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Back to the Blog Newt Gingrich on Entitlement Reform, the Federal Reserve and the Eurozone


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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech and Francis Cianfrocca are joined by Newt Gingrich to discuss his plans for entitlement reform, how he would change the Federal Reserve, the Eurozone crisis and more.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. We hope you enjoy the show.

Related Links:

David Brooks: The Gingrich Tragedy
Newt’s plans for healthcare reform
Newt Slams Media For Not Demanding Transparency Of The Fed
Newt Gingrich Judges You


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Transcript: Newt Gingrich on Entitlement Reform

Jackson: On the show today we are honored to have former Speaker of the House and current Republican Presidential Candidate Newt Gingrich. We’ll discuss his plans for entitlement reform, how he would change the Federal Reserve, and what qualities he would look for in a running mate. I’m your host Brad Jackson and you’re listening to the December 9, 2011 edition of Coffee and Markets.

Mr. Speaker, David Brooks writes in the New York Times this morning that “Gingrich loves government more than I do.” How would you respond to that?

Gingrich: I think that the efforts of the establishment to flail around and hit me from every direction and too far to the right. Too far to the left. I hate government too much. I love government too much. It tells you the emotional trauma of having a genuine outsider emerge as the frontrunner. I helped balance the budget for four consecutive years. We helped reform Welfare and two out of three people went back to work or went to school.

I am advocating, planning to lead the Strong America Now Project of Lean 6 Sigma which would end 130 years of civil service systems and save $500 billion a year by cutting government waste in a serious realistic manner. I mean, you just go through item by item and I had a 90% American conservative union rating. I helped elect Ronald Reagan and helped implement his program. And the Contract With America was probably the most conservative successful legislative platform in modern times.

Domenech: And of course that Contract is one that your primary opponent, Mitt Romney, did not support. I wanted to ask you a question based on the –

Gingrich: But that’s not totally fair. He was running to the left of Teddy Kennedy in Massachusetts in 1994 and he said flatly he wasn’t for the Reagan/Bush policies. He was an independent and he couldn’t possibly have been for the Contract, because how do you run in Massachusetts to the left of Teddy Kennedy favoring a Gingrich contract?

Domenech: Well, it is a challenge. I think that when you read the Wall Street Journal editorial page, when you read some of the coverage in National Review and elsewhere over the past couple of weeks, you’ll see that they’ve suggested that your plan on entitlements, particularly on Medicare reform, is more modest than Mitt Romney’s.

I want to ask, is this true and if not, can you tell us why you believe that your Medicare plan will give consumers more power and put us on a path to sustainability in that program?

Gingrich: Well, can I start with Part I of which they skipped over, although they mentioned it in passing. By my Social Security personal savings account model, which I know you’re very familiar with –

Domenech: Yes.

Gingrich: – the majority has students on 85 college campuses supporting it, is the boldest clearest statement by a Presidential candidate, I think, in your lifetime. It’s billed directly out of Chile and Galveston, Texas. It would according to Martin Felstein (phonetic sp.) it would eliminate about 50% of the inequality of wealth in the United States over a generation. It would turn every single American worker into a capitalist, owning stocks and bonds. It would increase the stock of capital available to the country by trillions. That would lead to several percentage points more economic growth. Felstein estimated that over the course of a generation it would increase the GDP by somewhere between $7 and $10 trillion. And in the process it would move all that money out of government, away from politicians, and return it to the personal ownership of the individual American.

Now, I just want to stop for a second and say, to sort of pass over that and say okay, so that’s a really big bold Social Security plan but, you know, I wish they had compared Romney’s total timidity, because they come back and say well, Gingrich still doesn’t cut Social Security. Well, if I just fix it, maybe you don’t need to. There’s a book, this goes back to the ‘60s, there’s a book called Change, Problem Perception, Problem Resolution by a group of anti-Freudian psychologists who said, instead of having you go through therapy what if we just fix your problems? Would that be okay, or would you miss not having gone through therapy?

Cianfrocca: It depends on the therapist.

Gingrich: You know, I think some people on the right are a little bit like Freudians in that you go in and you say I’ve got a brand new solution. They go yeah, but why can’t we do the old solution that doesn’t work and nobody will vote for? You know, well I have one that will actually work. And they go yeah, but you know, you see where I’m going.

