Sen. Phil Gramm Says Goodbye

In 1976, the late conservative activist Phil Nicolaides (later a Reagan White House aide) talked me into having breakfast with an obscure Texas A&M economics professor who was challenging the popular moderate Sen. Lloyd Bentsen from the right in the Texas Democratic primary election. I resisted because Bentsen looked unbeatable in his bid for a second term after defeating the senior George Bush in 1970.

Out of friendship with Nicolaides, however, I agreed to meet with Prof. Phil Gramm at the Hay-Adams Hotel in Washington. It began 26 years of conversations with the usually insightful, occasionally infuriating and always fascinating Georgia-born economist-politician-philosopher that ended a few weeks ago.

As Gramm’s comments over the Hay-Adams breakfast table made obvious to me, he was much too conservative to prosper in the mid-1970s as a statewide Democratic candidate in Texas. After getting drubbed by Bentsen, however, Gramm came back two years later to be elected to Congress as a Democrat from a predominantly rural Texas district and was named to the House Budget Committee to represent what then was the still substantial Southern conservative Democratic fraction.

In 1981, he collaborated secretly with the new Reagan White House on what became the Gramm-Latta budget bill and led some 40 fellow “Redneck Caucus” members into supporting it. That tore it for House Speaker Thomas P. (Tip) O’Neill (D.-Mass.), who kicked Gramm off the Budget Committee. That tore it for Gramm, who switched parties and became a Republican.

Following the British tradition, he resigned his seat and entered the subsequent 1982 special election as a Republican. He won by a landslide in a constituency previously represented only by Democrats.

Gramm made clear to me even in those early days that his election to the Senate in 1984 was viewed by him as only a way station en route to the Oval Office. A dozen years later in the run-up to the 1996 presidential race, Gramm had amassed an impressive campaign bankroll and was regarded as the probable conservative challenger against front-runner Robert J. Dole.

The Gramm campaign proved a disaster, stylistically and substantively, and he alienated vital support on the right. He lost to Patrick J. Buchanan in Alaska and Louisiana, eliminating himself even before the traditional Iowa and New Hampshire early tests.

Phil Gramm looked washed up in politics. Yet, the six years since his presidential campaign debacle proved to be his best performance in the Senate and his entire political career. With growing mastery, he would take the Senate floor to deconstruct legislation-stripping from it pork-barrel spending, protectionist gimmicks, new government regulation and other political hijinks. His decision not to seek a fourth Senate term in 2000 comes at the peak of his powers.

In the closing days of the 107th Congress, I sat down with Phil Gramm in his Senate office. He was in character: blunt, feisty and very conservative. His explanation of why he is retiring, his views of the government and Democrats, his take on Theodore Roosevelt and his radical views on taxes follow:

Novak: Your presence on the Senate floor will be missed.

Gramm: I enjoy participating in floor debate. I think it’s important to try to define an issue in a way people can understand it.

Novak: How did the Senate change since you’ve been there?

Gramm: It’s sort of conventional wisdom to talk about the dramatic change, but I’m not sure that I see a dramatic change. It is still a place where somebody who has energy and ideas can have a lot of influence. The fundamental principle of democracy is not “majority rules.” The fundamental principle of democracy is that people who feel intensely about things can have an inordinate influence. It’s one of the safety valves of our society. I think the way the system is structured it allows for that to happen. And the Senate is structured that way. A small number of people who feel strongly about something can have a big impact on the Senate.

Novak: You don’t think there is more bitterness than there was when you first got here?

Gramm: I think things are more partisan than they were. I don’t know to what extent that is as a result of how close the margins are. I see the Democrats are certainly more united than they ever were. I can’t imagine 20 years ago that you could have had one special interest group like public employee labor unions.

Basically, they don’t care what the public thinks about Homeland Security, they don’t care how strong the case that the President has, nor how strongly the public supports him. They have the influence within the Democrat Party to hold all but one of their Senators in line even though it is got to be a heavy burden to bear in the election that you’ve chosen public employee labor unions over Homeland Security.

