Understanding Trump and Trumpism Part 3: A Trumpian Balanced Budget
Newt focuses Part 3 of his “Understanding Trump and Trumpism” series at the Heritage Foundation on creating a Trumpian balanced budget.
Thank you all very much. It is a rather exciting week. It’s going to be interesting to see how all this plays out. I think it’s a remarkable achievement. As I said before, literally no person in American history has gone from never held public office and never served as a general officer in the military to being President. This is an achievement literally without any precedent and sets the stage, I think, for a period that we’ll all understand later by having lived through it, but what I’m trying to do in a series of speeches is lay out a frame of reference to think about it but I’m not suggesting that I have a prescription or a formula that inherently covers everything because it’s evolving. I’ll talk about that.
Today, I’m going to outline a Trumpian balanced budget but first I want to thank Senator Jim DeMint and Ed Feulner, who’s right over here, and The Heritage Foundation. We go back a long way. Before I was even elected, I was going to lunches at Heritage. One of the things I can report about conservatism is that the lunches have not actually changed. They are the same sandwiches. I think some days they are the same sandwiches but that’s different.
But despite its culinary lack of adventure, Heritage was the decisive intellectual center in the Reagan Administration’s bold policy changes, producing over 2,200 recommendations in its 1,093 page report Mandate for Leadership. Heritage then had the courage two years later to come back and actually issue a report on Reagan. The administration got about a 62 for having implemented Heritage’s ideas. That is, however, the highest score any president’s ever achieved. It shows you how tough a grader Feulner was when he was the head of Heritage.
In this transition, Heritage is once again playing a leadership role. These speeches are designed to reinforce the case for bold change. These speeches are in the tradition of Heritage’s vision statement which is, “To build an America where freedom, opportunity, prosperity, and civil society flourish.” Not a bad first step towards making America great again.
This is the third in the series we’re doing this month. We are preceded by a speech here at Heritage on the principles of Trump and Trumpism back on December 13th and a speech at the National Defense University of the 14th of December on Trump and national security. Both of them are also available at the Heritage website and at the Gingrich Productions website.
In terms of the concept of balancing the budget, back in February, 2016, Trump warned about excess spending and deficits at the MSNBC Town Hall Meeting. He said, “We can’t keep doing this. We’ve got to start balancing budgets.”
On June 17th, 2016, then candidate Donald J. Trump told Sean Hannity he would insist on a balanced budget. He conceded that the Obama deficit is so big, it would take a while but said, “I would absolutely insist on it relatively soon.”
Trump’s plans have been ridiculed by critics and so-called experts. In response, on September 26th, 2016, economist Peter Navarro and entrepreneur Wilbur Ross released an analysis arguing that the Trump policies would lead to a bigger economy with greater revenue and less government spending. They argued Trump would, in fact, lead to a balanced budget over time. Navarro is now the Trump nominee to be director of a new national council on trade and Wilbur Ross has been nominated to be Secretary of Commerce.
There are two very different arguments about balancing the federal budget. The first is whether it is a stated goal. The second is whether policies can be developed and implemented to actually make a balanced budget a reality. I think part of what makes Trump and Trumpisms so fascinating is while it was a stated goal, it wasn’t the central piece of the campaign but the underlying patterns, I think, give us a very real chance to get there.
For candidate Trump, balancing the budget was never at the center. He said over and over, he wanted to make America great again. He said he wanted to control our southern border and control immigration. He said he wanted to dramatically reshape our trade policies to favor America. He said he wanted to repeal and replace Obamacare. He said his domestic policy could be defined by three words, jobs, jobs, jobs. He said he wanted very bold tax reform, to increase America’s competitiveness and create jobs in America. He said he wanted bold deregulation to liberate Americans from bureaucrats and to renew the freedom for entrepreneurs and small businesses to create jobs. All of these policies help with shrinking the deficit and balancing the budget.
My argument is that Trumpism produces a balanced budget largely as a consequence of its policies rather than by focusing on the balance itself. It’s actually a little parallel to Bill Walsh’s book that he wrote when he was the coach of the 49ers, in which he said that the score is beside the point. His goal was not to focus on the score. It was to focus on the 49ers executing every play perfectly. If they executed every play perfectly, the score would take care of itself. In a sense, if the Trump policies are implemented, the consequence will be a balanced budget, even though that’s not necessarily the primary goal.
For those who would write this analysis off as political propaganda, I want to take a detour to the 1990s and the only four balanced budgets of your lifetime. I’m doing this deliberately because I recently have had some fairly stupid articles written critiquing my understanding of the complexities of the budget. Balancing the budget is a topic where most of my critics fit into Nassim Taleb’s Intellectuals Yet Idiots category, those of you who’ve heard some of these speeches know that I’m a big fan of this. I urge everybody to Google Intellectual Yet Idiot or IYI, which is Taleb’s argument that there are an amazing number of people who are now significant people who can write essays and answer tests but don’t know anything. They do really well at writing essays and answer tests, so they get accepted to really fine universities where they study under professors who are really good at writing essays and answering tests. They get really good grades, so they then get a job with the Supreme Court or the New York Times or in the bureaucracy, where they get to write essays and answer tests but they don’t know anything.
