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TRANSCRIPT

Interview with Curtis Dubay by Roger Aronoff

The “Take AIM” show on BlogTalkRadio, August 4, 2011.

ROGER ARONOFF: Good morning, and welcome to Take AIM, Accuracy in Media’s weekly talk show on BlogTalkRadio.  AIM is America’s original media watchdog, and every week we point out biased coverage and bring you the stories the mainstream media ignore.  I’m Roger Aronoff, the Editor of Accuracy in Media and The AIM Report, which you can subscribe to by visiting our website, aim.org.  You can also sign up for our daily E-mails there, and we hope you’ll come and visit often!  Our guest today is Curtis Dubay, a Senior Policy Analyst at the Heritage Foundation.  He’s going to walk us through the debt ceiling debacle and explain what the final compromise means for taxpayers.  Good morning, Curtis—we’re pleased to have you with us today on Take AIM.

CURTIS DUBAY: It’s a pleasure to be here.  Thank you for having me.

ARONOFF: Great!  Before we get started, I want to tell our listeners a little more about your background and your professional experience.  Curtis joined the Heritage Foundation as a Policy Analyst in November 2008.  Before that, he served as Senior Economist for the Tax Foundation, where he authored three widely recognized and cited reports.  He’s done extensive research on the details of a wide range of taxes, has been a guest on Fox News, and has been quoted by The Wall Street Journal and Forbes.  He previously worked for PricewaterhouseCoopers, and received his master’s degree in economics from the University of Connecticut.  So, this week, Congress came to terms on resolving the debt ceiling crisis and conservatives are quite divided over the outcome.  Some feel this was a victory of some degree for the GOP and the Tea Party because it didn’t include new revenues, and it now, and probably in the future, linked raising the debt ceiling with cutting the budget by an equal amount.  But are these cuts real?  Others on the Right believe that the GOP played right into the hands of Obama and the Democrats by taking part ownership of the economy, and by allowing Obama and the Democrats to avoid another debt ceiling vote before the 2012 election.  Just a couple of little things, Curtis, before we get into that.  Tell us your path.  How did you decide to become an economist?

DUBAY: I don’t think it was a conscious decision at any point.  I majored in economics in college, and I was pretty good at it, so I went to graduate school to further pursue it, and then I found a job with, like you were talking about, the Tax Foundation, doing the economics of tax policy.  So it just kind of evolved over time.

ARONOFF: Okay.  Economics is often presented as scientific, or at least as a social science—in other words, if you do x and y, then z will occur.  But isn’t it true that it’s really difficult separating economics from politics?  In other words, John Kenneth Galbraith and Milton Friedman—two iconic economists from recent generations—were both very high-profile, but they couldn’t be farther apart on the causes of economic problems in our society, and the best solutions to solve them.  How do you reconcile that, the political aspect of economics?

DUBAY: Here at the Heritage Foundation, we separate them, because we’re not a political organization, we’re a policy organization.  Our goal is to advance conservative policies.  Obviously we have to work within the frame of what is politically doable in the current environment, but we try not to blur those lines.  But, of course, in the larger debate, it becomes impossible [not] to blur those lines, because you end up having economists on one side—on the Left, it’s usually popularized by Paul Krugman, and then on the Right you have other well-known economists, guys like Greg Mankiw, or John Taylor out at Stanford, Glenn Hubbard—so it just becomes impossible to separate it out.  But you tend to know where people stand.  You know the Right-leaning economists, you know the Left-leaning economists, so you can evaluate what they say based on that.

ARONOFF: Okay.  There were reports this morning that we’ve now used [up] this new debt ceiling limit, and our total national debt is now equal to our GDP, our gross domestic product.  What is the significance of our debt equaling our GDP?  What happens when, say, it becomes 150% of GDP?