Democrats have remarkable cohesion in standing with their organized special interest groups. The Democrats have a passion to govern, and they’re willing to take positions that are to a large degree-at least to me-indefensible. Another example is the plaintiff’s attorneys in terrorism insurance.

There are three or four constituencies that are so powerful in the Democrat Party. I don’t think that existed when I came here, certainly was never put to the test as it has been in our session.

Novak: Did you enjoy the Senate at the end?

Gramm: Yes. I enjoyed it the last day of this session. The last substantive business of the session was when I objected to [Senate Democratic Leader Tom] Daschle’s trying to set up a deal where Democrats could vote yes and no [on the Homeland Security Bill]. Vote yes on Gramm-Miller [limiting union power], and then reverse it by coming back and gutting it with the Breaux-Nelson-Chafee amendment. As I said in the debate, I didn’t just come in off the turnip truck. So, yeah, I enjoyed it right up until the end. I love this job. It’s a great job.

Novak: What do you think you’ve accomplished here?

Gramm: Well I think it’s easy for anybody to overstate what they’ve done. I guess, I made a decision in my first year in the House. When you are conservative, as I am, you have to make a decision early on. Are you going to judge yourself by how you vote, or are you going to judge yourself by what happens? And I decided that someday I didn’t want to be having my grandchildren visit me at the nursing home, and I would say, “Well, everything went to hell in America while I was in Congress,” but I voted against it every step of the way.”

I decided I wanted to make a difference. And so, and I have, on important issues, fought every issue as if my effort alone was going to determine the outcome. And sometimes it has. So the only way I can judge the impact I’ve had, is what has happened, not what I was for.

The Reagan program on the key vote on the budget enforcement passed by two votes. Obviously, if I hadn’t been here it would have failed on a tie vote. I was the author along with [Republican] Del Latta from Ohio, and I believe my efforts did make a difference in the Reagan program being passed.

How different is the world because of it? I think a lot different. We cut entitlements by $25 billion-everybody’s forgotten that-in tin one year. We eliminated three unjustifiable social security benefits.

And I do believe, it’s important to remind people in the year 2002, there was an Evil Empire, there was a Cold War. We won the Cold War. And so I feel like that effort was part of it.

Gramm-Rudman [spending limitation] did make a difference. If you look at all the Western democracies, and this growth and spending between 1980 and the year 2000, the United States in the mid-80s had a substantially different growth pattern. So I think that made a difference. I think government would be bigger, and the revenue burden of the government would be bigger, and the level of general economic freedom would be lower without bringing in revenue.

I don’t know that I personally killed Clinton healthcare, but I had a lot to do with it. And it was a perfect example of where nominally there were 74 co-sponsors, but it was like a big balloon, once you tweaked it, it just blew up.

And I spent a long time trying to debate efficiency and cost-and getting nowhere. Finally when I turned the issue to freedom. When my mama gets sick, I want her to talk to a doctor-not a bureaucrat. And [Senators] Paul Coverdell and John McCain and I did over 130 meetings around the country-mostly in hospitals-on that bill and virtually every big media market in America.

So we’ve had an impact on it. I’m proud of my work on financial things and financial services modernization. Gramm-Leach-Bliley did knock down barriers that never made any sense, that were unstable from the depression.

And of course [Sen.] Zell [Miller of Georgia] and I were very active in the presidential tax cut, and there were lots of little things in the middle.

Novak: Having said that, if you could go back to 1980 and say we’re going to elect Ronald Reagan President and we’re going have Republican Presidents again for 14 years, we’re going to have Republican control of the House of Representatives eight years. Republican control of the Senate for six and a half years, and then you look at what was accomplished with all that. Can you really say you have changed the way the country’s governed and the direction we’re going?

Gramm: Well, I think it’s easy to be disappointed when you look at what is possible. This is the greatest country in the history of the world. And I’m proud to have served it. But it could be greater. We could have much broader-based opportunities, we could have a lot more freedom, we could have lot more successful people. If our policies were more enlightened.

