charlie Rose: All right. I mean, he’s not--my goal here is not to be someone who wants to use --and government as someone once said, I want government to be an engine of change but at the same time, not necessarily a permanent engine of change. You use it when you need it and then you don’t. I get--you know what I’m saying.
Paul Ryan: Yeah I know. You see, I still think at the beginning and at the end of the day, we have different philosophies of government. That’s a different idea of what our country is meant to be. And I don’t mean this in a bad way. This is a debate we need to have in this country because of the economics and the fiscal situation; it is demanding that we tackle this soon. And how we tackle this really flows from what is our philosophy of governing. Do we want to reapply these founding principles or do we want to kind of reinvent the country to something else?
Charlie Rose: And you think the president wants to reinvent the country to something else?
Paul Ryan: Yeah I think he’s a liberal progessivist, which I’m not saying that in a mean way, I just think that that’s what he is and I think that’s what he believes the government ought to be far more active.
Charlie Rose: And is that what you believe most of the Democratic Party is?
Paul Ryan: Well, after this last election, I think a lot of the centrists lost and so a lot of the remaining Democrats in Congress are more of that mindset. There are lots of Democrats, Irs Kimble is a good example of who are more centrists. Alice Ribble and Irs Kimble, Democrats I work with very closely on this fiscal commission who are not of that ilk. But I think the majority of their party right now is.
Charlie Rose:
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 9 - 11/16/2010
Okay, with respect to tax cuts, nothing’s going to happen during a lame duck session, correct?
Paul Ryan: No, I think during a lame duck, and I hope, that there will be an extension of the ’03 tax - -
Charlie Rose: Just an extension for two years.
Paul Ryan: Yeah, well for whatever time it will be.
Charlie Rose: What would you expect it to be?
Paul Ryan: Two to three. The thing is, with two years, there’s a problem, because 2013 you have big tax increases coming. That means we have another clip --
Charlie Rose: Where are they coming from?
Paul Ryan: From the healthcare bill.
Charlie Rose: Okay.
Paul Ryan: The 3.8 percent tax on unearned income. So that means you’re stacking a big tax increase down the horizon and that’s going to hurt the economy in the present term as well. I mean nothing is worse than hitting the economy right now with big tax increases. The second worst thing to that is just simply delaying these tax increases because what it does is it still adds more uncertainty to the economy. So it’s better than hitting the economy with a tax increase right now but we want to work to reduce the uncertainly out there for investors, for entrepreneurs, for planners in the economy.
Charlie Rose: Will there be 14 votes around for the deficit commission?
Paul Ryan: I don’t see 14 votes in anything that I’ve seen come up yet.
Charlie Rose: So what does that mean?
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 10 - 11/16/2010
Paul Ryan: That means --
Charlie Rose: This is to debating thing.
Paul Ryan: This is a commission that moves the debate forward. I’m hoping that we’ll bring some more ideas to the table to the commission and see if we can get 14 votes for some things. But this current plan was not designed to get 14 votes and passing the law. It was designed to get the conversation going and flowing. Alice and I, Democrat and Republican, are trying to bring contribution to that debate. Hopefully others will bring some ideas to the commission and we start moving this debate forward.
Charlie Rose: When you look at that Social Security for a moment, do you think it’s necessary to reform Social Security with private accounts?
Paul Ryan: No, it’s not necessary. I personally prefer it because, look at me for example, I’m 40 years old. I’ll get about a one percent return on my payroll taxes. If Social Security could pay me my benefit, which of course it can’t, my children who are five, seven and eight years old will get a negative one percent rate of return on their money. And I would argue that Social Security is probably one of the most successful programs ever created and it’s popular because multiple generations value it. If my kids are going to get a negative one percent rate of return on 13 percent of their payroll taxes basically, do you think they’re going to continue to support the program? Let them have the choice of having a personal account, like I have, as a federal employee as a member of Congress, it’s not privatized, it’s managed by the government in safe index funds, it harnesses the power of compound interest so they grow their money at five or six percent a year instead of negative one percent a year. They get better benefits, it’s a nest egg they own and control, it goes into their property. My dad died when I was a kid. My mom had to get his benefits. She had to forego all those taxes she paid when she worked as a lab technician in Milwaukee and she lost that because it went back to the government. So there are inequities in the system right now and I think that can be fixed with personal accounts and if you don’t like them and you don’t want them, then don’t have it. I just think it ought to be an additional voluntary option but it is not necessary to actuarially solve this problem. I personally think it’s preferential for younger people to have the option so they get a better deal, so they get a better benefit so that we don’t consign them to a miserable rate of return. Most people pay more in payroll tax than they pay in income taxes.
