Government & Economic Recovery: Friend or Foe?

I want to begin by saying that at no time in my lifetime have I thought that we were at a more decisive moment in the life of the American experiment than we are today. There have been more momentous times in the life of the nation, but in my half a century plus one year of life, I’ve never seen a time when the essence of who we are as a country was really in the fulcrum of the public debate.

I don’t necessarily believe this the most important election of my lifetime, which is the cliché you always here around election time. But I think this might actually be one of the most important elections in the life of this country. And the reason is that this is a real moment of decision. Nature abhors a vacuum, and markets abhor uncertainty. We are going to have some certainty after this fall about whether or not this nation goes decisively to the left or begins a pathway back to the right.

My wife’s favorite poem is by Robert Frost about these two roads diverging in a woods and how taking the one less travelled made all the difference. America up to this point has taken the road less travelled by; it’s taken the road of freedom, the road of limited governments and the road of free market economics. The idea of freedom and the preservation of freedom was enshrined in the Constitution as a limited government, and that’s what’s changing.

Since the recession began, the private sector has lost nearly 8 million jobs; the government has gained 656,000 jobs. That gives you a little bit of an idea about the times in which we live. It’s no real surprise when you look at the prescriptions that are being applied here. During the last 16 months, the President and the Democratic majority in Congress have actually raised taxes on Americans by $670 billion net. The same Congress passed a trillion dollar stimulus bill, a $1.2 trillion government takeover of healthcare, and a budget that will add nearly $14 trillion to the national debt over the next 10 years.

That’s on top of a national debt right now that is about 98 percent of our GDP, we’re at the $13 trillion mark in debt, 98 percent of our economy. The answer from this outfit is more borrowing, more spending, more bailouts, and ultimately more takeovers. It really is astonishing.

I probably don’t have to tell anybody in this room about all of the machinations of Barney Frank, Chris Don, and others about financial services reform, which for all the world looks like the Wall Street bailout made permanent—a permanent intrusion into the decisions between boards and shareholders, arbitrary decisions by bureaucrats. It is a prescription for economic decline, and it is a prescription that we will continue to oppose.

House Republicans, every single one, voted against that failed stimulus bill, and every single House Republican opposed the government takeover of healthcare. This is a new and improved and re-grounded minority on Capitol Hill.

There’s almost no one in Washington, D.C., who is talking about the principles of growth. I read a great biography of Margaret Thatcher over the Christmas holidays when I travelled to Afghanistan, and it pointed out the fact that she used the phrase “restrained incentives.” In the 1970s when she became the minority leader in the Parliament, she said—and I’m paraphrasing— “restraint alone will not be sufficient to cure what ails Great Britain, the disease of socialism.” She said it will take incentive, that it was incentive that built our cities and our great empire, allowing people to keep more of the fruits of their labors.

It’s what built our cities, conquered our frontiers, and made America the freest and most prosperous nation in the history world. And returning our national policy to the principles of growth has to be at the very center of what we’re about.

Lastly, it’s about leadership. As I look around the room, I haven’t seen this many people with unimpressed looks on their faces since I last dined with my three teenagers, and I understand it’s got to be hard for leaders to come to Washington D.C. I mean you don’t have the luxury of getting up and giving a good speech that people then mistake that for leadership; you actually have to pull people together in a room and figure out how to make the business work. And to be able to do that in these times in this economy is a great credit to your leadership abilities.

I think, frankly, at the national level we’re experiencing an absence of leadership in a classical sense of that word. I have great political differences with the President of the United States, but I’m not talking about that. The President’s probably as far to the left as I am to the right, but I don’t hold that against him, he’s entitled to his views and his opinions, and we’ve battled those out on a regular basis. What I’m concerned about is an absence of leadership, one that’s become apparent to millions of Americans with the response of this Administration to the crisis in the Gulf.

It first became apparent to me about two weeks after that April 20th explosion occurred when a New York Times editorial wrote, “A careful review of the timeline of the Administration’s actions is damning.” So I ripped it out of the newspaper and I came in and showed it to our team, and I said, “Talk to me about this because I lived through Katrina, and I saw the poor response by the Administration.” I thought we had put together enormous resources into FEMA to give us greater capabilities to put boots on the ground, and to move personnel and material into crisis situations, and I wanted to understand what was going on.

It was amazing to me that it took 10 days after this explosion occurred before the Administration sent cabinet level personnel into the region. I went to a press conference a couple days later and said, “Look, the American people deserve two things, they deserve action in the Gulf to get to contain this spill and to initiate the cleanup. And they deserve answers as to who was responsible at BP, but also why this administration was slow to respond.” The first few of weeks after I said that—and I think I might have been one of the only people on our side saying it—I was getting battered about the head and neck.

