HH: Such an extraordinary amount of news, so much of it having to do with the economy, I’m pleased, to help us walk through it, to welcome Governor Mitt Romney, former governor of Massachusetts. Welcome back, Governor, always a pleasure to have you.
MR: Thank you, Hugh, it’s good to be with you.
HH: Let’s start with the plan that was announced today by Treasury Secretary Geithner. How do you react to it, Governor Romney?
MR: Well, you know, I think it’s going to help. Clearly the marketplace of ideas and of thinkers across the country is responding positively. You’ve seen that in the response of what happened on Wall Street. But I think it will help. I think it’s going to be expensive, and I’m concerned that it’s more expensive than it needs to be, but in the scheme of things, you know, I’m reminded of that old Winston Churchill quote about America, and this might apply to the Treasury Department and the Obama administration, which is you can expect them to get it right after they’ve exhausted all the alternatives.
HH: (laughing) Now…okay, so that’s a good bit of news. Now let’s take a look at the budget that has been proposed by President Obama. I was just talking with John Campbell of the House Budget Committee, and we listened to Judd Gregg, your colleague, your supporter during the presidential campaign, saying it will bankrupt America in ten years and it can’t be serious. Your reaction to the budget?
MR: Well, the budget is very, very troubling. There is a perspective on the part of some in Washington that budgets don’t matter, that deficits don’t matter, that debt doesn’t matter, but the reality is that not only at some point does someone have to pay for it, and that’s something we’ve all been saying for years. Gosh, our kids will have to pay for this, it’s a terrible legacy to leave for our kids, and that’s true. And in my opinion, it’s not just wrong fiscally, it’s also morally wrong to leave this kind of debt to our kids. But there’s also the fact that someone’s got to agree to loan the money to us right now. And you know, when you’re issuing trillions of dollars of debt over this next ten year period, it’s very, very possible, indeed likely, that some of the buyers are going to say no more. I’m not going to give more to the U.S. It’s too risky, and there’s too much of a chance that the U.S. government will see rapid increases in inflation, and my loan won’t be paid back with dollars that are worth very much. So you really have a setting here where this kind of borrowing and this kind of spending could actually throw America into a position where the world loses confidence in the dollar, loses confidence in America, and we see an economic calamity unlike even what we’re witnessing right now.
HH: Now Governor Romney, you were one of the key spokespeople for Senator McCain in the fall election, and so you followed very closely what then-Senator Obama campaigned on. Has, is there any similarity between what he campaigned on and what he has proposed?
MR: Well, you know, if you look across the issues that are being discussed, yeah, I think a lot of people have to wonder exactly what’s happened. I noted this weekend that even the New York Times, which has always been very generous to Barack Obama and during his campaign, that the columnists in the New York Times were all very, very critical, and in part they don’t recognize what he’s doing based upon what he had said. Part of that I like. I like the fact that he’s not taking such a hard stand in pulling our troops out of Iraq. He recognizes that we’re experiencing victory there, and that if he acts too precipitously, we could snatch defeat from the jaws of victory. He has been upping the number of attacks on the part of drones in Afghanistan. So he’s not doing exactly what he suggested to the people on the left he was going to do. On the economy, you know, he’s taking a course which is really quite frightening. The massive spending is something which he did not signal during the general campaign. He also indicated that he would work with the Republicans on this side of the aisle, and that is not something he’s done so far. In fact, he’s pretty much abdicated his leadership over the stimulus to the Democratic majority. So he’s not exactly what we expected, and of course, we didn’t know what we’d get because he had done so little prior to assuming the office.
HH: Now the President has not yet said whether he would sign or veto the AIG 90% tax. It’s a horrendous idea in my view. What do you think of what the House did last week?
MR: Well, it was a very, very bad idea. And I understand, and fully identify with the outrage that everybody’s feeling about executives who decide that they should get paid huge bonuses even as they led the company into disaster. That’s not normally when you get paid a bonus. And what Congress did, and what politicians often do, is trying to deflect the blame for what they did onto somebody else. And the truth is, Congress passed a piece of stimulus legislation which included in it a provision to allow these bonuses to be paid. It was purposefully put in there. The measure was rushed through Congress. And now they’re trying to see if they can’t blame somebody else. And it’s their fault, number one. Number two, you don’t go back after the fact and take away something somebody has received. It’s a very bad precedent. It’s very dangerous. You could have people saying hey, let’s go after the radio talk show hosts, because we don’t agree with them. We’re going to tax them all at 95%. This is not within the meaning of the Constitution. It’s simply the wrong thing to do, even though we sympathize with the anger, you just don’t act in this way.
HH: Right now, the Geithner plan calls on the private sector to participate in the repackaging and the management of these toxic assets. Do you expect, Governor Romney, that some who would have been willing to participate are going to be less so because of the AIG precedent?
MR: There’s no question but that the big question on the mind of anyone considering participating in this Geithner plan is going to be, will they be subjected to the rules that Barack Obama and Congress might want to impose on them retroactively. And what that does, by the way, is it makes it more expensive for the government. When you create that kind of risk, it means people to invest are going to want to see a much higher return. They’re going to want to see a better deal on their investment. So by virtue of taking this kind of punitive action, Congress and the administration have actually hurt the prospects of getting these banks out of trouble. So you know, it was just wrong-headed to begin with, and frankly, it’s going to make it more difficult for the Geithner plan to work.
