Grover Norquist is the president for Americans for Tax Reform. He's led the conservative push against accepting any tax increases whatsoever, convincing the vast majority of Congressional Republicans — and current candidates for office — to sign his anti-tax pledge. We talked on Wednesday afternoon about his goals and predictions for what will happen right after the election as Congress deals with the fiscal cliff. Here is a transcript of our conversation, lightly edited for length and clarity.
Suzy Khimm: How do you see the debate over taxes playing out when it comes to actual negotiations over the fiscal cliff?
Grover Norquist: We have two futures: Romney wins and has a Republican House and Senate. They hold a press conference and say, "We're going to extend all expiring tax provisions out one or two years, during which time we will pass something [that] looks like the Ryan plan." And then they do the Ryan plan in terms of block-granting, means-testing for entitlement programs; taking one success of Clinton years, welfare reform, and extending it to Medicaid and food stamps. That's one future: No tax increases. No fiscal cliff, because we've pushed the fiscal cliff out and do tax reform. At worst, it's revenue-neutral. And we do entitlement reform.
If either the president is reelected, or [Romney wins and] Democrats win the Senate: In theory, either Democrats in the Senate could say no to continuing the lapsing tax provision, the AMT patch, or Obama could veto them. But how will the president react, how will the Democrats in Senate react? We don't have to have vivid imaginations. We had exactly the same chess board two years ago — they extended all the tax increases for two years. Back then economy was stronger than it is today, and Democrats thought someday they'll get the House back. [This time], Republicans will be stronger in the Senate.
Some people who are president-centric say now Obama can do anything he wants — he can drive the economy into the bridge abutment and not care what happens. Yeah, he could if he were the only hand on the steering wheel. But there are 20 Democratic Senators up for re-election in 2014. Those people in 2008 — from Alaska, Arkansas and South Dakota — who may not come back in a good year for Democrats sure aren't coming back if Obama has a "Thelma and Louise" moment over the fiscal cliff. If they want to do that, they aren't coming back. It's the Democratic Senate that would explain…"We do not intend to commit political suicide two years before the end of our term." They could lose 10 or more of 20 seats. They could lose the ability to filibuster in the Senate after 2014. They could lose that in an okay year, sure, and they're much more likely if they make life difficult for themselves.
SK: So you don't see any of the Bush tax cuts expiring for any income group, regardless of who's elected?
GN: No, because Republicans will oppose allowing any tax cuts to expire or not be restored after Jan 1. Dems will fear economic slowdown from tax cuts...just as they did two years ago.
SK: But what would happen if Democrats did go over the cliff, as some have threatened to do to get more revenues from Republicans?
GN: Democrats would get wiped out in the off-year election. There's a reason Obama didn't go over the cliff two years ago. The argument [now] is that he's so selfish, he wouldn't mind destroying the careers and livelihoods of the rest of his party. They said two years ago, "We're not going to do this because we're not going to damage the economy." The economy sucks worse than two years ago.
SK: What about the payroll tax cut? Do you think that should be extended for another year as well, to keep people's taxes from going up, or should it expire?
GN: Either way — We could replace that with other tax cuts…I think the Republicans are looking for revenue neutral tax reform — make sure you don't increase the total burden. Whether that means a Social Security tax cut or income tax cut, there are plenty of ways to do it.
One thing that's implied if you go over fiscal cliff — if you're voting to replace some [tax cuts] and not others — is that people wouldn't notice a trillion dollar tax increase. That was a theory that George H.W. Bush used, that no one would notice a tax increase — just because we had a series of votes in Congress, just because of the order in which they would happen. Was anyone in the country fooled by that?
SK: Do you think that the fiscal cliff will be a good time to overhaul the whole tax code?
GN: This is a good opportunity to get fundamental tax reform. In the Ryan budget: a 25 percent top rate for individuals, 25 percent top rate for corporations, and a territorial tax system instead of Obama's worldwide tax system, which he's dead set on. I think we should go to full expensing and move toward taxing consumed income at one time and one rate.
