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CNBC Transcript: CNBC Exclusive: Chief Washington Correspondent John Harwood Sits Down with Representative Paul Ryan on CNBC

WHEN: Today, Thursday, July 31st

WHERE: CNBC's Business Day Programming

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Rep. Paul Ryan. Excerpts of the interview will run during CNBC's Business Day programming today. Following are links to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000297406 and http://video.cnbc.com/gallery/?video=3000297417.

All references must be sourced to CNBC.

JOHN HARWOOD: Congressman, thank you for being with us.

PAUL RYAN: Good to be with you.

JOHN HARWOOD: Your program-- for the set of anti-poverty initiatives in the government does not cut funding for those programs. It consolidates them. Does that-- is that the signal that you think that Republicans have reached the end of the road in terms of cutting discretionary spending of that kind?

PAUL RYAN: I didn't want to get into a debate about proper funding levels of the status quo because we would spend all this time talking about budget numbers. I wanted to start a debate about how to reform the status quo. The fact of the matter is, is these reforms could occur at any spending level. You can decide later on.

JOHN HARWOOD: But do you want them at a lower level?

PAUL RYAN: What I'm saying is, let's take whatever our federal government does in these programs and keep the same level of funding for the states who choose to use the opportunity grant, which collapses as many as 11 programs into one funding stream to go to states to have more innovative ideas and solutions for getting people from welfare to work.

That's the key issue here, is not the level of funding, which would be the same for, say, if Wisconsin did it, versus any other state that didn't do it, but let's focus our poverty-fighting efforts, not on inputs, not on effort like how much money we spend, how many programs we create, but are we getting people out of poverty.

JOHN HARWOOD: Two objections –

PAUL RYAN: Results. That's the kind of thing we're trying to get to.

JOHN HARWOOD: Two objections that I've heard. One, I talked to Hillary Clinton last week. She said this is not a good idea, because if governors won't take federal money, free money to expand Medicaid, they can't be trusted to protect these programs, a. And b, that you eliminate the automatic stabilizer function of these programs that allows them to expand when the economy is worse.

PAUL RYAN: Yeah, so I'll take the last one first. The baseline of funding changes per the economy, and I would anticipate doing the same thing here with what you call automatic stabilizers. The first point though I just disagree with. This isn't free money. States are getting put on the hook with ObamaCare and then the federal government ratchets down its matching rate.

So it is an unfunded mandate at the end of the day. But more importantly, it's sort of an apples to oranges comparison. It's not the same thing for a governor to say, "I don't want to take this top-down, heavy-handed approach from Washington of a government-run healthcare system." There's nothing inconsistent with the governor saying no to that and then saying yes to, "I want more flexibility for how to customize benefits to get people from welfare to work." So I just don't see that as an accurate comparison.

JOHN HARWOOD: Doesn't the deal you struck with Patty Murray – didn't that signal that you actually think that the Congress has gone as far as it could in cutting those kinds of programs?

PAUL RYAN: No, the deal with Patty Murray was to keep the government running, stop two government shutdowns, and get Congress back into the business of appropriating and get some savings. But we have to get far more savings to balance our budget and pay off our debt. The question that I'm having here is not a budget question, it's a are we being effective at actually getting people off of poverty into lives of self-sufficiency?

And I would argue that after 50 years of the war on poverty, trillions of dollars spent, and we still had the highest poverty rates in a generation, we can do a lot better than this. And so that's the kind of conversation I'm trying to start. And that's what these reforms are aimed at doing.

JOHN HARWOOD: Now you know that this program cannot pass – it might pass the Republican house, could not pass the Democratic Senate. Are you going to try to pass portions of it that might have bipartisan appeal – licensing reform, sentencing reform, things of that kind – or are you putting this out there to wait and wait until you have a Republican President, wait until you have a Republican Senate?

PAUL RYAN: Actually, what I'm trying to do right now is start a conversation and get feedback, constructive feedback to improve on these ideas. But I think it's very possible to take pieces of these ideas, where we can get consensus on, say like sentencing reform and move those and then work on these other pieces.