So yeah, could it have been done better? Yes. Should it have been done better? Yes. Are the country and the world much better off today than it was when I came in 1979 in January? I would argue by almost any standard, yes.

People have got more confidence in themselves and less confidence in government. The tax burden is dramatically lower in terms of what people get to keep. When I came, you know, it was sort of out of fashion to be too pro-American. You had all this guilt in foreign policy. It was at the peak of Carter talking. Well, what drew me into politics was all this Carter business about “We’ve got to learn to live on less; the joy ride is over.”

We could have and should have done more. There’s certainly a conservative agenda out there to be pursued.

Novak: Do you see the Republican Party kind of sliding into a non-agenda party?

Gramm: Well I think Democrats, at least in my political experience, have always had a longer-term view of what they want. They want more government. They understand that the growth of government helps empower them politically.

Republicans have not understood as well that we want more opportunities. Because opportunity empowers us politically and because one of the reasons I have been so comfortable being a Republican is what is good for us is good for America.

Often Democrats have to cheer against America for something good to happen, and that is a position that I could never feel comfortable with. One of the things I’ve always done, is I’ve always looked at every issue that’s come along and said, “Is this creating the America I came here to create?”

I’m going to talk to my colleagues-sort of my going away thing in the [conservative] Steering Committee-and I’m going to talk about the tyranny of the inbox. It’s easy here to have events dictate your agenda. And the one thing I’ve always done is that is reminded myself every single day that I came here with an agenda, and my agenda is not to empty that inbox. My agenda is to change the country.

I don’t think we do as good a job at that as Democrats do. They instinctively understand in looking at an issue. I look at it this way: If Americans had less freedom, if this policy in the long run produces less freedom, how can it benefit me? How can it fit within my agenda? So, I don’t get confused in running down these little rabbit trails that a lot of my colleagues do.

But it gets back to why you got into public service to begin with. There are people in both parties who want to be involved. They want, to some extent, ride on a white horse. They want to stand and watch.

You remember Bush 41-his talking about his watch. I didn’t come here to stand and watch. I came here to make changes. And so I’ve always tried to have an agenda, to look at what I was trying to produce.

Novak: You often have addressed the Senate on flagrant pork-barrel spending with no response. Is that frustrating?

Gramm: Pork is an accepted part of life in Washington, D.C. It’s almost like the expectation of it is built into everything we do. So it’s sort of like taking the view that you are going to spill a certain amount of the milk and transferring it from milk into cow and ultimately getting it to the table.

I find it offensive because I’ve never forgotten when I first ran for office I lost. And so I haven’t lost at anything in a very long time, so I just kept running. And so I spent two years, basically all the free time I had, campaigning.

And so I talked to people in little grocery stores and talking to little old ladies in hairdressers, and one of the things I discovered in that two years was how good people were.

It didn’t take me long when I got here to figure out how bad government was, and I’ve just never been willing to compromise on those kind of things. I haven’t lost the ability to be outraged, I guess is the easiest way to say it. And there are plenty of reasons to be outraged.

The way we waste money to no good result is offensive. And it always will be.

I think I could be here 100 years, and I would not be affected by it. It’s why I didn’t like being an appropriator. It’s a great committee. Sen. [Robert] Byrd and I are very good friends. I admire Sen. Byrd. And it’s a committee where you really get to learn government. My six years on the Appropriation Committee really was an eye-opener in terms of learning how government works.

But it was a committee that I could never be successful on because the way deals are cut there is [by] spending money. So the subcommittee chairman would get together to try to iron out a bill, and they’d go around, and somebody wants 70 million, and somebody wants 120 million, and then they’d get to me, and I’d say, “I want to spend $5 billion less!” And everybody would have a good laugh, and then we’d go on. So Finance has turned out to the right committee for me.

Novak: One recent development inside Republican ranks was the canonization of Theodore Roosevelt.

Gramm: Yeah, I am not a Theodore Roosevelt man. You know it’s a shame that the new book Theodore Rex ends the day he left the presidency. Because the real Theodore Roosevelt came out in the Bull-Moose campaign. You know it’s interesting. McCain is a Theodore Roosevelt man. But I am not an admirer of Theodore Roosevelt.