DUBAY: It’s a troubling number.  Usually once a nation gets that level of debt, they start to encounter major problems.  The international credit markets start doubting whether that country ever has an intention to pay that money back.  We’re certainly treading into dangerous territory, and that’s why the Heritage Foundation thinks that we missed a major opportunity in raising the debt ceiling by not cutting more, and by not putting together a plan that actually gets at the root cause of our debt problem, which is overspending, mainly by our entitlement programs—Social Security, Medicare, Medicaid.

ARONOFF: Who, in your opinion, are the winners and losers in the debt ceiling battle that took place, and the compromise that was arrived at?  Who were the winners and losers this week?

DUBAY: I don’t think there are any winners.  There aren’t any winners any time you take a debt limit that’s already over $14 trillion and increase it by over $2 trillion.  The losers are the American people and the U.S. economy.  Once again, we’ve kicked the can and missed an opportunity to fundamentally fix what is wrong with our government finances—which, again, is our runaway spending, mostly on entitlement programs.

ARONOFF: Okay.  Tell us about the entitlement programs.  I think most people, if not everyone, agree that we really need to reform them, tackle them if we really want to get this problem under control.  What would be the reforms that you would propose, that you think would be good ones?  What is politically feasible?

DUBAY: The Heritage Foundation has actually put together a plan, put it down on paper, unlike some folks here in Washington.  We call our plan “Saving the American Dream.”  It’s a comprehensive fiscal program.  It was part of a larger project by the Peterson Foundation.  The Peterson Foundation asked six think tanks here in D.C.—two on the Left, two in the center, two on the Right—to come up with their plan for fixing government spending and the government’s budget.  As part of our plan, we balanced the budget in ten years, kept it balanced in perpetuity, and we did it without raising taxes one dime.  We were able to do that because we do reform Social Security and Medicare and Medicaid to make them more affordable, to make sure they’re going to be available to future generations.  Unlike some of the political programs that have been put out, we do not exempt current seniors.  We change those programs in the near future, because they’re simply unaffordable in the future, and they’re unaffordable right now.  What we do is, we take Social Security and Medicare and we turn them into what they were originally conceived to be, which are insurance programs for seniors who need them most.  Right now, Social Security and Medicare are open-ended entitlements for any senior old enough to qualify.  Instead of that system, we say, “No, we’re only going to give Social Security benefits to those who need it most.”  It’s called “means-testing.”  We’re going to phase out benefits for wealthier seniors.  When we say this, we’re talking pretty wealthy seniors—seniors who have about $170,000 of income a year.  That’s when the phase-out begins.  So we’re not hitting low and middle-income seniors—in fact, we’re increasing the average benefit that they receive, compared to the current system.  On Medicare, we do something very similar to what Paul Ryan proposed, which is premium support.  We would give seniors a certain amount of money to go into the Medicare market and purchase the plan that best fits their lifestyle, their health, and their budgets.  We would reduce that benefit for seniors as they earn more and more income—again, very, very wealthy seniors.  The purpose of this plan is twofold.  One, it fixes government finances, and, second, it changes the entitlement mentality, that we’re going to provide for everyone once they reach a certain age level.  These programs were originally provided to be social safety nets, to be insurance programs to help keep seniors out of poverty, and that’s what we intend to bring them back to.

ARONOFF: Sounds like you want to throw Grandma over the cliff!

DUBAY: I don’t think—

ARONOFF: You don’t want Grandma to have health care, is that it?

DUBAY: I don’t think anything I said just now intimates that Grandma’s going over the cliff.  As long as Grandma doesn’t have a particularly high income—about $170,000 a year—she’s going to get, probably, a Social Security check that’s bigger than she gets now, and she’s going to get better health care—health care more tailored to her than it is today.  She’s going to be able to go into the market and pick the plan that best fits her needs.  Instead of the health providers, the doctors and the hospitals, being beholden to the government, those doctors and providers will be beholden to Grandma, and the insurance companies will be beholden to her as well.  She’s going to get much improved service.

