President Obama’s proposal to increase taxes on the rich is “designed to come at me,” GOP presidential contender Mitt Romney told me this morning.
In his State of the Union speech Tuesday night, Obama proposed a minimum 30 percent tax rate on Americans earning more than $1 million a year. The proposal — known as the “Buffett Tax” after Warren Buffett famously said his secretary pays a higher tax rate than he does — was a key part of the president’s populist push for “fairness” in his speech to the nation.
The plan is “designed to come at me if I’m the nominee,” Romney said in an interview that will air tonight on The Kudlow Report. “If I happen not to be the nominee, he’ll still take the 99-versus-one attack. He’s really trying to divide America.”
Romney, who gave a glimpse inside his personal fortune on Tuesday by releasing his U.S. tax returns, paid an effective tax rate of 13.9 percent in 2010 and expects to pay a 15.4 percent effective rate when he files his return for 2011.
Those rates are far below the top income-tax rate on wages, which is 35 percent, because the U.S. tax code favors capital gains and other investment income by taxing them at 15 percent.
“The question is whether we’re going to eliminate the capital-gains tax break,” Romney said. “So if you say we’re going to raise that dramatically, you’re going to choke off a lot of the capital that goes into creating new enterprises and creating jobs. It’s the wrong way to go.”
Romney said Republicans are not all about the rich. “I’m fighting to help middle-class Americans get better jobs and better incomes,” he told me. “People who have been successful understand the path to success — we want everyone to enjoy success in America.”
Tune in to tonight’s Kudlow Report on CNBC (7:00 p.m., ET) to see the entire interview.
Senate Minority Leader Mitch McConnell (R., Ky.) told me on Monday night’s Kudlow Report that President Obama shouldn’t expect a lot of cooperation from Republicans after he outlines his goals for 2012 during the State of the Union address tonight.
“With the Obama economy established now . . . unemployment is still at 8.5 percent,” McConnell said. “It didn’t work, and we’re not interested in doing more of the things that don’t work.”
Obama is expected to use his State of the Union address to call for higher taxes on the rich, among other things. And while it sounds like more gridlock ahead in Washington, McConnell puts the blame squarely on the president. He said when Republicans wanted to tackle tax reform and entitlements last year, Obama went AWOL on his bus tour. McConnell expects more of the same this year.
“He was not involved whatsoever,” McConnell said. “So I’m not optimistic, frankly, that in an election year that he’s likely to be any more engaged than he was last year.”
What’s more, McConnell thinks the logjam in the nation’s capital is part of Obama’s agenda.
“That’s his strategy . . . to demonize Congress, to complain because he can’t continue to get everything he wants, like he did the first two years,” he said. “It’s all about his reelection and not about the country.”
One thing McConnell thinks will get done is an extension of the payroll tax cut, which was extended for only two months in December when Congress couldn’t come to an agreement.
“We’ll be back at [it] trying to figure out how to do that for the balance of the year and how to pay for it,” he said. “We don’t want to add to the deficit.”
Let me build on Charles Krauthammer’s great Friday column, “The GOP’s Suicide March.” Krauthammer argues that just as President Obama’s class-warfare, soak-the-rich mantra started lagging in the polls, some Republicans on the campaign trail started making the case that Mitt Romney’s Bain Capital was involved in nothing more than vulture capitalism, looting companies, and destroying jobs. Keeping class envy alive.
I’m not going to name names, because everybody knows who these Republicans are. Instead, I want to go positive, and commend Mitt Romney himself. Romney did his best in the second South Carolina debate to fight for free-market capitalism and Adam Smith, and against the spread of Obama-style crony capitalism and class envy.
Might a strong Newt Gingrich debate performance tonight trump the ABC Nightline interview with Newt’s ex-wife Marianne? Remember, the debate comes before Nightline. And the roughly five million to six million people who watch the debate will be a lot more than the roughly two million folks who turn on Nightline. Plus, the Nightline crowd is largely liberal, and these viewers are not going to favor Newt Gingrich.
I’m not saying the ABC Brian Ross interview with Marianne isn’t something. But I’m not sure how important it really is.
Here’s what’s more important: Newt has opportunities in the debate tonight to push his Reagan 2.0 supply-side tax-reform plan. If he stays on message about growth, jobs, and prosperity, he can point to Mitt Romney’s more timid tax-reform plan.
Plus, Newt needs to explain how the numbers work both for his 15 percent flat tax and his plan for Social Security personal accounts. Growth is great, but we also have this problem called the budget deficit. Newt needs to explain.
Mitt Romney has opportunities tonight also. He needs to announce an early release of his tax returns. He also should explain that his investment income, which is taxed at a 15 percent effective rate, is also taxed at the corporate level. So in fact, Mitt is paying a combined 45 percent tax rate on his income.
And while he’s at it, Mitt should unveil (unleash?) his own bolder tax-reform plan. Most people agree that Mitt has the business experience and the better understanding of how the economy works. But he needs a bolder solution. Tonight could be the night.