What I anticipate is getting a conversation going, getting feedback, and then hopefully next session putting pen to paper and legislating. And I do think some of these already have bipartisan support. And those that do we should move on it.

JOHN HARWOOD: One of the reasons why people have been – Democrats have been hostile to your ideas, and others have raised questions. Is the idea that they have taken from some of your public comments, that you think government help, per se, is the problem with the poor? The hammock is the problem and that the way to help people is actually take away government assistance.

PAUL RYAN: No, I think the hammock's the wrong analogy.

JOHN HARWOOD: You have used it though.

PAUL RYAN: I know and I think that is wrong. I think what I worry about are government programs that actually disincentivize work. And the many cases, and I flesh this out in my report, a person can be worse off leaving government benefits because they lose a lot of money doing that going to work. We need to fix that.

We need to remove the disincentive to work and make it so that work always pays. And so yes, I think the government has been very counterproductive. If the goal is to move a person from welfare to work. Number two, I think the federal government inadvertently has displaced a lot of good work at the local level.

JOHN HARWOOD: But that's a transition issue. It's not a government assistance issue.

PAUL RYAN: No, so the point I'm trying to say is the government should respect its limits and man the supply lines and not be the front lines. We shouldn't work against local charity. We shouldn't work against local poverty fighters, we should work with them.

And so the federal government in many ways has displaced a lot of good work that's being done in our communities. We should back that up. We should support that. And let's have a results-oriented approach where we measure and test results of new, innovative ideas that are being done at the state level so that we can find out what works so that we can scale that up. Because what we're doing right now in the status quo, it's not working.

JOHN HARWOOD: There's a lot of doomsday rhetoric early in the Obama administration from Republicans. We are going to be Greece, the President's proposals are out of control, you said at one point, we're living in an Ayn Rand novel and that the policies were an attack on the moral foundations of capitalism. Now that unemployment is down, GDP grew four percent in this quarter, are you willing to say that some of that was overheated and hyped up? Do you really think the President was attacking the moral foundations of the country?

PAUL RYAN: Well I think when we were running trillion-dollar deficits for a few years in a row, when we're seeing the debt basically doubling over the last eight years since the crisis, that's a real problem. This is what I'm so frustrated about with respect to this administration. I have a lot of frustration so I'll just give you a couple.

We haven't done anything to get this debt under control. The lowered budget deficit, which by historical standards is still very high, is an aberration. The debt starts taking right back off according to the baseline. Meaning we still haven't gotten a grip on our fiscal situation. And that hurts the economy today. But it also really hurts the economy for the next generation.

JOHN HARWOOD: But do you really think President Obama was attacking the moral foundations of the country?

PAUL RYAN: Oh I don't – that's a pretty broad statement. Ask me what policy you're talking about, then I'll give you a reaction to that. But I think his economic doctrine absolutely is the wrong way for the country. I think we could've done far better for economic growth. This is the worst recovery we've had on record. And I would argue this is the worst recovery we've had since World War II because of the president's policies.

Because of government policies, regulations, bad energy policy, no willingness to do tax reform, borrowing and spending, not getting the debt under control, loose money from the federal reserve. I think a lot of those policies has given us the worst kind of economic record, the worst economic recovery we've had in modern era. And that's because of his policies.

JOHN HARWOOD: There are some people who would say that the way Congress is functioning or not functioning is itself an attack on the moral foundations of the country. What report card do you give Congress, including the Republican house for accomplishment as you prepare to leave for summer vacation?

PAUL RYAN: The number I saw yesterday was 351 bills have passed the House of Representatives, aimed at making people's lives better, at fixing the problems that are plaguing our government. Forty of the bills are for job creation. All of which are sitting in the United States Senate, gathering dust, going nowhere.

Harry Reid has shut down the United States Senate. They're not legislating. And therefore, we have paralyzed government. So I think if you take a look at what the House has done, our job-creating bills, all the bills we've passed have balanced the budget and paid down the debt. That's constructive. But if you only have the House legislating and acting, and not the Senate, then nothing gets done.

