Former Massachusetts governor Mitt Romney joined me in Las Vegas yesterday to discuss his new jobs and economic plan. He also shared some thoughts on his new Republican rival, Texas governor Rick Perry.
The video and full transcript follow below.
KUDLOW: North Las Vegas, an international truck dealership, we welcome Gov. Mitt Romney back to the show. Thank you very much.
Governor, zero jobs in August; but actually we haven’t created a net new jobin 10 years in this country. We may be on the front end of another recession. The stock market is plunging. OK. How can you fix that if you were elected president? What’s in your new plan?
ROMNEY: Well, you have to recognize that the world has changed, the economy has changed. We’re still following the old policy, the old strategy. It’s not working anymore. I joked that President Obama is following a pay phone strategy, we’re in a smartphone world. And so what we have to do is recognize that our companies are competing globally. We got to bring our employer tax rates down to be competitive. Bureaucracy regulation and government…
KUDLOW: Corporate. Corporate tax rates?
ROMNEY: Corporate tax rates. Bureaucracy regulation has to be modernized, streamlined. Government has to see itself as an ally of enterprise, not an opponent. We got to open up trade for American goods. The last two and half years, the president sat on his hands with regards to trade. We got to get markets open to American products, push them into those products. We got to clamp down on nations like China that are cheating, stealing our intellectual property. We got to get serious about energy. Look, we’re an energy rich nation. We’re acting like an energy poor nation. Let’s use the energy that we have. The list goes on.
I’ve got 40–excuse me, 59 items that we have to address to get America’s economy structured for the new economy, and that’s going to put Americans back to work.
KUDLOW: All right. A lot of meat on the bones, a lot of topics. Before I can throw–toss is back to Bill Griffith, my colleague, let me just ask you, on the campaign trail you took some flack for saying that corporations are people, but you are sticking to your guns. Can you tell us, we’re the business and financial station, why are corporations people? What are you thinking?
ROMNEY: Well, I hope people understand that when you tax corporations that the concrete and the steel and the plastic don’t pay. People pay. And so when you tax corporations, either the employees are going to pay or the shareholders are going to pay, or the customers are going to pay. And so corporations are people. This old 1960s “We don’t like companies” shtick isn’t working anymore for President Obama. That’s just not the right course. We recognize we want small businesses, middle businesses, even big ones to grow and thrive and hire people. We like business. We’re not anti-business, we’re pro-business in this country.
KUDLOW: All right. Let me go and toss it over to my friend and colleague Bill Griffith up in Englewood Cliffs. Go ahead, Bill.
Larry, thank you.
Governor Romney, we welcome you here. Let me ask you a more market oriented question, if I may. Right now Wall Street is focused sole–to a great degree on what’s going on in Europe as they wrangle with their debt crisis, and they’re doing a lot of soul searching over there on how to restructure the Eurozone to solve that crisis. One extreme is to create what the New York Times labeled the United States of Europe, a central authority. On the other end it would be just to disband the Eurozone altogether. In your view, what would be in the best interest of the US economy and our banking interests here and there for Europe to do? Should there be the central authority or should they disband the Eurozone, or is there something in between?
ROMNEY: Well, I got to be honest with you, it is tough enough to figure out what we have to do for America to continue to lead the world and to put our people back to work and to help the middle class, and so I’m not going to weigh in on what I think Europe has to do. But clearly, their problems are not just temporary, their problems are structural. You have nations that are cobbled together with one monetary policy, despite having very different fiscal policies, and that simply can’t go on on an indefinite basis. And either those nations on the periphery are going to have to adopt fiscal policies that are consistent with those of nations like France or Germany, or myou’re going to see continued stress in the euro. My own view is they have to recognize that, show the world that they do recognize that, that they’ve taken structural change. And on that basis, you’ll get investors to once again have some confidence in the future of the–of the European currency markets.
KUDLOW: All right, let me just pick up. I want to come back to the corporate. You’re going to drop the corporate rate to 25 percent, is that correct?
ROMNEY: That’s correct.
