INTERVIEW TRANSCRIPT

C-SPAN’S “NEWSMAKERS”

Guest: Congressman Paul Ryan (R-WI), Ranking Member, House Budget Committee

Reporters: Jackie Kucinich, The Hill and Craig Gilbert, Milwaukee Journal Sentinel

Moderator: C-SPAN

TAPE DATE: Wednesday, October 10, 2007

AIR DATE/TIME: SUNDAY, October 14, 2007 at 10 a.m. and 6 p.m. ET

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PETER SLEN, HOST: Congressman Paul Ryan is the top republican on the House Budget Committee. He also serves on the Ways and Means Committee. And he is our guest this week on Newsmakers to talk about economic issues confronting the country along with budget issues and the alternative minimum tax.

Here to question him, Jackie Kucinich of The Hill newspaper, and Craig Gilbert of the Milwaukee Journal Sentinel.

Congressman, if I could ask the first question, your fellow Wisconsinite, David Obey, Chairman of the Appropriations Committee, has proposed a war tax. First of all, what do you think about that? And what do you think about the pay-as-you-go philosophy in general?

PAUL RYAN, REPUBLICAN CONGRESSMAN, WISCONSIN: Well, I don’t support the war tax. I think that’s a very wrong-headed thing to do, especially given the fact that we have some economic uncertainties in the horizon. So that’s question number one.

Question number two, the pay-as-you-go philosophy I think is a good philosophy so long as it’s not designed to raise taxes. The problem with the current PAYGO system right now is, number one, it only applies to two-thirds of the budget, not the discretionary budget which is what Chairman Obey’s in charge of.

Number three, if you take a look at the way the PAYGO’s been working this year, it either is a budget gimmick or it is a tax increase. Seventy-two percent of all the democrat’s bills that they’ve been passing this year were complied with PAYGO through either huge budget gimmicks, a $41 billion budget gimmick in the SCHIP bill or giant tax increases.

So I think PAYGO ought to be on spending. If you want a new program you have to reduce spending somewhere else to pay for a new program because if you don’t do it that way, it basically occurs what’s happening right now, either big budget gimmicks or more tax increases. And I don’t think tax increases are good for the American taxpayer or for the American economy.

SLEN: President Bush has requested $145 billion supplemental to pay for the war. How do you fund it?

RYAN: Well, we budgeted for the supplemental in this last budget. When the White House sent their budget to us, they put the supplemental in the budget. Now, they’ve asked for – I think they’re about to ask for about $42 billion more on top of that budget.

So number one, I think it’s important that we budget for the war and that we budget for these supplementals. That is something the White House didn’t do until this year. So they’ve made improvements lately, but I think they’ve been budgeting incorrectly for the war in the prior, you know, four years.

Going forward I think it’s very important to recognize that some of these are unpredictable. We didn’t know that the new kind of IED would be so lethal against our former armored Humvees. That’s why we now have these MRAP vehicles.

That’s $5.9 billion right there to get the kind of body armor and the kind of vehicles for our troops to protect themselves against the newest generation of IEDs. So some of these expenses are unforeseen. That’s what wars are about. That’s why you have supplementals.

But to the extent that we can predict how much money we’re going to spend in Iraq next year, we should budget for every one of those dollars.

JACKIE KUCINICH, STAFF WRITER, THE HILL: At what point do fiscal conservatives, though, say enough is enough when it comes to the war? At what point – and I know there’s the whole adage of supporting troops. But at what point is enough enough?

RYAN: What bothers me is when they – when the Pentagon puts base funding into the supplemental. When they put things that are ordinary, the Pentagon spending that they would have paid for anyway in their regular budget in these supplementals, that is just another way of getting around the budget limits we have on DOD.

So that is an area where conservatives like me have been talking to the DOD and the Pentagon saying, stop doing that. Don’t put, you know, B-2 Stealth bombers or a new joint strike fighter in a war supplemental that has nothing to do with the war. Fund that out of the regular part of the Pentagon budget.

And so in some areas they have not been budgeting with good fiscal discipline. At the end of the day, though, Jackie, you have to recognize this is a war. Some of these expenses are unpredictable, and that is why you have emergency supplementals.