So let me talk a little bit about Medicare. First of all I believe deeply in personal savings accounts and the ability to have a health savings plan which I think is the best long-term step towards people retaking control of their own health and having a direct interest in the cost of healthcare. Second, I believe that requiring transparency of cost and quality. Third, I would apply a Travelocity model to drug purchasing. So, you could go on-line, you could see what the various prices were, I would do this actually with the whole system. As you know, if you use Hotels.com or Travelocity or Expedia, you suddenly are able to find much better deals at lower prices if you’re willing to show. Amazon is now driving people, the retail business crazy by offering this on-line, for all sorts of products. Why not offer it in health? You’ll see a downward pricing pressure overnight.

I wrote a book called Saving Lives and Saving Money in 2002 which outlined how I would move towards a market oriented, personal responsibility, a transparency of price and quality system. I found at the center for health transformation to move in the same direction. We’ve shown conclusively in a book called Stop Paying the Crooks how you can save between $70 and $120 billion a year just by modernizing the payment system so you don’t give money away to crooks. And by “crooks” I mean a dentist in New York who filed 982 charges a day and got paid. So, start down that road.

I mean, first of all I would point out, and this is something I’ll be raising in the next few days, Romney doesn’t actually quite tell you what the details are that the Wall Street Journal likes so much.

Domenech: Yes.

Gingrich: So, I’m going to assume some details here. I mean, you can go to Romney and ask him if I got it right, and if I didn’t get it right he can tell you what they are, which will be one way to sort of get it out in the open. If what he is suggesting is a mandatory premium support plan, including people currently on Medicare, he is talking about a politically impossible proposal. Which of course he can’t tell you about in detail because if he told you about it in detail AARP, and 60 Plus and others would end his campaign in about three days.

Domenech: You know, in terms of your critique of sort of the dangers of forcing people into this, of making it mandatory, I certainly agree with you. But isn’t the problem with that sort of an approach that you don’t have predictability when it comes to the costs of the program in the future? And if you could explain to us, I’d love to hear it, why you’re confident that a public option versus a private option in Medicare will bring these costs down.

Gingrich: Well, here’s why and this is the only place, I mean, I think you know I like Paul Ryan and you know that I’ve praised him a lot over the years.

Domenech: Of course.

Gingrich: And in fact, Callista has known him since he was an intern, and he and I talked after Meet the Press was blown totally out of proportion. What I was saying was an answer to a very specific question which was if there’s a program which is very, very unpopular should Republican’s impose it? And my answer is no. When we pass Welfare Reform 92% of the country favored it, including 88% of people on welfare. Reagan ran to be a popular president, not to maximize suicide. And I think the (inaudible) have got to understand, you govern over the long run by having the American people think you’re doing a good job and think you’re doing what they want. Now the question is, how do you have creative leadership that achieves the right values in a popular way?

So, let’s take the example where I think Ryan is on to something I actually support, which is that you ought to have a premium support option. I wouldn’t do it in 10 years. I would do it next year, but I would do it as a voluntary program. And then I would go to the insurance industry and say to them, is there a way you could make a premium support option really desirable? Well, it turns out Medicare Advantage has 25% of the market despite the opposition of the bureaucracy. So, if you had a bureaucracy that favored market oriented systems, you might actually get to 50% much faster than you think. You know, we make our Social Security plan optional and the fact is that Social Security actuary scored it for Peter Ferrara and his official score, which is available at their site, is that 95% of young people would go to it very rapidly because it is so much better.

So, if you took for example Tom Price’s proposal, Dr. Tom Price, as in the republican leadership, that you have right of private contract. And you take successful people in America and you say to them, we might, you negotiate for your own healthcare outside the CMS bureaucracy. We’re going to give you a premium support baseline. You provide the difference. My guess is you’d have 10% to 20% in that system pretty rapidly and you would then have an experimental base to figure out how to make it better. If you really want to save a lot of money on Medicare frankly, and on Medicaid, what you really want to do is past tort reform because we did a study with Jackson Health and Gallup which indicates that maybe as much as $800 billion a year comes from the failure to stop trial lawyers from threatening doctors. So, the amount of defensive medicine you get now is just unimaginable.

(Commercial Break)

Cianfrocca: So, Mr. Speaker I’d like to turn this to a more immediate question, this is of urgent interest to businesses in capital markets. US entities like the Fed and the Treasury will be called upon to participate in addressing the ongoing Euro crisis. Do you have a general view on American’s role in the European crisis and are you for or against the various –

Gingrich: I am –

Cianfrocca: – specific actions that –

Gingrich: I am deeply opposed to extending American credit to sustain the Germany fantasy of dominating the continent to their financial muscle. I mean there’s apparently –

Cianfrocca: I think that you’ve been listening to Coffee and Markets, clearly.