And while he’s at it, Mitt should give a more detailed defense of both the successes and failures of Bain Capital. Details matter. And perhaps he can aggressively tell folks how a Bain-turnaround approach is exactly what’s needed for that troubled and near-bankrupt company, U.S. Government, Inc.
Finally, both Newt and Mitt should take on the cronyism in Washington. They should describe how they would end corporate welfare; how they would remove the costly and unnecessary deductions, exemptions, and carve outs in the tax code; and how they would get rid of all the government subsidies to big business for energy, exports, and agriculture (and ethanol). Changing Washington’s culture of cronyism is a key path to tax reform, deep spending cuts, and deficit reduction — along with growth.
In other words, in a dead-heat race in South Carolina, both Newt and Mitt have big opportunities in tonight’s debate.
There’s a very troubled company out there called U.S. Government, Inc.It’s teetering on the edge of bankruptcy. And it badly needs to be taken over and turned around. It probably even needs the services of a good private-equity firm, with plenty of experience and a reasonably good track record in downsizing, modernizing, shrinking staff, and making substantial changes in management. Yes, layoffs will be a necessary part of the restructuring.
While so much attention has been turned to Newt Gingrich’s catastrophically mistaken attack on Mitt Romney’s Bain Capital, free-market capitalism, investment, and profits, a potentially much more significant development occurred in the New Hampshire debate Saturday night. For the first time, Mitt Romney embraced a much bolder tax-reform plan.
Under pressure from a number of supply-side conservatives (including me, and most especially the editorial-page folks at the Wall Street Journal), Romney appears to be listening.
Republican presidential hopeful Jon Huntsman took aim at front-runner Mitt Romney on the eve of the New Hampshire primary, telling me that he’s the best candidate to unseat President Obama in November.
Huntsman, former governor of Utah and U.S. ambassador to China, said Romney is making himself “completely unelectable” when he makes statements like the one he made Monday about firing people. During a speech to business leaders, when talking about how people should be able to chose their own health insurance, the former Massachusetts governor said: “I like being able to fire people who provide services to me.”
“Words and statements matter . . . when you are in a heated campaign,” Huntsman said on The Kudlow Report. “I just want to make sure we can get somebody who can go up against Barack Obama and not be chewed up by the political machine that’s going to have a billion dollars to spend on it.”
To take on Obama, the candidate has to be able to get more than just Republican votes, and Huntsman said he’s the man who can deliver.
“In order for someone to beat Barack Obama this year, they’re going to actually have to convince people who supported Barack Obama last time to support them,” he said. “If you can’t come out of New Hampshire or any other primary state with the Republicans and also a whole lot of independents, than we’re not going to have an electable candidate at the end of the exercise.”
Huntsman, who skipped the Iowa caucuses last week to focus on New Hampshire, is pinning his hopes on a strong showing in the Granite State’s first-in-the-nation primary today. While he lags far behind Romney, some polls show him moving into third place. According to Monday’s Suffolk University tracking poll, Huntsman has 13 percent of likely voters supporting him. Romney has 33 percent, down from 43 percent one week ago, and Rep. Ron Paul is at 20 percent.
Huntsman also took issue with Romney’s criticism of his service as ambassador to China under Obama. During Saturday’s debate, Romney reprimanded Huntsman for implementing the policies of the Obama administration instead of helping Republicans across the country get elected. But Huntsman said his dedication to his former job should win him favor with voters.
“People want a leader who actually believes in putting their country first,” Huntsman told me. “And Governor Romney made it very clear [during the weekend debates] that he believes in putting politics first.”
Huntsman also disagrees with Romney’s stance on penalizing China for currency manipulation.
“If [Romney] imposes a tariff the first day he’s in office, as he has threatened to do, you will have retaliation immediately on the part of the Chinese and it will result in a trade war,” he said. “That is an absolutely nonsensical approach to doing business.”
While the Chinese aren’t appreciating their currency at a speed Huntsman would like, he said the solutions need to be found during negotiations.
But he wouldn’t join in the chorus of Republican candidates attacking Romney for his work as a venture capitalist. Instead, he thinks the front-runner’s record as governor is the bigger issue.
“[Massachusetts] placed 47th in job growth in this country,” Huntsman said. “[Romney] didn’t put forward any big, bold tax-cut proposals, he didn’t put forward any tax-cut offerings to his legislator, he didn’t do anything big, bold, and courageous.”
Utah, on the other hand, was number one in job growth, delivered a flat tax, and reformed health care and education during his tenure, he said. “What’s most germane here is our records as governor,” said Huntsman.
Message to my fellow conservatives: Please don’t blame the mainstream media for the improvement in jobs, unemployment, and economic growth. Reporters are not making this up. The economy is better. It’s going to give President Obama a leg up on the election. GOP beware, and come to your senses.
Last night on CNBC, host Larry Kudlow had some forceful objections to my column on Rick Santorum’s populism, and the resistance that meets in Republican and conservative circles.