Charlie Rose: Before we talk about the new Congress, what else can be accomplished, what will be accomplished in the lame duck Congress?
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 11 - 11/16/2010
Paul Ryan: Well, we have to pay the bills.
Charlie Rose: Right.
Paul Ryan: So that’s appropriations and the question is there is is it going to be a big omnibus appropriations bill, which I would not prefer, or a continuing resolution? That’s something the Democrats are trying to work out among themselves. Then you’ve got other tax-extender provisions, not the ’03 tax cuts but like the research and development tax credit and things like that. Those are expiring provisions and that’s really about it. They will probably try to see if they can get votes to pass some other things. I’ve heard lots of talk. They’ve got to get 60 votes in the Senate though. So anything really controversial, you need 60 votes in the Senate so I don’t see controversial stuff -- you know, card check or cap and trade -- I don’t think they’re going to do those things or an immigration deal. I think it’s pay the bills, deal with the tax code and then probably that’s it. We’ll see what else they try to do.
Charlie Rose: [unintelligible] signal the cap and trade is gone.
Paul Ryan: Yeah, I think that’s right, I think that’s right.
Charlie Rose: All right. The new Congress then. When Republicans are in the majority after January, what is the amount of discretionary spending that you think you can cut?
Paul Ryan: Well, I would go back to ’06 levels personally but I think --
Charlie Rose: What does that mean, ’06 level?
Paul Ryan: Okay so 2006 levels is if we want to save a trillion dollars, we would go back to ’06 levels and carry a freeze forward but that’s Paul Ryan speaking. What the Pledge for America did and what we’re on record as being in favor of is going back to 2008 levels. So that means cutting spending back to pre-crisis levels before the spending binge began. I would argue, you know the base level went up from 2008, domestic discretionary spending base spending went up 24 percent. Throw the stimulus on top of that? It went up 84 percent. So we’ve had an absolute gusher of domestic discretionary spending over the past two years. I would take all of that money back. It didn’t work. It didn’t bring unemployment below eight percent. We’re still at 9.6 percent.
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Charlie Rose: But would you accept the idea that the president would argue that it was necessary even if it might not have worked in certain instances, it was necessary at the time to try to stop an economic catastrophe?
Paul Ryan: Absolutely not. I would disagree with that. I would not accept that idea.
Charlie Rose: So no stimulus was necessary even though you --?
Paul Ryan: Not that kind of a stimulus.
Charlie Rose: Okay, but that’s a question of what -- whether it worked or not. Are you arguing that no stimulus to try to fix the economy that came out of the crisis of ’08?
Paul Ryan: Well, first of all, the Federal Reserve is really who pumped the stimulus in there. So the Fed needed to fill the gap of the liquidity crisis. The Fed had to put facilities, they had to put money into the system. I’m very much opposed to QE2 [spelled phonetically] right now. We can get into that if you want to. I do not believe that borrowing and spending works.
Charlie Rose: What’s necessary to get unemployment from 9.6 --
Paul Ryan: Four things I would do, low and predictable tax rates, sound and honest money so we have a predictable value of our money, regulations that are fair, transparent, reasonable, and predictable, and spending cuts, controls, and reforms, show the world that the Americans are not going to have a debt crisis, that we're going to preempt it, that we're getting our spending under control, that we're getting our debt under control, calm down the credit markets. The four basic cornerstones and foundations of economic growth, low tax rates, sound money, reasonable predictable regulations, spending reform and controls. There's no substitute for those things, no sugar high economics, like a stimulus is going to substitute the fact that we're not getting the core foundation for economic growth right. Our fiscal policy's miserable right now, and now, going to QE2, I would argue our monetary policy is trying to bail out the fact that we have bad fiscal policy and they're compromising the value of our money in the process of doing so.
Charlie Rose: So you think that the stimulus that's necessary for the economy will come from cutting taxes and cutting spending.
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Paul Ryan: Yes.
Charlie Rose: That's what will deliver --
Paul Ryan: Yes.
Charlie Rose: -- the economic growth --
Paul Ryan: Yes.
Charlie Rose: -- that you think will take care of the 9.6 unemployment?
Paul Ryan: I think that's -- yeah, we have to get to the fundamentals --.
Charlie Rose: So what's the level of spending cuts that you think are necessary? Is it as the chair -- as the future Speaker of the House has suggested, $100 billion or is it more likely to be 70?
Paul Ryan: I think that will -- no, I mean, I would go with 100. Believe me, there's plenty of room to -- you know how much waste is out there in Washington, under both Republicans and Democrats? We've shoveled so much money into these bureaucracies --
Charlie Rose: Okay, speaking of spending cuts, when the Commission talks about defense spending cuts, which the Secretary of Defense has also talked about, is that a place to go to cut some fat out of spending [spelled phonetically]?
