Former Reagan Adviser On GOP's Pledge To America

House Republican leader John Boehner has a two-point prescription for our economic ills: freeze current tax rates and cut government spending. But is it really that simple? Host Guy Raz breaks it down with former Office of Management and Budget director David Stockman.

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GUY RAZ, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Guy Raz.

For the last two years, Democrats in Congress have argued that Republicans are only any good at saying one thing - which is no, that they don't have a whole lot of new ideas.

So this past week, House Republicans unveiled a plan that they argue addresses that accusation, and they call it their Pledge to America. Here's John Boehner, the House Republican leader, talking about some of the specifics.

Representative JOHN BOEHNER (Republican, Ohio; House Minority Leader): If we're going to deal with deficits, and we're going to be honest with the American people, we have to cut spending, and we need real economic growth in America that puts more Americans back to work caring for themselves and caring for their families. And you can't have real economic growth in America if you insist on raising taxes on the American people.

RAZ: The cornerstone of the plan is to make the Bush-era tax cuts permanent, and then a less specific call to cut spending except for Medicare, Social Security and defense. And Republicans promise the result will be a massive reduction in the federal deficit.

Now, several economists and tax policy analysts have looked at the Republican plan. And most of them say the numbers don't add up. And we'll find out why in a moment. But first, to one man who feels like it's 1994 all over again.

Dr. LAWRENCE HUNTER (Senior Fellow, Americans for Prosperity; President, Social Security Institute): My name is Lawrence Hunter, and I was a minority staff director of the Joint Economic Committee during the writing of Contract with America. And I had a responsibility for writing one piece of it.

(Soundbite of archived broadcast)

Ms. LISA MYERS (Correspondent, "NBC Nightly News"): More than 350 Republican members of Congress and candidates on the Capitol steps, bearing flags and promising tax cuts. In trying to convince voters this was not just another campaign stunt, Republicans called their promises a contract.

Representative DICK ARMEY (Republican, Texas): Today, we Republicans are signing a Contract with America. We pledge ourselves in writing to a new agenda of reform, respect and renewal.

Dr. HUNTER: It was clearly understood that the point was to win back the House. There is no doubt about that. But the thing that was unique about it, I believe, is that Gingrich and Armey actually used policy as the mechanism that in their mind - that we could use a policy-centric contract agenda, and present it to the country as a Contract with America, and use that to rally voters around electing Republicans.

RAZ: Now, there's some debate as to whether the Contract with America actually won the House back for Republicans. The tide was already turning anyway. But Lawrence Hunter says that what it did was offer up a single, unifying Republican message. And he argues that it forced compromises between Democrats and Republicans that made government more efficient.

Dr. HUNTER: Through the 10-year window after Clinton left office, if federal law on the books at that time had been implemented, the size of the federal government would decline to 15 percent of GDP.

Now, what happened after Clinton left office and Bush took over? Federal spending skyrocket.

RAZ: That's Lawrence Hunter. He's currently the president of the Alliance for Retirement Prosperity here in Washington, D.C. Despite having written much of the Contract with America, Hunter broke with his party in 2008 and voted for President Obama.

Now, the 1994 contract is the obvious template for what Republicans are proposing now. But there are major differences. The Republican plan promises to tackle the skyrocketing budget deficit - a problem that will soon become unsustainable.

Rep. BOEHNER: It's time for us as Americans to have an adult conversation with each other about the serious challenges that face our country.

RAZ: That's John Boehner again. If you flip through the Pledge to America, you'll find idyllic photographs of the American countryside, the great national parks and monuments like the Statue of Liberty and Mount Rushmore.

But what the Pledge to America doesn't say is that if all of its provisions were to be enacted, then by the year 2020, according to economist Howard Gleckman, the federal government would have no money to maintain any of those beautiful places.

Mr. HOWARD GLECKMAN (Resident Fellow, Urban Institute; Tax Policy Center): They'd be closed. Maybe we could sell them to Hilton or something. But essentially, they would be closed.

RAZ: Howard Gleckman is with the nonpartisan Tax Policy Center. He's looked at the Republican plan, and he says if you make the Bush tax cuts permanent and you don't cut Medicare, Social Security or defense, then by the year 2020...

Mr. GLECKMAN: Well, there would be no more money for highways. There'd be no more money for mass transit. There'd be no funds for the national parks. There'd be no subsidies for small businesses. We talked a lot about how important small business is - well, the Small Business Administration, and the assistance that it gives to small businesses, would go away.

We complain that there's not enough food safety. Well, there would be no food safety in this kind of an environment. There'd be no National Institutes of Health to do research in cancer and other diseases. The government, as we know it, would simply disappear.