My column quoted Kudlow calling Santorum’s economic plan “terrible,” because it favors manufacturers by lowering their corporate income tax rate to 0 percent, while not doing the same for non-manufacturers. Kudlow says I accused him in the column of being anti-blue-collar. I certainly wrote that many Republicans are, but I don’t agree that my column leveled this accusation specifically at Kudlow.
In fact, Kudlow wrote a column recently which sticks up for blue-collar workers.
He wrote:“The Keystone opposition coming out of the White House is completely alienating all these people, the folks who work with their hands. And it’s these workers who have been decimated in the recession far more than any other group in the economy.”
Kudlow and I have our disagreements about bailouts and taxes (and the meaning of my latest column), but on these points, we agree: 1) Santorum is wrong to pick winners and losers, and 2) many economy-distorting policies need to be fixed, but the policies that hurt blue-collar workers impose unique costs.
– Tim Carney is senior political columnist for the Washington Examiner.
A day after coming in third in the Iowa Republican presidential caucuses, Ron Paul set his sights on New Hampshire and took aim at Rick Santorum. He also declared he had no intention of leaving the Republican party.
Santorum is a typical “big-government Republican” who is not really conservative, Paul told me Wednesday night. He said that he’s the true fiscal conservative who believes in free-market economics, adding that both Santorum and Newt Gingrich don’t understand that concept.
“I think they think in terms of patching up things, and maintaining the status quo, and don’t rock the boat and you can’t cut anything,” Paul said. However, Paul noted that former Massachusetts governor Mitt Romney deserved a “little bit of credit” for working in the private sector.
Santorum, a former U.S. senator, finished just eight votes behind Romney in the Iowa caucuses. But Paul, who did well among independents and younger voters in Iowa, says he can bring those votes to the GOP. He also slammed those who tried to vilify his supporters throughout the campaign.
“I thought the party was a broad tent, a big tent, [that] brings people in . . . but aren’t young people pretty important?” he said. “I get real energized when I go to the campuses and talk about economic policy and talk about gold standards and things like this, but they don’t want to invite these people in.”
But while his libertarian views may have brought in independent voters, Paul dismissed the idea of running as an independent.
“Right now I’m doing so well, why would I think about it?” he said. “I was raised in a Republican family. I was elected twelve times to Congress as a Republican.”
“The purpose of economic policy is growth, jobs, and prosperity,” supply-side founder Art Laffer told me today. As such, Laffer has endorsed Newt Gingrich and the Gingrich 15 percent flat-tax plan, which includes the 12.5 percent corporate-tax reform. “It’s nothing against the other candidates,” Laffer said. “But Newt’s plan is right, and therefore endorsing him is the right thing to do.”
Laffer is concerned with the fact that Mitt Romney has no tax-reform plan, and he worries that Romney doesn’t believe in the incentive model of economic growth. “He’s a good man,” Laffer said. “And he would make a good president. But he needs a bold tax plan.”
Art Laffer believes the Gingrich plan would help jolt the economy to 4 or 5 percent growth. And he also is impressed that Gingrich has been talking about King Dollar on the campaign trail along with his supply-side tax strategy.
Was Gingrich actually one of the original supply-siders? Well, no. But he did hang around with Jack Kemp and others during the early 1980s in what became known as the Opportunity Society. So Newt’s bona fides are there.
Laffer also is impressed with Gingrich’s bipartisan abilities. He noted that Newt worked with Bill Clinton during the “Contract with America” 1990s to get welfare reform and a lower capital-gains tax.
What about the inevitable criticism from Obama that a flat tax is a huge tax cut for the rich? “Listen,” Art told me. “We want to make the poor, rich. And you can’t love jobs while hating job-creators.”
Whether Gingrich’s supply-side bus tour and Art Laffer’s endorsement help him in the remaining days of the Iowa campaign remains to be seen. Polls suggest that Newt is a stock still looking for a bottom. His campaign to use federal marshals to haul judges before Congress is way off the economic-growth message and did him a lot of damage. That’s what the latest polls suggest.
Now, if Gingrich can stay on message, and stick with supply-side solutions for growth, jobs, and prosperity, he could still bounce back over the next five days. But he must be disciplined and stay on message.
When you think of Republican congressman Paul Ryan, terms like earnest, serious, and important come to mind. So does the term old-fashioned. Ryan comes from an old-fashioned place, the blue-collar town of Janesville, Wisconsin. He cherishes the old-fashioned values of a faithful family man. He even looks old-fashioned, with his white shirts and striped ties. And he uses old-fashioned argument skills, persuasively weaving big-picture themes with the numbers that back them up.
And Ryan has old-fashioned goals, too, like saving America from fiscal bankruptcy, economic stagnation, and a European-style entitlement state.
“Just look at what happened across the Atlantic,” Ryan told me in a year-end interview. “We have to avoid that. We must reclaim our founding principles of economic freedom and free markets. We must preserve the American Idea.”
With this vision, and with a pro-growth budget framework called “A Roadmap for America’s Future,” Ryan’s serious ideas have seriously gotten under President Obama’s skin.