They can write a brilliant essay on how you would change tires but if you called and said, “My car has a flat,” they would not have a clue how to change it. This explains a great deal of our policy problems at every single level. It’s actually a very serious and subtle critique of … He estimates 40% of the governing class in the world are people who are articulate and glib and know nothing, which is very dangerous because they sound so sure of themselves, that you’re sure they must know something. Many of them have multiple degrees. If you work at it, you’re going to have a Yale, Harvard, MIT set of degrees. You just look at him and you think, “My god, you must be smart.” They are smart. They just don’t know anything, so they’re Intellectual Yet Idiot.
I want to try to clarify that I fit the opposite group. That is, I’m actually not an idiot but I’m also not an intellectual but I did actually balance the budget. Having actually balanced the budget for four straight years, I’m willing to talk about balancing the budget, even though I will be criticized in a variety of op-eds and columns by people who don’t know anything but who write really well. I must say, their ability to turn a phrase is remarkable. If only they could combine that with knowledge, it would be really cool.
I was the leader of a House Republican team. It’s very important to understand this and Trump’s got to have the same attitude. Teams accomplish a lot. [Onodopekay 00:10:50],a French general wrote in the mid 19th century, “Four strangers encounter a lion and the strangers will flee. Four friends encounter a lion and they will kill the lion.” Teams can get things done. Individuals, no matter how powerful they are, in the long run, can’t sustain the momentum.
We had an amazing team because the truth was, this was all done by sheer will power, it was volitional. In the contract, we had promised to vote on the constitutional amendment which we did. It passed the House decisively and came within two votes of passing the Senate. We had had 65 or 66 Senate votes. Only had about 309 House votes in favor of the balanced budget amendment. We had a dinner one night in the Capital with our leadership, including our key committee chairman. We said, “You know, we could now say, ‘We’ve done what we’ve promised. We had the vote,’ or we could say, ‘Gee. If you have 65 or 66 Senators who claim to be for a balanced budget and over 300 House members who claim to be for a balanced budget, what if you just balanced the budget?'”
We talked about it for about three hours. Bill Archer, in particular, was then Chairman of Ways and Means, returned to his Chief of Staff on the way out and said, almost with tears in his eyes, “We’re actually going to do this,” because we decided we would go ahead and balance the budget which was, at the time, seen as crazy. You’ll see why in a minute.
The team included John Kasich as Chairman of the Budget Committee, Bill Archer, Chairman of Ways and Means, Bob Livingston at Appropriations, Tom Bliley at Energy and Commerce, and then the leaders of the leadership like Dick Armey and Tom DeLay.
When we set out to balance the budget, the four previous years, the combined deficit was a $1,017,000,000,000. Nobody in Washington thought you could balance the budget, just as nobody in Washington thought you could elect a Republican Congress. Starting in fiscal 1998, there were four years of surplus totaling $659 billion. Four years before us, we’re borrowing a trillion dollars. Four years after our policy goes into effect, we’re paying down 559 billion. That’s how big the difference is.
In fact, there’s a point where, in 1999, Alan Greenspan, the head of the Federal Reserve at that time is publicly commenting. They have to solve the intellectual problem. How would you manage the currency if there was no federal debt? Something we’d only achieved under Andrew Jackson.
The momentum of surpluses was so great that Jack Lew, then President Clinton’s Chief of Staff, now Secretary of the Treasury and Bob Rubin, who was then Secretary of the Treasury, wrote an op-ed in 1999. They praised the balanced budgets of the 1990s.
By the way, there’s a great introduction by Al Gore. If you go through and pull up balanced budgets, where Gore is taking total credit for how he and Clinton have balanced the federal budget, which is something he did shortly after inventing the internet. It was one of his many contributions to America.
The question is how did we balance the budget, particularly since nobody in Washington thought it was possible? But funny side story, by the way. We had said in the contract that we would bring up a constitutional amendment which said that the budget would be balanced within seven years of passing the amendment. We have this big dinner. We’re all excited. One week later, we have a leadership meeting. Kasich comes in very troubled because he’s the guy who’s the center of this. He’s got to carry the ball for the whole team. He says, “We’ve been looking at it. You know, seven years may be too short.” He said, “Maybe we ought to go for 10.” We all talked about it. He said, “Come on, guys. Who said that balancing the budget in seven years was written in stone? Why don’t we be practical?” We had a vote. The vote was 14 to 1. Kasich was the only guy who wanted to be practical because, of course, he’s the guy who had to do it.
The following week, we had a marble thing for his desk that said, “Balanced budget, seven years,” which we gave to him in a presentation in the leadership meeting saying, “You see? It is now written in stone.”
I tell this story because I think the two most dangerous words for the Trump administration are reasonable and later. They’re going to be surrounded by bureaucrats and reporters and people in the social cliques and lobbyists who say, “You need to really be reasonable. We can work this out. That always means sell out.” The second term is, “We really should do this later. Let’s not rush into it,” which always means never. Later means never, reasonable means never. They need to understand that every single day when they’re in the city.