But again, back to my original point, to the extent that you can predict these things, we should budget for that. And until just this year the administration hasn’t been doing that.

CRAIG GILBERT, WASHINGTON BUREAU CHIEF, MILWAUKEE JOURNAL SENTINEL: So you – I mean, even though you opposed the war surtax, you would agree with Congressman Obey’s – the point he was trying – the political point he was trying to make which is that we’re asking people to support a policy without really being up front about the cost of that policy.

RYAN: Well, again, it’s not possible to know exactly up front what the cost is going to be because conditions on the ground determine those factors. We didn’t know about IEDs that are made by EFPs. You know, we don’t know whether the surge was going to work or wasn’t going to work and therefore what the costs are.

So with things like wars, there is definitely amount of unpredictability. If you raise a new tax for something like that, you know, that – taxes become permanent. Tax increases are fixed into the system. And they encourage more spending.

GILBERT: Let me put it another way. I mean, do you agree with his – the political point he was trying to make which is that we’re – we’re not asking people to share the sacrifice associated with this war?

RYAN: We – our deficit is the lowest as a percentage of GDP in about 20 years. The deficit just went down 35 percent this year from the last estimate. So we’re making progress in the deficit.

We are still spending too much money. So where I would agree with Dave Obey is we need to budget for this war. And in too many cases we haven’t been budgeting for this war.

But simply raising taxes, all that will end up doing is in addition to this war spending we’ll have more domestic spending. So I really think the practical result of the war surtax (ph) idea is just to have more spending overall, more domestic spending overall. And that’s one way of getting around these PAYGO limits because the majority’s budget has 29 reserve funds to spend $190 billion.

So they’re looking for $190 billion of additional tax revenue to spend on things that have nothing to do with the war. I think the war surtax (ph), based on the way the rules work, would free up that money to be spent on other things and then you’ll just have a larger level of spending and taxing.

I think that’s the problem. That’s why I think we need to keep a focus on keeping our taxes lower.

The reason I focus on tax rates is because I think our economy is headed for some possible problems. And to the extent that we have so much uncertainty in our tax code, that’s fueling those problems.

We also have to keep an eye on the fact that we are now competing with the likes of China and India, and we have to be more internationally competitive. And when we tax our businesses, our capital, our corporations, at the second highest tax rates in the industrialized world, it is inhibiting our competitiveness.

So I’m very much worried that we are pushing jobs and businesses overseas, and we have to be more competitive on our tax system so we can attract growth and jobs and keep business and growth here at home.

And to the extent we just keep raising taxes to pay for ever higher spending, that hurts our ability to be internationally competitive. It hurts our ability to win in this era of globalization.

GILBERT: You’ve now got a proposal to eliminate the alternative minimum tax which is sort of a ticking time bomb in the tax code that obviously lawmakers are wrestling with, it’s hitting more and more taxpayers.

Again, you’re not – you’re not proposing an offset…

RYAN: That’s right.

GILBERT: …to the, what is it, $840 billion…

RYAN: Yes. Over 10 years.

GILBERT: …it would be, quote, lost as a result of abolishing the alternative minimum tax. So again, potential $850 billion hole in the budget.

RYAN: That’s right. So – but here’s the entire point of this exercise. We want to challenge the conventional wisdom in Washington which is shared by republicans and democrats that this is right that all this money comes into the government.

Let’s remember, the AMT is a mistake. It’s an illegitimate tax which was originally designed to tax about 155 wealthy taxpayers who were dodging taxes in 1969. Now at the end of this decade it’s going to consume about 25 million middle-income taxpayers.

So if you were to ask a republican or a democrat they will tell you they don’t think it’s a good tax. They think it’s a wrong tax.

But here is the problem in Washington right now. Most Washington thinkers believe that we have to have this money coming into the government. We just have to find another way of raising that tax.

I dispel that notion. I really think we need to focus on keeping our tax rates and our tax levels where they are today instead of going up as high as they’re being proposed under the alternative minimum tax.

Historically for about the last 40 years, the federal government has taxed the U.S. economy about 18.5 percent, meaning about 18.5 percent of GDP has been what we’ve raised for the federal government for taxes.