In the end Theodore Roosevelt was very weak on private property, had a strong collectivist bent and saw government as an engine for good in a way that was fashionable in the era.

Even his most successful efforts-civil service reforms-have basic flaws.

In giving people independence in the political system, he gave them protection from any effective management, he isolated them from any degree of effective control, in terms of setting an agenda and achieving it, any accountability, and finally, in the age of information, which we’re in now, he stifles the creativity of his program, which is the nucleus of civil service, stifles the creativity of the individual government employee.

So you have a paradox that you have a lot of good, dedicated, talented people working for the federal government. But the system is such that it produces bad results, and it’s destined to produce bad results. Which is why you don’t want the government to do for you anything.

Novak: TR was father of, imperialist foreign policy, the estate tax, the federal income tax, antitrust-

Gramm: The whole antitrust movement of the period was a failure because the major trusts were already highly unprofitable, had a very difficult competing against new competitors coming on the market, and the whole antitrust movement in Congress was an effort to protect the trusts from competition.

Novak: Is it too indelicate to ask your opinion of President Bush?

Gramm: I have a very high opinion of the President. I’ve never served with anybody who was more comfortable in his skin that George W. Bush. In that respect he’s similar to President Reagan, but I think even more secure in his skin.

Overall I give the President good marks. I was very disappointed with his actions on steel. I think he felt that that was somewhat a carryover from West Virginia and the election. I also believe you’ve got to take into account that the President was elected in a very close election, and I think you’ve got to give him high marks for not letting that thwart his agenda.

Novak: Are you happy with his Iraq policy?

Gramm: I think overall I am. We were far more successful in Afghanistan, than I had feared. I was totally supportive, but I thought, you know, looking at the history of that region, it’s extraordinary what we’ve achieved. Of course it’s not over yet.

With Iraq, I can’t see an inconsistency between Bush 41 being right and stopping where he did, and President Bush today being right in saying we got to go back and finish the job. Why? Because things are different today.

Novak: Any concern about developing an American imperium?

Gramm: I have great concern about the impact of the war on terrorism and this growing role we have in making the world safe for ourselves and our values.

I have great concern about how this all effects us as citizens. This whole terrorist threat is a huge potential danger to freedom. And that’s why I’m so keen on changing their lifestyle instead of our own.

But under the circumstances with the threat of terrorism, I don’t think you can leave a regime such as the regime in Iraq in place. I think the danger is too great I’m not so concerned about them using their weapons as I am giving them to terrorists who they feel can use them, achieve their results without them being held accountable. I think this new vulnerability changes everything.

It’s not a role I would have foresaw. I would have to say that my view on foreign policy is not dissimilar from President Washington’s view.

Novak: Don’t you think he would be shocked, if the USA was the arbiter of a lot of countries?

Gramm: No, I agree. But I think, I think the threat of terrorism and the ability of terrorists to impose very heavy costs on us with relatively few resources-at least for the time being-has changed all that. And I do appreciate the President as taking the view that we’re not going to turn over the protection of Americans to the UN or to our allies or to anybody else.

But you can see why people around the world are very nervous about this.

Because it’s not that they want to tell us how to use their power-our power-it’s that they’re very nervous that we have it, and we can do it without them.

Until this terrorist attack, we were on the verge of almost being able to say to people, “It’s our world. If you don’t like it, get off.” I’d say the terrorist attack kind of took the smugness off our face.

Novak: How did your failed presidential campaign-

Gramm: Listen. I turned out to be a terrible candidate. I lost because I was a poor candidate. The timing was also wrong. America was never going to elect me President unless it was a crisis. And in 1996, Americans did not perceive that there was a crisis. So I was the wrong person at the wrong time.

I, fortunately, came out of the whole experience with no bitter feelings. I was proud of my family and my wife. My wife did a good enough job to deserve to win. My children were very supportive, especially when you realized politics was my choice-not theirs. But I ended the whole experience with no bitter feelings.