In fact, I would recommend to all of his cabinet and all of his senior officers at the sub-cabinet level that they all watch Yes Minster and Yes, Prime Minister to get a vivid sense of how the British senior civil service blocks elected officials from doing things that they’re elected to do. They’re marvelously well done. The person who produced them was an advisor to Margaret Thatcher. You’ll never see the bureaucracy the same if you watch Yes Minister and Yes, Prime Minister. When we decided we were going to do this, a little bit like the story I told the other day about the Wollman skating rink where Trump says now that he’s in charge, he realized he didn’t know anything about fixing skating rinks. Once we decided we balanced the budget, we realized this is a really big project. You changing spending patterns by a couple hundred billion dollars a year.
The round table at that point was very, very helpful. They would, every Wednesday, fly 12 to 15 CEOs in to have dinner with us in the Capital. We had the same conversation every week. I would outline, “We want to undertake a change in the government, in revenue and in spending combined comparable to the size of General Motors or Wal-Mart annually. We need your advice. You’re a CEO. How would you think about this?” It was fascinating. We had probably six meetings like this. Every meeting had the same three principals which, again, I think the Trump team could find very useful. One, set very big goals with very short time horizons. Two, delegate like crazy. You need a lot of people doing this. Three, kick all the experts out of the room. That every expert will slow you down and screw you up. I kept, over and over, we got this.
That was the model we followed. We also learned doing it. Kasich really, I think, evolved remarkably in this period. You couldn’t run over people. In a free society and in the House and Senate, everybody has power. If you run over them, they may pretend they’ve given in but they just knife you in the back later. You’ve actually got to unlock them. We developed a model called listen, learn, help and lead where we would listen to people to find out what they really needed, try to learn from their situation and their problem and try to help them, at which point, they’d ask us to leave. We were constantly trying to unlock people rather than run over people.
We developed this whole notion of under what circumstance could you do this? We practiced the idea of yes, if rather than no, because. Don’t tell me, “No, we can’t do that because …” Tell me, “Yes, we can do it, if …” You can say exactly the same thing in the next part of the sentence, so you put the burden on me of solving it but the different psychologically for meetings to start with no, because or yes, if is astonishing. At least 10 times as productive to say, “Yes, if.”
We’re going through this. This was a very intense multi-month process in which virtually every member of the House Republican party was engaged, because to really change the federal government, you have to really dramatically move things. We had two core assumptions. If you accelerated economic growth, revenue would rise, and if you controlled spending over time, it would go down. Very simple model.
Applying it was complicated. The capital gains tax cut was one of the big keys. This is the largest capital gains tax cut in history. It was done very specifically to accelerate investment. It worked dramatically. We got much better reaction, many times bigger than the Joint Tax Committee thought we’d get because people responded to it.
The two things were going on that really changed the business environment were the capital gains tax cut which was a signal we wanted people to invest and save in America and the deregulation process that Dick Armey led, because that sent a signal there’s going to be less red tape, less harassment. We were not going to be nearly as tolerant of bureaucrats running over you, particularly small businesses. Small businesses were responding to the deregulatory process very dramatically and the combination of the tax cut and the deregulatory policy really dramatically increased revenues.
At the same time, we were controlling spending. The most powerful was welfare reform. Again, I think because this is a country with enormous talent outside Washington, some of which I hope the Trump team will actually pick up on, we were helped because particularly Tommy Thompson and John Engler and then, George Allen and Mike Leavitt had all experimented with welfare reform. They were prepared to actually loan us their welfare directors, something which frankly, the federal staff in Washington did not like. You go to the Energy and Commerce staff or the Ways and Means staff and say, “Hi,” you get some new playmates who are state-level people who actually run welfare programs, who actually do the work. Again, it was instinctively the opposite of Intellectual Yet Idiot. We wanted people who had their hands dirty, who had been running programs, who had dealt with trying to help the poor.
The result was, we produced a welfare reform bill that’s probably the most successful social conservative reform of the last half century. Welfare offices became employment offices. Instead of counseling people how to be dependent, we counseled people on how to get jobs. We took the great lessons learned by a firm in New York called America Works which is the most successful long-term welfare recipient program of training them and getting them into work. They don’t get paid unless they stay on the job for at least six months. It’s a really challenging program but we took all of these things, put them into a program, decentralized it back to the States, allowed them to experiment, had a dramatic decline in the number of people on welfare, a rise in income as people went to work and the largest decline in children in poverty in American history.
People on the left just go crazy because none of this can be true. This had to be hurting the poor. No, actually they got jobs, their incomes went up and their children came out of poverty, which means that work actually is superior.
We also had Medicare reform, which was our most challenging thing. We knew you could not balance the federal budget unless you reformed Medicare. We also knew Medicare was on the verge of going broke. We went through a very complicated reform process.
We worked very closely with AARP because we’re doing this in 1996 during a presidential campaign. We figured out we’d get killed if AARP said we were anti-senior citizen. We worked for a year to get the AARP national leadership. The Washington Policy office remained socialist and left wing and favoring Bernie Sanders but the political offices, the people who got elected from back home, the people who ran the actual AARP system all decided that what we were trying to do was real and correct. They actually sided with us against the Clinton White House.
