HH: We go over to the other side of the Congress, to the House of Representatives, and talk with Congressman John Campbell, of course of California. And John, before we go to politics, I was gone over the holidays, and so I didn’t have a chance to see what happened in the Sun Bowl where USC was playing.
JC: Gee, you know, I’ve been here in Washington for almost three weeks since Thanksgiving. I think I went home for five days, so I haven’t had time to pay much attention to college football. But I am rooting for the Kansas State Wildcats tonight.
HH: Okay, I’m telling that the Sun Bowl, which I thought was called the Sunni Bowl because of President Morsi, who is a USC alumni, would you check up on that by the time you come back to let us know what happened?
JC: You mean Egypt President?
HH: Egypt President, yes, the Sunni president of Egypt.
HH: So Campbell, you were ticked with me after I made my analysis of what was going on last week, and I urged people to vote no on B. And then you turn around and you vote no on the bill that I was endorsing. What were you thinking?
JC: Yeah, what are you thinking? That’s the question. That’s the question, what did you think? The strategy, Hugh, that a group of us wanted to pursue, and that we thought the thing to pursue was when this bill came over from the Senate was that the tax deal was probably as good as it was going to get in terms of the rates and so forth. But what we really hated was that it had $600 billion dollars of spending. Now if we were going to vote for something that raised taxes on anybody, the deal was we were supposed to get less spending, not more. This had more spending in it. So what we really thought was the best thing to do at the time was to strip that spending out and send just the pure tax bill back to the Senate. Now a lot of the spending was through the tax code, so you had to strip some of that stuff out like all that Hollywood and the green credits, and all that junk, is spending through the tax code that was put in law by the stimulus in 2009, which no single Republican voted for. And so there’s no reason for us to accept that in this deal. We gave them what they wanted, which was tax increases. And they’re really tax increases on people of $250,000 and over. It really wasn’t $450,000, because they limited deductions for people between $450,000 and $250,000, actually, anything over $250,000, they limited deductions. So there’s a tax increase on all incomes over $250,000. And to have spending increases on top of that, you know, with the unemployment insurance, and one of the things that just drove me nuts in there is the earned income credit, and the expansion of the earned income credit, which is the situation, it’s a refundable tax credit, so people get a check from the government that pay no taxes by filing a tax return. It is the single most abused program in the entire federal government, tax or spending, because the IRS says this is a welfare check, and we’re not a welfare agency. We have no way to police whether this stuff is right or wrong, so we just send the checks out. And there are estimates that as many as 30-40% of the checks that are send out are fraudulent. Anyway, all that was in the bill. We thought that should have been stripped, send it back to the Senate. If Harry Reid wanted to go over the cliff in order to spend an extra $600 billion, let him do it. But the Speaker was not on with that program, and so a number of us were, I was very upset that night, because I can’t stand that bill. I thought it was a terrible decision.
HH: But the politics, you would have been crucified. You saw how quickly the Speaker’s given up on Sandy because of one day of a beating from the national news media. You guys would have been creamed if you had rejected that bill.
JC: Okay, Hugh, let me ask you this, then. Are you ready to go over the debt limit?
HH: Yes, because we’ve got two months to set it up so that when we go over the debt limit, I talked to Congressman Ryan about this yesterday, and to Rand Paul about this yesterday, Arthur Brooks, I’m going to do nothing but talk about it for two months. But we’ve got two months if you guys do the right thing, not you, but the Speaker.
JC: We had two months before the other. The election was closed, but we had from November 7th.
HH: They didn’t do it. They didn’t use it. But they didn’t use it. That’s the difference, and that’s what I think, that’s what I want to ask you about. Do you think the caucus finally understands you’ve got to start arguing now about going through the debt limit in March if you’re going to make it stick?
JC: Okay, I don’t, the last speech I gave in the conference, you know, in the closed caucus, was I said when I knew what was going to happen, and I was very disappointed, extremely disappointed, and I said guys, you guys don’t want to go over the cliff, and I said but you’d better be ready to go over the debt limit, because we are not going to save this country from the cascade of debt unless we are willing to go over that debt cliff in two months. And I can’t tell you that they are. I don’t know that they are, but we have to be ready to do that. I just finished talking, I’ve had two or three interviews with the press today already, with a number of different press people, and I’ve been saying that we are going to have a debt default. Now we can wait and let that happen at a time not of our choosing, in a way not of our choosing, in a situation where we have no way to recover, a la Greece, a la Spain, et cetera, et cetera. Or we can do that now if we have do in order to force the correct decisions that will avoid the future debt default.
HH: I agree with that 100%. And I think if the President believes that you will go through the limit, and really believes the Republicans will stand tall, he may flinch. But the second part of that is what do you want in exchange for voting him more debt limit? And that is not, even Congressman Ryan, who is the chairman of the Budget Committee, could not articulate that with specificity. He said on the program yesterday we’re working on that right now. But that’s got to be articulated soon.
JC: It will be. My answer to that question is significant entitlement reform. Now what does significant mean? I’m not quite sure I can tell you exactly, but it has to be a big, noticeable change, probably in Medicare or Medicaid or both, and perhaps Social Security, and maybe even on some of the little entitlements. But the plan right now, I believe, is for us to basically create a bill of what we want that would include a debt limit increase and pass it by, hopefully, end of January or early February. I believe that is the strategy.
