The transcript of my June 28, 2011, interview with former Minnesota Gov. Tim Pawlenty in Atlanta:
Q: Being here in Georgia today and Florida tomorrow, I’m reminded a few years ago the Republican Party was described as a regional party, confined to the South, after the Obama election. Last year’s midterms proved otherwise, I think, and most of the candidates getting publicity right now are not from the South. But there are some differences, and I’m curious how you go about selling conservatism here versus other parts of the country, whether you have different approaches?
A: When I think about what’s important to conservatives in Georgia, I can’t find any differences between what’s conservative [here] and conservatives elsewhere. If you look at my record on taxes, on spending, on schools, on health care, on public employee benefits, on right to work, on traditional family issues, and on down the list, I’m in line with all that. And so to the extent people think there’s a big difference between conservatives in other parts of the country, there might be in some cases, but in my case I don’t think that’s true.
Q: Do you have to tone it down elsewhere and ramp it up here?
A: (Laughs.) No, I think you gotta be who you are, no matter where you are, and I think that you have to be true to yourself, true to your cause — it doesn’t mean you can’t vary your style a little bit, but you know, you gotta be true and authentic regardless of your location. And that’s because your compass settings aren’t based on the ZIP code [you happen to be in], they’re based on what you believe and why you believe it…
Q: The speech [you gave June 7] at the University of Chicago — I’ve read through that, and I think it was a really interesting speech, and you had a quote in there, “The tax code is littered with special interest handouts, carve-outs, subsidies and loopholes. That should be eliminated.” Do you get any pushback from people in the Republican Party who say, well, that amounts to a tax increase? How do you deal with that?
A: No — if you do it the right way. Even the most ardent defenders of a no-new-taxes position define that not as, ‘You can’t make any changes in the tax code,’ but [that] as you make those changes, then you do so in a decrease, or no net increase in revenues to the government. So even — I don’t want to speak for him, but for example — Grover Norquist has always defined a tax increase not as, change this category, change that category, but when you’re done with all that, does it result in a net decrease or a net increase. And our plan in that regard is designed to reduce taxes by a net measurement, not increase them.
Q: [I see] two potential problems: One, the ethanol tax subsidies that the Senate voted to remove. If you do it piecemeal like that, it’s pretty hard to take away this subsidy, that carve-out, that handout, and then do the lower rates later. So people — I believe Grover even criticized the ethanol position. I know you’ve supported that. And the second one, I don’t know that there’s a way you can do it so that everyone’s taxes all go down. There are going to be some winners and losers.
A: That’s always true, but even if you use him as the ultimate … measurement, whether it is or isn’t, I think he would concur with what I’m trying to describe to you, which is: It’s OK to reform the tax code, you just can’t have it result in a net increase in tax revenues. Now, as to the ethanol piece, it’s important to note we presented this as a package, and we didn’t limit our criticisms of subsidies to just ethanol. We highlighted that, first and foremost, but we also went on to say we should look at all subsidies, and not just across the energy sector but across all sectors, and have that as part of a package of tax reform. And also, no, it’s not just reforming the tax code because we want to make the tax code flatter, simpler, fairer. It also reduces cronyism. It’s also a type of government reform, because a lot of conservatives quite rightly focus on earmarks on the spending side, and they rightly bemoan earmarks, because if you’re a congressman, and you get to slap an earmark on something, and then the idea is you can get that and the rest of the congressmen don’t question it, then you start to have this unchecked power.
But the tax code is also littered with these special credits, exemptions, deductions, that can be manipulated to a certain extent by politicians to give a special deal to a special group. And pretty soon, the premium for companies is not to connect to consumers but to connect to their member of Congress, which is not a fair, transparent market approach. So we need to not only focus on earmarks on the spending side, we need to focus on earmarks on the tax side — A) for reform structurally, but B) to get cronyism out of the system to the fullest extent possible.
Q: Do Republicans sometimes get “pro-business” and “pro-market” confused?
A: Yes, no question. (Laughs.) No question, that’s exactly right.
Q: And are there other examples besides the tax code?
A: You just hit the nail on the head. We are not pro-business because we love business, we’re pro-market. And we want to be pro-private market, and we want to have individual entities compete on a fair playing field that’s pro-growth, pro-investment and pro-jobs, pro-economic opportunity, and if it happens to be pro-business, great, although on some fundamental level it’s hard to be pro-job and anti-business, because I tell people, that’s like being pro-egg and anti-chicken.