We did one other thing that, again, is part of this style of real change. We went and had Dan Miller, a congressman from Florida, spend a year training members into how to talk because we were going to increase spending on Medicare but increase it at a lower rate. The left would then describe that as a cut but it wasn’t a cut. It was an increase. It was a smaller increase but it was an increase. It was really important to get people trained to go back home and win the argument in town hall meetings or on television or in newspaper editorial boards. Because we did all that, we actually pulled of Medicare reform during a presidential year. That was a key component of the building blocks to getting to a balanced budget.
We also had communications reform which dramatically liberated the communications industry to modernize and to develop the systems we use today. We had FDA reform, a program which Congressman Joe Barton had actually worked on in the minority and laid the base for and knew what he was doing, so we could pass it pretty rapidly.
This always surprises people. We didn’t just cut spending across the board. We had very selective increases. Two examples. We doubled the budget for the National Institutes of Health because I’m a passionate believer that, in the long run, unless you get the medical research to dramatically break through, you’re never going to control spending. If you continue to have Alzheimer rising, you continue to have other diseases like that rising, you’ll just never control it. You can’t do enough bureaucratic things if you have an aging population with a dramatic increase in some diseases. Medical research, in my mind, is the most important long-term conservative commitment to getting to a long-term balanced budget. To give you one example, Alzheimer’s, by itself, from now to 2050, in public and private spending, is about $20 trillion, the entire current national debt. You have to find breakthroughs.
We should have actually increased the National Institutes of Health and the National Science Foundation. It was a mistake that we didn’t because a lot of the basic techniques that are used at NIH come out of the NSF.
The other place we increased spending was in the intelligence community. I have to confess, I was pleased when the 9/11 Commission singled it out and talked about it as the Gingrich plus-up and said that it happened against the Clinton administration’s deep opposition and that it was the money that was essential to preserving the capacity of the intelligence community. Those were the biggest fights but we were trying to be selective. Places that ought to go up, we tried to get more money for while we were controlling spending overall.
All of that activity strengthened the dollar and allowed for lower interest rates. The practical result was people were doing dramatically better but we followed the principle that a job is the best social policy or as Ronald Reagan put it, “The best welfare is a paycheck every two weeks.” Even liberals were stunned by the success of balancing the budget for four straight years and creating jobs. This is what, in the article I mentioned earlier, by Lew and Rubin. This is what they wrote. I’ve always loved this. “The President’s plan to retire such a large amount of debt is also the best pro-growth strategy for our economy.” This is the February, 1999 commentary in the Washington Post. “When the government adds to private savings rather than drawing from it, more resources are available for private economic growth, higher standards of living and increased revenues without any increase in tax rates.” They called high deficits, “A straight jacket on investment and economic growth,” saying that, “The deficit reduction achieved by Clinton and the Republican Congress led to economic growth.”
Later on, since Lew presided over the Obama deficits, one wonders whether he lost his believe in balanced budgets but it was interesting that even by 1999, you began to have liberals saying, “This is working. It’s increasing economic growth. It’s increasing take home pay. It’s increasing opportunity for the poor,” and so, I would argue that it’s important to recognize that, this is my key argument with all those people who are going to write these critical articles, we’ve balanced the budget in modern times. It’s not a theory. It’s a historic fact. We do know how to do this because we’ve done it. Furthermore, not only can we balance the budget, I think there’s a moral case for doing it and a practical case. Morally, outside of war and emergencies, it’s simply wrong for us to spend our children’s money.
We used to be a country in which people worked and save to pay off the mortgage and leave kids the farm. We’ve become a country in which people borrow and sell off the farm in order to mortgage the future. It’s fundamentally wrong. We need to understand that in many ways, balancing the budget is a moral, not an economic, issue. Ultimately, the regent pro-debt, pro-spending model collapses. Margaret Thatcher captured it best when she said, “The problem with socialism is you run out of other people’s money to spend.”
Our lack of discipline has created an absurd student loan crisis caused by absurd policies. If you went back and looked through the last 20 years and said, “We’re going to create a Ponzi scheme in which we’re going to encourage students to spend longer periods in college by borrowing the money so they don’t feel the effect of wasting their time until later when they graduate and now has to repay the money which they will now deeply resent because they’ve already spent it. At the same time, by setting up this kind of a debt scheme, we’re going to encourage the universities to raise their tuition because it’s all free money.” If you go back and look at the last 20 or 25 years, it’s simply a Ponzi scheme in education. It all becomes very obvious.
By contrast, I urge everybody to look at President Jerry Davis and the College of the Ozarks. College of the Ozarks is a work-study college. You cannot get in unless you need federal aid. They have no federal aid, so you work. You work 20 hours a week during the school year, 40 hours a week during the summer. That pays your total cost. Ninety-two percent of the students graduate from the College of the Ozarks with zero debt. The 8% that have a debt bought a car their senior year. It actually creates a real fundraising problem for them although they’ve done remarkably well building an endowment but their fundraising problem is historically, people give to a college they want their kids to go to. The alumni, by definition, are now doing well enough, their kids aren’t eligible to go to the College of the Ozarks because they’re earning too much money. It’s a very interesting conundrum but I think one of the most interesting people culturally and educationally in America is President Jerry Davis.