Color me cranky about this week’s Republican presidential debate in Iowa. The headline stories were about whether Newt Gingrich actually lobbied for Freddie Mac, or why Mitt Romney changed his positions on gay rights, guns, and abortion. But a GOP growth message to defeat President Obama was completely missing in this debate. It was a supply-side whiff.
This election is principally about the economy and its poor performance. It’s about the slow rate of growth, the high rate of unemployment, and the tax, regulatory, spending, and monetary obstacles conjured up by Obama that are holding back the animal spirits which are so essential to job creation and prosperity.
Risk-taking is virtually absent today. Business profits are strong, but firms won’t make commitments in front of Obamacare, regulations, mandates, and tax threats. The president is on the campaign trail with a leftist, class-warfare message. He blames successful entrepreneurs for their wealth, and slurs high-powered businesses at every turn. His is a big-government planning vision, an FDR-like vision.
But where was the GOP response in Sioux City, Iowa?
The payroll-tax-cut debate is not really about the payroll tax, which is a very weak-kneed economic stimulant and a lackluster job creator because of its temporary nature. Without permanent incentives at lower tax rates, these rebates don’t do anything for growth and jobs.
Instead, the key to understanding the payroll-tax debate is to grasp Pres. Barack Obama’s leftist vision of taxing successful earners (the millionaire surtax) and his obsession with clean energy at the expense of fossil fuels. These are ideological positions. They support the Obama vision of class warfare and his attachment to radical environmentalism.
And the key to understanding this state of affairs is the disposition of the TransCanada Keystone XL pipeline, which Republicans cleverly threw into the payroll-tax debate as the only real job creator.
Senate Minority Leader Mitch McConnell says a Democratic plan to concede on a millionaire tax in order to get Republicans to pass an extension of the payroll tax likely won’t be enough to get an agreement.
“The tax they wanted to implement on business owners was something that couldn’t pass the House and couldn’t pass the Senate,” McConnell told me on Wednesday’s Kudlow Report. “So if they are giving up on that, they are giving up on something that couldn’t have cleared either body anyway, so I don’t know [how] far we’re down the path to an agreement.”
President Obama and fellow Democrats are now considering dropping the 1.9 percent surtax on income above $1 million a year that they wanted to pay for the payroll tax. But if Republicans are going to agree to extend the payroll tax cut — which expires on Dec. 31 and affects 160 million Americans — they want something in the bill that saves and creates jobs, McConnell said. The Keystone oil pipeline project between the U.S. and Canada will create jobs, he added, and therefore it “needs to be part of the package.”
The U.S. on Wednesday faced the prospect of an imminent government shutdown for the third time this year as a fight between lawmakers in Congress over taxes and spending turned nastier. Democrats, led by President Obama, are refusing to sign off on a bipartisan $1 trillion government-funding bill that would keep federal agencies operating beyond Friday until Republicans agree to a compromise deal on the payroll tax cut. On Tuesday, the House passed its version of the payroll tax bill, which Senate Majority Leader Harry Reid has vowed to kill.
However, McConnell has said he wants to turn first to the government-funding bill. McConnell told me that funding had been agreed upon in conference until Obama stepped in and played politics.
“Now they’ve got us two days away from a government shutdown, all instigated by the president himself,” he said. “When do you turn off the campaign? When do you take responsibility for governing?”
Bob Doll, chief equity strategist at BlackRock, told me on Monday’s Kudlow Report that while Europe still struggles with its debt crisis, things are moving in the right direction in the U.S. and China. And he thinks cyclical stocks will reap the benefits.
A few months ago, according to Doll, “the U.S. was heading into a recession, Europe was falling apart, China was going to have a strong landing, and we had a lot of tightening going on.” Now, Doll says the U.S. economy is showing a little growth and China is “a little less bad, maybe eventually good.”
“I think cyclicals will benefit,” he added.
Stocks tumbled Monday, with the Dow dropping 163 points, after investors soured on a European Union plan adopted last week to enhance fiscal discipline in the eurozone in the hopes of quelling a two-year-old debt crisis.
There will be days like this when the market doesn’t think Europe can rescue its banks in time, Doll said. But he pointed out that it is not a “one way street.” And despite the volatile market, he thinks things are looking a little better.
“I think we are better off today than we were a week ago, but we’re still not where we need to be,” Doll said.
He also added that what’s happening in China is important to the global economy, noting that China’s inflation rate in November fell to the lowest level in more than a year. Said Doll, “This is a step in the right direction that should allow more reserve-requirement reductions.”
Following the GOP debate that nearly the whole world watched on Saturday night, the president on Sunday made it very clear that he will not back off his class-warfare vision in the coming year. Obama told Steve Kroft on 60 Minutes that middle-class inequality will be his big theme, and that somehow successful earners, investors, and small-business owners are to blame.
The president said that while fat-cat incomes went up 200 to 300 percent over the last few decades, middle-class incomes didn’t grow. This is not true, according to James Pethokoukis, whose blog posts citing various studies show that real median income rose at least 40 to 50 percent.