The AMT is moving us up in the mid 20s throughout this century. Next decade it takes us to 21 percent of GDP. And I believe that will hurt our international competitiveness. I think it will hurt jobs. It will take more money from hardworking American families.

And so I think that we should put the taxpayer first, not the government. And we should simply say no to this huge tax increase on American workers. And that’s why we should not get – we should get rid of it. If we say, “Let’s wait for these spending cuts to materialize, then we will lower this tax,” that will never come. But if we say, “We’re not going to raise these taxes and let’s focus on spending,” I think that’s the way to approach this issue.

KUCINICH: Could we turn to the budget and the appropriations bills really quickly here. Republicans and the president are waging – digging their – putting their – digging their heels into the sand over $20 billion, which is one percent of…

RYAN: Yes, about one percent…

KUCINICH: …about one percent of discretionary spending. Is this a lot of wasted time and energy? Because couldn’t you be spending this on reforming the entire – entitlement reform, which is a large issue of yours that you talk about a lot? And would that energy be better spent elsewhere?

RYAN: Actually I agree. If entitlement reform is what it is, we should – we don’t spend near enough time in Washington in Congress talking about reforming our entitlement programs, recognizing the fact that we’re not ready for the baby boomers.

But there is an important point here. It is $22 billion out of a budget floor of $933 billion. So in the whole scheme of things, you’re right, it’s about one percent. But the problem is when you put all that extra money into the baseline and you carry that out over the years, that’s a lot of money. And so it throws us off of our trajectory to balance the budget.

So $22 billion today carried out through five, 10 years means we miss actually balancing the budget. And so that is why all these spending increases right now, bringing up domestic discretionary spending at the levels that the majority is talking about is harmful because of those two things.

It puts us on a collision course with higher taxes, it makes it more difficult to make the tax cuts permanent, which is what we want to do at the end of the decade, and it throws us off balance budget. So that is why we think it’s very serious that we shouldn’t just say, “Sky’s the limit on spending.” We need to control spending.

And the problem is that the baseline that the president gave us is already an increase in spending. So we’re not even talking about really cutting spending here. So to me we need to do more to focus on controlling spending, all spending. But discretionary spending especially because that’s the kind of spending Congress can control on a year-by-year basis.

GILBERT: Congressman, as some people may know we’re getting deeper into the 2008 presidential campaign. Are you hearing the kind of candid, honest, and detailed talk that you’d like to hear from these candidates about the budget, about entitlement, about taxes?

RYAN: No.

GILBERT: What are you hearing?

RYAN: I think it’s kind of in the vague platitude stage of the campaign. I haven’t selected a person to support myself. Not that that matters to many people but I’m waiting to see who is going to be our nominee, who among our potential nominees are going to have a very crystal clear vision for where they want to take this country and if they’ve had enough – if they’ve really put together thoughts and ideas.

The problem I see with politics today at the national level, both on the democrat and republican sides, is that no one has proposed solutions that rise to the level of the challenges that are confronting us today.

We have three enormous challenges: Islamic totalitarianism, globalization, and this pending entitlement bankruptcy with the baby boomers beginning to retire next year. And not one of these candidates is getting beyond a two-sentence answer to any of these problems.

I really think the next leader of our country should be somebody who has a specific vision and a plan on how to address those challenges. And none of our candidates are doing that right now.

SLEN: Senator Hillary Clinton just said that social security is not in crisis. Do you agree?

RYAN: Her husband disagrees with that statement. Bill Clinton speaking to Georgetown University in the last year of his presidency gave a well known speech that we all referred to where he said social security is in crisis.

That was about nine years ago. So I think just speaking with the fact that Bill Clinton when he was in office said social security needed an overhaul.

Here is the problem with social security. We are increasing the consumers of this program over the next generation by 100 percent, but we’re only increasing the payers into the program by 17 percent. And social security goes – starts going insolvent in 10 years.

And if we do nothing now, and every year we delay fixing social security, we add another $600 billion to the debt that we’ll have to pay for to fix the problem. So every year we buy into this notion that there’s nothing wrong with it, that it doesn’t need any fixing, is another year where we go deeper into the hole where the options of fixing the program are that much uglier.