I just recommend that because I’ve tried unsuccessfully now for a decade to get states to create at least one work-study college in the poorest part of every state so you can go out and say to kids, “No, you don’t have to be in debt.” The first answer to kids is, “Don’t borrow the money.” I’m hoping that Betsy DeVos will have the courage. She’s going to be a great leader. She’s going to be a great Secretary of Education. You can tell how big a threat she is to the teachers’ union by the degree in which they’re already rabid but the fact is, she represents dramatic change. I hope she’ll have the courage to say, “You know, the truth is, we shouldn’t encourage students to borrow money. We should encourage them to work. We should encourage them to save. We should encourage them to focus.”
When you go to student debt, it takes longer to get out of school. You also have schools that only offer the courses every other year that you have to have. That’s absurdly destructive behavior. We shouldn’t tolerate it but it’s behavior built around one thing, can we optimize the life of the faculty? It has nothing to do with students just as, by the way, big city schools have nothing to do with students. Big city schools are remarkably successful engines of paying teachers. They do it very well. They’re close to 100%. They just don’t teach but that’s a different issue.
Our current policies have destroyed hope, trapped people in dependency, created a crisis of disabilities with Medicaid cards. I encourage everybody to read Quinones’ book Dreamland, which is a study of the opioid epidemic, the heroin epidemic which parallels the collapse of small-town America, the degree to which people get on disabilities for the purpose of getting a Medicaid card so they can find three or four corrupt doctors, so they can then get drugs charged to their Medicaid card. This whole process, if we understood how much we have subsidized the crisis in opioid addiction through taxpayer dollars, we would be in a rage. These are systems of really deep destruction. They’re compounded by liberals who sneer at hamburger-flipping jobs.
I just want to make an old-fashioned case here. Work is good. The first stage of learning how to work requires showing up. Any job beats no job. The older you are when you get your first job, the harder it is to learn certain key lessons. Being on time, staying the whole time, paying attention. Think about a math class where you can get through and get a passing degree with 70%. The first time you make change working at a McDonald’s or a Wendy’s or whatever. They actually expect you to be at 100%. If you said at the end of your first day of work, “Hey, my cash register is 70% accurate.” This again goes back to Intellectual Yet Idiot. What kind of system would believe that it isn’t useful to learn that the real world expects 100%. Over and over again. “I was nice to 70% of the customers. Why are you mad at me?” These are things which have created dependency. Dependency has proven to be a dream-killing dead end leading to drug addiction, violence and passivity.
Just as the unionized public bureaucracies have expensively reinforced those failures by leaving poor children with inadequate skills to get jobs, Trumpism can lead to a balanced budget by the consequences of its policies, if they have the courage to avoid screams of responsibility and screams of waiting until later. They can have an enormous impact. I think that the team of winners that he has assembled are so successful and so powerful that their collective will, if they focus it, will, in fact, change the city in dramatic ways.
I think the election of Trump is a psychological watershed which makes many things possible which were impossible on November 7. This is my key argument with all of the intellectual news media analyst types. They’re all still in the old world, reinterpreting Trumpism back into the world they’re used to. It’s profoundly wrong. Trying to measure the post Trump victory world by the standard and formulas of the pre-Trump world is comparable to the pollsters who simply could not believe the shape of the 2016 electorate until it actually voted.
Remember, even on election day, the pollsters were distorting the exit polls to get the outcomes they wanted. That’s what you’re seeing with all these policy analysts. I’ve lived through three watersheds in conservative politics. Goldwater, whose nomination shattered the moderate wing of the party, which had controlled the party up till then and was unthinkable in 1962. By the time he got control of the party’s machinery in 1964, had decisively begun to change the shape of the Republican Party and the shape of American politics. Reagan, who on three different topics, the future of the Soviet Union, the nature of economic growth, and the importance of American civic culture in American history. Those three topics, he was a revolution from Jimmy Carter. You cannot imagine the world of Ronald Reagan in the summer of 1981 as compared to the world it would have been under Carter.
I always remind people of this. What we’re going to see on Friday, just close your eyes and say, “It’s Hillary Clinton being sworn in. It’s Hillary Clinton’s cabinet being announced for the last three weeks.” That’s the gap we’re describing. Nobody in the intellectual system in Washington has really come to grips with this is the gap. This was the world they thought they would have. This is the world they’re getting. It’s that big a gap.
I will also say to all of my conservative friends that when, on occasion, President-elect Trump and then President Trump does something which I find wrong, irritating or whatever, all I have to do is close my eyes and think, “President Hilary Clinton,” and for at least the next two years, I will forgive him virtually anything because it is so much less than she would have done on the very first day.
I’ve also been through the revolution of 1994. Prior to 1994, Republicans had not held the House for 40 years out of ’68. Since 1994, we’ve held the House for 20 years and the Democrats have held the House for 4 years. The odds are pretty good now, we’ll hold the House for at least another decade.
I say this with great pride. Pelosi today has spent more time in the minority as a leader than any modern House Democrat. It just makes me feel warm all over.