People asked me afterwards, “Well, how can we fix the system?” And my response, “Well that assumes it’s broken. That assumes the fact that I was not chosen says that something’s wrong with the system. Maybe something was right with the system.”

I do think it’s unfortunate that you’ve got two very small states [Iowa and New Hampshire] that are very different in the country that exert a very heavy, permanent influence at the beginning of the process. And I think that should be changed.

But having said all that, the system works pretty well. I’m not saying that I’m mellowed, but maybe I am. I’ve never taken elections as being personal.

In my state, our greatest hero, Sam Houston, was defeated twice. And he’s still our most loved citizen. And I once explained that to some guy in a meeting, and he said, “Yeah, but he wasn’t loved until after he was dead!” And I said, “Well, that’s the only time it matters!”

So I don’t have any bitter feelings about that. I don’t think the system did me wrong. I’m very grateful for the people who supported me. I made lots of friends.

And I don’t have any-I sort of remember the good things about it, and I’ve forgotten the bad things about it. One of the things it did bring home to me, and I say this only because it’s true, it’s probably a point better left unsaid, but one of the things I discovered running for President is that, one of the mistakes I made early on is that I allowed myself to be portrayed as this cold-hearted guy who cared nothing except about balancing the budget and making hard decisions.

And I probably should have done a better job over the years in trying to combat that. I think some people in the media felt that, you know, Dole could say the same thing I was saying only people didn’t believe it. When I said it, they believed it. I think there were some people in the media who felt that they had an obligation to be fair and objective, but they also had an obligation to keep someone like me from being President

Novak: Do you feel the media was hostile to you?

Gramm: I think so. You go back and look at the event, the thing I did on NBC. I did a full-hour interview with [Tim] Russert of NBC, and I like him. But the guy who runs the show called me and apologized afterward. I mean, it was just an insult. And you know I’m not saying that’s not fair to do that, I’m just saying, the fact they don’t do it with everybody.

Novak: You think your views, more than Dole’s and more than George W.’s, are unacceptable.

Gramm: I think they believe that if I were President I would cut government spending, and I would’ve. I mean, I believe the government is too big, too powerful, too expensive, and I not only say that, I believe it. And again, I think it’s like Ronald Reagan could not have been elected-even with all his skills, which I lack-he could not have won except under circumstances we faced in 1980, and it was never in the cards for someone with my views to be elected in 1996.

Let me preface this by saying I once said I did not come to Washington to be loved, and I have not been disappointed. The plain truth is that is not true. The plain truth is that there are plenty of people in the Senate who do love me.

Novak: Who love you?

Gramm: Yeah, on both sides of the aisle, as it’s turned out. I didn’t truly realize that until the last year or two. But, I’m the guy that people turn to in a crisis. On a popularity contest, I normally would not win, but when the chips are down, I’m the guy that people ask to step forward.

And I think that if America had had a crisis in 1996, like it did in 1980, that maybe I would have won even despite the fact I was a poor candidate.

Another thing I didn’t lose-you had so many different people running that I never was able to carve out a niche-I mean that’s sort of a strategy thing that turned out to be a mistake. But I haven’t gone back and analyzed, tried to analyze it or myself, I came back to the Senate, went back to work, I’ve done better work since that election than I ever did before.

Novak: Do you think you’re leaving the Senate at the right time?

Gramm: I think so. I loved it [serving in the Senate]. You know most people that leave sort of feel burned out, they’re turned off. I’m none of those things. I have more confidence in the system today than I did the day I came-maybe because it’s better. I’m going to go into the private sector. I think being an investment banker is something that I will be good at. I hope and believe I will make a lot of money.

Novak: Why do you want to make a lot of money?

Gramm: I wanted to do something where there was a market test. You know a lot of people talked to me about hiring me, but they weren’t quite sure what they wanted me to do. That made me nervous. The thing about trying to put investment banking deals together is you either add value or you don’t. And there’s a market test of your success.

And I like the idea of somebody wanting to hire me for what I know, not who I know. Now I think both are valuable.

