Jed Babbin: Let’s talk about first the economic stimulus package that congress has passed and President Obama is going to sign today. This really isn’t an economics package is it? Isn’t it more of an ideological bill than an economic one?
Newt Gingrich: Well it’s almost an anti-stimulus package. They begin to repeal the 1996 welfare reform, they dramatically increase the amount of government spending, they turn more power over to big government, they turn money over to state and local officials without any reforms, and frankly, they also begin to set all sorts of interference in the private market which will make it much harder for Americans to compete with foreign companies. So, you’re setting the stage for American businesses to begin to behave like bureaucracies; politicians having influence.
JB: We heard throughout the debate — and unfortunately a lot of Republicans went along with this idea — that tax relief alone will not stimulate the economy. Do you agree with that?
NG: Well look, I think there are a lot of things you can do. I don’t believe in “stimulating,” I believe in investing. I don’t think we need a stimulus package; we’ve been trying that for years. The Bush – Obama plan started last spring with a $180 billion stimulus package that failed, then in the summer they had a $345 billion dollar housing bailout that failed, then in the fall we had a $700 billion Wall Street bailout that failed, plus a $4 trillion guarantee by Bernanke and the Fed. Now we have the $780 billion stimulus which I believe will fail. And that’s going to be followed by another, [Treasury Secretary Tim] Geithner now talking about another $2 trillion in guarantees. That means that we will have, in a year and a half, put up $6 trillion in guarantees and put up something on the order of $2.1 or $2.2 trillion in additional spending. That is just an amazing amount.
JB: And as you pointed out, the spending doesn’t necessarily stimulate the economy, investment does. You now propose, on www.AmericanSolutions.com, one of the solutions that really are more comprehensive for our economy. It’s a list of tax reforms and other things.
First off, it strikes me that it is nothing short of bizarre that we are less business friendly than some of the nations of Europe, particularly France. You propose reducing the corporate business tax rate, why?
NG: Well if you want to create jobs, we need to encourage people who believe in creating jobs. And Jack Kemp used to say, “You can’t love jobs and hate job creators.” And so, if you look at the island which has had a pretty good success rate, they have a 12.5 percent corporate tax rate; ours is three times that.
JB: And how can we claim to be business friendly?
NG: We’re not! I mean, you have a vice president who says let’s put [businessmen] in jail, you have a senator from Missouri who calls them idiots, and you have Chris Dodd deciding he’s now the czar of what people ought to get paid. These people are anti-business, anti-entrepreneur and ultimately that means they’re going be anti-jobs because they’re going to drive away the very people who create jobs.
JB: Now another one of the things you propose — and I don’t think anyone in the business community would disagree — is to replace Sarbanes-Oxley, the infamous law that requires so many billions of dollars to be spent on auditing and corporate book-keeping. All we’re hearing from the Obama administration is “We’ve got to regulate more, and this atmosphere of unregulated banking and business is what brought us to this sorry pass.” How do we beat back the demand for more and more regulation of business?
NG: Well first of all, we need to be taking them head-on intellectually. We had 200 full time people in a federal office with a $62 million budget designed to look at Freddie Mac and Fannie Mae, that’s the only thing they had to do all day. And those 200 people in that federal office couldn’t figure out what was going on.
JB: So regulation doesn’t work even when it’s heavy handed?
NG: So we passed Sarbanes-Oxley law because we were going to punish the people at Enron, even though the top 15 people of Enron went to jail. So, the laws had actually worked, but a lynch mob move was building and Congress passed a bill which raised the accounting and legal cost of the average small company that wants to go public by $3.8 million a year.
Now what we’ve done with Sarbanes-Oxley, and it’s a double whammy. On the one hand we have slowed down the creation of new jobs at a time when we need them more than ever. On the other hand, you can’t find a single instance of Sarbanes-Oxley working during the recent collapse.
It didn’t tell you about Lehman Brothers, it didn’t tell you about AIG, it didn’t tell you about Merrill Lynch, it didn’t tell you about Fannie Mae or Freddie Mac. So my question for all the people who say we have to have it is: what did it accomplish? You’re spending all this money, forcing all these companies to pay this amount. Remember, there are other bad things about Sarbanes-Oxley which has led to many successful entrepreneurs to get off the public boards, and has led many companies to go private and get out of the stock market altogether. So, what are we getting for all this money? The answer, I think, is not only zero; it’s in the negative.