Let me give you three other watershed examples that are outside of politics but have political implication. 1829, the first railroad engine, Stephenson’s the Rocket is built in Britain. 1831, the first railroad engine arrives in Baltimore. 1832, a young 23-year old candidate for the state legislature in Illinois runs with a pamphlet which includes building a railroad. His name is Abraham Lincoln. He’s never seen a train. He’s read about a train. He’s figured out that given the great prairie of Illinois, having a train would be helpful to farmers. He’s campaigning as a pro-railroad legislator, not having ever seen one. In the 1850s, he becomes a very successful, very famous railroad lawyer, wins a very key case involving whether or not railroad bridges are obstructions to paddle boats because there was a paddle boat which hit a bridge. A steamship company sued. Lincoln proved that the captain of the ship was drunk and that actually, you had to be utterly stupid to have hit the bridge. Very important decision because the steamship companies were hoping to knock down all the bridges.
Lincoln, he’s the only president in the United States to have a patent. It was a patent for turning ships right side. He’s always interested in technology. 1859, he goes to Council Bluffs, looks across the Missouri River and says, “We need a transcontinental railroad.” Ten years later, we open it. I just give you all that framework. Here’s a guy who’s totally in tune. Remember, he rides around Illinois to Lincoln–Douglas Debates on a train. He’s totally in tune with the technology of his generation.
The second great breakthrough I want to mention is Edison’s electric light. If you’re out somewhere using candles and whale oil and somebody comes along and says, “You’re going to have this dramatically better light with no smoke,” it’s like magic. It’s hard for us to remember just how much these things were magic.
Third is the Wright brothers. The first time people started talking about flying, it was almost like a joke. The Wright brothers start to fly in December 17th, 1903. The first time a large number of people see him is 1907. In 1903, when they first flew, they flew a distance shorter than the wingspan of a Boeing 747. Within four years, they’ve so improved the airplane that they fly around the island of Manhattan and a million and a half people see it. If you’re designing a world for airplanes while you’re still riding in a stagecoach, that’s a real watershed event.
I think it’s very important to get this in mind because almost none of our current analysts can imagine that we’re going through a watershed. They don’t understand the concept. They don’t pay attention to it. They don’t think about it but if Trump is, in fact, successful and that’s still an open question. He has an enormous fight ahead of him but if he is, in fact, successful, November 8th will have been a watershed truly comparable to Andrew Jackson or to Ronald Reagan or to Franklin Delano Roosevelt.
If you assume that the cabinet of winners and their advisors and supporters across the country stay committed to imposing and again, an important concept, imposing change. This is not a city that’s going to turn around and say, “Please change us.” Despite the establishment opposition and hostility, the ridicule of the media and the contemptuous lectures of the academic left and the entrenched, embittered and often dishonest opposition of left-wing bureaucrats seeking to defend their careers and their ideology from being dismantled.
Specific example, I was asked on Face the Nation on Sunday about shouldn’t Trump find a way to cozy up to the intelligence community? My answer was no, that his instruction to Dan Coats at the new director of national intelligence should be to thoroughly, totally overhaul the community.
I’ll give you three examples. One, remember, they talk about the community. Baloney! A couple of political appointees outrageously violated the system, outrageously! Should all have been compelled to resign. I don’t want to be told that the head of the CIA, who is a Clinton appointee, who’s a left winger and who I totally distrust is somebody I have to be friends with. I think what they did was despicable and discredits the entire process of intelligence.
Second, they did the same thing on Benghazi. It was the acting head of the CIA who approved the changes that were lies.
Third, Senator McCain correctly passes on a report he had been given and the community has months to decide whether or not this report’s accurate. They take the report without having checked it, put it as an addendum to a report they’re giving the president and the President-elect knowing it’ll be leaked, of course. It says that Trump may have been colluding with the Russians. They have a key piece of evidence in the report. One of Trump’s staff may have been in Prague meeting with Russians.
I have to tell you, as a historian, as a Speaker of the House, as somebody who’s one of the Committee of Eight who supervised intelligence, as somebody who’s worked with the CIA for years in the NSA, I was furious. This is a level of incompetence that third graders would be … You’d say to the third graders, “Did you check?” If a third grader came running in the door and said, “There was a dragon outside.” This is the equivalent. Nobody in Washington yet has gotten … I’m really angry about it and I really hope both the House and Senate committees are going to be … I don’t necessarily want to be serious about Russian hacking. I want them to be serious about American incompetence because guess what. It turned out when you called the guy, he’d never been in the Czech Republic.
This is tricky, back to IYI and Intellectual Yet Idiot. If you have never been in the Czech Republic, you can’t have been in Prague. I know. This is why I get in trouble. Big ideas, big themes. It’s factually impossible. I’ve known Jim Clapper for years, and I think in parts of his career, he’s done great things for America, but when I hear him explain that not a single person picked up the phone to call this guy, I just want to cry. This is a level of incompetence worthy of a Peter Sellers movie but it’s not worthy of the United States of America. When we’re told that Trump has to get along with these bureaucracies, my first answer is no. I want him to change the bureaucracies, not get along with them. If he’s going to change the bureaucracies, which are filled with people who gave money to Clinton, filled with people who voted for Clinton, filled with people who have total contempt for Trump, why would you pretend that they are a neutral civil service? They are the other team paid for by the taxpayers. I think it’s going to require a great deal of courage and a great deal of endurance to go through it but if they go all out.