ARONOFF: We talk about this $14.7 trillion debt that we have, and now, as of today, it’s up closer to $17 trillion.  But what if you factor in the unfunded liabilities of Medicare, Medicaid, and Social Security?  I’ve heard figures like $100 trillion—I’m not sure how far that goes out—and $30 trillion.  What are the figures?

DUBAY: I don’t have them off the top of my head, but they’re tens of trillions of dollars.

ARONOFF: Okay.

DUBAY: I think Social Security alone is $40 trillion, and Medicare is much bigger than that.  These programs have such huge unfunded liabilities for a couple of reasons.  First, we’ve been sold a bill of goods for 70 years now.  You talk to older people, they say “Don’t touch my Social Security—I paid in, I get out!”  They assume there’s some account here in Washington, that the government’s been keeping track of how much money they’ve been sending in, and then [the government is] going to pay them out of that account.  That’s not how it works.  Current taxes pay for current beneficiaries’ benefits.  So retirees today are getting paid out of the taxes we pay today.  It’s a pay-as-you-go program.  Second of all, these programs were built on the assumption of twentieth century demographics.  They’re basically twentieth century welfare programs that can’t hack it in the 21^st century.  Back in the 1950s and 1960s, there were five workers for every retiree receiving benefits.  Today, there are only three workers for every retiree, and in just a few short years it’s going to be two-to-one.  There just aren’t enough workers paying into the system to pay the benefits for retirees.  It just can’t be done.  We’re seeing how this plays out, the collapse of the welfare state, in Greece and in other European countries.  In a lot of ways, we should be thankful for them.  They’re showing us our future.  It used to be that our future was far enough down the line that we could keep kicking the can, but the current recession and the enormous spending binge that President Obama has engaged in has brought the future to today.  We don’t have the time anymore to wait.  These programs need to be reformed now so we don’t experience our own Greek future.

ARONOFF: Do you see any political will to do that?

DUBAY: I see some in Congress willing to lead.  I see Paul Ryan, Chairman of the House Budget Committee, put together a budget that begins to tackle those problems.  I see the House of Representatives, led by Republicans, voting on a budget that would begin to turn back the welfare state and turn it into more affordable and effective programs going forward.  But I don’t see a whole lot of leadership outside of the House of Representatives.  I see a President who wants to punt these issues to his second term, assuming he gets one.  No one knows what his plan is.  I know what his plan is for Medicare—it’s to ration, through his Independent Payment Advisory Board, IPAB—which was passed as part of Obamacare—basically, restrict the amount of services that seniors can get through Medicare, and restrict how much the government will pay for the services that it does pay for.  I don’t know what his plan is for Social Security.  I believe it’s just to raise taxes—basically, uncap the Social Security tax.  Even that doesn’t get us close to making Social Security actuarially sound going forward.  So he’s going to hide his plan, he’s not going to talk about his plan—because he doesn’t have one.  All the while, every day, we wait, it gets harder and harder to fix these plans, and we get closer and closer to bankruptcy.

ARONOFF: While watching this recent debt ceiling debate, and the crisis mode we were all in, I wrote about the media coverage.  A couple of things that really stood out to me as just being really bad—how they kept talking about, and had up on the screen the whole time, “Four Days to Default, Six Days”—they had the hours and seconds, even—“to Default,” and the point is, we weren’t going to default.  Obama could have taken that off the table at any time by saying, “Look: Let me calm the markets.  It’s only going to cost $29 billion in August, and we will pay that debt to make sure we don’t default.”  The other one was this notion that even just this past Monday, when he came and spoke on prime time, he said, “We’re going to reduce the deficit by $4 trillion.”  The deficit is one year—it has a very specific meaning, but people, throughout this whole debate, kept using “deficit” and “debt” almost interchangeably.  I’d just like to get your reaction—am I right on those things?