So I’m a believer that we need to address these problems now. And the sooner we act to address our entitlement problems, the better off everyone else will be, the more predictability people will have in organizing their retirement, and the nice – the better the options will be on reforming the program.

GILBERT: Did you conclude from the president’s failed initiative on social security when the republicans controlled Congress that there’s no real bipartisan foundation for a solution here?

RYAN: I think that’s a legitimate conclusion to make. I don’t want to believe that that’s the case. I will always labor to make this a bipartisan issue. I talked to a number of my friends in the democratic side of the aisle to try and come together on finding ways to fix social security.

Medicare and Medicaid are also the other two entitlements that we have big financial problems with. But unfortunately politics has gotten the best of this issue. And because of politics, people aren’t touching social security, Medicare, and Medicaid reform. And we’re going that closer to bankruptcy every year we delay.

And so to me that – as the ranking on the budget committee and seeing this huge fiscal challenge in our country and everybody in Washington doing this to each other, we’ve got to get out of that stalemate. And I think some of us have to put some ideas and some plans out there just to kick start this debate to get going so that we can start talking about different plans and different ideas.

And I don’t think people should be able to criticize until they’ve put up their own solutions.

KUCINICH: Is there going to be an omnibus this year?

RYAN: Probably.

KUCINICH: Or is it going to be a “mini-bus?”

RYAN: I’m not a – that’s a good question. For those who don’t know the language, an omnibus is this one – all the appropriation bills in one big package, or a “mini-bus,” small bills. I think you’ll see probably a tax package that will be separate unto itself, perhaps a Medicare package for the doctor formula problem separate to itself, and then appropriations in its own package.

So if I had to read the tea leaves today, which kind of change every day, I’d probably say there are going to be probably two or three different large vehicles that will pass probably in December.

KUCINICH: Would you say though – if not, if not an omnibus, would you say democrats might load some of these other appropriations bills onto defense, something the president is not going to veto?

RYAN: I think that that’s what the showdown ultimately comes down to. I think given the president has requirements and requests in the area of defense that are near and dear to him and his administration, democrats have large increases in domestic spending programs that are near and dear to them, I think you’ll be seeing some talk of a trade off.

Where that washes out in the balance, it’s anybody’s guess.

GILBERT: Shifting back to the tax side again, how do you see this debate over the alternative minimum tax affecting the future of the Bush tax cuts?

RYAN: That’s why we did what we did today. We are worried that this notion that the alternative minimum tax does the right thing and that it raises all these taxes, it just does it the wrong way and we should figure out some other tax increase to come up with it. I just reject that notion.

We think people should be able to keep their money. This tax was a mistake in the first place and we should just get rid of it.

But I do believe all of these things combine to give us what I call sort of a tax tidal wave at the end of the decade. You’ve got all the tax cuts going away at the end of 2010, all the income tax rate cuts, child tax credit, marriage penalty relief, death tax, capital gains, dividends, all of those going up and then the AMT hitting about 25 million people at that time.

That is about a $4 trillion tax increase in this economy over 10 years at the end of the decade. And the reason I think there’s a lot of economic uncertainty out there, you’ve got the sub prime mortgage market problem, you have some early indications of inflation out there on the horizon. But you have huge tax uncertainty. And that is really putting a chilling effect on investment in America and on capital formation.

And both of these things, the AMT and the expiring tax cuts I think are giving this recipe that is hurting our ability to grow ourselves out of the low growth we’re going into. I think just the sub prime mortgage thing probably shaved off a whole percentage point off of GDP this year.

If we did something that made taxes permanent, if we gave certainty in the tax code, then investment income, small businesses, are not going to have these massive tax increases at the end of the decade. I think that’s one of the best things we could do to get better, strong economic growth in this country and have more stable investment horizons.

Unfortunately because of the AMT and the expiring (ph) divisions all kind of coming together at one time, that’s probably not going to happen, at least in this session of Congress.

So it really is the next president and the next Congress is really going to determine if we’re going to go from a moderate level of taxation in this country to an extremely high level of taxation, higher than any other industrialized country in the world. That’s the problem we have.

