Paul Ryan: 'We owe so much to these men and women who fight for us.'
CNBC’s Kudlow Report
In an exclusive interview with Larry Kudlow, Rep. Paul Ryan (R-WI), House Budget Committee chairman, discusses the budget deal, the Fed's decision to taper, and veterans' pensions.
Larry Kudlow: House Budget Committee Chairman Paul Ryan is a big winner tonight. The Senate late this afternoon passing the Ryan-Murray compromise budget framework, sending it to the White House. But despite passage, there are still concerns about how the bill will affect veterans, especially disabled veterans, and that has some calling for a fix. This afternoon I had a chance to speak with Chairman Ryan and I asked him if he agreed with these comments from his Senate counterpart Patty Murray.
Patty Murray: In a provision included in this deal that mistakenly included disabled retirees and survivors for changes in the pension growth will be addressed in short order following passage of this bill.
Paul Ryan: Yes, I do. That will be solved with the technical correction that will pass when Congress comes back into session. We wanted to make sure that we kept military pension retirement better than their civilian counterparts. Civilians who retired before 62 get no cost of living update at all. These military retirees will still get a cost of living update then they get the benefits recalculated when they turn 62, to make sure that they got back what they had lost. In effect, build back the base of their pension. Look Larry, we owe so much to these men and women who fight for us. We wanted to make sure that they always have a better pension system than anybody else in government. We maintain that, and we have very modest reforms to help the Pentagon with their very big budget problems. The Pentagon has some budget problems. We stopped the bleeding, we stopped the cuts, we gave them some mild reforms and we have two years before this actual provision kicks in place to give Congress enough time to adjust it in another way if they want to.
Larry Kudlow: Let me just be clear on this. So in other words, you agree that disabled military vets will not be take the 1% call for reduction. You agree with that, and that was an oversight?
Paul Ryan: That's correct.
Larry Kudlow: And another big event today, I’m sure you're aware of this. The Federal Reserve released its minutes and they’re having a small taper. They are taking $10 billion off an $85 billion-a-month bond purchase and I wanted to get your sense of that. The stock market is rallying big time. What do you think?
Paul Ryan: Well, I thought they should have started tapering a lot time ago. You and I have similar views on sound money. I was not a fan of these later rounds of quantitative easing. I thought it was necessary in the beginning of the crisis. Subsequent rounds of QE, I think did more harm than good. In the long run, we'll know the answer to that for sure. High time they started. This is basically symbolic, because it's really not that big in the scheme of things.
Larry Kudlow: Periodically as Budget Chair you've held hearings on the Fed. Let me ask you now, with the changing of the guard, does Janet Yellen have your confidence?
Paul Ryan: I think we went to a more dovish Fed Chair with Janet Yellen. Ben ended up becoming a dove from my perspective – less of a sound money guy, more of a deflation fighter instead of an inflation hawk. More dovish. She’s clearly in the dove category. She’s a Keynesian. So, I don't expect much difference from her from where we are right now.
Larry Kudlow: Let’s go directly to the spending. You've raised the spending caps from sequestration in 2014-2015, I think the number sums to $65 billion. What do you say to people, particularly conservatives, and you’ve heard this. Conservatives who are saying budget caps, spending caps, sequestration, which was a signature Republican achievement, is dead? Is that true? Are the caps dead? Is the spending discipline dead?
Paul Ryan: No, not at all, actually. The Democrats came into these negotiations wanting to get rid of the caps all together – 100% of the caps. Well, we just got them to agree, in the next year and a half, to 70% of the caps. 70% of the sequester is still in place for the next year and a half. The 30% sequester relief we gave, $63 billion of spending, is paid for with $85 billion of permanent entitlement changes, permanent savings that results in deficit reduction, so that exceeds the Budget Control Act requirement of a one for one replacement, so we actually go farther than the law requires. More to the point, Larry, 92% of the sequester is left intact over the lifetime of the sequester with this agreement. So, what we like from a fiscal conservative standpoint, is we do give relief to the sequester now, particularly because the defense hawks in our conference would not support where this was going to go. We did not have the votes to stick to that $967 number, so we got excess savings to make us have more deficit reduction, and we prevent two government shutdowns from happening in the next year, which we think is a good thing for lots of reasons - for the country, for certainty, for economic growth. We want to focus on Obamacare and Obamacare oversight. We want to focus on tax reform. We want to focus on a pro-growth agenda. We don’t want to have two government shutdown scenarios, and we think this is that step in the right direction.
Larry Kudlow: Another one, the feud with the tea party, Speaker Boehner took a few whacks at the Tea Party. I’ve had many of them on The Kudlow Report. They wanted the full sequester, it's not an unreasonable request. How is your relationship to the Tea Party? What do you have to say to the Tea Party, which is kind of up in arms now because it seems like a lot of Republicans are attacking them?
Paul Ryan: Well, look, I have nothing but good things to say about the Tea Party. We wouldn't be here if it weren’t for the Tea Party. Look, when I started my budgets back in 2008, I had eight other members of Congress who were willing to co-sponsor and put their name on it. Eight. And because of the Tea Party, because of those grassroots conservatives out in America, I was able to pass it in 2011 with I think 233 votes. I was able to pass three budgets now because of these grassroots conservatives, these fiscal conservatives, which balances the budget and pays off the debt. There’s no way I could have passed these kinds of budgets if it weren't for them that’s why I credit them with this great success. Now, you can't let the perfect be the enemy of the good. In divided government, you have to look at the situation as it is, and not as you wish it would be, and keep moving the ball in the right direction even if it’s incrementally. I would prefer that these so-called feuds are in the family and not out in the public.
Larry Kudlow: You report to the Wall Street Journal that you want to be the Ways and Means Committee Chairman in 2015. Why? What’s your agenda?
Paul Ryan: Look, you know me, Larry. There’s nothing new here than what I’ve always said. This has been my career trajectory in the House. People ask me if I want to be Speaker. I don't. And this is the next logical step, but what I’m really focused on right now to be honest with you Larry, is helping Dave Camp with the Ways and Means Committee. He’s our quarterback, he’s our chairman. My dream for 2014 is that the Camp-Baucus Tax Reform Act of 2014, which reduces tax rates across the board in a pro-growth way to grow the economy, becomes law. I want to help Dave do that. Then after this election, after 2015, this is really no secret, this is not a newsworthy item, that is the natural progression of how I saw things. That’s the way I’ve always planned it. And there's nothing really new here.
Larry Kudlow: Are you leaving the Presidential door open for 2016? You just had a big poll in Iowa. You had the best numbers of all the Republican candidates. A lot of people are saying, ‘you know, look how he negotiated this budget. He can cut across party lines and get things done.’ You stopped the shutdown. Some people are saying you saved the Republican Party from itself because you stopped the shutdown. So is the door open for a 2016 Presidential run, I ask you, Paul Ryan?
Paul Ryan: Well, I'll answer you, Larry Kudlow, that I’m going to make my mind up on that issue later on. I’m just trying to do my job right now. The people here in Wisconsin elected me to represent them. My colleagues asked me to chair the Budget committee, so I’m doing that job the best I can. I’m not going to let future ambition or career moves cloud my judgment today, and what I decided, my wife and I decided, is let's get through this session and then I’ll make my mind up down the road. I haven't foreclosed any opportunity, I haven't made a decision one way or the other. Right now, I’m just sincerely focused on doing my job.
Larry Kudlow: All right. We've known each other a long time and if I may so, happy holy Merry Christmas and New Year's and thanks for coming on.
Paul Ryan: Awesome. Merry Christmas, Larry. Good to see you.