Only if this guy's elected president...
IF YOU weren't aware that Gary Johnson is running for the Republican nomination for president, you're not alone. Few people are. He is the longest of long shots, with little money, a bare-bones grassroots organization and parsimonious media coverage, to say the least. He has had to fight through the indignity of being uninvited to most of the candidates' debates. When polls are taken about voters' choices, his name is often simply omitted from the list, lending him little chance to develop support momentum.
All or parts of this interview may not resonate with you. But the fact stands that he's the most unique presidential candidate of the past...well, probably ever. He also has a plan to cure our economic malaise. It's radical. You won't hear anything remotely like it from anyone else. The Casey Report caught up with Governor Johnson at his home in New Mexico and hit him with a tough question right out of the gate.
The Casey Report: Everyone wants to know about the budget, and you've been reported as saying that President Johnson will balance the budget by 2013. How on earth are you going to do that?
Gary Johnson: No, what I am promising as president is to submit a balanced budget in the year 2013. To do that, I'm going to have to reduce spending by 43%. Medicare, Medicaid, military spending, everything. My promise is to submit that budget my first year in office, because what is America shouting if I'm elected? I think they're shouting that they want a balanced budget. And I believe we really have a 43% largesse built into government spending.
TCR: That's rolling it back to what, Clinton-era levels?
Gary Johnson: You know, I'm not sure, something like that. [Actually, only back to the 2002 Bush budget.—TCR] But coupled to the promise to submit a balanced budget is a promise to veto any legislation where expenses exceed revenue. Now, you may argue that Congress will just override the veto, and that's possible. But what I just described to you is a scenario where we will have less spending than any other scenario possible.
And Congress is going to have to do everything it can to accomplish that. Hopefully, we will get close. I draw a contrast to electing a president who's going to promise to do this over a 15- or 20-year time frame, because "that's the only realistic way to get it done." To me, all that means is, "No, we're not going to get anything done." And nothing will change.
TCR: Your plan doesn't involve raising new revenue. Do you see any need to raise revenues?
Gary Johnson: No. What I am advocating for, in addition to balancing the budget, is throwing out the entire federal tax system and replacing it with the Fair Tax. I'm sure you're familiar with it. [Anyone who isn't can go to fairtax.org to learn more.—TCR] By all free-market economists' reckoning, a consumption tax is really the way to reform the system. It is, as the name implies, fair. It simplifies everything, does away with the IRS, does away with income tax and corporate tax, FICA, estate, capital gains and dividend taxes. It taxes goods, new goods, and services, and is administered by the states.
So this is a reboot to the American economy. Given a zero corporate tax environment, why as a business would you start up, grow, nurture that business anywhere on the planet other than the United States? This isn't government. This is private businesses hiring tens of millions of people because we've created this kind of environment.
TCR: Let's get back to that in a minute. But before we leave the budget, we're currently running something like one trillion six in yearly deficit spending. Some people have suggested that the only way out of that mess is simply to default on the debt and carry on from there. How do you feel about that?
Gary Johnson: I think we're on the verge of a monetary collapse. But I don't see us ever defaulting on the debt. I see us printing the money. Last year, the Federal Reserve was printing, out of thin air, up to 70% of the money it was using to purchase Treasuries. And the monetary collapse comes at the point at which we're printing 100% of the money used not only to incur new debt, but also the rollover of existing debt. When that happens, in my opinion, it's "Katie, bar the door." We need to stop printing money, and that's not a very sexy message...Or maybe it is sexy, because unless we fix this, we're all going to find ourselves with nothing.
TCR: So what you're saying is that you're going to honor the debt but inflate it away and destroy the Dollar.
Gary Johnson: No, I'm not going to do that. But that's going to be the reality of what happens if we keep printing money.
TCR: A hyperinflationary depression is much worse than a deflationary depression because it hurts everyone, especially the most prudent ones, the savers. So why not default? That would be painful, but it'd be preferable to hyperinflation.
Gary Johnson: Or the third alternative, that being balancing the budget and stopping the printing of money.
TCR: We're skeptical that would work.
Gary Johnson: Well, you also have to have tax reform, which brings us back to the Fair Tax. It promotes savings. And the more money you save, the more you're going to consume and the more tax you're going to pay. Borrowing money is OK when it comes to the debt, as long as you're borrowing. But we're printing money to do that. If we stop printing, we still have the rollover debt, and I have to believe the money will be there for the rollover.
