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Government Gone Wild: One-on-One with Paul Ryan

Here's my interview last night on the huge spending mess and budget battle taking place in Washington with House Budget Chairman Paul Ryan of Wisconsin. I was very impressed with Congressman Ryan.

LARRY KUDLOW, host:

Now there's a story raging on cnbc.comright now that is telling the truth about government handouts, Social Security, Medicare, unemployment insurance. It makes up more than a third of total wages and salaries of the US population, a third of what you earn. It's a record figure that will only increase if nothing is done to stop it. The Senate is going to vote in the morning on the Republican plan to cut $61 billion. The Dems say they have a better plan, a piddling six billion. The sparring over spending, however, appears to be getting us nowhere.

So here now we are honored to have House Budget Committee Chairman Paul Ryan, Republican of Wisconsin.

Mr. Ryan, you are very kind. I know you are a very busy person. I just want to ask you this, the public is seething over this out of control budget spending and borrowing and deficits and the rest of it. Seething. Now why is it--I hear it from Jeff Sessions, Eric Cantor's press conference today, you have said it. It seems like the Republican position now, since you can't get your budget cuts through, is to do everything to avoid a shutdown. Is that the case? And why?

Representative PAUL RYAN: It's not to do everything to avoid a cut--shutdown. It's to get these lower spending levels. Look, we want spending cuts and we're basically saying, `If a shutdown occurs, it is because the president and Harry Reid don't want to do any spending cuts.' This on top of the fact they increased discretionary spending on domestic government agencies by 24 percent. You throw a stimulus on top, it was 84 percent. A blowout of spending that occurred. And so what they're trying to do is lock those numbers in, those high levels for five years. And so if they could--if the government is shut down, it's because they are unwilling to bring back those massive spending increases, double-, triple-digit increases at the government agencies. And we want to see the cuts. We want to go back to normalcy. They don't. And if--and if there is s shutdown, that's why.

KUDLOW: All right. So, OK, fine, you phrased it differently and that sounds more interesting to me.

Rep. RYAN: Good.

KUDLOW: Look, at this--at this moment, what are the odds that you'll get you'll $61 billion budget cut with the Democrats at, I don't know, six, seven, eight, $9 billion? And the White House doesn't even have plan. Eric Cantor blasted them today, saying they don't even have a plan. The--your majority leader. What's the odds, Paul, that this is going to happen.

Rep. RYAN: I don't know what the final number is going to be, Larry. But I do know this, it's not going to be 2010 levels. We're already now below 2010 levels. We already cut four billion in the current two week cycle we're in below the 2010 levels that the president swore he was going to maintain. So we're already going in the right direction. We've already gone below President Obama's spending floor that he tried to put in his budget. So as far as I'm concerned, we're going in the right direction. Are we going to get all the way to 61 billion? I don't know. But we are showing that we are not going to accept those elevated 2010 spending levels. The president has already gone below that. The question is, how much farther do we go? And that's what we're debating over.

KUDLOW: All right, let me ask you this. I think that the public, ordinary citizens and so forth--I hear this on my radio show all the time. You know, they see gasoline prices jumping to $3.50.

Rep. RYAN: Right.

KUDLOW: Maybe on the way to four, maybe on the way higher. They're real worried about that. They're still...

Rep. RYAN: I paid 3.67 today.

KUDLOW: All right. They're still worried about their paychecks. They're worried about jobs. Tell us how this budget battle affects jobs and growth, which I think has still got to be the end game.

Rep. RYAN: It is.

KUDLOW: Growth, growth, growth.

Rep. RYAN: Our end game, Larry--and you'll see this in our budget--is economic growth, is job creation, is prosperity. Today's really big deficits simply translate to tomorrow's big tax increases and interest rate increases. Our fiscal policy is on a collision course with our monetary policy and our tax policy. So the more government borrows and spends and prints today, the more businesses will pay for it tomorrow and the less economic growth we will have. Getting these deficits and debt under control today means more jobs and economic growth today. We want tax reform. We want budget reform. We want government to live within its means so that the entrepreneurial economy can take off.

So look, we're talking about $61 billion out of a $3.8 trillion budget. We have a $1.6 trillion deficit this year alone. And so when we keep borrowing all of this money, Larry, we are simply saying we're going to pay higher taxes tomorrow, higher interest rates tomorrow.

KUDLOW: All right, that's a key point. I don't hear Republicans making that point the way you just did.

Rep. RYAN: I say it every single day.

KUDLOW: A higher spending and greater deficits guarantees humongous tax hikes.

