Republican presidential frontrunner Mitt Romney was in Wisconsin on Friday, campaigning with Rep. Paul Ryan ahead of that state’s GOP primary next week. After the former Massachusetts governor and venture capitalist gave a feisty afternoon speech at Lawrence University in Appleton, he gave me a call as I rode the Amtrak Acela to New York to appear on CNBC’s The Kudlow Report. (I am an official CNBC Contributor.)
I asked Romney if he was planning on doing any bowhunting with Ryan, an avid bowhunter. Romney said he wasn’t, but that Ryan had promised him some venison from his freezer. Anyway, here are some excerpts from the economic policy portion of our chat where Romney talks about corporate taxes, Medicare reform, Obamacare, breaking up big banks, and the possibility of a mass refinancing plan for U.S. homeowners:
JAMES PETHOKOUKIS: We’re having a recovery, but it’s a subpar recovery. Democrats say that’s because we’ve had a financial crisis and housing crisis, so maybe we should cut the president some slack. Sure the economy’s been weak, but there’s all these extenuating circumstances. What’s your response to that?
GOV. MITT ROMNEY: My response is that virtually every action the president has taken has made it more difficult for the recovery to occur. He had launched an all-out attack on small business … Dodd Frank caused community banks to retreat. Cap and trade frightened businesses that are energy intensive. Obamacare concerned any business that has a lot of employees or is thinking about hiring more. The Boeing decision in South Carolina and stacking the [National Labor Relations Board] frightened anyone thinking about hiring more workers. … So his policies have been anti-business and business is where jobs are created. So he can hardly excuse a failed economic policy by virtue of the difficult economy he inherited.
PETHOKOUKIS: As of April 1, the United States will have the highest statutory corporate tax rate of any advanced economy. You want to cut that corporate tax rate. How would that help workers?
ROMNEY: If our corporate taxes are made competitive with other countries, we create less of an incentive for business to move elsewhere. Lower taxes mean more jobs here, and more jobs here mean higher wages as companies are competing for the most skilled workers. The same is true with the individual marginal tax rate. Fifty-four percent of American private-sector workers work for companies that are taxed at the individual rate. … When you raise the marginal tax rate, as the president has proposed, you make it harder for small business to hire people. One of his worst tax moves is the excise tax in Obamacare. It taxes revenue as opposed to profit. This makes it harder for start-up medical businesses to grow in America, and as a result, they’ll start up elsewhere.
PETHOKOUKIS: If the U.S. debt situation is really so dangerous and perilous, why not move up your Medicare reform plan? Why not advance it and apply it at some point in your first term to seniors currently receiving Medicare? Why wait?
ROMNEY: We’ve made commitments to retirees and near retirees on which they rely, and I think we have an obligation to follow through on those commitments. In addition, the other reductions in government spending, which I’ve, proposed will enable us to reach a balance budget and secure the confidence of lenders that we will repay our obligations and there is no need for higher interest rates. … to meet our obligations and bring financial stability to our economy without having to renege on promises made to seniors. For me, neither Social Security nor Medicare are subject to the kind of cuts that President Obama put through. He’s the first president in history to cut Medicare by $500 billion and … to end Medicare as we know it
PETHOKOUKIS: Under your plan, what would the U.S. debt-to-GDP ratio be at the end of two Romney Presidential terms?
ROMNEY: Jim, I’m going to have to get Lanhee Chen, my policy director, to get you that precise number. What I’m focused on is to get to a balanced budget by the end of my second term … But as the public debt as a percentage of GDP, that number is not in my head, but I can sure get it for you.
PETHOKOUKIS: If Obamacare gets thrown out, we could have clear field for healthcare reform in 2013. Do you have favor limiting or phasing out the tax exclusion for employer-provided healthcare, which analysts say contributes to the third-party payment problem which drives up healthcare costs?
ROMNEY: My tax plan is lowering the marginal rates across the board by 20%. And I indicated that I would also limit deductions and exclusions, particularly for those at the higher-income levels. My principle is that high-income individuals will pay the same share of the government’s revenue that they pay today. So contrary to Vice President Biden and President Obama, I am not cutting taxes for the rich. I am maintaining the progressivity in the code.
PETHOKOUKIS: How will you make up the lost revenue from your tax cut? Any idea how much will come from faster economic growth and how much from trimming tax breaks?
ROMNEY: The majority comes from trimming tax breaks, the minority comes from higher economic growth. But as you know, the power of the compounding growth rate in the out years becomes a source of great economic stability.
PETHOKOUKIS: Richard Fisher, head of the Dallas Fed, recently called for the breakup of large banks. Should we break up the big banks to ensure financial stability in the future and avoid another “too big to fail” problem?
ROMNEY: I’m not looking to break apart financial institutions. I think what caused the last collapse was a convergence, almost akin to a perfect storm, of many elements in our economy and regulatory structure. … And if we have in place modern regulation and regulators who are keeping their eye on the ball, there’s no reason to think we will go into another crisis of the kind we just endured as a result of the mortgage meltdown.
PETHOKOUKIS: Speaking of housing, Glenn Hubbard has a plan to use [Fannie Mae and Freddie Mac] for a mass refinancing of GSE mortgages. Do you think there is any merit in that idea?
ROMNEY: I am studying that. As you know, Glenn is an adviser of mine, and there are some elements, which I am forced to consider when I study a program like that. One is not to encourage moral hazard where we encourage people to believe they’re going to get bailed out. And secondly, not to break the contract which had existed with any party to the mortgage document. It would be inappropriate to throw a huge loss to some party which had relied upon the existing practices of the marketplace. That being said, I am always interested in new ideas and will give it a careful review but no conclusion at this stage.
PETHOKOUKIS: Do you think the Supreme Court is going to throw out the individual mandate and strike down Obamacare?
ROMNEY: Well, I think they should, and I am pleased that for the first time in my memory the limits of the Commerce Clause are being discussed in the Supreme Court chamber.
James Pethokoukis is a columnist and blogger at the American Enterprise Institute. Previously, he was the Washington columnist for Reuters Breakingviews, the opinion and commentary wing of Thomson Reuters.
Pethokoukis was the business editor and economics columnist for U.S. News & World Report from 1997 to 2008. He has written for many publications, including The New York Times, The Weekly Standard, Commentary, National Review, The Washington Examiner, USA Today and Investor’s Business Daily.
Pethokoukis is an official CNBC contributor. In addition, he has appeared numerous times on MSNBC, Fox News Channel, Fox Business Network, The McLaughlin Group, CNN and Nightly Business Report on PBS. A graduate of Northwestern University and the Medill School of Journalism, Pethokoukis is a 2002 Jeopardy! Champion.
Pethokoukis can be reached [email protected] or follow him on Twitter @JimPethokoukis