Midway through one of the most productive--and polarizing--congressional sessions in history, House Speaker Newt Gingrich (R-Ga.) isn't slowing down. In a May 26 interview with BUSINESS WEEK, he outlined a vision of post-Welfare-State America. The GOP, Gingrich promised, would soon keep its pledge to balance the budget and cut taxes. He also vowed to revamp Medicare and complete a massive shift of power to the states. And then? He was coy: His coming New Hampshire visit, he allowed, could be to build support for his views, or it could be a scouting trip for a Presidential run. Excerpts:
Q: Some Republicans prefer to balance the budget, then cut taxes. You want to do both at once. What's your rationale?
A: It is politically impossible to sustain a balanced-budget coalition without cutting taxes. If we are the party that says to the average working American, "In seven years we might get around to a tax cut," and we're competing with a party that says, "What the hell, at least I'll give you something," then we will get beaten.
Q: That's politics. What's the economic case for cutting taxes?
A: First of all, unlike the Senate, we [in the House] are prepared to cut spending enough to pay for the tax cuts. Second, if you don't cut capital gains and create economic growth, you never get to a balanced budget. The third reason is that you want to send a signal that we are reestablishing the value of
Q: House Republicans propose to cut taxes by $353 billion and trim $1.4 trillion from spending over seven years. The Senate formula is $170 billion and $1 trillion. Will the two sides, plus President Clinton, get together and reconcile their differences?
A: [Clinton] is not in the room for reconciliation. The only way he can get in the room is to cross a watershed, and he won't look at the New Paradigm.
Q: What's your prediction of the key elements of a compromise tax bill?
A: I cannot imagine a bill coming out of conference without [a cut in] capital gains, a children's tax credit, an [IRA-type] savings account, and a tax credit for adoption.
Q: And the bottom line?
A: It might be $250 billion [in tax cuts over seven years] or a little more.
Q: You're assuming that the Senate, which has made tax relief con-
tingent on future spending reduc-
tions, really wants to cut taxes.
A: We're not adjourning this year without a tax cut. [Senate Majority Leader Bob] Dole has said there will be a tax cut. I trust Dole, and he will deliver. Period.
Q: Do you worry that taking $1 trillion of stimulus out of the economy might increase the risk of recession?
A: No. Politicians should quit trying to micromanage the economy. I could make an argument that if the market really does believe that we are going to balance the budget, the drop in long-term bond [rates] will more than offset the loss of fiscal stimulus.
Q: What if President Clinton vetoes some GOP bills, so you don't get $1 trillion in deficit reduction?
A: He can veto the rescission bill because it cuts spending. The appropriations bills--if you don't sign them, there is no government. Which of the two of us do you think would be more worried by that?
Q: So that's your strategy--provoke a showdown?
A: We have many strategies. One of them is to work with the President. If he'd like to be in the room, he can be in the room. Our second option is to say: "We'll pass the bills that we think are right." But the two most recent [White House] fiascos are like vaudeville. One, the President goes to New Hampshire and says: "I think we can balance the budget in 10 years." His staff says, "What?" and he repudiates what he said. You sit there and you want to cry. Second: The President sends his staff to talk to [Senate Appropriations Chairman Mark] Hatfield and [House Appropriations Chairman Bob] Livingston. The aides say, "There's one thing we'll veto [in the rescission package]: if you block us from implementing the Executive Order on striker replacement." They take it out. We all go to bed thinking we've met the veto request. We read in the Washington Post the next morning they're going to veto the rescission bill. That is just stupid. You say to yourself: "Why would you let them in the room?"
Q: Do you support the President in his trade showdown with Japan?
A: I'm refusing to disagree with the President when he is directly negotiating with the Japanese. After we get through, I'll comment in retrospect on how this was strategically handled.
Q: One tenet of your program is giving more authority to the states. What evidence do you have that the states are ready to assume this responsibility?