Q: Another thing that you said in the speech was that under your plan, those who currently pay no income tax would stay at a zero rate. At the same time, you have a lot of Republicans complaining about the 47 percent of Americans who don’t pay any income tax to the federal government. Can we balance the budget while exempting, continuing to exempt, that large a segment of the population from paying any federal income tax?
A: Yes, because I think the pathway forward on balancing the budget is not tax or revenue increases, it’s spending reductions. And keep in mind — I’m familiar with that statistic you cited, it was reported by the AP based on somebody else’s work — but it does include within that Social Security and fixed-income people. So, they would say if they were sitting here, look, I paid payroll taxes on that money when it went in, there’s some taxes paid previously on those … so there’s still a high percentage, but probably in fairness it has to be noted that that’s what it includes. But no, I don’t believe that deficit reduction and balancing the budget should require tax increases or revenue increases. If you look at the revenue of the government versus spending from the government, those two things are out of line because of spending, not because of revenues.
Q: Strictly from a moral standpoint, is there something wrong or potentially dangerous to the country with having — even if we take out the fixed-income people that you referred to — a large number of people not paying income tax and yet benefitting from the programs that those income taxes pay for? Does that feed the entitlement mentality that we see?
A: Well, one way that I put it is, in a democracy, if we reach a point where you have more people riding in the wagon that you have pulling it, we have a problem.
Q: And are we close to that?
A: Yes. So, the hour is later than people realize, and you can set aside the rhetoric of the right and the left, and just look at this as a matter of sixth-grade math. And you can see, as I suspect you well know, the spending commitment line and the revenue line — and not only that they never catch up, they are growing and separating exponentially. Look, I know all politicians say, this next election is a big one, this is the fork in the road, this is the one that’s gonna make the transformative difference for the country. But if you look at it in the manner I just described, setting aside the rhetoric and just looking at it as just an elementary-school math exercise, it’s obvious that the finances of this country get to a tipping point, not within 20 years, not within 15 years, but within 10 years, and … this upcoming, 2012 election, in my view, will truly be the last election after which we can restore the country before it becomes mathematically irretrievable to restore short of an implosion. And I don’t think that’s an overstatement. I think it’s mathematically demonstrable.
So, regardless of people’s political views, I hope they see and sense the urgency and importance and magnitude of this election, and for that reason I think it’s going to be one of the most historic and impactful and transformative elections in the country’s history. And it’s not too late now, but it’s going to be too late short of an implosion to get this thing fixed, and we can do it.
Q: On the spending side, obviously entitlements are the biggest chunk, especially going forward. I believe I’m correct that you said you would sign Paul Ryan’s plan but that you also favor, as regards Medicare, allowing people to choose to stay in that system if they would like. Am I right about that, first of all, and if I am, how would it work if everyone says, ‘I’ll stay in the current system,’ and nothing gets fixed?
A: I’ll try to answer all that for you, just one step back on the context. You probably know this as well, but if you think of federal outlays as a pie chart, and color in the red part as Medicaid, Medicare, Social Security and interest on the national debt, and few other entitlement programs, you’re already over the halfway line. And at the rate at which that’s growing, you’ll be over the three-quarter line within 15 years. Almost all the rest is defense. Now, there is a little sliver there for parks, prisons, the bureaucracy, the Department of [Agriculture], VA [the Veterans Administration]. But if you believe what I believe on defense, which is that it needs to be maintained, and realize that the other stuff that I just mentioned is such a small sliver, almost the entire rest of the picture is entitlements. And so the main way to address this crisis is to reform entitlements.
So, Paul, I thought, was very courageous in putting out the plan. The president should be leading on this issue, President Obama; he’s nowhere to be found on most of these issues. You can’t find him on any detail, or on Social Security reform, or on Medicaid reform, or Medicare reform. He’s just leading from behind, as he likes to say, which is preposterous for the president of the United States. We’ve got a country that’s in crisis, it is careening towards the cliff, and he refuses to do anything about it. He’s either unwilling, unable, doesn’t know what to do or lacks the courage to do it. So into the breach steps Congressman Ryan from Wisconsin, and I applaud his effort. I did say that if my choice was to have the Obama plan, which is nothing, or the Ryan plan, I’d sign the Ryan plan.
