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OMB Director Mick Mulvaney On The Road Ahead

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OMB Director Mick Mulvaney joined me this morning to discuss the president’s budget:

Audio:

03-06hhs-mulvaney

Transcript:

HH: John Michael “Mick” Mulvaney is the director of the Office of Management and Budget. Until recently, he was a congressman from South Carolina. He is a graduate of Georgetown University and the University of North Carolina at Chapel Hill Law School. He knows what he’s doing. Director Mulvaney, welcome to the Hugh Hewitt Show, great to have you on.

MM: Hugh, it’s good to be back with you.

HH: Now my buddy, John Campbell, tells me you’re the guy for this job, and that you’re going to bring the axe out, and I’m glad to hear that. Let me start, though, have you picked anyone to fill the Office of Information and Regulatory Affairs, yet?

MM: We’ve got it down to two candidates, and I think we’ll be ready to make a recommendation on that area to the President here probably this week.

HH: Okay, that is terrific. And I appreciate, by the way, I should have said this at the beginning, that you’re coming on and talking to me this morning for a few minutes, because I don’t know that Republicans communicate well. Are you going to be committed to being available to the media to talk through this budget process and the Obamacare repeal?

MM: I got up early just for you, Hugh, if that sends any kind of message.

HH: That does, but I’d like to get you over to NBC with Chuck and Rachel and me and a bunch of others and do a town hall or something, because I think the more we talk, the more we convert people to our way of thinking. Is that your view?

MM: Yeah, in fact, I’m happy to do that, wanted to do that, and actually planned, I think, on doing that on a couple of networks this weekend. And then I think topics changed. I was going to go on the air and talk about the budget, because we’re going into that process here, well, we’re in the middle of it right now. We will be releasing our spending budget on March 16th. But apparently, there were other stories breaking over the weekend, so they kicked me to a future slot.

HH: Well, we’re going to dive deep into the budget here in a second, but I’ll also tell the folks at NBC that we ought to just get a town hall going with you. First, before I go to the budget, Congressional Review Act, it’s, there’s a way to read it that’s pinched, it says only the last 60 legislative days can we repeal those rules with a simple majority. There’s an expansive way to read it, which says we go back and if a report wasn’t filed, that rule is fair game. Have you looked into that, yet, Director Mulvaney?

MM: Yeah, we’re looking into it along with a bunch of other people, keeping in mind that even the narrow reading of it, the 60 days is actually 60 legislative days. I can’t remember how far back that get us into last year, but since Congress wasn’t around much during the election year, and that’s not unusual, I think the 60 legislative days goes well back into the summer, so it gives us a good six months.

HH: Yeah, June.

MM: Yeah, six months of the last days of the Obama administration to look back. So that even by itself narrowly read, that’s a tremendous opportunity. But we are going to try and look at any ways to legally push the limit on how far back we can go.

HH: That’s very good news. It seems to me obvious that you’d want to push the limit and then see if a court would let them interpret CRA. Let’s go to the budget. First, an overarching question. Are we going to have a supplemental appropriation for readiness purposes for the Department of Defense?

MM: Probably. Yeah, in fact, we’re working on that now, trying to figure out what the right number should be, how to go to Congress, how to pay for it. The President wants a little bit of money to start the wall, so we’re going to look at ways to save money elsewhere so we can get him that money. The Defense Department knows that we’ve plussed up their budget for 2018. There’s stuff they can start doing now, so we’re working very closely with Secretary Mattis and the DOD to and figure out the best way to start getting them that money sooner rather than later.

HH: So that would actually mean a bill moving through the House and Senate and coming to the President for a supplemental for FY’17?

MM: Correct.

HH: All right. Last year, President…

MM: Keep in mind, that has to happen, that has to happen anyway, because Fiscal ’17 is only funded through the end of April, so there has to be some type of spending bill before the end of April anyway to fund the government for the rest of the year. So the supplemental would be either part and parcel of that, or just tacked onto it.

HH: Yeah, I was thinking a standalone that people could assess, because Senator Cotton and others, Senator McCain, etc., are pushing for readiness dollars right way, and I’ve got to agree with them. Let’s talk defense, Mick Mulvaney. President Obama’s last budget was $582 billion dollars. The OCO, the Overseas Contingency Operation, was $58.8. Your proposed budget is only three percent over that, a mere $54 billion, in my view, way too little. I’m sure you’ve heard that from other people. What’s your response?