DUBAY: Right. The deficit is a one-year figure.  It’s the one-year difference between how much the government collects in taxes, and how much it spends.  Debt is the accumulation of our deficits over the history of our country.  You can’t use them interchangeably.  They are different things.  But, I would assume what the President was saying is “Reduce accumulated deficits over a ten year window”—although, see here we use a ten-year window, a ten-year budget window, but the President has changed that to twelve years.  So you have to be careful!  His window is not the basic window that we use here to evaluate spending programs.

ARONOFF: Right—which brings up another point, which is, they talk about “cutting,” whether you’re talking deficits or debt, accumulated deficits or total debt.  Nothing is really being cut.  The only thing that’s cut—from what?  From these projections that have been made, that they don’t have to keep because there’s supposed to be a new budget each year that’s going to basically overrule what those ten year projections were.  So when they talk about “cutting,” you look at how the spending keeps going up and deficits keep adding up, and the debt keeps adding up—to an estimated $7 trillion over the next ten years, and that assumes, like, a 4% growth rate, and it also assumes these Bush taxes cuts are going to end.  The whole thing is such smoke and mirrors.  Do you agree with that?   How do you see it?

DUBAY: Oh, absolutely.  That’s just how we do things here.  It’s a ten-year window where the Congressional Budget Office estimates what spending will be over the next ten years, and a “cut” is actually a reduction of increases that the Congressional Budget Office anticipates.  It’s basically, they anticipate that spending will grow at some rate over the next ten years, and if we reduce that rate of growth, that is a “cut.”  So, yes—I don’t know the numbers exactly for the next fiscal year.  It will be interesting to see, because we’re about to start a new fiscal year in October, October 1^st.  We’ve heard about a cutting in the continuing resolution for the budget for this year and part of this debt deal.  It’ll be interesting to see.  It’s possible that we will actually spend more, in absolute dollar amounts, next fiscal year than this year, and Washington will still say it “cut spending.”  I think that’s an important thing that happened as part of this debt ceiling debate is that—especially—the Tea Party folks have kind of been illuminated to these baseline budgeting shenanigans that go on here in Washington, where a “cut” is basically a reduction in growth, not an actual cut.  I think maybe we’re starting to see the beginning of the end of baseline budgeting.  It’s something that is long overdue to go away, because it makes it very difficult for us to actually have real reductions in government spending.

ARONOFF: Well, let’s talk about that a little more.  I don’t know if the figure is about 8% a year that it automatically goes up, and that’s supposedly because of population increase and cost of living, I guess, that sort of thing—so that it’s automatically built in—but the fact that the Democrats have not passed a budget since April of 2009, and we just lived on continuing resolutions—do these continuing resolutions take the baseline increases into consideration?  Do they add those increases as well?  And what about this not passing a budget for over two years?  Is that unprecedented?  Irresponsible?  How do you view that?

DUBAY: Well, not passing a budget is an abdication of their Constitutional responsibility.  It’s a complete and utter breakdown in the Senate.  They’re required to pass one, and they just haven’t done it.  It’s stunning that, in this day and age, when we have out of control government spending, that they would not even put down what their priorities are, and show where they—of course they want to keep spending, [but] they won’t even tell us where they want to keep doing the spending.  They just want to hide that from us.  It’s all politics.  They don’t want to go on the record for anything.  You can see that in the Senate, you can see that at the White House.  It’s becoming absurd.

ARONOFF: Then on these continuing resolutions—do the increases occur in those even though they’re not passing a new budget?

DUBAY: Well, yes.  A continuing resolution uses the same type of baseline budgeting assumptions, so, if you hear of a of a “cut” of, say, $20 or $30 billion this year, that’s likely a reduction from the baseline estimate, meaning that it still probably means that they’re increasing spending more above the absolute dollar amount from the year before.

ARONOFF: Okay, but doesn’t the continuing resolution mean the last budget—we just keep operating on that last budget, we’re not increasing it, we’re not passing a new budget with new increases and all that?