KUDLOW: And what will you do about taxing overseas profits of US companies? A lot of people think repatriation would give the whole economy a shot in the arm.
ROMNEY: Yeah. I’ve been talking about that for a long, long time. As you know, it makes absolutely no sense to say to a company, `If you’ve got money overseas and you keep it there and invest it there, you won’t pay US tax. But if you bring your money home and invest here and create jobs here, we’re going to tax you.’ It doesn’t–that just doesn’t make any sense at all. We got to go to a territorial tax system which says, `Look, you’re going to pay taxes in the territories where you’re competing. We want you to bring money home without having a repatriation tax.’ Let’s get the trillion dollars or so some estimate is parked outside the country back home, creating jobs here. My Democrats friends say, `Well, some companies will just send it out as dividends.’ It’s like, `Yeah.’ And that’ll go to shareholders, and it will go to pension funds and retirees.
KUDLOW: Just terrible things.
ROMNEY: It’s not all bad.
KUDLOW: That would be a terrible thing.
ROMNEY: And they’ll–and they’ll buy stuff. That’s a heck of a lot better than having the government take money from one person and give it to another…
KUDLOW: And it’ll pay for itself.
ROMNEY: Take the–yeah, it’ll pay for itself.
KUDLOW: Yeah. And then some. It’ll pay for itself.
ROMNEY: It’ll do more than pay for itself.
KUDLOW: But I was surprised in your documents that you’re not going for fundamental tax reform for the individual personal tax code. Explain to me. As I understand it, you want to keep the Bush tax cuts in place.
ROMNEY: Yeah. Yeah.
KUDLOW: But you don’t want, for example, Governor Huntsman, your friend and colleague and so forth, he wants to go, what, eight, 14 and 23, and he wants to eliminate most of the deductions. Why did you stay away from fundamental personal tax reform?
ROMNEY: Well, I lay out in our plan that I do want to see down the road a restructuring of our tax system with a broader base and lower rates. But my plan is about getting Americans back to work right away. And the place I’ve targeted is on middle income Americans. The people who have been most hurt by the Obama economy are middle income Americans, and so I say to anybody who’s making under $200,000 a year, we’re going to eliminate all taxation on interest dividends and capital gains for you so that you can save, so that you can invest, so you have more money, so you’re able to care for your kids and their future and your retirement as you think is best. That, for me, is the place we need to move immediately.
KUDLOW: All right, I’m going to sign off here. We’re going to continue with Governor Mitt Romney in a second. I’m going to just toss it back to Bill Griffith on “Closing Bell.” Thank you, Bill.
GRIFFITH: You bet, Larry. Thank you.
And, Governor Romney, thank you for being with us here. And don’t forget, you can see the rest of Larry’s interview with the governor tonight at 7 PM Eastern time right here on CNBC on “The Kudlow Report.”
KUDLOW: All right. Let me continue with you on this issue. Now you’re going to eliminate–I’m sorry–you’re going to abolish capital gains and dividends…
KUDLOW: …for singles earning $200,000 a year, is that correct?
ROMNEY: Or less, that’s correct.
KUDLOW: All right. Now about the top people? Why are you not including them? And I raise this because you’ve got some people who have who have been ankle biting you on this question. They said years ago, in the middle 1990s, you argued that the flat tax–Steve Forbes’ flat tax was a fat cats tax, and George Will rhetorically in a column asked, `What does Governor Romney think? What constitutes a rich person? What constitutes a fat cat? What’s the dividing line?’ Tell us why you made it 200,000.
ROMNEY: You know, there’s nothing magic about a particular dividing line. You pick a point where you’re getting the great majority of Americans. Look, there are many people who think we should have zero tax on capital gains, interest and dividends for everybody, as–the very, very wealthy. But recognize that means that Bill Gates and Warren Buffett would pay no income tax at all. And some people say, `Well, that’s a good thing for growth of the economy.’
KUDLOW: But you’re referring to the capital gains tax?
ROMNEY: And I–yes, exactly.
KUDLOW: And the dividend tax, those are different.