In any case, whatever the exact numbers, it’s still a mystery to me why successful people getting ahead cause anybody to fall behind. The Jack Kemp idea was always to foster a rising tide that would lift all boats. How can this happen if we penalize success and raise top tax rates on work and investment to 50 percent or more? That’s a mystery.
I should think, in a system of democratic capitalism, that more millionaires are a good thing. Show me a system of redistribution, and I’ll show you a system of economic stagnation.
Elsewhere in the interview the president said he did not overpromise on the results of his stimulus package. But actually, according to the original February 2009 stimulus documents, today’s unemployment rate should be close to 6 percent, not 8.6 percent. The president is now backing off by saying economic recovery is a long-term project that will take more than one term and more than one president.
By the way, Obama told the Today Show’s Matt Lauer in February 2009 that if he doesn’t “have this done in three years, then it’s going to be a one-term proposition.”
Which leads me to this thought regarding the GOP race: Since we basically know what Obama’s vision will be, which candidate will be better at besting Obama and his vision?
It’s going to be a battle between FDR’s 1930s and Ronald Reagan/Jack Kemp prosperity optimism.
Say what you will about former Speaker Newt Gingrich. His philosophy, his policy proposals, his track record, his campaign, and all the rest. But the one thing you have to acknowledge about Gingrich is that he’s a sizzler. He has a way with words. And he’s as good a communicator as anyone in modern politics.
In my CNBC interview with Gingrich this week, he slammed President Obama’s tax-the-rich, class-warfare attack on bank’s and businesspeople. He hammered Obama, calling him a hard-left radical who is opposed to free enterprise, capitalism, and “virtually everything which made America great.”
It was a brutal, frontal, hard-hitting attack on the president. He called Obama “the candidate of food stamps, the finest food-stamp president in American history.” He said, “I want to get equality by bringing people up. [Obama] wants to get equality by bringing people down.” He said, “I want to be the guy who says, ‘I want to help every American have a better future.’ [Obama] wants to make sure that he levels Americans down so we all have an equally mediocre future.”
Here’s the video and transcript of my interview with Newt Gingrich on Tuesday night’s Kudlow Report:
KUDLOW: Now just 29 days until voters head to the polls in Iowa. There’s a clear new front-runner in the GOP race for president. The latest in national Gallop polls shows former House Speaker Newt Gingrich soaring to a 15 point lead over Mitt Romney, 37 to 22. Ron Paul and Rick Perry trailing in single digits.
All right. Joining me now for a first-on-CNBC interview is the aforementioned GOP frontrunner, Newt Gingrich.
Mr. Speaker, welcome. We appreciate it very much.
GINGRICH: Thanks. It’s great to be here, Larry.
KUDLOW: I want to ask you about Barack Obama on the campaign trail today, or whatever trail he’s on. He’s pushing his temporary payroll tax cut in order to have a permanent increase on millionaires and billionaires. And he says Republicans who oppose this are discredited, “you’re-on-your-own style of economics.” “You’re-on-your-own style of economics.” What is your response to that?
GINGRICH: I think we all have to recognize that the president is a student of Saul Alinsky. He represents a hard-left radicalism. He is opposed to free enterprise. He is opposed to capitalism. He’s opposed to virtually everything which made America great, and he keeps using wild rhetoric that is simply false. I happen to favor keeping the tax cut because I like tax cuts.
KUDLOW: Why is that, though? That’s a — you want to finance by higher taxes on millionaires?
GINGRICH: No. I want to finance it by cutting government.
KUDLOW: Well, that’s what they want. They want to finance it with higher taxes on millionaires.
GINGRICH: But that’s — but that’s because — look, they know they want higher taxes on millionaires, they just need to know what this week’s argument is. But they know what the answer is. My answer is government’s too big. We don’t have a problem of being under-taxed; we have a problem of being overspent. And so I would cut a tremendous amount out of the federal government. And I would — one of the things that we’ve developed with Peter Ferrara’s help is a block-grant program. There are 185 different federal programs to help the low-income American, 185 separate bureaucracies. Put them into two or three block grants, cut out all the federal bureaucracy, send it back to the states. You save hundreds of billions of dollars. The people at Strong America Now have a program on applying lean six sigma to the federal government. You can save, they believe, $500 billion a year through better government.
So my attitude is, I like the lowest possible taxes. If the Democrats want to give me a tax cut on working Americas by — on the Social Security level, fine.
KUDLOW: Yeah, but, Newt Gingrich, I’m going to challenge you on that. You were a close friend and associate of my mentor Jack Kemp.
GINGRICH: Right.
KUDLOW: We never believed in temporary one-year-long tax cuts.
GINGRICH: Right.
KUDLOW: Whatever. They’re just rebates. We believed in lower marginal tax rates which would improve after-tax incentive to work and invest.
#more#GINGRICH: I do, too.
KUDLOW: Are you going to sell me that this temporary one-year cut, which did nothing last year except waste money, is going to do nothing this year? Why are you so — why do you favor it?
GINGRICH: Look, I don’t think …
KUDLOW: Why aren’t you out there asking for pro-growth tax reform …
GINGRICH: I do.