DUBAY: Right, but with gross assumptions built in.

ARONOFF: I see.  Okay.  A new budget is supposed to be in place for October 1^st.  I think it’s been many years since we’ve had one and all the appropriations bills passed by then.  Are we headed for another crisis and battle over this coming continuing resolution that needs to be passed by, I guess, September 30^th?

DUBAY: Yes, it will be a battle, but I think this commission that was set up by the debt deal has made it a bit easier, because maybe they can punt and say “Well, we’re not going to do anything, we’ll keep going at last year’s levels.  We won’t pass a new budget.  We’ll wait until this commission reports, and then we’ll do it.  We don’t want to infringe on their important work”—is what they’ll say.  So they’ll basically punt their responsibility to that commission, and the commission will, of course, fail, because all commissions are set up to fail here in Washington.  They’re just a way to punt responsibility and kick the can down the road.  So there will be a battle over the budget at some point, it just might not be on October 1^st.

ARONOFF: This commission.  I’d like to explore that a little bit more, because what it’s been characterized as is, basically, like a conference committee—after legislation has been passed in the House and in the Senate, then it goes to conference—that they’re just skipping the legislative process and going straight to conference, because, out of this, they have to come up with legislation that’s to be voted up or down in the House and Senate.  So it seems like, in that sense, this is a little different than, say, the Simpson-Bowles [Commission], where there was no mandate that it was going to be at least voted on, or anything like that.  In that sense, does it have a better chance to succeed than these other ones?

DUBAY: You know, I don’t hold out much hope.  The reason is that we have, supposedly, cut a trillion dollars out of the discretionary spending as part of the debt deal.  There’s certainly more discretionary spending to cut.  That’s just not where the money is anymore.  We have to reform entitlement programs.  That’s where the money is, and that’s what’s driving us into bankruptcy.  But the Democrats on that commission will never accept entitlement reform ,because the President and all the Congressional candidates are going to run on preserving entitlements in their current form.  The President wants to run on a “Mediscare” campaign, as do Senators.  They want to basically say that—as you said earlier—Republicans want to throw Granny under the bus, or throw her off the cliff.  They’re not going to do anything that’s going to jeopardize their political campaign message, so I don’t hold that much hope that there can be real substantive change coming out of the commission.

ARONOFF: Another thing is that they’re talking about tax reform as something that’s supposed to come out of the commission.  If you look at, say, Simpson-Bowles, or even the Gang of Six model, then it would be something—all the rates come down into the twenties and below, and maybe you come to three rates, but how does that reconcile with, also, the fact that they are planning on ending the Bush tax cuts, which would raise the rates up to what, 39% or something?  You can’t have both those things happening.  What’s the anticipation on that?

DUBAY: Right.  That’s important to point out, because the President butchered this badly back in April with his big debt speech, where he obliterated his own budget and then submitted a speech in its place.  He called for fundamental tax reform.  At the same time, he said he wanted to eliminate the Bush tax cuts.  Well, you can’t have both.  They’re mutually exclusive.  Fundamental tax reform is—the purpose of that is to increase the tax base.  That means eliminating economically unjustified credits, deductions, and exemptions, and, in their place, lowering tax rates so that the new tax code doesn’t raise any more revenue than the old tax code, and that we have those lower rates in place to improve the incentives for working, saving, investing, taking on new risk—basically, the very basics of economic growth.  So the President confused that issue.  He made it, basically, impossible to move forward.  I don’t hold out, again, much hope for tax reform because the Left sees it as a way, as a ruse for raising taxes.  You saw this again and again. The, the Gang of Six plan was a massive tax hike, trillions of dollars—but they said, “Well, we’re just getting rid of credits.  You know, getting rid of loopholes.”  Well, sure, you’re broadening the tax base, but you’re not lowering rates nearly enough to offset that base.  Higher taxes mean that the government gets more control over our resources.  It means it grows the size of government.  Conservatives, we in the Right, are not going to go for that.  We are in this problem because government has spent too much.  If we raise taxes, we’re giving the Left license to grow the government, even if it’s just a small thing like the ethanol credit, they get a small incremental growth in government.  This should all be done on the spending side.  Spending caused the problem, spending cuts will fix the problem.  So, again, until we can agree on what the actual purpose of tax reform is, until we can say that this is not about raising taxes, it’s going to be very difficult to get done.