Even some otherwise friendly conservative commentaries were, “Oh, Mike Pence is wrong and the President is doing absolutely every he can do,” but things have changed a little bit. I mean James Carville and I finally found something we can agree on. I mean James is a liberal, he’s a Democrat but doggone it, he’s a New Orleans man, and he’s not messing around with that. He’s down there speaking loudly and boldly what’s needed here. And it seems to me, all the way through the President’s shirtsleeve meeting late last week that there’s still a disconnect here and it’s a disconnect about leadership.

I was on Joe Scarborough’s show and he asked, “What more do you want them to do?” I said, “Well, here’s a thought, how about lead?” Do what leaders do when you face a problem in your organization. Don’t have a press conference, put all the stakeholders in a room with somebody sitting at the end of the table who can make a decision and be responsible for the decision and work the problem.”

We need to recognize that, yes, there’s a profound ideological choice that’s being made in the country in the upcoming elections. I also think we’re in a time where we have a very thoughtful, dedicated family man serving as President of the United States of America, but we don’t have someone who’s exercising leadership in a crisis environment. That’s deeply problematic.

My job in the cheerful minority is going to be to continue to urge and encourage the President to step into that gap and provide decisive leadership on behalf of our allies overseas with the widening crisis in the Mediterranean involving our cherished ally Israel. To provide strong and decisive leadership. But at the end of the day, as I said, nature abhors a vacuum, and so does politics and so does leadership, and I expect it’ll be filled.

Q&A Session

What role should government be playing to drive growth in this world of competing against Chinese and Indian markets?

Mike Pence: A good starter is marginal rate reduction, getting away from these boutique tax cuts that we’ve been passing. We know what reducing marginal rates, reducing rates on capital formation is the way to get the economy moving again, and that’s specifically what we would champion and what we would advocate.

Obviously, the President is the President until after Election Day 2012. But if we can gain Republican majorities in the House and maybe in the Senate, there may be possibilities to go forward and preserve some of the tax cuts that are in place and put in some pro-growth measures. As you look at $13 trillion in national debt, you will never cut your way out of that. You just won’t. It’s one of the canards of the recent healthcare debate is they made it deficit neutral because they were going to cut $500 billion out of Medicare. Do you know how much money we’ve cut out of Medicare since I was elected 10 years ago? Zero. And I predict that’s how much we’ll cut out of Medicare for the foreseeable future.

Now, you can reduce the rate of growth of these entitlements through long-term entitlement reform. You have to do that. But the reality is, unless you combine long-term fiscal discipline and reform with growth, then we’re going to be living in an America that’s saddled with an ever-widening national debt and in 10 to 15 years, we’re going to be Greece. In 10 to 15 years, we’re going to be at about 120 percent of GDP for our national debt. So, growth has to go to be a big part of it.

What other specific things that you have in mind that we should be focusing on?

Mike Pence: Nobody talks about regulatory reform. I know there are financial instruments that need to be regulated as ordinary securities and we’ve been doing some of that and we should [pursue] greater transparency and greater accountability. But the reality was, the growth in the 1980s was generated by marginal tax rate reductions, by expanded international trade, which we’ve got trade agreements in our own hemisphere that are sitting on the sidelines right now being ignored. It was sound money policy, which we don’t even talk about sound money anymore. And the last thing it was, it was regulatory reform.

When I talk to business owners, I know a guy who builds animal cages in Muncie, Indiana, who just moved 90 percent of his production to the coast of China, and it was 100 percent because of the regulatory environment here and there going forward. So we need regulatory reform that allows us to compete in the world without compromising worker and consumer safety; we can do those things.

When the smoke clears, who is going to be the best standard bearer, and if different, who will be the real standard bearer in two years’ time?

Mike Pence: You can’t know the answer to that until you know what the American people decide to do in 2010. I think it was Shakespeare who said, “Comes the times, comes the man.” I don’t think you can have any idea what the times would require in 2012 until you see what the American people have done on Election Day.

Everything turns on 2010. I really do believe that in a very real sense this is one of the most important elections in the life of this country. Should they manage to hold on to power in both chambers of Congress and consolidate what they’ve done in the government takeover of healthcare, then [they will] have the ability to pass a massive national energy tax and reorganize our energy economy along European style. To be able to do that in conjunction with a President who is left of most of his members of his party in the Congress would represent a real and serious challenge to the vitality of this country going forward. If, however, we win a chamber of the Capital, or both, that calls for a different kind of leader. And if we take the Congress back in 2010, I’m confident we’ll take the country back in 2012 and we’ll know the right person to lead that effort.