MM: Yeah, keep in mind the President offered that number, but then offered no real way to get that. That was sort of his, by the way, I’m walking out the door, $588 for Defense. I can’t remember the exact number that he got in, but it’s ever, what’s $603 minus $54? I can’t do that math in my head. That’s, I’m not the OMB director because I can do math whiz stuff in my head. But he never actually passed that, nor did he propose a way for how to pay for it. So like so many things with the Obama administration, it was just a made up number that was designed to make him do good and not do anything. The $603 that we are putting hard into our budget is a $54 billion dollars over the last real spending level for the Defense Department. That’s about a 10% increase. And this is what it gets down to. This is the number that gets rid of the military sequester. Without the sequester, the Defense Department budget for Fiscal Year 2018 would be $603, $603 billion, which is exactly where this President’s budget is going to set it.

HH: Okay, now let’s talk about the specifics of that. Over the weekend, North Korea fired off four missiles. Three of them hit in the Japan exclusive economic area. One of them, at least, intercontinental ballistic missile-capable, believed to be. That means we need a lot of ships with Aegis class missile defense systems. That means a lot of money. We’ve got to go higher than $603, Director. I mean, are you hearing that from the Senate?

MM: Well, I hear it from different sources. Keep in mind at the Office of Management and Budget, we don’t solve problems by simply throwing money at them. One of the questions we ask is how much money can you spend this year? How much money can you spend, for example, in Fiscal Year ’17? There’s only six months left of it. We could take a supplemental to $400 billion dollars if you wanted to, but there was no way that money could be spent, or at least not spent responsibly. So we try to sort of walk that tightrope between getting the military the money they need as quickly as they possibly can without just throwing up big numbers to try and make everybody look good.

HH: Now President Trump…

MM: We’re actually trying to solve the problem.

HH: I don’t care about that, either. I want to get to specific designated things. President Trump campaigned at the Philadelphia shipyard on a Navy of 350 ships. That actually goes back to the OMB. You have to approve a path to get there. Have you done that, yet, Director? You’ve been there a whole week. I would like you to have revamped the fleet by now.

MM: (laughing) No, but surprisingly, I can answer the question, is that yeah, as we sat down with the Defense Department and went over the supplemental for this year, went over the budget for next year, went over what we’re looking at for OCO, it’s too early to talk about numbers there, that’s, we’re actually backing into exactly what you just talked about. There’s a number for readiness, and there’s a number for getting Aegis destroyers started. There’s a number for getting all sorts of equipment online. There’s a number for getting the size of the military up to meet with the President’s proposals and so forth during the campaign. So again, we’re not just picking numbers out of the air. We’re sitting down and doing it the way that you would do it at your radio business, or that we would do it here under a well-run administration. We’re actually trying to spend with some sensibility attached to it.

HH: Now given that, I’m glad to hear that, what year do we get to 350 ships?

MM: I don’t know, yet. I don’t know if we’ve seen that proposal. We’re trying to essentially get things back started again after 8 years of the Obama administration. By the way, and sooner or later, it’ll fall to me to look into this. We’ve spent, I don’t know, Hugh, if you average $500 billion dollars a year for 8 years, that’s $4 trillion dollars during the Obama administration, and yet he left us with a military that is, you know, woefully underprepared. And I don’t know where all that money went to.

HH: Oh, it’s astonishing. Yeah, it’s astonishing. A couple more on defense, and then I want to turn to other things.

MM: Sure.

HH: The Columbia-class replacement for the Ohio had a separate line item. It’s going to cost $6.2 billion to get the first of our boomers, new boomer generation, into the water. And then the average cost is supposed to be about $4.9 billion per sub. Have you got a separate line item for those, Director Mulvaney?

MM: Yeah, not going to talk about specifics on weapons programs. I will tell you this, that the President made it very clear to me that rebuilding the nuclear triad was a big part of his administration, and we are going to fund them.

HH: All right, that’s good news. How much will the wall cost, Mr. Director?