KUDLOW: … across the board?
GINGRICH: If you go to newt.org and you look at the things I recommend …
KUDLOW: Ah.
GINGRICH: … you’ll see lots of stuff I favor that’s exactly what you believe in. All right? And I like pro-growth tax cuts. Listen, I’m for zero capital-gains tax.
KUDLOW: Mm-hmm.
GINGRICH: I’m for abolishing the death tax. I’m for 100 percent expensing for all new equipment. I’m for a 12.5 percent corporate tax rate. I’m for an optional 15 percent flat tax on the — on the Hong Kong model. So I’m happy to match — you know, I was with you and Wanniski and Laffer and Kemp when this game started.
KUDLOW: Mm-hmm. That’s …
GINGRICH: But, politically, psychologically, middle-class Americans sitting out here going, “OK, you don’t want — you don’t want to repeal the Bush tax cuts. You want to keep all those tax cuts. You say don’t, don’t let them go back up. But now we’re going to let taxes go back up on every single working American.” I don’t think psychologically you can make that case.
KUDLOW: All right.
GINGRICH: And so — and so I’d rather say to every single working American, “Not only am I with you, I want to pay for it by cutting out government waste, unlike Obama.”
KUDLOW: But the GOP has got to make that clear.
GINGRICH: Yeah, exactly.
KUDLOW: I mean, they really have to make — now I want to ask you a related question. I want to stay with President Obama for a second. You can see with clarity on the campaign trail, and including this tax proposal which is about raising tax rates on the rich, is the whole election in 2012 — if you’re the candidate or whoever is the candidate against Obama, is it going to be about class warfare? Is it going to be about the 1 percent versus the 99 percent?
GINGRICH: Absolutely.
KUDLOW: And what’s your response? How will you rebut that?
GINGRICH: This is going to be the finest exercise in self-government in your lifetime. We’re going to have the candidate of food stamps, the finest food-stamp president in American history, in Barack Obama, and we have a candidate of paychecks. And I’m going to make a simple case. You want class warfare, fine. You’re going to get stuck on food stamps because it’s going to kill jobs. You want really high tax rates? Fine. You’re going to get stuck on food stamps because it’s going to kill jobs. You want to watch America decay and China become the leading country in the world? Obama’s got a model for getting you there. It’s called Saul Alinsky’s entire book.
Now, would you like to create jobs? The kind — I want to get equality by bringing people up. He wants to get equality by bringing people down. You know, Reagan use to have this great line about the British worker who stood by the road with his son or daughter, and a man goes by in a Rolls Royce, he says, “Someday we’ll get him out of that car.” American worker stood by the side of the road with his son or daughter. A Cadillac went by and he said, “Someday you’ll buy that car.”
KUDLOW: Ah, right.
GINGRICH: So I want to be the guy who says, “I want to help every American have a better future.” He wants to make sure that he levels Americans down so we all have an equally mediocre future.
KUDLOW: And yet, he is now calling himself a follower of Theodore Roosevelt, Teddy Roosevelt. And you have called yourself a follower of Teddy Roosevelt. And I’m trying to figure out — I know what his message is. Roosevelt did want to raise taxes on the — Roosevelt was a government activist. He was a regulator.
GINGRICH: Sure.
KUDLOW: But you’re not. Why do you say you favor Teddy Roosevelt? And are you actually the conservative candidate that so many people are hoping you are?
GINGRICH: Well, first of all, there are a lot of different Teddy Roosevelts. He was a very complicated man. And the Theodore Roosevelt as president is very different than the Theodore Roosevelt in 1912 running for president on a very aggressive big-government strategy. I like Roosevelt, first of all, because he was for conservation. I liked what he did in saving forests and saving national parks and doing things, caring about the inheritance we give our children and grandchildren of a wonderful country. I like the Roosevelt who is common sense about regulations. We got a food-an-drug act because back then there were no rules, and people were eating meat that was basically poisonous. People were literally dying from food.
When I was a kid, and we were stationed in Europe — my dad was in the Army — the sense that America actually had clean water was remarkable. I mean, I go anywhere in America, I’m relatively confident the water is good.
KUDLOW: But we don’t — we don’t lack for regulations.
GINGRICH: No.
KUDLOW: I mean, it’s a different era than TR.
GINGRICH: But, no, it’s a different era. But I’m just saying, but here was a guy who, as a pragmatic person looked around and said, “I want to fix these things. I want to find solutions.” He’s also a great American nationalist. I mean, he’s the guy who — the modern Navy was in part built by guys like Theodore Roosevelt.
KUDLOW: All right. I’m going to leave it there. Some people are going to say you’re a big-government conservative, a big-government conservative rather than a small-government conservative. I mean, why aren’t you saying, “I’m a Ronald Reagan conservative.”
GINGRICH: I am a Ronald Reagan conservative.
KUDLOW: Or, “I’m a Jack Kemp conservative.”
GINGRICH: Look, I’m …
KUDLOW: I don’t want to get stuck up on TR, but I just …
GINGRICH: Wait a second. Wait a sec — wait a second.