So I think you can't just say all of Congress. I think you've got to give credit where credit is due. And those of us in Congress who believe in fixing problems with certain solutions have passed those solutions here in the House.

JOHN HARWOOD: Well, as you know, President Obama says precisely the opposite. It is not just Congress, it is the Republican House. He gave a speech today and he said, called on House Republicans to stopping hating and get some things done. Why don't Republicans in House deserve just as much blame as the President or Democrats in the Senate for not passing things that can pass their political adversaries?

PAUL RYAN: We're passing a number of bills today, this week. We're passing a veteran's bills this week. We passed a transportation bill last week. We passed job training reform. And we're passing a solution for the border.

JOHN HARWOOD: So what grade do you give Congress?

PAUL RYAN: So I think that's a pretty productive grade. But if you ask the Senate, who's doing nothing, who won't even let Republicans and the minority have amendments on bills, I would not give them a passing grade. Look, we're used to the President talking like this. The president uses this kind of rhetoric all of the time.

JOHN HARWOOD: Are Republicans haters?

PAUL RYAN: Personally, I think the President uses this rhetoric fairly often. I think people are tuning it out and I think it's very counterproductive.

JOHN HARWOOD: What do you think about that specifically? Stop hating?

PAUL RYAN: I think the President is choosing to impugn our motives versus trying to be constructive and work with us to get things done.

JOHN HARWOOD: Why haven't Republicans in the House passed entitlement reform? The kinds of things you have proposed in your budget?

PAUL RYAN: We passed a budget four years in a row.

JOHN HARWOOD: No, you passed a budget. But you haven't passed a comprehensive reform of Medicare or social security. Why not?

PAUL RYAN: We've – because when you pass a budget, you have to have a Senate pass the budget. And then you bring it together. The Senate has not been willing to do those things. We've said very clearly--

JOHN HARWOOD: But you've just talked about all the bills that you guys have passed in the House and they haven't passed. You have not done entitlement reform.

PAUL RYAN: Yeah, but that's because the Senate has chosen not to pass budgets. I won't go into the budget process and how it works. But you have to start with a budget, then you move it through the House and the Senate to get final bills. We have not had that process working because the Senate hasn't been passing budgets.

Patty and I broke that mold for the first time in a long time. The budget agreement we had, which has entitlement reforms, some modest ones, very modest-- was the first budget in divided governments since 1986. I think that was a step in the right direction. But we've been very clear about the kinds of entitlement reforms that we think should pass. And we have included those specifically in our budgets.

JOHN HARWOOD: But isn't the actual reason that you haven't passed in the House, freestanding entitlement reform, that even though you're willing to do it, your colleagues are not.

PAUL RYAN: No, I don't think that's it. I think we know that the Senate won't act on these things. And we're trying to pass a lot of bills that we think have a chance, a reasonable chance of passing into law to make a difference in people's lives. And that's why we've been passing things like Keystone pipeline, energy legislation, a job-training legislation. We would like to think that these things could possibly get a fair hearing in the Senate. But even those reasonable measures haven't gotten a fair hand.

JOHN HARWOOD: Because the White House argument is that your members, that some of your members say they want to pass entitlement reform, but they actually don't want to cast that vote and that is why they haven't done it.

PAUL RYAN: I disagree with that I think our members – I think if we had willing partners on the other side of the aisle, if we had a president who was actually willing to tackle or tough fiscal issues, our members in the House would be more than willing to participate in that. But it's been abundantly clear to us that the Senate and the White House is not interesting in tackling the really big problems facing our country fiscally.

JOHN HARWOOD: If the Republicans take the Senate in mid-terms this fall, what changes in the next two years? Anything?

PAUL RYAN: Well, I think we can pass legislation then. I think we can actually get Congress working again.

JOHN HARWOOD: You still have President Obama with a veto pen.

PAUL RYAN: We can get things on his desk. I think that's right. But I think we can put a lot of things on the President's desk. Harry Reid has been preventing the President from having to make any difficult decisions on any issue because he's stopped legislation in the Senate.

