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GOP Debate: US Economy Can Grow With Less Government

Wednesday, 9 Nov 2011 | 9:41 PM ET

ROCHESTER, Mich. — Herman Cain swatted away character issues and the entire field of Republican presidential candidates railed against bailouts and pledged to shrink the size of government.

The eight hopefuls spent two hours stating their case on why they should lead the country and its economy and replace the incumbent Democrat.

GOP candidates debate
CNBC.com
GOP candidates debate

CNBC is moderating the debate at Oakland University, which is nestled in a tiny suburb that both supported President Obama in 2008 and, two years later, Republican Gov. Rick Snyder, who has waged war with the state's labor unions.

High unemployment and Europe on the brink set a daunting backdrop for a Republican presidential field without a clear leader.

The debate began not on the US, though, but on Europe, where first Greek's debt and now Italy's have called into question not merely those economies but also the standing of the US.

Worries over Italy help throttle the US financial markets Wednesday. But the candidates insisted that it wasn't the responsibility of the US bail out irresponsible European nations.

"My view is no, no, no. We do not need to step in and bail out banks in Europe or here in the U.S. that may have Italian debt," former Massachusetts Gov. Mitt Romney said.

Texas Rep. Ron Paul said the Italian debt needs to be liquidated, and further warned that the U.S. is on a similar path.

"If you prop it up you'll do exactly what we did in the Depression — prolong the agony," Paul said.

The debate was to focus on the economy, but allegations of sexual misconduct against Herman Cain have added a salacious element to the contest.

To hoots from the audience, Cain was asked to address the issue of whether he has a character problem that disqualifies him from being able to serve as president.

"The American people deserve better than someone being tried in the court of public opinion based on unfounded accusations," the former CEO of the Godfather's pizza chain.

Romney was asked to address the issue but declined.

The debate was relatively gaffe-free, with Texas Gov. Rick Perry providing the biggest oops moment: He said there were three Cabinet departments he wanted to get rid of but could only name two.

The candidates universally deplored the bailouts that came about after the 2008 financial crisis and said they would not occur under their watches. They also bemoaned the state of the debt and deficits that have helped hamstring economic growth.

Former House Speaker Newt Gingrich took particular aim at the Federal Reserve.

Fed Chairman "Ben Bernanke is a large part of the problem and ought to be fired as rapidly as possible," he said.

Such stringent remedies were in abundance.

Minnesota Rep. Michelle Bachmann said she would repeal the Dodd-Frank banking regulation bill, legislation that was a favorite target for the candidates. Former Pennsylvania Sen. Rick Santorum said he would repeal every regulatory measure the Obama administration has imposed over the past three years.

"Taxes lead to jobs leaving the country. All you need to know is we have the second-highest corporate tax rate in the world," Bachmann said. "Our biggest problem right now is our regulatory burden. The biggest regulatory problem we have is Obamacare and Dodd-Frank. I will repeal those bills."

Perry articulated the no-bailout movement among the party.

"We are not going to pick winners and losers...We're going to trust the capital markets and the private sector," he said. "If you are too big to fail, you are too big."

Candidates on stage at the CNBC GOP candidates debate.
CNBC.com
Candidates on stage at the CNBC GOP candidates debate.

On health care, the candidates advocated a market-based approach with some pushing for the government to allow tax-free medical savings accounts.

Asked to answer in 30 seconds how he would fix the health care system, Gingrich berated the debate moderators as he has done at several other debates for providing a short time frame for such a complicated issue.

On housing, the answers stuck to a narrative of shrinking or eliminating Fannie Mae and Freddie Mac, the two government-sponsored entities that backstop a majority of mortgages.

"In the long run, you want to see housing come back, the economy has to come back," Gingrich said.

Paul advocated the same approach for housing as he did for education and health care — get government out of the way.

"When the government gets involved in the delivery of any service, whether it's education, medical care or housing, they cause higher prices, lower quality, they create bubbles and give us this mess that we're in," he said.

Utah Gov. Jon Hutsman was perhaps the most populist in the crowd, saying he understands protests such as Occupy Wall Street, which have organized across the country to deplore corporate greed and bailouts.