KUDLOW: I just want …
GINGRICH: Wait a second. I …
KUDLOW: You’re a historian, and you’re an intellectual historian. You know this stuff.
GINGRICH: Yeah. But you take a line out of context. I’ve done a movie on Ronald Reagan called Rendezvous with Destiny.
KUDLOW: I understand.
GINGRICH: Callista and I did. We’ve done a book on Ronald Reagan. You know, I campaigned with Reagan. I first met with Reagan in ’74. I’m very happy to talk about Ronald Reagan. And, in fact, I would argue that the 1994 contract was just Reaganism revisited. So I’m very comfortable. If you look at my speeches and things, I drive the left crazy by quoting Reagan.
KUDLOW: All right. We’ll leave that one there.
Now, let me ask you some nastier stuff, not coming from me, but I want you to react. Big story at the top of Drudge today. Ron Paul is running ads slamming you, basically. Okay? He’s calling you hypocritical. He’s saying you are an influence peddler for Freddie Mac and for drug companies and pharmaceutical associations. What’s your reaction to that? He’s running a lot of ads in Iowa.
GINGRICH: You know, he’s got to make up a lot of lost ground. He’s going to say something. My reaction is, you know, I’m a 90 percent American Conservative Union conservative, lifetime voting record. I am the only person in your lifetime — the only speaker of the House in your lifetime — who has balanced the budget for four consecutive years. I helped craft and pass welfare reform, the largest entitlement reform in your lifetime. Two out of three people went back to work or went to school. I helped pass the first tax cut in 16 years and the largest capital-gains tax cut in history. Unemployment dropped to 4.2 percent. In the four years I was speaker, we — 11 million new jobs were created. We went from a projected deficit over ten years of $2.7 trillion when I came in. Four years later when I left, there was a projected surplus of $2.3 trillion over the next ten years. That’s a swing of $5 trillion.
KUDLOW: I think it’s all …
GINGRICH: Okay. So my point …
KUDLOW: I think it’s all great, and I think it’s all factual.
GINGRICH: Okay.
KUDLOW: But I want to ask you, do you regret, in hindsight, do you regret working for Freddie Mac to defend their point of view? Do you regret working for the pharmaceutical companies …
GINGRICH: Well, I …
KUDLOW: … working for the drug entitlement, which so many …
GINGRICH: Wait a second.
KUDLOW: … Tea Party, grassroots, conservative Republicans were appalled when George W. Bush pushed through that entitlement. Do you regret working on that side?
GINGRICH: Let me draw a distinction. First of all, I do no lobbying. I have never done any lobbying. It’s written in our contracts that we do not do any lobbying of any kind. Okay? I offer strategic advice. I — by — the advice I offered Fannie Mae was in — or Freddie Mac, was, in fact, aimed at how do you help people get into housing, and how do you — and I don’t think government-sponsored enterprises are inherently evil. I think they’ve been bad — these two have been badly run. I favor breaking them up into four or five smaller units each because I think they’re unmanageable at their current size. But I don’t think the concept of a government-sponsored enterprise, which is as old as the country, is an inherently bad thing.
Second, I was — I was for the drug benefit for a practical reason. When Medicare was developed in 1965, there were no pharmaceuticals that mattered, so they designed a health benefit that didn’t take care of pharmaceuticals. We were in a position, and we said to people, “We will give you kidney dialysis for the rest of your life, but we will not help you get insulin.” Now, that’s both inhumane, and it’s really a bad health policy, and it’s stupid fiscally.
KUDLOW: I liked — I loved the health. I love the science. I didn’t like the fiscal side of it. It was never paid for.
GINGRICH: Well, I don’t like that, but what we …
KUDLOW: And it pushed — put Bush behind the — I mean, it really helped spawn the Tea Party. And so I just wonder, in retrospect, would you rather not have been on that side or would you rather have had your own plan, which would have financed it properly?
GINGRICH: Well, no. I’d — well, first of all, I think we’re going to have to reform Medicare. I led the Medicare-reform task force in 1996. We saved $200 billion over ten years. We did it so well that nobody opposed us. I mean, we’ve never gotten any credit for having saved Medicare in ’96, but, in fact, we did. But we did it with AARP being happy and with Clinton not fighting with us; and, therefore, it became a non-event in this city.
I think you’re going to have to rethink all health care. I helped found the Center for Health Transformation. But the two big sidesteps that you had in — that are important in the Medicare bill in 2003 — were, we created a Medicare-advantage option …
KUDLOW: Yes.
GINGRICH: … which really began to allow Medicare to reach in …
KUDLOW: The best part of the bill. The single best part of the bill.
GINGRICH: Well, and, we also created health savings accounts.
KUDLOW: Yes. Yes.
GINGRICH: Okay. Those two, in my mind, were the beginning of the right direction. And I tried for five years and couldn’t get the Bush administration to realize they had begun a transition that would, frankly, have pre-empted the Obamacare approach.