Gingrich: Well, did you see the cartoon that showed Merkel holding the French President Sarkozy? She’s sort of the nanny and he’s a little child.

Cianfrocca: Yeah. But they’re both about the same size. So, how do you feel about the currency slop line that the Fed announced last week and now they’re talking about increasing the US share of funding for the IMF?

Gingrich: I’m against both. I will tell you flatly, I want Bernanke gone. I want the Fed to narrow its ambitious. This grandiose idea that these guys, if you remember Thomas Wolfe wrote a book about Masters of the Universe –

Cianfrocca: Oh, yeah.

Gingrich: – well, it turns out that they migrated from Wall Street to the Treasury in the fall. And the hubris involved in Bernanke is unbelievable.

Cianfrocca: Very interesting. Okay. So, are you in support of some of the proposals for changing the structure of the Fed? I mean, you know, putting on an audit requirement is pretty low end as a reform. What other things are you thinking about in terms of changing the Fed, since you made that point?

Gingrich: Well, I would say four things. I would have them audited. I would publish all of their decision memos of 2008, ’09, and ’10, because we deserve to know who they gave money to and who they didn’t give money to and why.

Cianfrocca: Right.

Gingrich: I would repeal the Humphrey Hawkins Act because it has totally confused the Fed’s functionality. The Fed’s job should be hard money, having a dollar as good as gold. So that if you save $1.00 this year it’s worth $1.00 twenty years from now. The Fed’s job should not be to try to be confused about trying to have full employment and stable money because you end up with neither.

Cianfrocca: Okay. So you’re forthrightly advocating an end to the dual mandate with that statement.

Gingrich: Absolutely.

Cianfrocca: Okay. Fantastic. I love it.

Gingrich: And I’m also, then finally I’m suggesting that specific bank bailout focus functions should revert to the Treasury where they are available to public scrutiny and where you can supervise what’s going on. But the Fed should not be picking winners and losers in the financial world. That totally confuses its job. Its job should be to manage the money supply to ensure price stability over a very long period.

Cianfrocca: Well now, that’s interesting because historically the Fed has a role in crisis times. And not to say that that happens very often, but when it does you really need them there as lender of last resort. Are you talking about —

Gingrich: But I would lend through the Treasury. They can lend the money to the Treasury and the Treasury can apportion it.

Cianfrocca: Okay.

Gingrich: Because if you get the Fed into picking winners and losers then you have transferred a level of dictatorial power over the economy to the chairman that is very dangerous.

Cianfrocca: So, are you in favor of the Treasury which is considerably more sensitive to politics actually functioning as the lender of last resort in a crisis?

Gingrich: I’m in favor of the Fed providing the money by which the Treasury ensures that the crisis is resolved. Because we have no evidence by the way of what you just said is true. That is, we have no evidence that Bernanke is more impervious to politics than Geithner.

Cianfrocca: Yes. That’s fair. Quite fair. Yes. Quite true. Understood. And especially insofar as he and his colleagues are very interested in preserving their independence, you know, so they’re going to bend in ways that, you know, to their lives will insulate them from political pressure which amounts to almost the same thing.

Gingrich: Exactly.

Cianfrocca: Very interesting. Well look, so let me shift gears a bit. I mean, and this is another question with an economic focus but it cuts across to foreign policy a little bit. And this is a new but very critical policy issue that really hasn’t been talked about too much yet, and that is cyber-security. Okay.

Now, in all candor, to me, an important part of foreign policy is getting ready for war. War isn’t really what it used to be. So, how much thought have you given to cyber-security and particular issues like protecting civil infrastructure in the United States, also cyber-defense and cyber-offense? Preparing for cyber offensive war.

Gingrich: Well, I’ve been involved in thinking and talking about it for about a quarter century.

Cianfrocca: Tell us more.

Gingrich: Partially because we looked at it from an offensive side in terms of NSA, and partially because you had to look at the emergence of all sorts of capabilities, including the potential rise of quantum computing and the extraordinary complexity of trying to break those kinds of codes.

Cianfrocca: Yes.

Gingrich: I would say that –

Cianfrocca: Well, that’s actually quite far away frankly.