TCR: Well, your balanced budget deals only with the deficit, not with the federal debt, which is nearly 100% of GDP.
Gary Johnson: And if interest rates return only to normal levels, interest on the debt nearly triples. It becomes unbearable when the largest ticket item in the budget becomes interest on the debt, and that is fast approaching.
TCR: Right. So your deficit reduction program, while it's great if it's achievable, doesn't deal with the fourteen going on fifteen trillion in debt we're piling up. Do you believe that with an end to deficit spending and implementation of the Fair Tax, we could generate enough in revenue to begin paying down the debt?
Gary Johnson: I do.
TCR: What about the Fed? Do you favor abolishing it, as Ron Paul suggests?
Gary Johnson: No, it should be audited. But if you abolish the Fed, the Treasury would take over the money printing the next day. I would like the Fed to return to its original mandate of price stability, as opposed to trying to control price stability and employment, which are contrary purposes.
TCR: OK, a further question about the Fair Tax. People who oppose it contend that it's unfair because it's regressive. How do you respond to that?
Gary Johnson: Everyone in the country would get a prescribed prebate that would pay all Fair Tax up to the poverty level. And, of course, everyone would have their paychecks freed from income and the highly regressive FICA tax. We estimate that those spending at twice the poverty level would pay only 11.5% Fair Tax, much less than they're paying now.
TCR: And what's the ceiling tax rate?
Gary Johnson: 23%. And here's another thing. There's a theory, I don't know if it's beyond that yet, but there's a theory that the cost of all goods and services contains about 23% in taxes already embedded in them. I don't know if it's exactly that, but it's a lot. I believe that over a very short period of time, that embedded tax would bleed itself out, and that this would actually be revenue neutral to what we're currently paying. In addition, because it doesn't tax used goods, all of our possessions arguably become worth more. There's going to be less of an inclination to throw away your used toaster instead of putting it on Craigslist and selling it.
TCR: How does all this interface with state and local taxes?
Gary Johnson: It does not. State and local taxes are what they are.
TCR: So there's no plan for funneling some of this revenue back to the states and localities, in lieu of their taxes.
Gary Johnson: No, it's revenue neutral with regard to the states.
TCR: OK, to a different but related subject, what do you think about banks that are "too big to fail," and how would you have gotten us out of the financial crisis of '07-'09?
Gary Johnson: I would not have bailed out these institutions. I talked about this one afternoon at Chapman University with a group of economists, including Vernon Smith, a Nobel laureate, and the 100% consensus was that the system would not have collapsed if these financial institutions hadn't been rewarded for their bad decision making and been allowed to fail. And that if we would have had that, markets would have established a bottom very quickly.
The decline might have been much steeper, but the recovery we would be engaged in today would be real, as opposed to the economy just being artificially propped up. We should have had a fire sale. The problem with the mortgage market is that we never had a fire sale.
TCR: So you don't think we came within an eyelash of chaos, a situation some say we barely avoided, with no money in ATM machines, banks closing their doors all over the place and the whole system freezing up?
Gary Johnson: Well, I'm basing this on the Ph.D. economists who are advising me, all of whom say there would not have been that meltdown.
TCR: What about Glass-Steagall, the law repealed in the last year of the Clinton administration, that had kept the investment banks and the commercial banks separate? Some people blame the crisis largely on the loss of that law. Do you think we should reinstate it?
Gary Johnson: I understand how that may have exacerbated all this, so I think reinstating it might be a good thing.
TCR: There are a lot of people who believe that the Obama administration has collaborated with Wall Street in covering up and refusing to prosecute fraud. Would you go after the fraudsters who've been caught lying and cheating and stealing?
Gary Johnson: If I was absolutely aware of that, yes. Absolutely. If there's something there.
TCR: We're just asking if you'd order your Justice Department to look into it, since so many people have made that charge.
Gary Johnson: Well, I have to say this – I have to believe that they have done that. If they haven't done that, then that, in and of itself, is treasonous.
TCR: But there hasn't been a single prosecution. How can that be?
Gary Johnson: I've talked to my economists, and they would chalk it up to really bad decision making, rather than criminal activity. Just made some really stupid judgment calls that they were not allowed to reap the benefits of. Meaning failure.