ARONOFF: Obama often says he inherited a $1.2—sometimes he says $1.4—trillion deficit from President Bush.  Now, that would obviously take into consideration the $700 billion TARP expenditure.  So is that—especially since that was money that was paid back, I guess, whether in reality or due to accounting tricks—$700 billion attached to Bush’s final year of deficit, and, if so, is Obama correct in saying he inherited a $1.2 trillion deficit?

DUBAY: There’s no doubt that President Obama inherited a pretty big deficit.  But it rings hollow when he whines about it because when he got in he decided it wasn’t big enough, so he passed a one trillion dollar stimulus program.  He basically squandered a trillion dollars of taxpayer money and exploded the deficit even higher.  So I don’t know what he’s complaining about.  The last full year of the Bush Presidency, the deficit was $450 billion.  It seems like the good old days now, but that was a big number back then.  In 2009 the deficit increased to $1.4 trillion.  It basically went up a trillion dollars in one year.  Some of that was certainly TARP, but the President—remember, when he came in only one half of the TARP money had been spent.  He immediately took the second half and then did the stimulus, and then passed a huge number of other big government programs.  His policy all along has been to drive the deficit as high as possible.  That’s what Keynesianism’s all about and even, even in the debt talks he didn’t want to cut spending too much because he didn’t want to imperil the “recovery.”  So, yes, he inherited a bad situation, but he made it exponentially worse.

ARONOFF: Okay, what about his talking point, or whatever, that when he came in the economy was losing 750,000 jobs a month, and now, even though it’s still going much slower than he would like, at least we’re growing jobs each month—so does he deserve credit for that, as he seems to want to take?

DUBAY: The economy certainly was losing jobs at a horrific clip back then, and the economy did bottom out at some point.  However, usually when you get a very steep recession—any recession, but particularly one as steep as the one we went through, you would experience an aftermath rapid economic expansion, where you’re talking about economic growth of 6% or 7%, like we had after the ’81-’82 recession.  You’d have rapid economic growth, and you’d be having months where we’d be adding 400,000 jobs, half a million jobs—huge amounts of jobs being created month after month after month.  We are not seeing that, and I think it’s a direct result of the policies that the President has pursued in the aftermath of the recession.  You start with Obamacare; you start with the financial overhaul regulation, the so-called Dodd-Frank bill; the threat of regulation from the EPA and other regulatory agencies; the constant threat of raising taxes; the demagoguing certain industries and certain individuals.  The President never stops demagoguing the rich, corporate jet owners, oil companies, the productive people in this society.  You add it all up, and I think we’re basically having what we had during the Great Depression, which is a capital strike.  People with the money to invest are saying, “We’re not going to invest as long this guy’s in office.  We could be the target of his next attack, and we’re just not going to put up with that.”

ARONOFF: Another issue is parceling out the blame for what happened in 2008, to Bush, to—look: The Democrats had taken over Congress in 2007.  When we look at what happened, some people cite the Community Redevelopment Act and the whole situation with the housing markets.  Some just say it was Wall Street gone greedy and crazy, and no regulation, no oversight.  I know it’s a huge topic to try to touch on, but how do you parcel out the blame for the situation we arrived at in 2008?

DUBAY: There’s a lot of blame to go around.  I don’t think anyone’s immune.  You can look at Fannie Mae and Freddie Mac, I think that’s a good place to start—but this is really a global financial meltdown, so you can’t just pin it here in the United States, although we were a major, a major part of it.