A: The states that have education departments with the most local autonomy consistently have the highest reading scores. Every analysis proves that
unionized big-city schools fail. For 40 years we have shifted money out of the classroom, hired more labor bureaucracy, and it's all garbage. You ought to be able to go through every bureaucracy and say: "If you don't prove you're more valuable than a teacher, you're gone."
Q: Yet some state officials still worry that they lack the resources to cope.
A: I don't know of a single successful downsizing CEO who would agree. They all say, "You will be astonished how much water there is in the system."
Q: Why isn't campaign-finance reform higher on your agenda?
A: In a country where children are dying of drug addiction, where children are illiterate, and we have huge problems with Medicaid and Medicare, I think the priorities are to restructure the underlying system. Eventually, we are going to get around to rethinking the campaign system. But I don't know when.
Q: Is there a way for government to redress the rise in income inequality?
A: Eliminate the welfare state. The largest single factor in the rise of inequality is the collapse of the educational system and the rise of anti-entrepreneurial, anti-property-acquiring rules and regulations, and anti-family, destructive rules, which collectively strip the poor of their chance to be true Americans.
Q: Are you concerned that Americans are more protectionist than they used to be?
A: They're not more protectionist, they're more scared. They believe the world economy is a fact. They just don't have a clue what we should do about it. The [Patrick] Buchanan wing of America is pretty narrow. It won't be if the economy decays radically. You could have a [French rightist politician Jean-Marie] Le Pen movement in this country if you have a bad economy and bad leadership.
Q: Would you support Buchanan if he were the GOP nominee?
A: I'm not entertaining that question.
Q: How do you explain the fact that at the same time you say your vision is taking hold, the President's popularity is rising?
A: It's true he has risen into the doldrums. But "strong" is Eisenhower, Reagan, Bush at 70%. I don't regard getting to 54% as terrifying. This is a President who always improves his ratings every time he hides.
Q: Why are your negatives so high?
A: It's very hard to be a successful revolutionary and not have a large number of people think the things you're doing are not appropriate. Combine with that the transition from being a very partisan Minority Whip to the leader of the House and a national figure. I had unrelentingly negative press. And then, I did some things very clumsily.
Q: Such as?
A: One was the $4 million book contract. If I had said from day one, "I can't consider that kind of contract, I'll take $1," we'd have had 90% less flak. And I should have not talked honestly to reporters on Election Night about my analysis of Clinton. It is not the job of the leader of the alternative party. And I probably shouldn't have done daily press briefings. Given the nature of the Washington press corps, they are inherently adversarial sessions.
Q: Is the current GOP field a strong group?
A: It's a field that's going to beat Clinton. Any of the major players could.
Q: Would it be easier to implement your vision if you were President?
A: Sure. If you waved a wand tomorrow morning--I think that would be cool. First of all, in the current competition for defining where we're going, I'm doing fine. You look at the last six months and tell me which of the two offices [the White House or the Speaker's office] has been more effective. I don't have a clue as to how you'd do what I do in terms of educational leadership, and as Speaker, and run for President at this point in my life.
Q: Do you foresee any circumstances under which you would run?
A: Sure. Seven million people show up Tuesday morning with a draft petition and beg me. Even Eisenhower came back from Paris. I don't have any compulsive urge to run for President.
Q: So why are you headed to New Hampshire on June 9?
A: There are two ways to look at this. One is that this is a good way to cover your bet. The other is, assume for a minute that I have no intention at all of running, that I really want to shape the debate. Where would you go to maximize the impact of what we're saying? Des Moines and Manchester.
Q: What is the most important thing you learned in your first months in power?
A: The key is leading the culture, not leading the government. Because if you change the direction of the entire dialogue, everything else falls in place behind it.
Q: What's the biggest risk to your agenda?
A: This is very, very hard. I worry that the number of smart things that we have to do simultaneously over the next year--and the number of dumb things we have to avoid--is so large that sheer exhaustion will break us.