Now, that being said, we’re also going to have our own plan, which is going to have some differences, and a couple of the noteworthy ones are on entitlements. He chose, Paul, chose not to address Social Security. I am addressing Social Security. We’re saying for the next generation, folks who are entering the work force, we’re going to tell ‘em now, so that they have fair warning and long warning, that we’re going to gradually raise the retirement age over time because of increased life expectancy. We’ll make it clear that nobody on Social Security currently, or nobody close to eligibility for Social Security, will be impacted.
Q: What’s the [age] cutoff?
A: We haven’t set that exact cutoff point yet, but that’s the concept, we’ll have more details coming out later this summer. And then on, also on Social Security … I don’t like means testing because it breeds class warfare and rhetoric, and I don’t like that, but … we’re choosing amongst all bad choices, so we have to choose one of the least bad, and it’s this one. I think we’ve reached the point where we need to say, wealthy people, you’re not going to get the … cost of living adjustment each year if you’re wealthy. But you will continue to get it if you’re middle income or lower income.
Q: So not a total break, but just the increase.
A: Yes, so each year Social Security gives a COLA, cost of living adjustment, and it’s usually 1 [percent] or 2 [percent] or 3 percent or somewhere in that range. And so that part of it only would be means-tested so that wealthy people wouldn’t get that. They’d still get the rest of their benefit. Those things by themselves would not entirely, but substantially, redirect and reform Social Security and get it back on a more stable path.
On Medicaid, I support ending the dual management of it, block-granting the whole thing to the states, shutting off the auto-pilot spending increase feature and allowing the states to do what they were intended as the laboratories of democracy: Compete and share best practices, innovate, cooperate. I think you’d find within five years some astoundingly good results if states could run that program.
And then lastly on Medicare, you touched on this, but we will have a different plan than Paul’s. And we don’t have the details out yet, but I’ll give you a preview of it, directionally. One component of it will be to make sure that people on Medicare or close to eligibility for Medicare will remain on it as-is. But unlike Paul’s plan, we’ll also allow people to stay on Medicare in the future. But, they will also have lots of other options to choose from. And they will compete with each other on price and quality, and the Medicare will be one choice, but it will be differentially priced compared to these other alternatives.
Q: In terms of a premium?
A: Yes. So, people will not be denied an opportunity to stay on Medicare. There will be a choice to stay on it — and I’m talking about the younger generation, because anyone above a certain age would get the current program. But they would be incentivized to make the wisest choices when it came to higher quality and more efficient health care, and that will be a whole bunch of offerings that will be pitted against each other in competition.
Q: A couple of questions about those: Social Security COLA, do you support switching to price inflation versus wage inflation?
A: Well, there’s a good argument about all that, but the fact of the matter is, to do that now to current recipients, it’s a benefit cut to current recipients.
Q: As for the block grant for Medicaid, what would that have meant to you as a governor and your state when you were putting together a budget over the past eight years?
A: It would have been huge, primarily for this reason: Setting aside whether the feds give you a little more or less money each year, the hope and the vision that I have for this is to take off all the handcuffs to the states and have one requirement: Use it for health care for the poor. And beyond that, the only obligation is to report back on how they’re doing in a few years. All the other regulations and bureaucracy, red tape, federal employment careerists, all goes out the window.
And the reason that would make a huge difference, is every time I or any other governor wanted to reform or change Medicaid, had a new idea, wanted to try something, had an innovation, you had to go to the federal government and play “Mother May I?” “Can we please change a comma?” No. “Can we please add a sentence?” No. “Can we try this pilot program?” No. And by the way, they want you to submit a truckload of documents, and they’ll take a year or two to think about it, and most often the answer was no.
And so, when you unleash the governors, and you unleash the states to do what the Founding Fathers envisioned, which is, they would be the laboratories of democracy, they would be the places where that were smaller, more nimble, more dynamic, more creative, more responsive to local appetite and preference, they would compete against each other, they would have best practices. Nick [Ayers, his campaign manager] would be the governor of Florida and I would be the governor of Georgia. We’d see each other, we’d compare notes, he’s one-upping me, I’m one-upping him. Believe me, governors pay attention to that, and so do legislators. And that’s what the Founders wanted. So why don’t we try that? Make sure the money does get used for health care for the poor, but take all of the nonsense of the one-size-fits-all, top-down, government-centric, federal takeover of this program, and let the dynamic qualities of the states work. And I think it would be astounding what you’d see in five years in this program.