Paul Ryan: Yeah, I mean, there's a lot of demand for defense, and we're at war. So I would plow a lot of those spending savings back into financing our troops and the things they need to be secure. But there's a lot of waste in the Pentagon, no two ways about it. And the Commission did a good job of identifying a lot of that. So has Bob Gates. He's doing a pretty good job of going after a lot of the waste. You can't not have waste when you throw that much money at one government agency, so clearly I would restructure the firewall a little differently than this Commission plan does. I think domestic discretionary grew so fast so recently that we should take more of the cuts out of that because that's giving us a base that's going to be very difficult. What I would say is bring
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 14 - 11/16/2010 discretionary spending down like you just mentioned, 100 billion I think is a good place to go, and entitlements take a while for those savings to accrue.
Charlie Rose: But the crucial thing here is that you think that reducing taxes and I mean cutting spending is the only way to recreate growth and bring the private sector into creating businesses and creating jobs and spending the money they have.
Paul Ryan: That's right.
Charlie Rose: In their bank accounts.
Paul Ryan: Do we print and borrow and tax money so Washington can try and spend it on the economy and people or do we create the foundations that the atmosphere for economic growth so entrepreneurs and businesses can have the skills and the confidence to go forward to create jobs and create value. That is what has always worked in this economy. That's the American idea. That's what will work in the future. So to me the necessary precondition is stable money, and I'm worried about that, I'm worried about the prices in the future, I'm worried about inflation down the road, but also we have so much uncertainty, regulatory uncertainty, price uncertainty, interest rate uncertainty, tax uncertainty, we need to address that if we're going to be able to have people plan for the future and grow.
Charlie Rose: What do you make of the reaction the president got at the G20, some lecturing by --
Paul Ryan: Yeah, I think he had an electoral repudiation a couple of weeks ago and this was more of an international repudiation. The Germans are getting their economics more right than we are, and the Germans did not take our advice in 2009 with the Keynesian demand-side stimulus --
Charlie Rose: This is a very tough austerity program the Germans [unintelligible].
[talking simultaneously]
Paul Ryan: And the Germans are cutting and they're growing, so I would simply argue -- I mean, in the past I think Germans got economics wrong but in the present the Germans are getting it right. And so what I'm trying to answer your question is basically do what the Germans have effectively done and look what they're doing, they're getting their finances
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 15 - 11/16/2010 under control, the markets are rewarding them for that, the credit markets are calming down for Germans, and they're growing. That's something we can learn from.
[talking simultaneously]
Charlie Rose: You know the argument being made by Paul Krugman [spelled phonetically] and others which is that yes indeed the deficit is a big issue but at the same time growth is a big issue and how you can produce growth quickly may very well need a stimulus that you’re not going to get that quickly from tax cuts and from --
Paul Ryan: If borrowing and spending, taxing and spending, and printing and spending works to grow prosperity we’d already have it. We’ve been doing this for trillions of dollars, we’ve put trillions of dollars out through fiscal policy, we’ve put trillions of dollars out through monetary policy and it’s not working and it’s fueling the uncertainty that's out there.
[talking simultaneously]
Charlie Rose: [unintelligible] when a republican calls for tax increases in the future you think David Stockman’s [spelled phonetically] economics is simply wrong.
Paul Ryan: Yeah I just don’t agree with that because here’s the problem. Here’s another issue, what kind of country do we want to be in the 21st century? Do we want to be a country that grows our government much more dramatically, that takes our spending line which is like this, maybe make it there and then bring the revenue line up to it? The point I mention this is do we want to be an entrepreneurial fast growing economy, an opportunity society, or do we want to be sort of a managed decline of society? What I’m saying is that if [unintelligible] --
[talking simultaneously]
Charlie Rose: [unintelligible] if you asked it that way, everybody should say you want to be an opportunistic ownership everybody --
Paul Ryan: Sure, okay, but well we have to pick our aspirations --
Charlie Rose: The poorest among us want to do that.
Paul Ryan:
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So we have to pick --
Charlie Rose: They want the same opportunity --
Paul Ryan: So we have to pick the policies that get that.
Charlie Rose: All right.
Paul Ryan: And so right now we’re practicing what I would call more Japanese economics than we are German economics. We need to focus on having a low tax, sound money, you know limited government in order to have growth and prosperity. So the policies we are putting in place right now I believe are damaging our chances to getting this economy growing. We should after a recession we just had --
Charlie Rose: The policies we’re putting into effect or the policies that were put into effect?
