STEVE: Is the reality of the situation that the national debt is going to have to go up before it goes down?
GREGG: Oh yes, there's no doubt about that. We're not going to run a surplus for 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 we're going from 35 million retired people to 70 million retired people in the next seven years.
STEVE: When you look at this specific proposal, what's one thing that works in your view and one thing that shouldn't be in there?
GREGG: Well, I think the total rewrite of the tax laws is really an original and creative idea. Basically, they suggest 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 returns which means you're using capital most efficiently.
Plus, the rate structure is extraordinarily low. Now, I've heard a lot of people jumping up and down saying "Well, it's going to destroy the real estate industry" because of the (home mortgage deduction.)
But the home mortgage deduction would pale for most Americans who take it in comparison with a 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 will sell because every tax deduction has a group defending it.
STEVE: And you also have people in your party, forgive me, who will say elminiating any tax deduction amounts to a tax increase.
GREGG: No, I don’t think anybody can argue that and argue that honestly. Because this basically was 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.
STEVE: So this is something in this proposal that you like. What is something that doesn’t work in this proposal?
GREGG: Well, I think the tax, raising the cap on 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 bracket will never ever under any circumstance get back any significant percentage of what they pay in.
STEVE: Are there any spending cut in that menu of spending cuts that you would say "no."
GREGG: I don’t take any spending cuts off the table. If you look at the problem today, it is spending. We've gone from a government that took 19.2 (percent) to 19.8 percent of GDP to in spending. In the last two years that has jumped to 24 percent and it's headed to 28 percent.
The single largest increase in the size of the government in our history except during World War II...
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 happen, they don't happen gradually. It's an explosion.