House Majority Leader Kevin Brady joined me to discuss the first 100 days of the new “unified Republican government” and my Monday op-ed in the Wall Street Journal on what not to do (and The Fourth Way.)
HH: I get to talk to my friend, House Leader Kevin McCarthy from California’s 23rd Congressional District. He is the guy who’s going to make it all happen in the House here shortly. Leader McCarthy, welcome, great to have you back on the Hugh Hewitt show.
KM: Thanks for having me back. I hope you feel better.
HH: I feel fine. I just can’t talk.
HH: I know it’s…
KM: That’s a great thing to be in the occupation you’re in.
HH: It’s a terrible thing. I had your colleague, Kevin Brady, on to start the hour, Mr. Leader. I want to confirm a couple things. He thought that a repair and repeal bill would be on President Trump’s desk by the end of February, and that it would include the repeal of the medical device tax and the repeal of the tax penalty for people who do not buy off the Obamacare exchange. Do you agree with that assessment?
KM: I agree with that, and you’ll see the beginning of that movement by passing a 2017 budget this Friday.
HH: And in addition, Mr. Brady said don’t expect the corporate rate reduction to be in that February bill, but that it will be part of a tax overhaul that will nevertheless fit within reconciliation’s 51 vote margin. Do you agree with that?
KM: Yes, and you’ll see, there’s three pillars of what has to happen here, because we’ve got to get growth in our country again. We’ve got to get the economy moving. One happens to be dealing with health care. Second has to be with tax reform, and third is with regulatory reform. Now we’re already starting on the regulatory reform. If you watched what we passed last week with the Raines Act, the midnight rule, this week, the Regulatory Accountability Act, and starting January 30th is when the Congressional Review Act, remember that old bill?
HH: You bet.
KM: …in the 90’s?
HH: You bet.
KM: That becomes privileged on January 30th, so you’re going to see in February the first two weeks, a lot of those regulations that were in the last 60 legislative days start moving to be repealed, because people don’t quite realize since the November election to January 5th, this administration, Obama’s, have put in, have offered 145 new regulations. They’ve enacted more than $16 billion dollars on all of us just since the election.
HH: Yeah, but those can all go on a 51 vote margin, right?
KM: Yes, out in the Senate.
HH: Yeah, and so that’s, but it can’t be done in one bill if I understand correctly. You’ve got to pass a lot of bills.
KM: Yeah, but if the midnight, that’s what the midnight bill deals with. It allows us to compile those together afterwards if that gets signed into law.
HH: But that’s a 60 vote bill.
KM: But we have to do them, we’re going to do them individually at the beginning.
HH: Yeah, that’s a 60 vote bill. I’m not expecting that.
HH: I think you’re just going to have to stay there all night. Let’s go back to the big three, though. Regulatory reform, you guys are killing it. The repeal and replace, you’re killing it. Will there be any other parts of repeal and replace, for example, a national exchange that says to insurers if you offer a policy anywhere, you’ll offer it everywhere and no preexisting condition exclusion? Will that be part of the repeal and replace?
KM: Well, the thing that we’ll do is I actually talk at like almost a rescue, because when you look at the health care, it’s totally collapsing upon itself. We need the new administration in there. We need Tom Price in there looking within HHS, and then we’re going to sit down, we’re going to talk, and we don’t want to have it one party rule it all the way through. That’s the problem with Obamacare. I put a letter out to every governor, every insurance commissioner at the end of last year. Give us your ideas as well. We want a health care system that goes across state lines, gives people greater choice. Do you realize in 1,022 counties in America, and there’s just roughly 3,000 counties in all of America, they have no choice? There’s only one plan offered?
HH: Right, and that’s why I go back to when I ran the Federal Employees Health Benefits program under Reagan when I was the OPM deputy director. Everybody got a book. There were lots of choices. It seems to me national choice is the way to go. But can it get done by February?
KM: The time frame, I’m not going to lock us in. But you’re going to find us moving day and night. You’ll find that Congress has changed. We’re in five days a week this week.
