Gregg: U.S Needs To Find The Path To Fiscal Responsibility

Sen. Judd Gregg (R-NH), one of the leaders of the Senate banking committee, will retire in January.

Sen. Judd Gregg (R-NH) Cliff Owen/AP hide caption

itoggle caption Cliff Owen/AP

Sen. Judd Gregg heads back to New Hampshire in January after three terms. He's retiring just as his pet issue — the federal deficit — has become one of the hottest issues in Washington. As a member of the National Commission on Fiscal Responsibility and Reform, Gregg spent nine months studying fiscal policy and coming up with a plan to keep the country from going broke.

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STEVE INSKEEP, host:

The next Congress will face many decisions about the federal deficit. The U.S. has been spending over one trillion dollars per year more than it takes in.

RENEE MONTAGNE, host:

Last week, the co-chairman of a presidential commission offered some tough ideas to reduce the deficit over time. It's hoped that 14 of the bipartisan commission's 18 members will soon agree on some approach.

INSKEEP: The commission members include Republican Judd Gregg of New Hampshire, who is retiring from the Senate. Along with Democrat Kent Conrad, Senator Gregg originally proposed this panel. Now he's seeking to reduce the deficit gradually.

Senator JUDD GREGG (Republican, New Hampshire): It wasn't a five year exercise. It isn't a 10 year exercise. It's literally a exercise that will have to be spread over 15 to 30 years. And it shouldn't be done in five years, because if you did it in five years, it'd be so precipitous and harmful to the economy and two people that it would be incredibly disruptive.

INSKEEP: President Obama, in his public statements since this proposal was laid out, seems to have touched on that very point, that he says he wants to reduce the deficit, but not do it so rapidly that it damages the economy. It sounds like at least that far, you agree with him.

Sen. GREGG: Well, I agree with the president on the initial purpose of the commission, because he took my Kent's and my idea and...

INSKEEP: Took your recommendation.

Sen. GREGG: Basically did.

INSKEEP: Kent Conrad.

Sen. GREGG: Kent Conrad. But...

INSKEEP: You felt that Democratic...

Sen. GREGG: Yeah. If you did this in five years, in a slow economy like we have now, you'd actually create significant economic disruption and probably undermine the ability to get the economy going, which is critical to actually addressing the debt. You have to have a strong economy so that your revenues pick up.

INSKEEP: Is the reality of this situation that the national debt is going to have to go up some more before it goes down?

Sen. GREGG: Oh, yes. There's no question about that. We're not going to run a surplus in the foreseeable future for a variety of reasons, some of which are purely our own doing, such as the health care bill and the stimulus package, and some of which are demographic facts, which is that we're going from 35 million retired people to 70 million retired people within the next seven years.

INSKEEP: When you look at this specific proposal, what's one thing that works -in your view - and one thing that doesn't work, shouldn't be in there?

Sen. GREGG: Well, I think the total rewrite of the tax laws is really an original and creative idea. Basically, they suggested that we eliminate all deductions and exemptions and radically reduce the rates, which is a really appropriate way you should have tax policy, in my opinion, because then people, rather than investing for the purposes of tax avoidance, they're investing for the purposes of best return, which means you're using capital most efficiently.

Plus, the rate structure is extraordinarily low. You know, now, I've heard a lot of people jumping up and down and saying, well, it's going to destroy the real estate industry because it'll kill the mortgage.

INSKEEP: Because of the whole mortgage deduction (unintelligible), yes.

Sen. GREGG: But the home mortgage deduction pale for most Americans who take it in comparison with the reduction of rates as a benefit. And more importantly, it will be a huge incentive to economic activity. So, it really is a great approach. Now, it's so radical, I'm not sure it'll sell, because every tax deduction has a group defending it.

INSKEEP: And you also have people - forgive me - in your party who will say that eliminating any tax deduction is a tax increase and is therefore wrong.

Sen. GREGG: No, I don't think anybody can argue that and argue it honestly. Because this is what's a basically a revenue-neutral exercise. You might argue there's 100 billion in here that goes to debt reduction. Well, nobody on my side should be opposed to that.

INSKEEP: So this is something in this proposal that you like. What is something that doesn't work, in your opinion, in this proposal?

Sen. GREGG: Well, I think the tax - raising the cap on the Social Security income levels. Social Security was always supposed to be basically, in theory, an insurance program where you pay in and then you get out. We're getting to the point where, basically, people in the upper brackets will never, ever, under any circumstances, get back any percent - significant percentage of what they pay in.

INSKEEP: Is there any spending cut in that menu of spending cuts that was laid out last week that you would say, no, sorry, (unintelligible).

Sen. GREGG: No, I don't take any spending cuts off the table. I mean, if you look at the problem today, it is spending. I mean, we've gone from a government that historically took about 19.2 to 19.8 percent of GDP in spending. In the last two years, that has jumped to 24 percent, and is headed towards 28 percent - the single largest increase in the size of the government in our history, except during World War II.

INSKEEP: Hasn't a lot of that been temporary spending because of the recession?

Sen. GREGG: No, it's all going up. Sure, it jumped up as a result of the stimulus, but...

INSKEEP: And the bailout.

Sen. GREGG: ...it's projected to continue to go up dramatically.

INSKEEP: Some Democrats will ask, and are asking: Why not address at least part of this problem by letting tax rates to go back to what they were in the 1990s when the economy was pretty good?

Sen. GREGG: My problem with that is that if you raise taxes in a slow economy, you're basically stifling the chances for economic recovery. And I believe a massive tax reform bill - which we discussed at length earlier - is the best way to go to address the tax issue.

INSKEEP: You think there's sufficient support for that.

Sen. GREGG: I don't know that. But it would nice if there were. It's within three to five years that we're going to have a very serious problem with our currency and our ability to sell debt, which is huge. I mean, when these things happen, they don't happen gradually. It's an explosion.

INSKEEP: I'm curious, having spent time - and I assume the 18 members of this commission, you've all sat around the table, you've looked each other in the eye and you've had discussions. There is a basic frustration on both sides with Republicans who think Democrats are not willing to tolerate any spending cuts whatsoever, and Democrats who think that Republicans are not willing to tolerate any tax increase or anything that can conceivably be called a tax increase at any time.

Sen. GREGG: That's why the commission was created.

INSKEEP: And when you look across the table at people from different viewpoints, has something like common ground begun to emerge?

Sen. GREGG: Well, we're going to find that out. We don't know yet. I'm sure there are going to be a lot of adjustments to get to 14 votes, and the question is: Can we get to 14 votes?

INSKEEP: Do you regret that you're leaving Congress just at this moment when it's at least plausible that this great problem might be addressed?

Sen. GREGG: No.

(Soundbite of laughter)

INSKEEP: You're ready to pass it on to somebody else?

Sen. GREGG: I am. I've been pushing this rock up the hill ever since I've been in the Senate. And it is time to pass on the effort.

INSKEEP: Senator Gregg, it's been a pleasure. Thanks very much.

Sen. GREGG: Thank you. Thanks for taking the time to talk to me, Steve.

INSKEEP: This is NPR News.

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