RAZ: Which may not be such a bad thing for a certain segment of the American public, but that's not necessarily what the Republican plan promises to do. President Reagan is quoted in that manifesto, and many Republican leaders argue that this plan is based on his economic principles.

So we called up the architect of Reaganomics, David Stockman, who was Reagan's budget director, to find out what he thinks about it.

Mr. DAVID STOCKMAN: When I look at the Republican plan, I have to say I think it's half right on some things, and it's half-baked on a lot of others. It is right in at least addressing the out-of-control spending problem. And it is true that non-defense discretionary spending has soared not only since Obama came in, but even as bad during the Bush administration; it rose 60 percent.

The problem is the deficit is 1.5 trillion and growing, and what they're proposing on non-defense spending will save 100 billion if we're lucky. And I doubt that they would actually accomplish that if they were in charge.

So when you try to solve the problem by filling 7 percent of the hole, I don't think you've gotten very far. And in the process, you're telling the people of America that we can solve this issue - which is very dangerous, the deficit that we're facing and the debt we're building up - by not raising taxes on anyone. That, in my judgment, is a big lie.

RAZ: Now, as you mentioned, the Republican plan talks about cutting discretionary spending - nothing too specific, but presumably things like education and infrastructure spending. No talk about cutting mandatory spending, things like Medicare and Social Security. Can you begin, you know, to tackle exploding deficits without beginning to take a hard look at those programs?

Mr. STOCKMAN: No, I don't think you can. And that's why I think, as I said, the plan's half right but also half-baked. They're being disingenuous when they say right in the second or third page, I see here, that we will exempt seniors -that's all of Social Security and Medicare, I presume, and federal retirement and so forth - that will exempt veterans; will exempt all of defense, Homeland Security. And you have to pay the interest on the debt.

Well, that happens to add up to 2.4 trillion - or almost two-thirds of the budget. So if you're exempting two-thirds of the budget, and you're focusing only on non-defense discretionary, which actually is only about 500 billion - or 15 percent of the budget - it's pretty obvious you can't get the job done.

And when you're talking only about freezing non-defense discretionary - again, maybe you save a hundred, or rolling it back to 2-0-8 - maybe you save 100 billion. But how does that really answer the challenge and the threat of a 1.5 trillion hole in the budget? So therefore, the plan just doesn't measure up.

RAZ: David Stockman, let me ask you about the idea of making the Bush tax cuts permanent. Some economic analysts have said that if you do that, that by the year 2020, the government wouldn't have enough money to spend on anything except for Medicare, Social Security and defense - if it's lucky. Do you think that sounds about right?

Mr. STOCKMAN: Yes, I do. We couldn't afford the Bush tax cuts when they were put in, in 2-0-1, 2-0-3. Now, we're - eight years later, we're trillions in additional debt later, we're two unfinanced wars later, we're a trillion dollars of stimulus spending later, 800 billion of TARP. So it's pretty obvious if we couldn't afford them back then, in no way, shape or form can we even dream about affording them now.

RAZ: Do you think President Obama is being honest with the voters?

Mr. STOCKMAN: No, I don't think he is at all. I think when he said no taxes on the middle-class or on anyone below 250,000, he was being totally disingenuous. That's most of the people in the country. Sure, there...

RAZ: You're saying he has to raise their taxes as well?

Mr. STOCKMAN: Sure, absolutely. He should tell them, we're going to raise all your taxes because that's the only way we can support all these programs that I want to keep. He's for, you know, everything we have in the budget today. And a lot of it is meritorious, and a lot of isn't. How this president, who ran on the ticket that I, you know - change you can believe in; I'm going to tell you -tell it to you like it is, can possibly take that no-tax pledge, and then support all of this spending and all of this stimulus, just doesn't add up.

RAZ: Are you worried?

Mr. STOCKMAN: Yes, I'm very worried about it because I thought it would never come to this. When I was in the White House in the Budget Office in the early '80s, we had the deficit breakout, 100 billion or 200 billion. Admittedly, the economy was smaller then, but it was still 4 or 5 percent of GDP.

Here we are today with a deficit that's 10 percent of GDP, and it doesn't look like there's any prospect that it's going to decline at anytime soon - or any willingness to even acknowledge the problem and address it. The idea that the economy is weak and so we have to wait two or three years, is just an excuse.

The economy is weak because of our irresponsible fiscal and monetary policies over the last 10, 20 or even 30 years. And it's going to keep getting weaker unless we face up to the problem. So, yes, it's the chicken and egg. If we cut spending and raise taxes, it may slow down the economy even more, but that's, unfortunately, the choice that we face.

RAZ: That's David Stockman. He served as President Ronald Reagan's budget director.

David Stockman, thank you so much.

Mr. STOCKMAN: Well, thank you.

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