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.com right 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.

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.