HH: That’s great.
KM: …getting things done. We’re going to be in more days you’ve seen in 100 days. We’re going to do as much as we can. I don’t want to lock us into a date, because one thing I know, I want to get it right, and I know I’m going to do it as fast as possible.
HH: So to be specific, though, there will be a bill on the President’s desk by the end of February? It might not include all of the replacement, but some of the replacement?
HH: All right. Now Mr. Leader, I talked with Kevin Brady about the second bill, the simplification. The corporate side, everyone gets. The Speaker told me last week maybe a repatriation rate as low as 5 ½%. That would be terrific. But the tax simplification, I have a book coming out, The Fourth Way, I had a Wall Street Journal op-ed on Monday. We’ve got to save the home mortgage interest deduction with its current cap of a million dollars. We’ve got to save the charitable deduction, and the chairman and I debated a little bit about the state and local income tax deduction. It’s not on his card, but if it’s not in the final bill, we’ll destroy what’s left of the Republicans in the blue states. Your seat gets imperiled. Everybody gets imperiled if we delete that deduction. What’s your position on the state and local income tax deduction?
KM: Well, the one thing we’re doing, if you talk about the first two, I’m all for. Home ownership, you’ve got to keep it. Charitable, you’ve got to keep that, because for us who are conservatives who believe in smaller government, believe in individual engagement, that’s where the charities come in. They can solve problems faster in a community than government can. And it just entices it and helps it. When you talk about where we are with the state deduction, that’s still, that’s still in play. You want to get the rates as low as possible, but the more that you keep in, means you can’t lower the rates as much. There is a philosophical debate, and you and I can talk about the political debate, but there is a philosophical debate about why are these taxes so high in these blue states? Well, some people can argue then the others are subsidizing it. But you also know from where it comes, we make policy in the world of politics. So that’s one that’s still out there, still be debated.
HH: And my physical debate with your, or philosophical debate, and it’s in The Fourth Way, and I’m sending it up to the retreat, is that…
KM: Yeah, I’m excited about reading it.
HH: Thank you. But people make their life’s decisions based on tax codes. And if they moved into New York or Connecticut or California, they can’t unmove. You know, they can’t unring bells.
HH: And they do it in part based upon the tax code as it exists, and that therefore, if you’re going to eliminate it, I don’t mind eliminating it, just given them a 20 year warning so that, or you know, a 15 year warning before you do that kind of thing.
KM: Yeah, because you watch what the Democrats did in California when they passed the tax increase? They made it retroactive.
HH: Right. Right. It’s got to be fair. That’s the most important thing, is it’s got to be fair to everyone.
HH: I talked to him about the casualty loss as well, and I don’t think anyone argues about that, Mr. Leader. If you lose your home to fire or earthquake, you can’t be paying income taxes after that. Do you agree with that?
HH: You see, I thought so. So everything is cooking. Let’s talk now about regulatory reform. What you can’t get done under the 51 vote rule, and if the midnight rule doesn’t pass with 60 votes, you could look at a Scott Pruitt at EPA, you could look at Ryan Zinke at Interior. They could just simply say things, for example, any species listed in the last 15 years using in whole or part the adverse impact on future habitat, which is bogus. You and I both know that’s bogus.
HH: Or you could look at the waters of the U.S. rules. We could write some spectacular rules. Do you think our appointees that you’ve seen will write some rollback rules themselves?
KM: I have been so impressed with who Donald Trump’s been looking at and nominating. This is a different election, and remember, from a Republican point of view, only two other times since World War II have we ever been in this type of position. It was with Eisenhower, and it was with George W. Bush. But this was a different election, too. This was a reform election. So the American public is expecting fundamental change, structural change in Washington. So you’ve got to take that Article I power back. But from the same standpoint, we’ve got to roll some of this back, because it’s been too burdensome. The CBO has done a study. For the last five years, this administration has enacted 82, on average, every year, a new regulation or major ruling. 82 of them. To make the definition of a major ruling, it has to cost at least a minimum of $100 million dollars to business. They have been compounding this every single year, 82 of them, one after the other, after the other. And that just adds into thousands of dollars to everybody’s life. It adds into hundreds of hours of paperwork. And you’re not getting the productivity. That’s why when you look at the economic numbers, participation rate in the economy today is 62.7%.
