Republican Presidential candidate Mitt Romney at an 'Ask Mitt Anything' luncheon at the Raccoon Bend Golf Club in Jefferson, Iowa.
A successful private-equity investor before he became governor of Massachusetts, presidential hopeful Mitt Romney claims a special expertise when it comes to economic issues. Business Editor James Pethokoukis chatted with Romney by phone yesterday evening as the candidate campaigned in New Hampshire.
Since the Civil War, every presidential election with a recession has meant defeat for the incumbent party. If nominated, can you win in 2008 if we have an economic downturn?
I actually think that in a setting like we have—where we face real competitive challenges, particularly from Asia and the weakened dollar and high energy prices—that people are going to want someone who understands how the economy works, someone who understands what drives employment, what brings good jobs and what scares jobs away. And so far as I know, I'm the only candidate whose almost entire career was in the private sector, who has done business in well over 20 countries around the world, and I think Americans are going to want somebody who understands the economy.
Why so much economic angst out there? Some blame perceived rising income inequality.
Well, clearly the subprime mortgage crisis and its spread to the overall credit market has spooked the stock market and is being widely reported, and some people have concerns. And there's no question that the media shapes a good deal of public perception, and there is nothing that sells like fright. Clearly, those things affect the national mood.... I also think what's important is that people see rising prospects for their own future. I hope that we as a people are most concerned about whether we are doing better than whether someone else is doing better than us.
How can we make America more innovative and competitive?
I think there are a number of things we need to do to make ourselves more competitive. One, lower the corporate tax rate. As you know, we and Japan have the highest corporate taxes in the world. Two, provide regulatory relief. Regulations grow like weeds, so you got to get a weed whacker and regularly pull them out. We need national tort reform. Last year American corporations spent more money on tort claims than they spent on R&D, and that is unacceptable. We have to strengthen our education system, particularly in math and science. We are falling behind the world. We need to invest in science and technology in our country—and I am talking not only private-sector but also public-sector investment in basic science. We are going to have to make investments in infrastructure because we are becoming an expensive place to do business. We are going to have to get ourselves independent of foreign oil, and that's going to require a substantial investment.
By "investment," you mean "spending." In the past you have mentioned an "Apollo Project" for energy independence. The original Apollo program cost $100 billion. What will yours cost?
I wish we could become energy independent for only $100 billion. But energy independence is going to take a long-term commitment and the public and private investment which will most likely be quite substantial, but the return will be even more substantial. We send over a billion dollars a day out of our country to buy oil and energy from other countries. Building nuclear power plants, developing carbon sequestration, liquefied coal, or gasified coal will be the more expensive efforts, but the payback is enormous.
Can government successfully invest billions of dollars?
The answer is no. The government should not be picking winners and losers. The government should not be getting behind companies and say[ing] "we are going to play venture capitalist." Venture capital is a tough industry. I know. I've been in it, and I wasn't perfect either. And government doesn't play that role. But in basic science, we invest $50 billion a year in healthcare research. The total investment that we have been able to come up with on new technologies for energy efficiency or energy production is roughly $4 billion a year, and we send a billion dollars a day outside the country.
Would implementing Mike Huckabee's "fair tax" idea be better than our current system?
Before I would jettison our current system—which of course needs fundamental reform—I would want to have a thorough and complete vetting of new tax proposals, and that should be done by professionals and not by politicians. But I noted that the Wall Street Journal concluded that the fair tax would cause an increase in the tax burden that the middle class would pay. That's not a good idea. They may be wrong, but we surely need to determine where the tax burden would fall before we put in place a new plan. And by the way, the fair tax has a lot going for it. It gets rid of embedded taxes, the unfair tax treatment we get in foreign competition. It gets rid of the IRS. There are some great features about a consumption tax, but let's also recognize that the supporters of the fair tax want a constitutional amendment banning any other tax, and those things take a long time, so let's move with something immediate if we can.
Private consultants will tell you that the key to innovation is subjecting America to as much competition, such as through light regulation and free trade, as possible. You buy that?
I know that our Democratic friends are 180 degrees off on this front. It's really sad, but none of the leaders on the Democratic side and almost no one on our side has any significant experience in the private sector, and that's why I began with regulatory relief.... And you really have no choice but to compete with the world. I realize that with the [World Trade Organization] there are many features that are not advantageous to us. It doesn't deal with manipulation of currencies as it should. It doesn't deal with protection of intellectual property as it should. We're treated unfairly relative to people with a value added tax. And so we are going to have to establish either better rules at the WTO or launch what I call a Reagan Zone of Economic Freedom, invite other countries to trade with us, but they are going to have to abide by high standards and enforcement.
What about making Social Security solvent by linking future benefit increases to inflation rather than wages?
The idea has merit if you apply that lower inflation rate to the benefits of high-income individuals. I think it would be a mistake, as Fred Thompson has proposed, to do that for all Social Security recipients. People at the low end of the income scale would find it difficult to live on the sharp benefit reduction that a lower inflator would lead to. This is [finance executive] Bob Pozen's plan, to use the [consumer price index] inflation for higher-income people and the wage inflator for lower-income people. And that's something which has some merit.
The economy has been booming almost uninterrupted for a quarter century. How do we keep it going for another 25 years?
Keep our taxes down and our spending down.... Deregulate, deregulate, deregulate. Invest in technology, and sharply improve the standards in our schools.