TCR: OK, it's a complicated subject, and we won't resolve anything today. Let's let that go and turn to another subject. The Fed is now paying interest on deposits, and a lot of banks are just leaving their money there, in excess of reserve requirements. How do we get that money out of the Fed and to people who really need it?
Gary Johnson: That brings us back to the monetary collapse. We're all watching this, and banks may be holding that money there for liquidity, in the fear that we're going to have a repeat of the last crisis and they'll have to have it for their balance sheets.
TCR: They're also borrowing money at around zero interest and putting it back into Treasuries for whatever they're paying. It's free money.
Gary Johnson: Right, I mean, holy cow, that's the criminal activity...No, I mean that tongue in cheek. But that's where we've gotten to. It's a giveaway. A giveaway to the banks.
TCR: Let's go on to Social Security and Medicare. Are you in favor of means testing on these two?
Gary Johnson: I oversaw the reform of Medicaid as governor of New Mexico. We went from a fee-for-service model to a managed-care model, and we ended up establishing a much better health care network, and we saved a lot of money by doing that. It's my belief that if the federal government would have block granted New Mexico all of the Medicaid funds – at 43% less than we were currently spending – that I could have delivered health care to the poor in New Mexico without any strings, without any mandates, with 43% less money, I believe that.
And I believe that if you apply that same model to Medicare – block grants to the states at 43% less than what the government is currently spending – that we would be able to deliver health care to those over 65. That's basically how I would handle Medicare and Medicaid.
Washington should give it up to the 50 states, 50 laboratories of innovation and best practice. In that context, if some states chose to apply means testing, those would be very viable experiments. In a process where you have 50 states working on this, in different ways, I think there's going to be some fabulous successes that'll get emulated, and there'll also be some spectacular failures that will be thereafter avoided. Because we are very competitive, and we can put that to work for us.
TCR: And a block grant for health care means they're mandated to use it for that.
Gary Johnson: Yes, they have to use it for that. But no strings or mandates about benefits that have to be given out...Now, Social Security's another animal completely. It's a problem that just pales in comparison with Medicare. Medicare is the 800-pound gorilla. Social Security is simply a system that needs to take in more money than it pays out. So without raising taxes, under the Fair Tax Social Security would not be a withholding anymore, on the part of the employee and the employer. You could put it on a sound basis by raising the retirement age, by implementing means testing.
There are a lot of iterations of that, of means testing, but bottom line is, you put money in, you get money out. It should be fair. Also, we should change the escalator built into Social Security from the wage index to the inflation rate. That also does miracles, actuarially. And also add the ability to direct funds in your own Social Security account. That ought to be part of it.
TCR: Now we've got to talk about foreign policy. Let's start with defense. I know you want to cut defense and end the wars we're in right now. Correct?
Gary Johnson: The important question is: Can we cut military spending and still provide for a strong national defense? Yeah, we can, the operative word being defense rather than offense. And as opposed to nation building. So how do you do that? Well, you go down the line, looking at: military in uniform; civilian support to the military in uniform; the conflicts we're currently engaged in; decisions on research and development, how we're going to spend our money going forward; a reduction in our base levels all across the planet; a reduction in nuclear warheads from 2,300 to 500. Given all that, I believe we can provide a strong military defense with a 43% cost reduction. Recognizing that the biggest threat to our national security is our overspending.
TCR: It doesn't quite sound like you're saying you'd bring the troops home on Day One.
Gary Johnson: Yes, I would bring the troops home on Day One. Afghanistan, Iraq...and Libya, if we become more involved there.
TCR: Would you close all the overseas bases?
Gary Johnson: No, but I think within the context of a 43% reduction, there are some that are warranted and some that just aren't. I'd look at our troop presence in Europe, Japan, South Korea.
TCR: A 43% reduction in military bases in the US means the towns that depend on them are going to be economically decimated. What are you going to tell those people?
Gary Johnson: [sighs] Well, there is going to be some real shared pain, some sacrifice, in all of this, it's going to be shared by everybody. But if we don't do it, we're going to find ourselves with nothing. That's a hard sell, but it's also something that I think people generally recognize. It's just, who oversees doing this? And I think I'm the guy to oversee it. We accept the sacrifice to save the republic.