KM: That’s the lowest it’s been since 1978.
HH: Well, the hidden part of regulatory reform, Mr. Leader, you know this and I know this, but I want to explain it to the audience, is that all these rules have to go through the D.C. Circuit.
HH: The Democrats packed the D.C. Circuit. Now confirming judges is not your job, but you could help with the Senate expand the D.C. Circuit so that could be rectified. You could split the 9th Circuit so that California’s crazy liberal stuff doesn’t impact.
HH: What about those two initiatives? I know they’re Mr. Goodlatte initiatives, but would you support splitting the 9th Circuit and expanding the D.C. Circuit?
KM: Yes. I think that will be, we’re looking at, and it’s coming out of Judiciary, and Goodlatte’s working on getting litigation reform. You need that in America today, because when you talk about fairness and others, things are just being imposed upon them. It’s a challenge out there, and this is another area that you can look. Our courts…
HH: The most important one, though, the most important one is the D.C. Circuit, because we can’t get regulatory relief unless the D.C. Circuit says yes.
HH: And they packed that. Harry Reid did a jam down on that.
KM: Impacted that tremendously.
HH: And so now, yeah, so we need to, can that move quickly as well, do you think?
KM: Well, you know, you’ve got a lot in the Senate. I’m not going to judge them how fast they can move because of their rules. When you get a new administration, that’s 1,200 people that have to be confirmed. That is they could take 10 hours for each, but I see the way that McConnell is moving right now. These new cabinet members are very impressive. I’m very impressed at what they’ve been able to do so far. And they’re working long hours.
HH: What about the withering…
KM: I was at dinner last night with Senator Tim Scott, and they’re working long hours, but you know what? It’s worth it.
HH: Are you guys going to be staying in and working, not just this week five days, but a lot of week five days, because I think actually, the American people expect a lot out of the next two months.
KM: We do, and the one thing that I have done, one of the roles…
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HH: So Leader McCarthy, I think that someone heard you were about to commit the House Republicans to working five days a week and they pulled the plug. They didn’t want to hear that.
KM: (laughing) I know. Well, the other thing, I’m going to modernize our phone system.
KM: My gosh, it just totally went out.
HH: Oh, that was terrific. But in any event, you guys are moving fast. You’re working hard. Now talk to me a little bit about realignment and making it permanent. That means getting the fence built, but it might mean some immigration overhaul as well. Do you expect to see that in the first year?
KM: I think we will see it in the first year, and you’ve got to remember, structure dictates behavior. You’ve got to get the structure right. So we can’t have government get out of control like it has in the past. And if you ignore immigration, the immigration system is broken. So you can’t sit back and do nothing on it. So you’re going to have to deal with it, and I think you’re going to see us deal with it rather early.
HH: And that would, obviously, it includes the fencing, which was originally passed by a House Republican majority…
HH: …in 2006, but not implemented. Can you combine, the Dreamers have a great hold on the American imagination. I’m in favor of allowing them to stay if they’ve got clean noses and clean records, ditto a lot of the people who are not here with documents. Is there a compromise there, 30 seconds, Mr. Leader?
KM: I think we can work something out, but I think the very first thing that has to happen before any conversation about anything else, you’ve got to secure the border. Once the border is secure, I think you can have a discussion with the rest and the new administration, and we’ll be able to do that.
HH: Terrific. Leader Kevin McCarthy, great to talk to you. Follow him always over at @GOPLeader on Twitter. Talk to you early and often throughout 2017, Leader McCarthy, I appreciate it very, very much.
End of interview.
The book length version, which everyone needs (and lefties will hate to read) is here: The Fourth Way: The Conservative Playbook for a Lasting GOP Majority.