Gingrich: Yeah.

Cianfrocca: Unbreakable encryption, you know, from using quantum computing is a bit far off.

Gingrich: Yeah.

Cianfrocca: But the more immediate threats are from, and let’s, everybody dances around this and I don’t understand why. There are sovereign states that I could name right here, I mean right now, that are targeting information systems within government and within industry with the eye toward destabilizing them and exfiltrating data. And they’re also aggressively targeting civil infrastructure such as the power grid, water systems, railway and airports. The oil and gas network. What can we be doing as a matter of policy about this that we’re not doing today?

Gingrich: Well, I would like to convene a conference on this for the following reason, I think that we have to treat state based overt activities as the equivalent of acts of war.

Cianfrocca: Yes. They are.

Gingrich: And I think that we have to respond to that and create a level of pain which teaches people not to do it. I don’t think you can have a defense only strategy for this sort of thing. So, I’m much more inclined to find a way for us to systematically and methodically develop capabilities that are both much more robust on the defense side but also to develop capabilities that allow us to punish countries that engage in this kind of behavior.

Cianfrocca: Do you have any reaction to the various statements that have been released partly by the White House, partly by people in the Defense Department, and kind of in coordination on the matter of cyber-offense? And they’re just really, really dancing around it and it’s kind of in the category of well, let’s not be too overt. And let’s not be too aggressive about our plans to destabilize other countries. Should they be doing more? Should they –

Gingrich: Well, but I think this ought to be a very high level conversation at the presidential level, as it relates, for example, to both China and to Russia. In saying, look there are games we’re not going to tolerate being played. And we either need an armed truce or we’re going to engage as aggressively as you are.

Cianfrocca: Do you suppose that those conversations need to take place in secret?

Gingrich: Well, probably they need to be confidential in the first phase, but that ought to be part of our talk. But people should clearly know that that’s our position and that can’t be –

Cianfrocca: Yes. So, you’ve advocated here a convenient conference so I’m assuming that you’re thinking about the individuals who would be involved in that. Some from industry, some from the defense sector, some from the intelligence community and –

Gingrich: Well, but also just random people. There are some very smart people out there who randomly know an immense amount about this who aren’t part of any official structure.

Cianfrocca: That’s right.

Gingrich: And when I say a “conference” it would probably be top secret.

Cianfrocca: Okay. All right. That’s kind of what I was going for.

Gingrich: I mean, yeah. I mean, but I am saying to you I believe, the two areas I believe that are the greatest unknown threats are electromagnetic pulse and cyber-warfare. The greatest known threat is a nuclear weapon in an American city, probably by a terrorist. And I think all three of those require dramatically more attention than we’re giving to them.

Cianfrocca: But would you involve Congress in that top secret conference? And that’s kind of a loaded question, because you know, from a couple of perspectives, but it’s a serious question.

Gingrich: You would probably involve a very small number of very strategically placed members and staff.

Cianfrocca: Right.

Gingrich: Because you want the legislative branch to be moving in the same direction.

Cianfrocca: Okay.

Jackson: Mr. Speaker, I want to close with one last question. What kind of attributes are you looking for, what would you consider as a top priority for a running mate and why?

Gingrich: One, the ability to be president. Two, an absolute commitment to my plan. I don’t want to go through what we went through in the ‘80s where Reagan was going one way and Bush was going another. I want compatibility and commitment to the scale of change which, if you go to Newt.org you see the opening phase of a process that will go on until September 27th for the legislative contract, and October 1st for the executive order part of the contract. I want somebody that says yeah, that’s what I’m willing to live through. I’m willing to do that. Third, ideally they would help us win the election, but in that order.

Jackson: Do you see executive experience, previous executive experience as an important asset to have in a running mate?

Gingrich: No. The lesson of Harry Truman is that presidents are about leadership not management. Presidents hire managers. Lincoln had managed a two lawyer office with no clerks. That was the sum total of his management experience before he got to be President.

Jackson: Well thank you, Mr. Speaker, for joining us today. We’ve really appreciated having you on.

Gingrich: Great.

Domenech: Thank you so much for taking the time, sir.

Gingrich: Thank you very much. By the way, this was a lot of fun. I enjoyed it very much.

Cianfrocca: Terrific. Thank you so much.

Gingrich: Talk to you soon.

Domenech: Well, thank you. Good luck.

(End of Podcast)