MM: That depends. I’ve got, in fact, I’m sitting with a stack on my desk, hang on a second. Believe it or not, I have that handy. It just depends on the kind of wall that you want to build, and I don’t think we’ve settled, yet, on the actual construction. You can do steel, you could do concrete, you can do a combination of concrete and steel. You can supplement it with different types of technologies and so forth. So it sort of depends on what you want to build. And of course, when you’re talking about a wall that’s, you know, several thousand miles long, there’s going to be certain places where a certain type of wall are more appropriate than others. For example, some places, a solid concrete barrier might be desired. In other places, the border folks are actually telling us, border control’s actually telling us that they like the one you can see through, because it reduces the number of violent attacks on our folks. So it’s a complicated program. I don’t know what the answer is on the cost, but we will have one shortly. And again, we’re going to try and start to fund this during the 2017 Fiscal Year.

HH: Yeah, I’ve always been a fan of the double-sided open fence with a road in between. That seems to have worked in the California portions, but it’s pushed immigration eastward into Arizona and New Mexico, and I’m more concerned, though, with getting language about not withstanding any other law so that the National Environmental Policy Act, the Endangered Species Act, the Clean Water Act. All these different environmental groups can’t stop the fence. Is that part of your writ, Director Mulvaney, to make sure the legislations gets it done?

MM: Yup. Well again, we don’t legislate down here at the White House. Capitol Hill will do that, but we are already pressing on the, to the appropriate committees on the Hill, and it’s pushing against an open door. They know the same. The Republicans in the House and Senate know the same limitations. You can’t build a wall, for example, I think across national monument lands. That’s going to have to change. So yes, there are legislative changes that we’d need in order to effectively build the wall. And we’re already working on that.

HH: So what’s the range of the cost? I’ve heard so many different figures. I’d like to hear the OMB Director give me a range on the barrier at the border.

MM: Oh, let’s see, Hugh, I’ve got, I don’t know, six or seven different papers on my desk. I’ve got one that goes, starts at $8 million per mile. It goes up to about $25 million per mile. So again, it just depends on, when you’re talking about across 2,000 miles or so, what you decide to build in what areas.

HH: Okay, and do you expect to be specific in this budget as to that choice set?

MM: The ’17 and ’18, probably not. The ’17, we probably won’t be specific in terms of what the whole thing looks like. ’17, I’m sorry, I’m using numbers and I apologize. The Fiscal Year 2017 ends at the end of September. The President wants to have the wall, wants to have new construction done on the wall before the end of the fiscal year, and we will find a way for him to do that. We will provide more details in the ’18, and then really, the big details will come in the ’19 budget. Keep in mind, I have to sort of nail down the ’18 budget spending purposes by the end of next week, and then holistic purchases by the end of May, which doesn’t give us a lot of time.

HH: Sure. Let me talk to you about the five hot buttons – Planned Parenthood…

MM: Only five?

HH: Yeah, there are only five on my list.

MM: Okay.

HH: There’s Planned Parenthood, there’s the National Public Radio, there’s the Corporation for Public Broadcasting, there’s the National Endowment for the Arts, and the National Endowment for the Humanities. Those five, will they be zeroed out?

MM: We’ll know more by the 16th. I can tell you this. Let me see if I can be politically correct, which is usually not what I do, but I’m having to learn how to do this a little bit. The President ran very, very clearly on priorities. And the priorities are spending money at home on national defense, on border control, on immigration enforcement, on enforcing the laws generally that are already on the books. He also added a couple of different programs such as, or different ideas such as expanding the monies available for school choice. Those are the numbers that you will see go up in our proposed budget. In order to do all that, including the $54 billion for the Defense Department, without adding to this year’s deficit, keep in mind, this year’s deficit is already going to be about $490 billion dollars, but in order to prioritize those spendings, without adding to that already large deficit, the money has to come from someplace. And you know me fairly well as to where I might start looking for places to reduce spending.

HH: This also goes to the essence of government. I’m a veteran of PBS, and I was the general counsel of NEH. I like these places. But in an era of these deficits, I can’t see spending a dime on NPR or CPB or NEA or NEH.

MM: Well, the question is this. What’s more important? What’s more important – defending the border, defending the country, or doing those things? You could also ask it another way. Is the, is NPR so important that we should be borrowing money from our grandkids to fund it next year? I think you know where you and I probably stand on that.

HH: I do. I also wonder whether or not agencies like the U.S. Fish and Wildlife Service, the job of which can be done and is often done by state agencies, whether or not they ought to be reduced dramatically, and the Army Corps of Engineers. They’ve got some federal authority, obviously, but they’ve got their fingers in all sorts of state land use issues, ditto EPA. Are you going to bring the axe down? I think those three are the biggest three obstacles to economic domestic growth at home, period.