ROMNEY: No. If we eliminated capital gains, all tax for the–for everybody, even those making millions a year on interest dividends and capital gains, then Bill Gates and Warren Buffett would pay no tax at all because their income is overwhelmingly if not entirely capital gains interest and dividends. And so the very, very wealthiest would pay no tax at all. My guess is that the American people would feel that, you know, right now the people that are hurting in this country are not the very wealthy but the middle income folks. And so the place I want to focus my effort and my break and also encourage more investment savings is for middle income Americans.
KUDLOW: So you agree with Buffett then, there should be higher taxes on the upper income people.
ROMNEY: Well, listen, I believe in keeping…
KUDLOW: But would you also tax wealth?
ROMNEY: I believe, Larry, I believe…
KUDLOW: Would you tax wealth?
ROMNEY: Well, of course not. We have right now a 15 percent tax on capital gains. That’s the rate that I would keep in place for now. And what I would say is we would remove the tax for people in middle incomes. Their tax would go to zero. The tax for higher income folks would stay the same.
KUDLOW: All right. Let me move on. You talked about trade and you sort of have a two-edged sword going here in your package. You want free trade deals but you’re very tough on China, in fact, uncharacteristically tough on China. Piracy, counterfeiting, I get that. How can China be brought into the WTO or play by–at an all-out…(unintelligible).
ROMNEY: Well, the people are going to always threaten that if they don’t get their way, they’re going to do something that’s hurtful. And sometimes people get frightened and say, `Oh, I better give them what they want.’ But, you know, we’ve been doing that for a long time and China continues to steal our intellectual property. They hack into our computer systems. They manipulate their currency such that their products have a substantial disin–excuse me, substantial advantage relative to our products in the world. They buy far more–excuse me, we buy far more of their products than they buy from us. Their government doesn’t buy anywhere near the products from America they should be buying.
KUDLOW: How can we force them?
ROMNEY: And so, look, what you say is, `Hey, look, you signed agreements.’
KUDLOW: All right.
ROMNEY: `You’ve agreed to follow certain practices. If you don’t follow those practices, why, then, we’re going to take the corrective actions which are outlined.’
KUDLOW: What would the correction actions be?
ROMNEY: Well, you take a–when you negotiate, you let them know that you’re willing to take whatever action is necessary, and that would include, for instance, if they’ve stolen intellectual property on a particular series of goods that you’re going to put tariffs on their products if they don’t abide by the rules.
KUDLOW: So you agree with Don Trump. Essentially Donald Trump wants to put tariffs on their imports.
ROMNEY: You know, I’m not going to adopt the policies of someone else that I haven’t read. I can tell you that I agree with my policies that I describe in my book, which is to say that in places where people have taken advantage of us and have killed American jobs or are threatening to do so, that we’re not going to sit back and just say, `Oh, we got to do this because we owe them a lot of money.’ We’re going to say, `You know what? We don’t want a trade war, but we’re not going to endure a trade surrender.’
KUDLOW: All right. So tax cuts for corporations. Tax cuts for the middle class, keeping the Bush tax cuts in place, free trade but tough on China, deregulation. You have a big deregulation point.
KUDLOW: Let me ask you this, economics on the campaign trail, it’s getting pretty rough and tumble. Yesterday, once again, Governor Perry slammed you. He said Governor Mitt Romney did not create jobs in Massachusetts and he, Governor Perry, created jobs in Texas. What’s your response to Governor Perry?
ROMNEY: You know, I’m not responding to Governor Perry right here. He’s not here. I’ll probably get the chance to do that at some point. But I’ll talk about my record on that.
KUDLOW: But it must get under your skin?
ROMNEY: Why would I be worried about what other people say? I’ve been in politics now for long enough to not worry about what others are saying, but instead to talk about what I believe.
KUDLOW: Did you create jobs in Massachusetts?