Paul Ryan: The policies that were put into effect.
Charlie Rose: Were, right, right.
Paul Ryan: So, were, excuse me, so --
Charlie Rose: There’s nothing on the --
Paul Ryan: We should be bouncing off this recession.
Charlie Rose: -- drawing board that would do that.
Paul Ryan: After the big recession in the '70s, big recession of the '80s we were growing at seven or eight percent right now, we’re limping along. Usually the deeper the recession in America the bigger the bounce coming out of it. We’re limping and I would argue it’s because of our government policies.
Charlie Rose:
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Okay give me this. Let’s assume that you and a new Congress can enact the kind of economic future that you would like to see for the growth, cuts in spending, other incentives to business and to the small business especially. What is possible --
Paul Ryan: You mean in this divided government era.
Charlie Rose: -- that's right, yeah.
Paul Ryan: Yeah.
Charlie Rose: Now, what’s possible?
Paul Ryan: I don’t know, the reason I’d say I don’t know is I just don’t know where the president’s going to come down on these things.
Charlie Rose: Well, there’s been some conversation. I mean have you spoken to the president since the election?
Paul Ryan: Yeah he called me --
Charlie Rose: Hello?
Paul Ryan: -- yeah he called me right after his press conference he had in the [unintelligible].
Charlie Rose: Yeah. And what did he say?
Paul Ryan: Just wanted to start talking, get a dialogue going.
Charlie Rose: And what does that say to you?
Paul Ryan: Great, I thought it was wonderful. Look, he’s my president, too. You know, I think I said this to you last time I was on your show. I hope we can get a dent on spending, I hope he can decide, “I don’t want to use some of these issues as political weapons, I want
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 18 - 11/16/2010 to get some stuff done.” And I hope there’s some areas in compromise. I’m not sure, I don’t think that’s going to be there on healthcare, but perhaps in other programs there’s going to be an area for compromise. I really hope we get that because that’s in the interests of the country. I just don’t know where he’s going to decide he’s willing to come together with House Republicans on these things. We need to try and we need to put that hand -- we need to outreach this hand, but on the big issues of the day my guess is he’s not a Bill Clinton triangulation type, that you know he just has a difference of opinion on these big issues philosophically, and there’s nothing wrong with that. What hopefully there -- on trade, on agricultural reform, on some issues we’re going to see some common ground and move forward.
Charlie Rose: As you know based on what the Fed did, there is some opposition developing around the world because they think it will harm their exports --
Paul Ryan: That's right.
Charlie Rose: -- and benefit our exports. At issue is trade.
Paul Ryan: Right.
Charlie Rose: So where do you stand in terms of currency, using pressure to get the rest of the world to change some of their currency practices, especially China, in order to create a freer trade market?
Paul Ryan: Right so we’re the guardians of the world's reserve currency. It’s a dollar based system.
Charlie Rose: As of today.
Paul Ryan: As of -- yeah, good point, as of today. We got to watch going down this sort of begger [spelled phonetically] thy neighbor competitive devaluation world. If that were to come, then we would, we would sort of smooth [spelled phonetically] [unintelligible] this current recession and tip us into a depression. I think people on both sides of the aisle understand the consequences of that and want to avoid that. But this jawboning down the dollar I think is very dangerous. And I think the past Treasury -- I mean the Bush administration and the current administration Treasury has been more of a weak dollar policy.
Charlie Rose:
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They don’t say that, but you think --
Paul Ryan: They don’t say it but it seems accepted [spelled phonetically].
Charlie Rose: Because nobody wants to be talking down the dollar.
Paul Ryan: That’s right but I --
Charlie Rose: But you believe that the policies have that impact. [unintelligible]
Paul Ryan: I do and that’s not [unintelligible] Obama, that was Bush as well.
Charlie Rose: And you think that’s the consequence they want, they want to see a lower dollar because it will help our exports.
Paul Ryan: Yeah. That’s right and then that's our officially -- I’ve never seen a country devalue its way to prosperity. But it’s a quick fix at the expense of the long term and the medium term. Now there’s nothing more insidious that a government can do to its people than debase its currency, and it’s my fear is that with this new QE2 move, the upside is so small but the downside is potentially so large by doing this. It is very dangerous in my opinion, and I think the Federal Reserve ought to be focused on price stability, not on this dual mandate, which is employment. I’ve had legislation for years, that says, just like the ECB, the European Central Bank, your job is price stability, maintaining the value of our currency and keeping prices stable. That’s a necessary precondition for economic growth, not trying to micromanage employment because that comes oftentimes at the expense of price stability. I think what’s happening now is Bernanke and the doves that are on the Federal Reserve are trying to goose the money supply through quantitative easing to overcompensate for the fact that our fiscal policy is going in such a bad direction. And that to me is a very dangerous notion and it will flirt with inflation. Here’s the other problem is, they use the core indicator of core inflation to look at measuring inflation. That’s exactly what the Greenspan fed did in the 2003, 2006 period, which gave us excessively loose money which helped create the asset bubble which gave us the problems we have today. So if you look at the leading indicators, the dollar, the yield curve, commodities prices, they’re all sounding alarm bells and so I would err on the side of caution, on the side of price stability and not do this quantitative easing and I’m hoping the Fed --
Charlie Rose: And you do this by raising interest rates?