We are about to get into a position where we are taxing our businesses and our citizens and our workers more than any of our competitors around the world are. And that is how you lose globalization. And that’s my biggest concern about the next session of Congress.

SLEN: Jackie Kucinich, time for one more question.

KUCINICH: Is there going to be a compromise on SCHIP?

RYAN: I think there will be a compromise on SCHIP. Everyone wants to extend the current law. So this really isn’t about low income children getting health insurance who are uninsured. Nobody is against that. The question is do we go into all these new expansions?

I believe at the end of the day we will have an extension of current law and perhaps a bit of an enhancement on that. But this whole notion of getting people out of private insurance onto government-run healthcare, making this a new middle class entitlement, I don’t think any of that will happen.

SLEN: Congressman Ryan, what are the chances that you will be chairman of the budget committee after the ’08 elections? A lot of the commentators and analysts say that the republicans lost in ’06 because of their spending habits.

RYAN: I think that’s right. I think we committed the biggest sin and that’s hypocrisy. We ran as limited government republicans, fiscal conservatives, and that is not how republicans governed.

I fought that. I fought for earmark reforms, line item vetoes, lower spending caps. Nevertheless, republicans spent too much money. I think that’s one of the great reasons why we lost our majority.

It’s up to us to go back to the American people with new ideas and based upon on principles and give them a reason why to vote for republicans. If we don’t do that, I don’t think we’ll get back in the majority.

SLEN: Congressman Paul Ryan is the ranking member on the budget committee. He has been our guest on Newsmakers. We will be right back with our reporters.

(BREAK)

We are back with our reporters, Jackie Kucinich of The Hill and Craig Gilbert of the Milwaukee Journal Sentinel. Craig Gilbert, you’ve been covering Congressman Ryan for a while. What did you hear today? Is he consistent on his message?

GILBERT: Well, he’s a – I think he’s a very articulate spokesman for the kind of supply side, quote, “pro growth,” unquote, tax cutting wing at the party which is where a lot of the party is, not where everyone in the party is.

I think his proposal to eliminate the alternative minimum tax, which is unpopular across the board, but not offset it with any kind of new revenues elsewhere is a way of kind of laying down a marker into the debate.

I’m not sure it’s a realistic foundation for any kind of a bipartisan solution to this problem because democrats are going to want to – are not – are going to want to find offsetting revenue for that tax if it’s abolished, which many of them support.

SLEN: Where is the debate on the AMT going, Jackie Kucinich?

KUCINICH: Well it’s exactly as Craig said. Who knows if it’s going to go anywhere. It depends on if they get any democrats on this. It depends on who they speak to.

Rangel has his own bill coming up. They haven’t seen it yet.

So you don’t – it really depends on the democrats. And that’s been a lot of the problem in this Congress is you do have a lot of stalemates these days. So I’d hate to – I hate to say this but we’re going to have to wait and see where it goes.

It is unpopular. How do you fix that? It’s – that is a big question mark I think with a lot of issues going on in Congress right now.

GILBERT: And, you know, in the recent past they’ve been fixing it, quote, unquote, by these so-called temporary patches, by fiddling with these ceilings so that it takes the burden or takes the bite out of the expansion of the alternative minimum tax but it doesn’t really solve the problem on a permanent basis.

And so I think republicans, or some republicans, are sitting back and watching the democrats try to wrestle with this real dilemma. Some people have argued that the alternative minimum tax is a blue state tax because if you look around at the states that tend to get hit the most by this tax are states that in some cases have higher incomes but also have the state income tax deductions where they kick in, places like New Jersey and Connecticut, and that that creates a little bit less pressure on republicans to solve the problem.

Obviously you’ve got Congressman Ryan suggesting that the whole thing be abolished. But then you’ve got the budget dilemma of what to do about making up that revenue.

KUCINICH: And this makes blue dog democrats very uncomfortable, this – and they’re very uncomfortable within their party about taxes because they’re just the different guys. And a lot of the new freshman – which is redundant.

A lot of the freshman you are blue dog democrats. And they have to go back to their districts and explain these things, like why they’re not solving this kind of problem. And that’s going to be difficult for them. If the republicans do manage to make this an issue, that resonates in the districts.