ARONOFF: Okay.  What about another thing Obama takes credit for, rescuing the auto industry?  Their point is that if it were left to the Republicans the company would have gone.  GM would have gone bankrupt, and that would have cost all these jobs, and all the related jobs, and all that.  But, others talk about, well, bankruptcy as just a way to deal with the situation—it didn’t mean the end of the company.  Instead we’ve created these precedents, this nationalization, how they treated the bondholders, and all that.  How do you view what happened with the sort of bailout of the auto industry?  Was it handled correctly?  What do you think should have been done?

DUBAY: What we’ll never know is what would have happened had the President not stepped in and created this different extralegal process, basically taken over GM and Chrysler and so, you know, things tend to resolve themselves in free markets. And, yes, GM would have ceased to be what GM had been in the past, but it’s already ceased to be what it was in the past, and it would have emerged as something much different.  Without government interference, it’s likely that it would have emerged much stronger.  I mean, look at the Chevy Volt.  They sold about a hundred of them last month.  That was a government idea, to push the Chevy Volt, and it’s a complete and utter disaster in the marketplace.  Somebody would have, maybe, come in and bought GM.  It’s really impossible to know.  One thing that’s interesting, that often gets overlooked, is that one of the first acts of this administration was to basically destroy the legal precedent for what happens when a company goes into bankruptcy with the Chrysler bankruptcy.  Basically, when companies go into bankruptcy it’s the bondholders who are first at the trough.  They get paid back first, and then there’s a legal list of who comes second, third and fourth.  Obama came in and said, “No, we’re not paying the bondholders, we’re going to give the money to the United Auto Workers.”  The bondholders said, “Whoa!  Hold on!  This is not—this is illegal!  You can’t do this!’  And he basically threatened them.  He basically told them to keep their mouths shut, or he would make it much worse for them than it already was.  That was very chilling to markets who base their activities on common law, on, basically, a stable legal structure.  Ever since then, I think, it’s had a chilling effect on the economy and on investment going forward, because no one knows what law the President will choose to ignore next.

ARONOFF: Okay.  What about duplication of programs?  I realize, and we talked about, how the entitlements are the main driving force, that there’s not that much out from the discretionary side, but there’s so much—and Tom Coburn gave this speech on the Senate floor this weekend, which I’ve quoted from extensively in an article—out of 56 programs on economic literacy, they’re never measured to see if they’re successful.  There are just so many duplicative bureaucracies that just spend a tremendous amount of money.  They’re almost unaccountable, it’s very unlikely that they’re doing any good, and yet there seems to be nothing being done to end that.  The GAO documented a lot of this in a report recently.  How does it happen and how can we undo this?

DUBAY: This is just the result of a government that’s grown much much too big. Any time that you have a government that’s grown to the size that our government has grown, you’re going to get these ridiculous situations.  The only way is just that we have to start rolling it back.  We just have to shrink the size of government. There’s no other way around it.

ARONOFF: So if you were in a position to tell this commission, “Here’s what kind of tax reform we really need to make this economy grow, to really stimulate economic growth”—and the other thing they always talk about how “We need to focus on “Jobs, jobs, jobs,” but yet the policies don’t seem to reflect that—what would your policy be—your tax policy, say, to try to really get this economy back on a strong footing?

DUBAY: There’s lots of things to do.  First of all, roll back all the big government programs that have passed in the last couple years, including Obamacare, including the financial reform regulation.  Cut spending anywhere and everywhere you can, entitlement reform programs, like the Heritage Foundation has laid out.  Reform the tax code by increasing the tax base, by getting rid of so-called loopholes, and lowering tax rates, and then just get government out of the way.  I think the slow growing economy is largely the result of no one wanting to invest in this current political climate, with so much uncertainty and the threat of being attacked from the White House, uh, at any given day because you happen to be productive and successful.