HH: That would be super.
JC: And then so basically to set the marker and say this is what we want.
HH: That would be…but specificity is we’ve got to raise Social Security to 67, entitlement eligibility to…
JC: Yeah, yeah. No, it would be total bill language with exact entitlement reforms in it that we want.
HH: Oh, that is, now do you think the caucus will support that, because that’s exactly what has to happen. That’s what I wrote this morning, in fact, over at Townhall.
JC: Yes, I think the caucus will. The question is if the thing, assuming if this bill is going to be effective, it should have a debt limit increase in it, so it should say…
JC: …you know, basically, give us this, and you get this.
JC: And it should have that in it. So you have to convince 218 Republicans, because there aren’t going to be, we might pick up a couple of Democrats, but you can’t count on them, that are willing to vote for a debt limit increase on the basis of what’s in there. And you know, it’s not going to be something that makes the deficit zero in six months. That’s not doable, and so the question is will we get enough people to do it if it’s something that is reasonable and doable and significant, but includes a debt limit increase?
HH: I can’t imagine who would vote against that?
JC: Somebody who says I’m only going to vote for a debt limit increase if the deficit is taken to zero.
HH: Oh that, when we come back from break, we’ll explain why that’s completely nuts.
– – – –
HH: I want to go back now and talk about, I just got done talking with Leader McConnell. He also wants to lay out and go the specificity route. Some people are going to make the perfect the enemy of the good. And it seems to me that if we start talking about this now, they will shamed into not doing that, but that will require great candor in the Republican caucus. Is that going to be forthcoming?
JC: Oh, I think so. This last battle was, you know, nerves were frayed. There was…people said what they thought.
HH: Yes, they did.
JC: And it wasn’t what leadership or somebody wanted to hear. But there’s candor in there. Nobody’s…if somebody holds a punch back, it’s because someone else already threw that punch, and they didn’t think they needed to get up and do it again.
HH: Well then, my question is it is so stupid to not vote for entitlement reform because it’s not a balanced budget. That’s just stupid if we’re going to set this up. Will someone say that’s stupid?
JC: Well, but remember there were some Republicans who did not vote for Paul Ryan’s budget last year, or the year before that, because it did not get to balance soon enough.
HH: But in this occasion, coming up against the debt ceiling, with the opportunity to actually make entitlement change if it’s followed through, that will be, we’ll have to scorn those people. Now the second part of my question is how long will the Republicans hold out, if in fact the President calls your bluff, because he’s called your bluff many, many times.
JC: Correct, and that I do not know. And that is what scares me. Clearly, we were not ready to go over this cliff, this fiscal cliff, this time. And the consequences to the markets will be much greater going over the debt cliff than they would have been going over the fiscal cliff. And so we have to be prepared to do that. And I would love to tell you, Hugh, that I think oh yeah, I’m absolutely confident that we are. But I’m not, yet. And so…
HH: Now you have the chairmanship of a subcommittee on Financial Services, right?
JC: Yeah, Monetary Policy.
HH: That means Ben Bernanke comes in front of you, right?
HH: Do you think he’ll make a statement on the necessity of doing this?
JC: Of course he will. You mean of passing the debt limit?
HH: Of making the entitlement changes as part of the debt limit raise.
JC: Ooh, I don’t know whether he will do that. He will, what he generally does in order to avoid trying, you know, being political, because the Fed chairman is not supposed to be political, is he will say that we have a debt problem, and that we need to reduce the deficit, and as he has said for a long time, quickly or else we will face default problems in the future when people don’t, won’t buy our debt anymore. Then he will be asked if, what he thinks about going over the debt limit, and he will say that that would be a very unwise decision, that the markets will lose confidence in the dollar, they will lose confidence in Treasury debt, and that will make it more difficult for him to do his job. And so he’s not going to say do this to do that. He just won’t go there.
HH: All right, now…but will you pose these questions to him when he comes up next? Will that happen before the debt limit issue arises?
JC: I think what they call the Humphrey Hawkins, which is a bill that requires that the Fed chairman speak to us twice a year, I believe he is speaking to us in late February. Now whether that is…so right around the time of the debt limit expiration, which day, unlike the fiscal cliff, isn’t known. We’ve already passed through the debt limit. But basically what they’re doing is borrowing money from other sources within the federal government, which they can do and go along for a while. Then, there will be a point at which literally the federal Treasury runs out of cash.
HH: How long will you be willing to go after we’re through the limit, to get entitlement reform?
JC: Oh, you just sit there until you get it, I think. I don’t know that you can say how long you would go, because you don’t know what happens to the world, because you can say something, and then there are circumstances that occur that you didn’t anticipate. But if you’re ready to go over if you don’t get entitlement reform, which I am, then you have to be ready for what’s going to happen when you go over, and all the screaming that people are going to do. And you know, and the other thing about this, Hugh, and I don’t know how much time we have left.
HH: Ten seconds.
JC: How much?
JC: Oh, all right, then we’ll talk about this next time, is the markets. Everybody worries about what the markets are doing. The markets are short term, not long term. We’re dealing with a long term problem. They give short term signals. They’re not, we shouldn’t be paying too much attention to them right now.
HH: Congressman John Campbell, thank you. Sorry about USC getting thumped badly. Maybe by next year, they won’t have been beaten in a bowl game.
End of interview.