SLEN: We spent a bit of time when we were talking with him about the war tax in Congressman Obey’s proposal and pay-as-you-go. Did – were you satisfied with his answers?

GILBERT: Not entirely. I mean, again, he’s – I think he’s suggesting that Congressman Obey has a little bit of a point when he’s saying that the war’s not being budgeted. The question is, you know, how are we going to make the numbers add up?

And Congressman Ryan and a lot of other republicans have kind of drawn a line in the sand on taxes. They don’t want to support any tax increases, so that leaves the sort of spending side of the debate. I mean, there’s – which is kind of his answer to that question. And his other answer is that, you know, wars are unpredictable and you can’t anticipate all the costs and so you can’t budget for all of them up front.

But I don’t think it – it’s a complete answer to the problem.

KUCINICH: This is another example of republicans not having an alternative to a democratic proposal. They can say, “Oh, it’s bad.” Well, how are we going to start funding this war? How – where is this money going to come from? And there’s no – there’s no answer. You just hear crickets.

And it’s – you’re going to see it on the AMT. You see it on SCHIP. You see it on this.

So really they don’t have a good answer to this or they don’t have an answer. Just saying wars are unpredictable, that’s fine. But they do have constituents to answer to at the end of the day. So…

GILBERT: I think he does – he does make a very compelling argument against the AMT and also against the notion that just because we have this tax that has all the out-year cost that’s going to get bigger every year that he’s sort of challenging the notion that that’s money that we – the government’s obligated to bring in.

In other words, if we cancel the AMT, we have to get it somewhere else. I mean, there’s obviously a budgetary pressure to get that money from somewhere else. But who’s to say that in perpetuity, you know, the cost, the projected cost of the AMT should be found by some tax somewhere under any circumstances.

SLEN: In a recent C-SPAN interview, Newt Gingrich called Paul Ryan an up and comer in the Congress. Craig Gilbert, what’s his reputation at home? Jackie Kucinich, what’s his reputation on the hill?

GILBERT: Well, he’s a very good politician. He’s had no trouble getting reelected. He actually represents a district that long ago was Les Aspin’s district, Les Aspin a democrat. It’s the part of Wisconsin that goes along the Illinois border.

And it was traditionally a swing district. It’s been redistricted a little bit to make it a little bit more republican. So it’s not a 50/50 district anymore. But even before it became more republican, he was very comfortable in that district. I think because of his political skills and because of his communication skills he doesn’t come across to people in the district who may not agree with his politics as being a kind of divisive figure.

And so I think that explains in part, you know, his reputation as a political up and comer.

KUCINICH: He’s very popular. In the conference he’s very popular and the Congress. He is friends with members like Sensenbrenner that don’t really – they’re not the most gregarious members you’ll ever come across as a reporter or as a member.

He’s – he was friends with Bill Thomas. He – and yet he still – with his peers in the Congress he’s very popular. He’s – I’ve heard him – people say that he’s going to be the next chairman of ways and means. I’ve heard people say he could be speaker.

He has been pressured in the district to run for governor. He’s an extremely up and comer is absolutely the way everyone describes Paul Ryan, because he’s so young, because he’s so sharp. I mean, that’s – you hear it over and over and over again, whether you’re talking to a member who just got there or someone who’s been there for 10 terms. So you hear it across the board about Paul Ryan.

SLEN: And what kind of power does he have as the ranking republican being in the minority?

KUCINICH: Well, that’s the thing is he’s the ranking republican in the minority. It depends on how many democrats you can get to agree with him. That’s the problem in the minority. Their job is to – they don’t make policy anymore.

GILBERT: He’s got a little bit of a platform.

KUCINICH: Yes.

GILBERT: And he is a – I mean, one thing – some members are good at political stuff and some members are good at the policy stuff. He’s a good politician and he’s also a real policy wonk as he would, I think, admit to.

And so he’s someone – he’s in a position to use that platform to both kind of represent the party politically and his wing of the party politically but also, you know, in terms of the policy message.

SLEN: Craig Gilbert is with the Milwaukee Journal Sentinel. Jackie Kucinich is with The Hill. Thank you for being on Newsmakers.

KUCINICH: Thank you.

GILBERT: A pleasure.

END