JB: One of the other things you propose on AmericanSolutions.com, is more American energy now. We had a lot of discussion and you were very prominent speaking about it last year, saying, “drill here, drill now, pay less.” Now we see in this awful omnibus lands bill that’s perking through the Senate right now. I believe they’re taking several million acres of explorable oil and gas land off the charts, they’re not going permit leasing there. Are we going backwards in American energy development at this point?
NG: Well you know, Callista, and I just released a new movie that we did with Dave Bossie and Citizens United called “Ronald Reagan: Rendezvous with Destiny.” And, in the movie we have a section on the Carter administration which ultimately got us to 13 percent inflation, 22 percent interest rates, a collapsing economy, and gasoline rationing. You could only buy gasoline for your car every other day, based on the last number of your license.
In fact, a great side story, I gave a speech about this recently and a man walked up to me afterward and he said, “I was only 13 when Carter was doing that, but my job every morning was to go out with a screwdriver and swap the license plates so that the car that needed gas had the right license. And I came up with the following principle, “A way to test with your liberal conservative: if the government adopts a rule so bad that it’s teaching 13-year-olds to break the law, maybe we should change the rule. Whereas liberals would say, no, what we need to do is get license plate police.”
JB: Now, do you have in your mind how much your proposal would cost versus how many jobs it would create?
NG: I am comfortable in asserting that if you followed the economic policies we’ve outlined, you’d get such dramatic economic growth, that if you went back and reformed welfare again, repeating what we just did, and if you had the kind of health reforms that we’ve been advocating at the center of the health transformation, I have no doubt we would be able to ultimately balance the budget despite the recent efforts.
But the key to balancing the budget is economic growth. It is fascinating that the House Republicans, and I thought this was very clever, actually took the formulas of Obama’s new council of economic adviser’s chair. When you apply her principles and her formulas, it turns out that the House Republican alternative created twice as many jobs, at half the cost. So it’s obvious that President Obama didn’t want to ask his Council of Economic Advisers chair to measure the two, because he would have had to end up coming out in favor of the House Republican agenda.
And and it’s important to remember, the number one goal of this bill is not economic growth, the number one goal of this bill is more power to politicians.
JB: Now, I suppose that it would be really unkind of me to say that there’s no coincidence when you see an extra billion dollars added for Census “improvements” at the same time they’re maneuvering to put the Census under Rahm Emanuel in the White House.
NG: Well I think it’s very clear, and I think it should disturb every American, that they are trying to follow a strategy right now of creating what some have referred to as a Chicago Census, which describes what Rahm Emanuel did in order to try to create the Democratic Congress, the degree to which he was, not just intensely partisan, but prepared to drive people out of public life, prepared to cripple people if necessary, to make them so miserable they would quit. I think if you look at that, and say alright, this may be the kind of guy that Obama was going to put in charge of the Census, you know it was going to be an entirely partisan operation.
That’s why I’ve urged the Senate to take the position that until they get a commitment, the Census will be run with a bipartisan nature. And we did this with Clinton, we actually passed a board which ran the Census, and it was a bipartisan board, and as a result, we will be writing about this in the very near future, both sides were comfortable that the other side was not going to get away with anything; that it not what you’re getting right now from the current group.
JB: So — bottom line — give us an example of how Republicans should go forward?
NG: All I’d say is that Paul Ryan is working on a bill to actually abolish the capital gains tax. That’s one of our provisions and here’s the big thing with that: if you lost money on a 401K, or a pension fund, or you lost money in your child’s college savings account, no single step would rebuild the value of your asset faster than abolishing capital gains, because it would raise the value of all equities by the differential in the tax that you wouldn’t have to pay anymore. And we actually have some members in Congress who are working on some numbers which will be released in a week or two, but you get a 30 or 40 percent increase in the value of capital gains than you have the in value of capital. If you had a 401K and you’ve lost 40 percent, you might regain half or more of that in one bite, almost over night.
JB: Should we be thinking again about Congressman Louie Gohmert’s idea of a tax holiday? Wouldn’t it have worked better than all the other stuff in this stimulus bill?
NG: It just depends on the size of the bill, but every American could have paid zero income tax and zero Social Security and Medicare tax, including zero matching for about seven months for the price of this bill.
You would think we would get more of a stimulus if you did not pay any taxes for seven months, but they all just stare at you because they cannot believe that was the alternative.