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Paul Ryan: Well we already have -- we have zero rates right now. So even if we went to a one percent federal funds rate, we would still have loose money.
Charlie Rose: I’m just asking where you are on that particular idea of trying --
Paul Ryan: I would [unintelligible] the Kansas --
[talking simultaneously]
Charlie Rose: Using monetary policy to affect the economy. What would you like to see the Fed do with respect to interest rates?
Paul Ryan: I -- well first of all they should focus on price stability.
Charlie Rose: Right, but how are you going to create price stability?
Paul Ryan: By having a single mandate--I would go with an explicit price rule on how the Fed should operate to take away some of its discretion and go with a price rule focused on --and I’d use maybe a basket of currencies and commodities to do that. Not necessarily these backward looking output gap models that they use.
Charlie Rose: Right.
Paul Ryan: So if you do as I say, you would see a specter of inflation on the horizon, you’d be watching that. Second of all, don’t get involved in this micromanage --
Charlie Rose: And if you see a specter -- if you see inflation on the horizon, from this price instability, you do what?
Paul Ryan: It means you don’t have excessively loose money for too long. It means you mop up the money supply, well that’s a sterilization issue. It means you don’t have loose money for too long and you don’t create asset bubbles. What I fear right now is we’re creating an asset bubble, and it’s not going to help the economy now. It’s going to hurt us later on and we should have the Fed focus on keeping sound money and that means, I would have
Prepared by National Capitol Contracting 200 N. Glebe Rd., #710 Arlington, VA 22203 Charlie Rose - 21 - 11/16/2010 been a dissenter had I been on the FOMC, like the Kansas City guy, Honig [spelled phonetically]. And he’s suggesting we go to a -- not a huge interest rate hike, but something to show that we’re worried about inflation down the road, that we want to maintain the value of our dollar and we’re not trying to depreciate our currency.
Charlie Rose: You send this -- this is where our mindset is.
Paul Ryan: Yeah.
Charlie Rose: Okay. The debt ceiling.
Paul Ryan: Yeah, that comes up in, somewhere in the March to May timeframe.
Charlie Rose: So what are Republicans going to do about the debt ceiling?
Paul Ryan: I don’t have the answer to that yet. Ask me in the March to May timeframe. You know, that will be [unintelligible]
Charlie Rose: Some say that may very well be a test for some of the Tea Party members of Congress.
Paul Ryan: Yeah. Look, we understand the consequences as a fault, so don’t think that we don’t understand what happens and what’s actually occurring here.
Charlie Rose: You also understand history.
Paul Ryan: I do. Hopefully by this time, we will have done some good things on fiscal policy. Hopefully we will have gotten some spending cuts enacted. Hopefully we will have taken a step in the right direction, down the path of fiscal responsibility by the time that moment arrives.
Charlie Rose: Last question. What’s going to happen to housing in this country and what’s going to happen to Fannie Mae and Freddie Mac? [unintelligible] pushed into the future.
Paul Ryan:
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Yeah, it’s the rug they’re sweeping everything underneath. It’s a real disaster. I think -- second part first, I think you should privatize Fannie and Freddie ultimately. That’s going to take a long time to do and we should decide, as a government, if this is a public goal, then make it a government agency. Have Jennie Mae do it, if it’s multi-family, low income housing or something like that. But we need to have a secondary mortgage market, but let’s not have this corna-capitalism where we privatize the profits and socialize the losses. Let’s spin these things off in the private sector. And the private sector has proven capable of doing this in the past. And let’s reserve for the government whatever role we think it ought to have explicitly. Housing is going to have to hit bottom before you can come up, and it’s going to be still a bump. We still have a bad vintage of loans coming through the system, of foreclosures coming through the system. If you put a moratorium on these things, you’re simply just delaying the inevitable. So it’s better to clear the system out and have sound money, have stable interest rates so we can go forward in the future.
Charlie Rose: Thank you for coming.
Paul Ryan: Thank you Charlie.
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