The consequences of their policies could easily lead to a balanced budget. Just consider a few bold changes. As Jim Frogue wrote in his book Stop Paying the Crooks, “If they simply brought in an American Express, Visa, and MasterCard to replace the CMS bureaucracy on payments, you save somewhere between 110 and $120 billion a year,” so we’ll round down to be cautious. A trillion dollars over a decade. Not big money. That’s on Medicare and Medicaid alone. If you apply the same technology to disabilities and to food stamps, you again save billions of dollars a year. Not as much as you do with Medicare and Medicaid but if you apply it also to the VA and TRICARE, again, you get these changes that are dramatic.
If you stop the GSA right now from building a whole series of new buildings. Again, Trump is a great contractor. He understands this. There is zero reason for any program which was designed before November 8th to automatically go forward, zero. Every program that was designed before November 8th should be rigorously scrutinized by the Trump team to decide, is it necessary? Is it too big? Can it be done less expensively? Is there an alternative? All of these things I think are serious questions.
GSA’s just out of control. They have three or four building projects that combine to be well over a billion dollars. I think it’s 3 or $4 billion now and their wish list that they’re going to rush forward. Of course, like good bureaucracies, they want to rush forward faster than the new civilian leaders who been elected can stop them. They ought to put a stop on all of it until they get through it.
If we shift from a regulatory system based on inputs to a regulatory system based on outputs and liberate people to achieve the goals and with their own creativity, their own effort, we’d dramatically reduce costs. We’d dramatically move power out of Washington. Philip Howard has done remarkable work on that.
If we reverse Obama’s war on private sector education options and immediately eliminate the gainful employment rule, the current bureaucratic war on private education costs billions to taxpayers while cutting off people from learning for better jobs. This isn’t one of those hidden zones where the bureaucracy and the Department of Education has methodically going out to destroy private sector trade schools and education for people and has done so in a way where when they destroy one of the schools, they then use taxpayer’s money to pay off the student’s debt, not to help the students go get educated.
They try to maximize the cost and they build this propaganda war. I’ve gotten involved in it. It is astonishing how hostile and how much like a totalitarian system they have become in this particular zone where they just hate the idea of a for-profit school. It’s ideological and it’s deep and they have been very effective at it.
On Obamacare, it’s something which Tom Price knows very, very well. They need to liberate patients and doctors from red tape to enable them to be honest about cost options. By the way, Price is one of the people who will be the most attacked because, along with Betsy DeVos, he represents a direct threat to the system of the left.
I think we should insist on health information technology being interoperable to save lives and reduce costs. It is astonishing to me. You have two or three very, very large corporations whose deliberate strategy is to put into hospitals IT programs that do not talk to anybody else. This is their corporate strategy. It is absolutely something we ought to be having hearings on and we ought to bring the CEOs in and ask them to explain why in the national interest would we tolerate paying for this kind of activity because it literally, you can have two hospitals side by side using the same company and the company will not make the hospitals interoperable.
The hospitals are also guilty because the hospitals want to make it hard for the doctors to change hospitals but all of this is against the public interest. This is the sort of thing that led AT&T, frankly, to be dramatically changed right after the turn of the century, in the last century because there were 2,500 small telephone companies and AT&T wouldn’t connect to them. Gradually, the country said, “This is crazy. You can’t do this.”
We’re in the same place right now. We could almost overnight dramatically improve health care, improve interoperability, make life easier for doctors and patients if we could get that solved.
Again, we need to create a public-private partnership for Mars, the Moon, industrial space and tourism. We can get there faster, at lower cost, better if we profoundly redesign NASA so it is a public-private partnership cooperating with people like Elon Musk.
This is a weird development of the modern world. We have a whole bunch of billionaires who are space freaks. They’re all willing to put up money. My view is, if I could find a couple billionaires who are willing to risk their own money, I would much rather have them take the risk because they’ll do it faster, more aggressively and they’ll fail some. Remember, I said the other day in my speech, the Wright brothers failed 500 times before they could fly. You’ll never get there with a government bureaucracy. I mean, the studies alone guarantee, they couldn’t do 500 experiments in your lifetime but if you’re out here letting them fail and try again and fail and try again, you make progress really fast if you’re actually doing things as opposed to studying them.
You need to reform the Food and Drug Administration to move science from the laboratory to your medicine cabinet as rapidly as possible. Particularly if you have a fatal disease. This idea, we’re going to protect you in safety when you have a disease you’re going to die from in 18 months strikes me there ought to be some kind of informed consent you’re allowed to sign but there are a whole range of ways in which the FDA bureaucracy now is a major impediment to getting things to the public as fast as possible.
We ought to overhaul the Pentagon to dramatically reduce red tape and reduce acquisition time and cost. We got to shift from civilian employees to fighting. It’s amazing. Under Obama the number of people in uniform has gone down. The number of people in civilian jobs who can be unionized has gone up. The current Pentagon is totally imbalanced away from the professional military.