Q: You mentioned earlier balancing the budget through spending reductions, and I know that, again in that University of Chicago speech, I think you mentioned Amtrak, Fannie and Freddie … those are some specific services. You hear especially Republican candidates talking about eliminating entire agencies, entire departments, Cabinet-level departments. Are there any of those that you’re prepared to say today you would eliminate?
A: Sure, I think if you look at agencies — and when I was governor, by the way, I eliminated agencies, combined agencies, I think we reduced, I can’t remember the exact number, a handful of agencies, either by combining them or just outright eliminating them. One of them was the State Planning Agency. We did a bunch of mergers, so I’ve done this.
But there’s a number that I think could be dramatically scaled back, reshaped, merged or reformed in quantum fashion. It would include the Department of Education — I think that primarily is properly a state function. It would include the Department of Energy, it would include the EPA. Now, in each case, I’m not saying they have to be completely wiped out. They might be merged, they might be streamlined, they might be block-granted in some fashion to the states. So we want to go through those one by one, but those are some areas where the federal government could definitely scale back. And by the way … know that the slice of the pie, 10 years out, all the agencies, parks, prisons, the whole thing, it’s a pretty small slice of the pie. The big money is where we were talking about earlier.
Q: You described all these policies as contributing to the kind of economy where we might see 5 percent growth a year for a period of 10 years. I don’t think we’ve seen that in my lifetime, I don’t think we’ve seen that –
A: You’re young!
Q: — in the lifetime of anyone who’s alive. That’s quite a stretch — in this country, anyway. What does that kind of economy look like? And apart from the policy aspects of it, what do you think are the industries that might be able to drive that kind of growth?
A: Well, a number of things. GDP you know is a function of population growth and productivity growth. So you have to think about how you get to 5 percent based on some combination of those factors. Now, this is admittedly a big, aggressive growth target. But intentionally so. You know, when Kennedy said we’re going to have a space program, he didn’t say let’s have a space program and try to maybe get out of the atmosphere. He said let’s go to the moon.
So, is it a big goal? Was it aggressive? Yes. Is it a stretch goal? Yes. But if we have any hope of getting out of this massive hole that we’re in, part of it has to be substantial economic growth. And the laggard, anemic, below-average, pathetic economic growth under the Obama administration isn’t going to get us there. So this takes that laggard attitude that he visits upon the country and says, we’re not going to be lagging behind. We’re going to lead, and we’re going to lead big-time. So, it’s a stretch goal, I acknowledge that, and put the details underneath in the Chicago speech.
But know that there have been at least moments in recent history where we did achieve 5 percent growth. When Reagan came out of the Carter recession, for a year or two we had 7 percent growth, and then he hit nearly 5 a couple other times. Same with Clinton. China, Brazil, India they all have –
Q: They’re a little bit different –
A: Yes, they’re a little more developing in nature, so I understand that. But look, even if we don’t quite get there, it’s still a heck of a lot better than what we have now. And I believe we can get there.
Q: And do you think that there are some certain industries that could help contribute to that — are we seeing a change in what Americans can consider our comparative advantages compared to other countries, that sort of thing?
A: Well, I think there’s a bunch of — I don’t think it’s government’s job to pick winners and losers like Obama has –
Q: Short of doing that.
A: — but, you know, creating the environment where lots of people can prosper. And within that — not saying government would micromanage it — but a renaissance in energy is a huge opportunity in our country. We’re finding massive new deposits of energy in the form of natural gas all over the country, including in places like Pennsylvania and New York and North Dakota and many others. We’ve got tremendous opportunity to revitalize the oil industry in this country in terms of energy development through new technologies and new finds, new resources. I think the health-care industry — if properly reformed through market forces rather than a government-centric model like President Obama is pushing — has a tremendous opportunity to be part of a revitalized economy.
I think if you look at manufacturing, obviously it’s had its ups and downs, but we want to be a country where people still make things, and we offer good-paying jobs in manufacturing. Manufacturing numbers actually, notwithstanding the employment part of it, manufacturing numbers in terms of total value produced have been showing some signs of promise. And on down the list. But I don’t think it’s our job to pick the particular sectors, but there’s no question America’s got the horsepower and the ideas and the momentum to get this thing back on track.
See my blog post based on this interview.