I believe that I have had a successful political career. I had a successful academic career. And I think, you know, when I came down deciding whether to run or not, the job comes in a six-year increment, and I just think there were several things that swayed me in deciding not to.

There’s something to be said for quitting while you are ahead. There’s something noble about voluntarily giving up power before they have to carry you out. Also, it gives me an opportunity to have one more career. And I’m not totally unlike that scene in Gone With the Wind when Scarlett finds this turnip and eats it and says, “As God is my witness, I’ll live through this and neither I nor any of my people will ever be hungry again.”

I do believe I have it in my power to be successful, to contribute something. If a guy creates a hundred jobs, they’ve done more than most do-gooders ever do.

Novak: And senators do.

Gramm: Yeah, and most senators And I think that I can do it, and I can make money, and my children, my grandchildren can benefit from it.

Novak: What if the President said, “Phil, I really need you in Treasury.” What would you tell him?

Gramm: Well, I don’t know. If he called me today, I’d say, “Mr. President, there are a lot of good people out there.”

I’m hoping I can go and do this job. I think this experience on Wall Street would be a good experience. I don’t know what I’d say. I hope and believe that he is not going to call me.

You know, one thing about being a zealot-and I am a zealot-is that, you know, you often have a hard time saying no.

Novak: What do you think should be the agenda for a conservative administration?

Gramm: Well, I think the first thing that President Bush has got to do is make his tax cut permanent. We have a new dynamic that’s never existed in my political life before and that is the Democrats are trying to spend money not just because they want to spend money but because they want to crowd out this tax cut.

The tax cut being temporary creates terrible dynamics in terms of responsible government, and I think this first objective has got to be to make the tax cut permanent. I think that needs to be a prominent issue in his campaign for reelection, and I think Democrats have got to be held accountable to the issue.

I want the President to go back to investment-based Social Security. The downturn in the market, I do not believe really undercut the support for an investment-based system. If I could have signed a contract 12 years ago to have my teacher retirement worth what it is today, after it has come down by 30%; I would have signed the contract. I’d sign it today. So, investment-based Social Security really provides security and really changes behavior, making people more secure and happier.

The reason that we’re going to have such fierce opposition is that it cuts hard against the Democrats, because if I’ve got investments, I need an investment advisor; I don’t need a politician. And the ability of Democrats to frighten seniors and change the voting pattern of people after they’ve retired is critical to their success.

Also, an investment-based system will create wealth in the Hispanic and black community. I think those are two very big issues, and I think they ought to dominate things.

I think that at some point we do need a tax reform system. I am now completely convinced that the way to go is a consumption system because you can never get rid of the biases built into the tax code as long as you have an income tax system.

As long as you are taxing income, you got the problem. I do believe, however, that people will figure out how to game a consumption tax by differential taxes on consumption-which is why I never devoted the energy to it that some have.

The Holy Grail is spending, and that’s the hard issue. You can’t have unlimited government and unlimited freedom, and I understand that not everybody is committed to freedom as I am.

And you know, people like Will Durant, the great historian talks about this: There is a constant and eternal struggle between people who want more freedom and people who want more security. And ultimately, he concludes, that people who want more freedom dominate.

Novak: Why do you think after his first few months in office, President Reagan really gave up on spending?

Gramm: I think he always wanted to do something about spending, I just think there were other things that always took precedent. The Cold War, Central America-those things ended up taking precedent.

And then in the last two years the Reagan Administration-as you know-there you could see something was beginning to go on in terms of the decline. My last meeting with Reagan, I had a fundraiser in Los Angeles, and he came and spoke to me when I was head of the senatorial, and this was before anybody knew about the Alzheimer’s, though, even in his last two years as President, I sensed something. He got out of his car, and I went over to meet him, and he looked at me in the quizzical way, and it was clear to me and clear to him that he didn’t remember my name.

So the President took my hand. He said, “You know, I don’t remember your name, but I remember what you did.” And I said, “Mr. President, my name’s not important. What I did is important, and I want to thank you for remembering. I’ll remember it. too.”

And that was a high compliment.