ROMNEY: Well, of course I did. Of course I did. The unemployment rate went down as I was governor of Massachusetts. We were losing jobs every month when I came into the state. We turned that around and created jobs every month. And, you know, I’m proud of the fact that when I was governor, the three of the four years I was there, our unemployment rate was below the national average. You know, each state has some differences. I’m pulling out those differences and we’ll talk about the prospects we have for seeing the entire country have as its leader a person who has not just watched other people create jobs but someone who’s actually created jobs. In 25 years in business and at the Olympics, I created jobs.
KUDLOW: All right, that’s where I was going. OK. You give as good as good as you take. You have charged that Governor Perry is a career politician and that you have spent the bulk of your career in the private sector. Do you understand how the economy works better than Governor Perry?
ROMNEY: You know, I haven’t spoken about Governor Perry, but what I have said is that career politicians don’t know what it takes to get this economy going again, and, you know, evidence number one is what’s going on in Washington, DC. You’re seeing the president come out with more of these stimulus plans. Plan one, two, three, four and five didn’t work. He’s going to do another one that’s going to have the same output because they don’t understand what it takes to get businesses to invest in America and to hire people. I do. I’ve done that. I’ve competed around the world. If people want somebody-if they think the most characteristic of a president is someone who understands how the economy works and is expert in turning around enterprises, then I’m the guy. If there are other measures that they want to select upon, well, maybe I’m not the guy. That’s the choice that they’ll have to make.
KUDLOW: Well, just interesting on these choices. People are kind of freaked out by the debt limitation debate, and there’s a lot of economists who are actually saying that that whole debate, which came right up to the edge of a default and still really didn’t make a dent in our spending and our borrowing, damaged the economy. That what we’re seeing now in a potential double dip is in part caused by that. I want to ask you, is it possible for you and other Republicans to make any common ground at all with President Obama, who gives his jobs speech on Thursday night?
ROMNEY: Well, of course. We’ll see what he has to say in his jobs speech. But I’ve found in my interactions with people on the opposite side of the aisle that we can find ways for us to find common ground. There are a lot of Democrats who realize that spending is too much. But, Larry, you have to understand, back in the days of John F. Kennedy, government at all levels–federal, state and local–consumed about 27 percent of the economy. Today it consumes 37 percent of the economy. And Republicans like me are saying, `Look, that’s too much. We’re not going to keep growing the government.’
KUDLOW: Where would you target it?
ROMNEY: I’d get the federal government down to 20 percent. Right now it’s close to 25. Get it down to 20 percent. We’ve got to cap the amount that the federal government is spending. We can’t let government keep growing and growing because you’re seeing in Washington a class of people, permanent politicians, career politicians who have never worked in the private sector, never really built an enterprise, never signed the front of a payroll check, and they think they know what’s right for America. And they don’t. They need to go home and get a job.
KUDLOW: What about President Obama’s infrastructure bank proposal? He also talks about targeted tax credits. But I want to go into infrastructure bank. Is that the answer to an economy that hasn’t really grown in 10 years?
ROMNEY: Well, I’m afraid we do need to see better infrastructure in this country and we need to encourage the investment in airports, in new flight systems, in highways and bridges. Our bridges are in terrible disrepair. And there are a wide array of ideas about how to do that.
KUDLOW: Could you support a government project bank?
ROMNEY: Well, I…
KUDLOW: It sounds like Fannie Mae.
ROMNEY: I will–look, I don’t want the government getting into more and more enterprises like Fannie Mae and Freddie Mac. I’ll look at ways to see if we can’t get our highway system updated and get our bridges rebuilt. That’s something that we can do. And there–and there–what I want to make sure is that we have revenue streams to pay for it, not just more money coming out of the general fund. And guarantees. Look, this idea of the government guarantees, that that doesn’t cost anything, that’s wrong, as we’ve learned. Government guarantees are real cash and can end up hurting the taxpayers.
KUDLOW: All right, Governor Mitt Romney, we’re going to leave it there. Thank you for visiting us. It’s a warm day here in North Las Vegas, but it’s a great pleasure to have you back. All best on the campaign trail.
I’m Larry Kudlow, folks. We’ll be right back with The Kudlow Report in just a moment.