KUDLOW: All right. So the Ron Paul ad also attacks you for your TV ad with Nancy Pelosi on global warning. I interviewed Ron Paul. I said, “Newt has said it was a bad, dumb thing to do. Will you forgive him?” And I think Ron Paul forgave you for that.
GINGRICH: Good.
KUDLOW: But I am impelled, I have to ask you, regarding Nancy Pelosi, her latest charge …
GINGRICH: Sure.
KUDLOW: … that she has new information on your ethics investigation years ago. What’s your response to that?
GINGRICH: Well, first of all, it tells you how political she was on the ethics committee. And it tells you — I called it a Christmas gift. And she can’t — if she releases any of it, she has violated the rules of the House. But it also, just a reminder, that committee was extraordinarily partisan. The job of the Democrats was to get Newt Gingrich. They couldn’t beat any of our ideas, so they decided to try to beat the messenger. And I think it actually will help people understand what happened in that period and how much of it was partisan.
KUDLOW: She — all right. Granted. But she’s saying that she’s not going to give unpublished information. She’s going to help people cull through the public information. Is there anything in there that you can imagine that’s going to pop out?
GINGRICH: We turned over a million pages of material. We cooperated in every way. They published a report. One of the things that made her mad was I said, at one point in a planning session — this was in the documentary turnover — that, you know, Bill Clinton might well decide to sell out the Left and sign welfare reform, and if he did there’s nothing we can do about it.
KUDLOW: She didn’t like that.
GINGRICH: Well, she said, “Why would you say that?” I said, “Now, don’t be mad at me. It’s Clinton who sold you out, not me.”
KUDLOW: But didn’t you help cut that deal?
GINGRICH: Of course I did, because it got us welfare reform.
KUDLOW: All right. Let me go on. Final point. And I appreciate your being here. Mitt Romney. Romney says you don’t understand the economy and you can’t recover it and grow it because you spent your entire life in professional politics. What’s your answer to Mr. Romney?
GINGRICH: You are the worst possible questioner.
KUDLOW: The worst.
GINGRICH: You and I worked together with …
KUDLOW: I …
GINGRICH: … with Richard Rahn, Jude Wanniski …
KUDLOW: I understand. But I’m doing my job.
GINGRICH: … Art Laffer. I’m just saying.
KUDLOW: I’m doing my job.
GINGRICH: But you’re a witness to this. I was part of Kemp’s little cabal of supply-siders who, I think, largely by helping convince Reagan and then working with Reagan, profoundly changed the entire trajectory of the American economy in the 1980s. You can make an argument that I helped Mitt Romney get to be rich because I helped pass the legislations that …
KUDLOW: Not a bad argument. Have you ever made that argument to him?
GINGRICH: I am as of right this minute. Just occurred to me.
KUDLOW: You — you’re the incentive models, the lower tax rates, the smaller government, and the welfare reform …
GINGRICH: That’s right.
KUDLOW: … helped make him rich from Bain Capital.
GINGRICH: He should be thanking me. He should be thanking me because I did the macroeconomic things necessary to make his career possible.
KUDLOW: Yeah. Well, I’m going to get a response on that.
GINGRICH: I bet you will.
KUDLOW: I want to ask you — regarding Bain Capital, this is a tough time. I mean, the country has turned against Wall Street.
GINGRICH: Yeah.
KUDLOW: Against the Wall Street bailouts. Because Mr. Romney was successful — and I say God bless him he was successful — can he win as a financial guy, as a Wall Street guy?
GINGRICH: Sure.
KUDLOW: Is that a big issue for him?
GINGRICH: Sure. Can he win against Obama?
KUDLOW: Can he win against you in the Republican primaries?
GINGRICH: No. But that’s — I hope not.
KUDLOW: Why …
GINGRICH: I can’t — I can’t sit here and offer advice on how he could beat me.
GINGRICH: Look, I think Mitt Romney’s a very smart man. I think — I think that he — any Republican could be proud to have him as their nominee, and I think he’d be very formidable against Obama. I happen to think I would be a better candidate than Mitt, but that’s, I mean, we are, after all, competing here. But I’m not going to say anything negative about him. I think he’s a terrific person. And, candidly, we, all of us who believe in free enterprise, have to be committed to explaining to people that the process of improving the economy, the process of becoming more competitive, the process of being more effective in the world market, is best done in the private sector by people who, literally, in the tradition of Adam Smith, while following their own interest, create a dramatically better general interest. And we can’t allow socialist and left-wing radicals to browbeat us and seize the moral high ground. Because they represent the future of poverty and impoverishment, and destruction and food stamps, and that isn’t a good enough future for any American.
KUDLOW: And economic freedom is a moral issue.
GINGRICH: It is a moral issue, and it’s at the heart of freedom. If you don’t — the Founding Fathers almost wrote in “the right to property” instead of “the pursuit of happiness.”
KUDLOW: That’s right. That’s what it was. Thank you. Newt Gingrich …
GINGRICH: Good to be with you.
KUDLOW: … former speaker of the House, Republican frontrunner. We appreciate you’re here …
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