I think if we were to obtain the Senate, we would actually have the ability of passing legislation all the way through Congress, not just half the way through Congress and giving the President the opportunity to make a decision whether or not to support legislation.

JOHN HARWOOD: But shouldn't the message for the conclusion that average Americans should draw is that there's really nothing that's going to happen until we have a new President? Whether it is one party or the other?

PAUL RYAN: I hate to think like that. Unfortunately, I think there's some merit to that criticism. But I hope that that's not the case. And I still want to see if we can get things done.

JOHN HARWOOD: I interviewed two weeks ago Chris Christie, who said – and asked him about potentially running in 2016, and he said, "I'm not going to decide. I've got some time to decide and in fact, it would be immature for somebody to say at this point that they –"

PAUL RYAN: Premature or immature?

JOHN HARWOOD: Immature.

PAUL RYAN: Immature, okay.

JOHN HARWOOD: "To say at this point they're ready to run, not having done the spade work and the home work that you could do." Is that why you're holding back? That you're more mature than some of those who are out there going to Iowa and New Hampshire?

PAUL RYAN: I'd say premature, not necessarily immature. I have an important job to do here in Congress. I take this job very seriously. The people of Wisconsin elected me to do this job. So I'm doing my job. There is a right time and place to think about those things. That's 2015. Right now, we have problems that need solving and I'm focused on the here and the now and I'll worry about those things later on.

JOHN HARWOOD: Your friends say you really want to be Ways and Means Chairman more than you want to engage in a Presidential campaign. Is that right?

PAUL RYAN: I'll make my mind up later on. Right now, I'm focusing on what I'm doing here in the House and I'm focusing on the kinds of reforms, like a better, effective way of fighting poverty. Getting the border crisis under control.

JOHN HARWOOD: But give us a window into your thinking. Would you rather actually make tax policy in the Congress than –

PAUL RYAN: You know, I'm not going to go into the hypotheticals. I'm going to keep my options open. I am on a track here in the House that I'm pleased with. I have chosen to forgo running for other things here in the House because I like where I am. And Janna and I will sit down in 2015 and have the kind of conversation that husbands and wives have at the appropriate time. And to be honest, I'm just pushing that out of my mind, focusing on the here and the now, because I think that's what I ought to be doing.

JOHN HARWOOD: Two things quickly for you before we let you go. If you become Ways and Means Chairman, what would you do about tax inversions and the movement overseas of so many American companies?

PAUL RYAN: Tax reform. There's no substitute for tax reform. If you try to do a patchwork, you'll just accelerate foreign companies buying U.S. companies. There is no – and I think the Treasury Secretary would agree that the real solution ought to be fundamental tax reform to make American businesses more competitive in the global economy, which they are not right now.

JOHN HARWOOD: And that is not happening until the next administration.

PAUL RYAN: I wish it were the other way. Our committee, the Ways and Means Committee made a very sincere and strong attempt to engage in a conversation about tax reform. But the administration--

JOHN HARWOOD: No action in the House on Dave Camp's proposal though.

PAUL RYAN: The administration chose not to take us up on the offer of engaging in a dialogue on tax reform.

JOHN HARWOOD: Finally, you're a football fan, I'm a football fan. There's a bill in the Congress, sponsored by, among others, Tom Cole, former college football player in your party, to force the Washington Redskins to change their name. Should they change their name?

PAUL RYAN: I think that should be up to them. I think we should stay out of it.

JOHN HARWOOD: Do you think the name should be changed?

PAUL RYAN: I haven't given it any thought.

JOHN HARWOOD: Come on. Every football fan has heard about that.

PAUL RYAN: I'm a Green Bay Packer's fan. They're not even in our conference. So I just haven't given it really much thought. I think we should focus on the problems facing this country that we have direct control over and let people in Washington and the team owners make that decision.

JOHN HARWOOD: Congressman, thanks for joining us.

PAUL RYAN: You bet, John. Take care.

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