MM: Yeah, I think if you looked at the primary burden on domestic growth back home, it’s probably the regulatory regime writ large. And if we could figure out a way to rewrite that, in fact, I’ve seen some really great academic literature that suggests that a regulatory reform, it could actually have twice the positive impact on GDP as a really, really good tax bill.

HH: Yes.

MM: So that’s fantastic. But you talk about devolving things at the states. Keep in mind, because of the Democrat obstruction in the Senate, the whole cabinet isn’t even here, yet. I don’t even know if Rick Perry got confirmed yet or not, so how can I expect…

HH: He did.

MM: …was it late last week? Was that what it was?

HH: Yes, yes, he did.

MM: On plans, you know, plans on reforming the Department of Energy, plans to getting stuff back to the states, getting the government back to its core mission is sort of an administration-wide approach. And when you’ve got some cabinet agencies who are just starting work here for the first time, it’s sort of hard to come up with a plan. So you’re probably not going to see specifics on devolution in the 2018 budget, but 2019 budget, which actually starts in September of this year, I hope to get deep, deep down into those details.

HH: That’s exciting. Let’s talk now about Obamacare repeal.

MM: Terrific. Yes.

HH: I’m a believer, Director Mulvaney, in passing a, Obamacare is repealed by August 31st of 2018, period. And if we can come up with a replacement, great. What is the strategy here, because I do not understand standing halfway up the mountain taking fire from both sides?

MM: Strategy is to try and get a bill that does what the President wants, which is to repeal and replace that is different than what passed the House and Senate in 2015, which was just mostly a repeal bill. But the President gets a say, and I respect that. In fact, he should have a say, and he wants to repeal and replace. When we talk about reconciliation, and I know that’s getting deep down into the weeds, but you and I both know how critical that is. What does that mean?

HH: Yes.

MM: Reconciliation means it only needs 50 votes. Keep in mind, we’re trying to undo a bill that was written when the Democrats had everything they wanted. They had 60 votes in the Senate, and this was their dream bill. They didn’t have to work through reconciliation to begin with until Scott Brown won. And they didn’t have to work with Republicans at all. So you’ve got a hard-wired bill in the system that came up with 60 Democrat votes. Undoing that through reconciliation is very difficult, because the reconciliation rules are limited. You can only effect spending in a reconciliation bill. So we are somewhat limited, but we are fighting a battle with 50 votes that they, you know, that they passed with 60 votes. So it’s sort of an un-level playing field to begin with. But the idea is to do exactly what the President talked about on the campaign – repeal it and replace it with something even better. That means something that is really affordable. One of the things that just struck me about the Affordable Care Act was how is not really affordable and didn’t really provide that much care. But we are coming up with something that is better, fairer and more likely to save the health care system in this market in the long run than Obamacare is, because as I think the President said one time, the politically smart thing to do is just let Obamacare go, let it run, and prove what a dismal failure it was. The problem is that’s terrible for the country, so that’s not what we’re doing. We’re working on stuff, and I hope to have something out here in the next couple of days.

HH: Most people, though, heard the President say erase the lines and repeal. And so to me, you can use reconciliation to say the 2,000 page bill is gone, and we are replacing it, and then, with a single national market. So very specifically, will there be a single national market where one policy available, whether or not you want to buy it, is available anywhere in the United States?

MM: And keep in mind, as much as I want that to happen through reconciliation, I don’t think it can. It doesn’t affect spending. So I don’t think you can erase the lines through reconciliation. You can repeal all the taxes. You can repeal all the subsidies. You can create new tax credits, because all of this deals with spending. But when you start driving things that are purely policy, the better example, the one that, not better example, but another example is malpractice reform, medical malpractice reform, not suitable for reconciliation. Keep in mind, reconciliation is part of the budget process. It is a budget tool. It’s sort of an anomaly within the Budget Act, and it must be budget-driven in order to be reconcilable. And creating a national market for insurance, which we want desperately, doesn’t seem to be subject to the reconciliation rules in the House and the Senate. So we will be limited on what we can do. That doesn’t mean that we stop pushing for it. It means that we…

HH: It does me, though, that the administration put out what it’s going to do. It’s going to have to have its five points of what it’s going to get done through reconciliation.