Rep. RYAN: Absolutely.

KUDLOW: Which will sink this economy if we don't get it through. What...

Rep. RYAN: Higher tax rates loose--and don't forget the monetary policy angle of this.

KUDLOW: Right.

Rep. RYAN: We're going to have an interest rate problem, as well.

KUDLOW: All right. That's a great message. Now final point in our limited time. There are going to be some entitlement proposals in your 2012 budget.

Rep. RYAN: Mm-hmm. That's right.

KUDLOW: If we ever get to the 2012 budget.

Rep. RYAN: Right.

'HOW FAR ARE YOU GOING TO GO?"

KUDLOW: Now how far are you going to go? You have been a great leader. You have been willing to say things that most people shy away from. You're not afraid to touch this story. On the other hand, you may be alone in Washington DC. What are you going to say, Paul Ryan, on the entitlement fix?

Rep. RYAN: Well, I'm not going to be alone come April. April is when we put our budget out, and we will propose fixes to our fundamental entitlement problems. We will attack the drivers of the US debt and we will put in place a plan that gets growth back in the economy by getting this debt under control. So, yes, we will tackle the big drivers of our debt. Those are our health care entitlements. We're going to offer reforms that are prospective. And the point we make, Larry, is we can have prosperity and not austerity if we go now. The changes we're going to propose do not affect people in a near retirement. They're for prospective generations, but it's a plan to keep our taxes low, our interest rates stabilized, and get our debt taken care of and our deficit taken care of.

KUDLOW: Are you talking...

Rep. RYAN: That's a plan for prosperity.

KUDLOW: All right, Mr. Chairman, are you talking about benefit cuts? That's a tough sell. You may be right.

Rep. RYAN: So...

KUDLOW: But are you talking about benefit cuts?

Rep. RYAN: It's very clear that these entitlements are growing themselves into bankruptcy, that they are going bankrupt. So we need to reform these entitlements going forward so that they're sustainable. So what we're going to do is propose plans that reform these entitlement programs that prevent people in and near retirement from any kinds of changes, and reforms for the next generation, my generation, you know, the X generation on down, so that we actually have these benefits for us when we retire.

KUDLOW: But, Paul...

Rep. RYAN: Right now nobody in my generation thinks they're going to get

these benefits.

KUDLOW: I...

Rep. RYAN: We're going to fix these things, and it will change the way the benefits operate. You'll see all the details, Larry, when we bring our budget out in April.

KUDLOW: All right. I want to see--I'm dying to see it. But what do you say to supply siders and others who argue--regarding Social Security, not health care--if you grow the economy in the next 50 years at 3 1/2 percent per year, which is the long-term growth since World War II, then Social Security will fix itself?

Rep. RYAN: No, it doesn't.

KUDLOW: Now that doesn't mean we shouldn't have personal account option and so forth, but that's what they argue. If you grow the economy, growth, growth, growth, then we don't have to slash benefits and the Republican Party will look better, not worse.

Rep. RYAN: Except, first of all, nobody is talking about slashing benefits. We're not even talking about touching benefits for people in and near retirement. But we've run those numbers on growth and Social Security and they don't catch up, because when you have more growth and you have more Social Security contributions, you have more expenses. The more you pay in, the more you get out. So growth, you cannot grow yourself out of our Social Security solvency problem. I've run those numbers with the actuaries. You do need to make some changes in Social Security benefit for the future generations to make this program solvent.

KUDLOW: But the actuaries say you can only grow at 2 percent for the next 50 years.

Rep. RYAN: No. But even if you run bigger growth numbers through the system, you still don't fix the problem. I've run those numbers. I've run the 3 and 3 1/2 percent growth numbers through the system. We are kidding ourselves if we think we can simply grow ourselves out of our entitlement problems. We can't. We have an $88.6 trillion unfunded liability with our entitlement programs, according to the GAO. Last year that was a $76.4 trillion problem. Every year we delay fixing these entitlement programs. We go about $10 trillion deeper into our unfunded liabilities.

KUDLOW: All right. I got to get out.

Rep. RYAN: We got to fix this stuff and we got to have pro-growth economics to help us do that.

KUDLOW: Right. I need to spend a solid hour with you on the air to walk through this, but it's great stuff. You're fascinating.

Rep. RYAN: All right.

KUDLOW: It's great. Look, I wish you all the best in the world. You're wonderful to come back on the program. House Budget Chairman Paul Ryan of Wisconsin.

Questions? Comments, send your emails to: lkudlow@kudlow.com

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