HH: Now I want to turn to what the Federal Reserve did last week. Chairman Bernanke came out and announced $1.2 trillion dollars in purchases of government securities, mortgage-backed securities, and other liquidity moves. Applause from your end, Governor Romney?
MR: You know, at this stage, I’m watching with a waitful eye on this one. I think you have to let the Fed take the action it deems to be appropriate given what they’re seeing. They’re seeing numbers we’re not seeing at this point. They looked to see what happened in Great Britain when the equivalent of their fed took this same action, and it did not seem to hurt the market. Instead, it seemed to buoy it. I think there’s every hope that this particular action will likewise keep interest rates down, and will improve liquidity. But you know, a trillion here and a trillion there, that old joke about it adding up to real money, I don’t think we’ve ever talked about trillions before. This is actually, you know, since the new administration has come in, the first time I can recall people talking about trillions of dollars. And the number is an incomprehensible sum. Billions are incomprehensible. Trillions are just hard to imagine. And one program after the other, adding up to trillions, is getting to the point where I wished they’d have been a little more selective, and done those things that would be efficient and effective, because ultimately, someone is going to have to pay for this, and the concern is that the cost will come not just to our kids, but to runaway inflation in the interim.
HH: Now Governor, you put your finger on this. The budget deficit for the United States government in 2006 was $248 billion, and people were up in arms. In 2007, it was $163 billion, and people were up in arms. Now last year, it was an extraordinary year with the TARP, and this year’s an extraordinary year with the stimulus. But the year after that, he’s calling for a $1.3 trillion dollar deficit, which is in essence a nine-fold expansion in the course of normal year to normal year. It’s astonishing.
MR: It is astonishing, and I just don’t think it will pass the test of credibility in world financial markets. I just don’t think that there are going to be lenders out there that’ll say okay, we’ll lend the U.S. even more money. I think they’re going to want to see higher interest rates, and that could have the impact of slowing down our economy. And so he’s going to have to retreat from this. My goodness, I saw that the Congressional Budget Office recalculated the extent of the deficits by virtue of the Obama plan, and they’ve now said it’s going be more like $9.3 trillion dollars over the next decade in additional deficits, which is well above where Barack Obama had estimated it would be. Look, these kind of numbers are, people have to recognize that money has to come from somewhere, and the Chinese and the Japanese and the British are going to say at some point, we’re not going to keep loaning money to America.
HH: How big was the budget deficit when you took office in Massachusetts?
MR: Well, I’m almost embarrassed to say how small the number was given what we’re talking about here, but it was just about $3 billion dollars, and that’s the gap between what the agencies wanted to spend on an ongoing basis and what our tax revenues were going to be.
HH: But that was considered to be a big deficit.
MR: Oh, it was a huge deficit. And you know, one of the things that really irks me about the media these days, and people generally, is they look at deficits as if they give credit to somebody who just goes out and borrows the money to bridge the gap. The real credit goes to whoever can figure out a way to solve the deficit problem without borrowing more money.
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HH: Governor, I just wanted to chat with you about the New York Times piece yesterday, a trial balloon that suggested that the Obama administration is planning a massive regulatory push into private sector executive pay, saying it would go beyond covering the TARP-related programs, but would impose greater requirements on company boards and executive compensation that will cover all financial institutions including those not now covered by any pay rules. Others said it could be applied to all publicly-traded companies. What do you make about such an agenda?
MR: Well obviously, anybody who is any student of the success of America over the last couple of hundred years recognizes that the reliance on freedom and free enterprise has been the source of our strength. And if we have government deciding how much people are going to get paid, we’re going to put a brake on the engine that’s created America’s wealth and well-being. It would be a terrible, a devastating idea, and of course, there are, I mean, I wish the new President well. I hope he’s successful, but he’s not going to be successful if he promotes these extraordinary liberal ideas that are being bandied about. The other one, of course, is this whole card check idea that we’re going to unionize businesses as small as ten employees without even a secret ballot election. I mean, there are, policy after policy are being promoted that would undermine the very foundation of what allows our economy to succeed.
HH: Last question, Governor Romney, your governorship overlapped with Larry Summers’ presidency of Harvard. And so you worked with him, in some respects. Are you surprised at some of the administration proposals, and how far left they are, given your working relationship and knowledge of Lawrence Summers?
MR: You know, I’ve got to admit that I think that Mr. Summers is not one of those that’s going along with some of the plans. I’d be surprised if he would sign up for some of the ideas that are being kicked around in Washington right now. He is a bright guy and a capable guy. He usually doesn’t pull back his punches. And I know that there’s a lot of anger towards executives these days, and particularly for those on Wall Street. But you know, cutting off our hand is not going to make us whole. All the streets in America are connected, and we’re going to have to live within the principles that made the country great, and not try and, if you will, adopt principles that are totally foreign to us. So I’m hopeful that Larry Summers will have a stronger voice for moderation, and that the extreme left wing members of the Obama administration are going to be put to the sidelines. But that’s not what we’re seeing so far.
HH: Governor Mitt Romney, always appreciate the time, thank you, Governor.
MR: Thanks, Hugh, good to be with you.
End of interview.