Charlie Rose Talks to Paul Ryan

Tell me about this road map and why you felt you had to write it.
We are walking off a fiscal cliff. We will have our own debt crisis, and the social safety net will shred itself. My plan says nothing changes for anybody 55 and above. So if you are in retirement, on Medicare or Social Security, or 10 years away from retiring, if we act now, we can guarantee your benefits. But if you are 54 and below, you already know these programs won't be the same.

People say the urgent problem is unemployment. The constant one is the deficit. But dealing with unemployment adds to the deficit.
I would actually argue that one of the best things to do for the economy now is to show that we're getting the debt situation fixed. That will help unlock uncertainty in the economy. It will help us take pressure off our currency and stabilize interest rates.

But are you prepared to spend money for stimulus in order to do something about unemployment?
I don't subscribe to the typical Keynesian doctrine that you need to borrow and spend money to create jobs. We borrowed and spent $1.1 trillion when you add interest costs to the stimulus, and we've lost 2.6 million jobs since that legislation passed. I would argue that the reason jobs aren't materializing is because government is producing so much uncertainty. We have a debt crisis right around the corner, plus new regulations that are causing businesses to sit on capital and not hire employees.

Stimulus doesn't work?
There are better ideas that would help create jobs, such as keeping our tax rates low, reducing spending, and showing we are serious about our debt situation. That and more regulatory certainty would help us unlock private capital.

There's regulatory certainty now that we have financial reform.
There are over 500 regulations that will come out of this new law that haven't been promulgated yet. We have a new health-care law, and many businesses don't really know what the consequences are. So the government has done a lot lately that is having a chilling effect on businesses. When I talk with businesses big and small, I get the same question every time: What is the government going to do to me next? What I really worry about is this class-warfare rhetoric we're getting from the White House and from others that is pitting people against each other, using the election-year moment to tap into the emotions of fear and envy. Those might make for good short-term politics. They make for rotten economics.

What would you do about taxes?
I give people an option. Do you want the current system with its bells and whistles, or do you want a postcard-type tax return, two rates—with none of the loopholes and deductions—10 percent on the first $100,000 for couples, 25 percent after that? Generous personal and standard deductions such that a family of four earning $39,000 would not pay tax until after that amount. For businesses, I would repeal corporate income taxes.

No itemized deductions, which the rich have been able to use better than the poor?
That's right. That is who gets these itemized deductions. It's the people in the top tax brackets that can manipulate their tax code to pay lower taxes. I would replace the corporate income tax with an 8.5 percent consumption tax. Our tax rates matter a great deal. We're pushing money and companies overseas because of our tax code.

What will happen in the midterms?
The other side has more money and a lot of muscle. And so we as Republicans should not start measuring the drapes. What I see happening not just in this election but also in 2012 is a political realignment. The only real question is, which way is it going? Right now it is very much going to the left of center. We're not playing small ball anymore. We are talking about what this country is going to be in the 21st century.

Is the Tea Party a threat to the Republican Party?
If we violate our principles in office in the next two years, then it more or less creates a third party [in 2012]—a Ross Perot kind of a phenomenon, and that will reelect this Administration.

How many Republicans have signed on to the road map?
I jumped into the pool of entitlement and economic reform hoping other people would jump in with me. So far I'm swimming around by myself.

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