"I don't like the anti-capitalism message but I do agree that this country is never again going to bail out corporations," he said. "So long as we have banks too big to fail we are setting ourselves up for long-term disaster and failure."

Asked, though, to answer a question on whether the government and Federal Reserve need to unwind their positions in the Treasury and mortgage markets, Huntsman wound his way through an answer that ended up trumping the flat tax he implemented in his home state.

Big Choice for Voters

The GOP race thus far has amounted to a carousel of flavors-of-the-week, with voters unsure whether to pick quick-witted businessmen, dapper ex-governors or darlings of the tea party right.

Romney said picking the right candidate is important to defeat a president who cares more about his political aspirations than getting the country on the right track.

"What we have now is a president who unfortunately is driven by one thing — his re-election," Romney said. "It's unbelievable that we have a crisis going on in America like we have and we have a president who is only focused on getting re-elected."

Candidates on stage at the CNBC GOP Debate.
Photo: Rick Osentoski for CNBC.com
Candidates on stage at the CNBC GOP Debate.

Among the students on campus here, there was high anticipation and anxiety over what the Republicans can tell them about their future, which includes questions over the economy at home and abroad, where European debt turmoilserves as a daily reminder about how uncertain conditions are ahead.

Each candidate has asserted superiority on that area, but their plans have several common denominators.

Simplifying the tax code and broadening the tax base — getting more people to pay — has been the cornerstone, with many advocating a flat tax that eliminates the legion of loopholes that has made generating revenue an increasingly difficult proposition for the debt-laden federal government.

Cain, who joins Romney atop the field in most polls, has managed to capture the attention of many Republican voters in this regard.

His 9-9-9 tax plan — which opponents deride as sounding like a special on the pizzas Cain's former company, Godfather's, makes — would implement an across-the-board levy on sales, income and business revenues.

The plan's benefits are that it simplifies the system and tosses aside most of the tax code's byzantine structure that allows the rich to avoid paying their fair share.

Critics, though, suggest that 9-9-9 actually would raise taxes on poor people. His most severe detractors allege that Cain himself doesn't fully understand how the plan works.

He pledged that the numbers in his plan would not escalate should politicians decide they need more money to run government.

"Tax codes do not raise taxes, politicians do. The people will hold the politicians' feet to the fire," Cain said to applause. "Because the approach 9-9-9 will be very visible, the American people are going to hold the rates at 9."

Mitt Romney at the CNBC GOP candidates debate.
CNBC.com
Mitt Romney at the CNBC GOP candidates debate.

Perry, too, has proposed a flat tax, but his plan has met with skeptics over the option for taxpayers to choose his plan or stick with the old tax code.

One of the other main topics is how to cope with the nation's $15 trillion debt and $1.3 trillion debt while trying to help an economy that grew at just 2 percent in the last quarter.

Raising taxes is anathema, though, to the Republican base, so the candidates have tried to sell their tax plans as both growth-friendly and less burdensome on those suffering most during the downturn.

"We're looking for a person to win this nomination and show a consolidated, reliable resolve to reduce and focus on a small government, on the essential task of government while engaging in the policies that encourage growth in the private sector," Dick Armey, former House Republican majority leader and tea party organizer, told CNBC.

Voters have been fickle about whom they see as most able to accomplish those goals.

Polling in recent weeks showed a two-man matchup between Cain and Romney.

Perry's position has been the most volatile.

He declared his candidacy on Aug. 13 and vaulted to the status of immediate front-runner, but has seen his fortunes slip during Cain's emergence. Cain's primary weakness has been debates just such as these, where he has had difficulty displaying the vision and charm he uses to sway crowds along the campaign trail.

The candidates also teed off on China, with Romney blasting "cheaters like China" and both he and Gingrich saying the U.S. needs to impose penalties even if it risks a trade way.

Huntsman — the former ambassador to China under Obama — said that would be a mistake.

"We've had a 40-year relationship with China. It is a troublesome and problematic relationship, very complicated," he said. "You can throw out applause lines and say that you're going to slap on tariffs. That doesn't work."