SK: Romney says that he wants to reduce the rate by getting rid of tax loopholes, deductions and the like, comparing it to Bowles-Simpson's approach. What do you think of the "base-broadening, rate-lowering" tax reform?
GN: That's what Reagan did in 1986. It's fine. But everyone's been clear that offsetting revenue is revenue that comes in from economic growth. If the economy grows at 3 percent rather than the Obama and French level of 2 percent, that adds $2.5 trillion to federal revenue. If it grows at Reagan's rate of 4 percent, that's $5 trillion in higher revenue. More people working and making money and paying taxes. Of course you can drop rates and make up the revenue loss of lower rates, both from eliminating Obama's special deals with GM, windmills, algae, and Solyndra — tax-advantaged companies and industries. Let's get rid of all that crap and get higher revenue from economic growth.
SK: Speaking of tax breaks — there are a whole bunch of smaller tax changes that we don't hear about, the tax extenders, that are also scheduled to expire. But they affect a lot of different kinds of businesses and industries — the R&D credit, for instance. What do you think we should do with those? Should we go through them one by one, or just throw them all out in a bigger tax overhaul?
GN: You look at them one by one. There isn't any tax deduction, credit in the tax system that Americans for Tax Reform is wedded to. The pledge says no getting rid of deductions and credits unless you reduce rates, dollar for dollar. So you can't use tax reform as Trojan Horse for tax increases. As long as it's not a net tax increase, fine.
SK: What do you think will happen with this bipartisan push for "grand bargain" after the election?
GN: We've had this conversation in 2011, for almost a whole year. There were people saying, "We're going to write Simpson-Bowles down." They couldn't even write it down. What changes after November? Nothing. Now what can we do? If Republicans are in control, reform taxes and reform entitlements. If it's Democrats? It delays reforms.
The code we have today is exactly what Obama and Reid want. Obama, Reid, and Pelosi sat on supermajorities — they could have raised any tax they wanted to or cut any tax they wanted to. But they didn't. They could reform any entitlement. But they didn't. For two years. They didn't reform the tax code or entitlement programs. They didn't do it when they could.
SK: How would you sum up what you want to happen with the fiscal cliff, and the longer-term deficit?
GN: You want to stop any tax increases, so continue any tax cuts that lapse. And you want to push for fundamental entitlement reform. That's basically the Ryan plan on the tax side and the entitlement side.
SK: What advantages do you believe the Ryan plan has over what's been proposed by the Romney campaign? Why do you believe that it's the right framework for us to follow?
GN: The advantage of the Ryan plan is it's actually been voted upon by House and the Senate. Presidents are allowed to bring interesting ideas to Congress. Then it's voted on by legislators. The stimulus package was written by Pelosi and Reid, Obamacare was written by Pelosi and Reid. Presidents can have ideas they put forward to Congress and legislators. It's easier for guys on TV to talk about the president this and president that. The Reagan tax cut was not what Reagan designed; it was along the lines of what Reagan wanted. But history writes, "the Reagan tax cut." They call it "Obamacare." I don't think there are two sentences that he wrote.
SK: Do you think it's actually a good thing, then, that the fiscal cliff is happening all at once, in terms of providing an opportunity to push through these bigger reforms?
GN: I don't think it's a help or a hindrance. If you have a united Republican government, you can do entitlement reform which means you don't have to do the sequester. If you have a divided government, you'll have the sequester.
SK: You don't think that Congress would find some way to replace the sequester, or at least put it off?
GN: What in the world deal would Democrats offer? Each [party] wants to avoid it for completely opposite reasons. The Republicans in the House won't let you delay everything because this is what they fought for. If there's a divided government, you get the sequester.
Obama will agree after a lot of huffing and puffing to extend the tax cuts. But the House Republicans will only extend the debt ceiling one month at a time.
SK: You mean they'll demand cuts in return for raising the debt ceiling?
GN: The Boehner rule will be the legacy of the Obama administration. Romney will help himself fight for lower spending by accepting the strictures of the Boehner rule. So even with an Republican president and Congress, the debt ceiling limit will be a leverage for lower spending.