MM: Yes.

HH: When do we see those five, or seven or ten points of the reconciliation possible?

MM: This week.

HH: Thank you. Let me ask you then, before we run out of time, about entitlements.

MM: Yeah.

HH: The President said he wasn’t going to touch Social Security. I get that. But what about Social Security Disability Insurance? What about Medicare? What about Medicaid?

MM: Great questions. And as soon as the 2018 spending budget is done at the end of next week. I’m hoping to put together something for the President to look at on the other pieces of entitlement spending, or mandatory spending. Some people don’t like the word entitlement. I use that simply because are entitled to that under law. It doesn’t mean it’s, some people misinterpret what that means, but try and lay out for the President what’s driving the deficit, and what we can do while still keeping his promise. Keep in mind, you see the AARP ad on television, which many of us have seen, and the speech he gives says he’s going to protect and save Social Security, protect and save Medicare. And that’s exactly what we are going to try and do. So I’ve already started to socialize the discussion around here in the West Wing about how important the mandatory spending is to the drivers of our debt. I think people are starting to grab it. There are ways that we can not only allow the President to keep his promise, but to help him keep his promise by fixing some of these mandatory programs.

HH: That’s big news, Director. Let me interpret that. When you say protect and save, that means, it could mean that you could increase the retirement age. You could unchain the CPI from Social Security and protect and save it. You could bloc grant Medicaid to protect and save Medicaid. You could increase copays under Medicare to protect and save. You could move to a voucher plan in order to protect and save. Am I correct in interpreting you that way?

MM: Well, drill down on one of those. Let’s drill down on one, which is Medicaid. Clearly, you can help fix and solve Medicaid as part of this larger Obamacare replacement, right, that the two things are tied together. So if we get Obamacare replacement right, it might also allow us to fix Medicaid. I don’t think you’re going to see this President have any interest in raising the retirement age anytime soon. But we need to address things like Social Security Disability, which you and I both know is one of the fastest growing and probably one of the most abused mandatory programs in the country. Yes, there are things that we can do there. So I know the national narrative, and the national narrative is we’re not going to do anything on mandatory spending. But I think really what this President is interested in doing is not affecting the benefits for folks, and saving these programs long term. And I think there’s a way to do that.

HH: Last question, Mick Mulvaney, I flew for three hours yesterday with Mr. October, Reggie Jackson. You know, he’s 70 years old. He’s going down to work in Tampa with the Yankees. He and I both were talking about the President and how he communicates. Would you relay that Reggie wants to sit down with him and talk to him? But number two, we’re all working to 70. Why wouldn’t you want to work, why wouldn’t he want to raise the retirement age? Everybody in this country knows we have to raise the retirement age.

MM: Not only that, and I’m not going to raise it on Reggie, although his means test is an efficient measure…

HH: (laughing)

MM: The, but the better question is this, is you know, my kids. I’ve got three 17 year olds. The President has grandchildren who are you know, under the age of 10. Are they really going to grow up in a world where the average age expectancy is, say, 90, or even 100, that they’re going to work for 65 years and then you know, retire for 35? Does that make any sense?

HH: No. Yeah, it’s crazy.

MM: So that’s, that is a conversation for another day.

HH: Okay, I tricked you. One last question. My old home state, California, is effectively bankrupt, given unfunded pension liabilities. Do we need a new chapter to the bankruptcy code, Director Mulvaney, that will allow states to reorganize, given Illinois, given Connecticut, given California?

MM: Well, that is a curveball, one I didn’t expect. Let me shoot from the hip, which is always a dangerous thing to do on the Hugh Hewitt Radio Program. You can’t change the rules after the fact. People have lent money to those states, expecting those states to not have access to the bankruptcy courts. I think it would be entirely unfair to the markets to change the rules after the game’s started.

HH: How in the world do they get out of this whole? I mean, California is broke. People don’t know it, but they are just completely insolvent.

MM: Be smarter. I mean, face it. They got into a problem on their own. They should be able to get out of a problem on their own. I’ll tell you this. Don’t come looking to the federal government for a bailout, because it’s not going to be here.

HH: Amen. Director Mulvaney, I hope we can drag you on TV. Come back early and often. Every day, anytime you want, come and talk to us.

MM: Thank, Hugh. See you.

HH: Thank you.

End of interview.

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