ARONOFF: What about the idea—and this is something that Obama has repeated—that taxes are the lowest percentage of our GDP since, I believe he says, the Eisenhower years—

DUBAY: Yes—tax revenues are low compared to the historical average.  The historical average is about 18% of GDP in tax revenue.  Right now we’re probably below 15%.  The President, when he says that, though, is so disingenuous, and he should know better.  He makes it sound like that’s the result of policy changes like the Bush tax cuts.  It has nothing to do with debt.  It’s everything to do with our terrible economy.  Back in 2007, before the recession, tax receipts were above the historical average, well above.  In the aftermath of the recession they’ve plummeted.  Once the economy starts growing again, receipts will rebound and will grow back to that historical average and above it.  So this has nothing to do with low tax rates.  It has everything to do with the economy, and the President should stop making the case that we need higher taxes to increase revenue.  What we need is economic recovery.

ARONOFF: Yes, that’s a good point you’re making—that up to 2007, right before the recession, up until then the Bush tax cuts, I guess you could say, and his economic policy, really had produced quite a lot of vigorous growth in the economy, and a lot of jobs created.  That kind of all went away in 2008, and so then they look at the net results, and say, “Look: The Bush tax cut, if it was good, if it was successful, it would have created jobs and growth, but instead look what it’s created!”  But for six or seven years it actually did a quite a good job, didn’t it?

DUBAY: Absolutely.  We added, I think, a tremendous amount of jobs between 2003 and 2007.  2003 was when the second set of tax cuts went in place.  2007 is when the global financial meltdown occurred.  The tax cuts were never put in place to protect the economy from something like we went through, so it’s not fair to blame them for the recession that we’re going through now.  If you just look at the basic statistics it’s very obvious that the economy grew very strongly in the tax cuts’ aftermath.  I think it’s just a little bit of historical reconstruction by those who’ve always opposed the tax cuts and those who want them to go away now.

ARONOFF: All right.  Just one final thing.  I noticed this week that there was an announcement by the Obama White House that they’re going to start mandating free birth control, free breast pumps, HIV tests, and all this under Obamacare.  What will offering all this for free do to the demand for these services and what will it do to our health care system?

DUBAY: There’s no such thing as “free.”  It just can’t be free.  Somebody has to pay for it—and the people who pay for it is all of us through higher premiums.  All of our premiums are going up because of those mandates, and it’s not just the mandates that came out this week, but all the other mandates that they’re going to lop on.  Remember the President promised that we would have lower premiums?  I forget what dollar amount he used, but he said we’re all going to be saving money because of this new health plan—

ARONOFF: $500 a year, I think it was—

DUBAY: Yeah, a complete lie.  We’re going to be paying for it also.  We’ll all be paying for contraception, breast pumps, HIV tests, because it’s mandated that we cover it for those who want them.  But those of us who don’t take those services or don’t use them, we’ll be paying the bill for those who do.

ARONOFF: Curtis, any final thoughts that you have?  Maybe I’ve missed something that you’d like to get across here?

DUBAY: No, that’s it.

ARONOFF: Okay. Our guest has been Curtis Dubay at the Heritage Foundation.  It’s been a fascinating forty minutes or so.  This will be posted on the aim.org website as a podcast, with a transcript, a write-up of this interview.  I want to thank Curtis for spending this time and enlightening us on these issues.  We will be back next week with another edition of Take AIM.  One last thing—where can they find your work and your website?

DUBAY: Sure, yeah.  Everything that we write and we produce at the Heritage Foundation is at our website, www.heritage.org.  Come there and see all the papers we’re putting out, our blog where we comment on all the latest happenings, and all the data and all the information that you need to be up to date on the current, different policy debates.

ARONOFF: Thank you so much for being with us today, Curtis, and so long.  We’ll be back soon with another episode of Take AIM.  So long!

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