We need to substantially overhaul the intelligence community and really look at things like do you really want a director of national intelligence with adding 700 or 900 staff, in addition to having 17 intelligence agencies? Somewhere in there, the picture makes no sense.
We need to create a regulatory complaint and review process. What I would like to figure out how we could do with every member of the House and Senate, with every state legislator, every governor and every cabinet officer is develop essentially crowdsourcing where people could identify the red tape they find stupidest. Whether you’re a small business or you’re a local community or you’re a school board, so everybody could pile on in helping us figure out how to intelligently get rid of red tape and replace the most destructive and expensive regulations.
All of that will accelerate economic growth. The estimate today is that universities spend 10 to 15% of their overhead just filing out federal forms. Which of those federal forms really matter and which of those federal forms are just paper? The whole series of those things.
This is a minor thing but symbolically, it’s not. I’d be curious to see how Trump reacts to it. We ought to cut dramatically the cost of White House travel. If you look at the total cost of the Obama vacations, they’re really astonishing. We have been drifting steadily now towards a monarchical vision of the presidency, in which everything gets bigger, more bloated, more surrounded. We really ought to reduce that and ask ourselves in very practical terms does the vice president really need to be treated as though they were the president while the president’s being treated as though they’re an emperor? The growth of who has to go on the trips, all this stuff. It seems like small stuff but literally go back and look at … Eisenhower had, I believe, 40 people in the National Security Council. I think it’s over 400 now. There’s just a general gigantism. It’s perfectly natural. Parkinson wrote about it. It’s the natural growth of bureaucracy.
We should change the trade laws to rebuild American industries, create American jobs and increase the American tax base. We should liberate federal lands for energy and minerals and other development reflecting the original sense of America as the land of opportunity. We need to protect the national parks. There are some wilderness areas we need to protect. I’m totally in favor of that. I taught environmental studies. I taught in the second Earth Day but do we really have to have the federal government own 82% of Nevada? If you’re the Sierra Club, all 82% is precious and somewhere in that 82% is a species we haven’t found which might be lost if we, in fact, developed it. Therefore, in order to avoid stopping any species, we should develop nothing but 82%? That’s astonishing.
I think in Rhode Island, we have 5,000 acres, for example in the whole state. It’s the state where we have the least federal land because in the east, you didn’t have this huge federal government. As we went west, we just kept absorbing the land. Places that weren’t good for homesteading, nobody occupied them until the Sierra Club came along. Now, they’re automatically sacred.
Just take one state, Nevada. Aren’t there some areas of Nevada we could develop out of 82% of the state? I’ll let you decide whether it’s half of it, 41% or 10% but as a theoretical model, can we really make with a straight face the argument that virtually all of Nevada has to be federal land and untouchable? These policy changes I’ve just outlined in terms of federal lands, would generate more than $200 billion a year or over a trillion dollars in a decade.
Finally, jobs, jobs, jobs could easily product 5% real growth, which would dramatically increase federal revenue. That’s not the peak of the Reagan growth but 5%, in my mind, and I’ve been told by various people in the new administration, “Don’t get too big a number.” I think they should be going in the opposite direction. What’s the optimum growth rate we could achieve over the next decade to put the maximum number of Americans to work to increase participation rates in the economy and increase take home pay?
For example, a 5% onetime repatriation tax for the over $2 trillion in profits that are locked up overseas would both yield $100 billion in revenue and would increase the total investment in the United States massively. These are the kind of things that are real game changers. The revenue from that alone would move us towards a more balanced budget.
We need a program to move from disabilities to capabilities. If you look at the Wounded Warrior Projects and you look at what people are capable of doing, then you have to really rethink a lot of what we currently accept as disabilities and ask, “Why aren’t we exploring how those people could be capable of leading full lives rather than how we keep them locked in dependency because of a particular diagnosis?”
School choice will move people from more expensive bureaucratic unionized schools that are failing to less expensive schools with higher rates of success. On almost every front, the current bureaucracies are so inefficient and so out of touch with 21st century capabilities and the policies are so anti-work and saving and learning and anti-competitiveness but the potential is enormous for a less-expensive federal government leading to a dramatically bigger American economy with far higher incomes.
I’ll just close with one last example. There’s a firm called Zocdoc. Zocdoc was created with the understanding that the average doctor has every fourth appointment cancelled. They have empty space every day. Patients have a very hard time finding a new doctor. They created basically dating, a switching system where you put in your ZIP Code and which of 40 some specialties you need. They then find out which doctor just had a cancellation. They get the average person to a doctor in one day. The doctor makes money out of time that would have been lost. The patient’s happy because they got to a doctor. They make the transaction fee of linking the two up. They make about the same number of reservations as the Veterans Administration, around five million. They have 400 people. Veterans Administration has well over 1,000 computer programmers and I think they have 23,000 people in the reservation department and they fail. That’s one of the great areas of scandal.
Take those two models and ask yourself, “What is the potential savings if we bring government into the 21st century?” I think you get to a balanced budget but it’s a consequence of the change, not the goal.
Can I just toss it open for questions, now? We have people here with microphones.