And you know, I'm not advocating an across-the-board 43% cut in everything. Because there have to be areas...You take veterans' benefits, for example. I have a hard time cutting one cent from veterans' benefits, given what they've been asked to do and what they've done. So maybe it's not a 43% cut in one area, and maybe it's more than that in another. I do favor abolishing the federal Department of Education and Housing and Urban Development. There may be more, but at the moment those are the only two I'm advocating eliminating.
TCR: Speaking of eliminating, a lot of Republicans want to kill the Environmental Protection Agency. But I think we all agree that the environment we bequeath to our children is our most important legacy. Do you think the federal government has a role to play in protecting the environment?
Gary Johnson: I do, but looking at the EPA, I think the agency has a 43% largesse built into it, too. We do need some regulations. From my years as governor, I know that there are some bad actors out there. There are companies that would pollute the environment and would continue to do that to...whenever, without any accountability to anyone. Government's role is to protect us from individuals who would do us harm, whether that's monetary, from a property standpoint...from a personal-health standpoint...the environment kind of touches on all of those.
TCR: Another issue that is important to our readers is the extraordinary expansion of the surveillance state. Would you favor repealing the Patriot Act?
Gary Johnson: I would. And I would never have established Homeland Security. I think that it's completely redundant. I would have never established the TSA. I would have left security to the airports, to the airlines, and I dare say that today travel would be as safe and absolutely less intrusive. Or hey, maybe there'd be an airline that says you have to strip naked and you won't be able to carry a single thing onto the airplane. I'm not gonna fly on that airline, but maybe some would do that.
TCR: And maybe we'd have another that said, "We won't even look in your bag, come on, get on. If you're willing to take that risk, we don't care."
Gary Johnson: Maybe. [Laughs.] And I probably wouldn't fly on that airline either. I think that the important thing is, since 9/11 we've beefed up the cockpit door, so a commercial aircraft can never be used as a missile again. And maybe even more important than that is, as passengers now, we don't put up with any kind of aberrant behavior on a plane. You know, the underwear bomber, he was accosted...accosted isn't even the right word, he was pummeled, beat up and pinned to the floor for the rest of that flight.
TCR: As a former border state governor, you're particularly qualified to speak to this one. What's your immigration policy?
Gary Johnson: Immigration needs to be about work, not welfare. Leave it to the states to not be delivering any welfare services to illegal immigrants. I think we should make it as easy as possible for somebody who wants to come into this country to work, to get a work visa. Not a green card, not citizenship, but a work visa that would entail a background check. And I'd like to point out, if we adopt the Fair Tax, there wouldn't be any question about them paying taxes because everyone would. Legal, illegal, nobody avoids that.
For the 11 million who are here now, I think we need to set up a grace period whereby we can document them and give them a work visa. And if you're here working, where we've made it easy for you to get a work visa, it needs to be one strike and you're out. If you're working illegally, you'll be arrested and deported, you won't come back and work again. I don't believe that building a fence would be cost effective in any measure whatsoever, but I would put more boots on the ground on the border. I'm of the belief that Mexicans will stand in line to get a work visa, as opposed to crossing illegally.
Then, legalize marijuana. It's the root cause of the border violence, which is prohibition related. If we can't now connect the dots between prohibition and the 30,000+ deaths that have occurred over the past four years in Mexico, then I don't know if we ever will. These are disputes that are being played out with guns. So don't discount how rational drug policy would eliminate so many of the issues that are currently associated with illegal border crossing and violence.
TCR: Let's touch briefly on Islamic terrorism. Do you think it's a major threat to the US, and what would be your policy in dealing with it?
Gary Johnson: I think it's a real threat, and we should be vigilant against it. But I think other countries need to share in this war on terror, instead of us always picking up the tab. Of military spending worldwide, we're spending half of every Dollar and we're 5% of the population. So within the context of reducing military spending and maintaining vigilance against terrorism, against countries that would raise arms against the United States, this becomes more of a shared responsibility.
TCR: Under what circumstances do you think it's proper for us to project force outside the borders?
Gary Johnson: I wouldn't rule it out. The specifics would have to include imminent threat to the security of the United States. Or not even imminent, if it's an actual, live threat to the US.
TCR: Want to say a few words about Israel and our relationship?
Gary Johnson: Israel has been an ally and will remain an important ally.
TCR: And you're in favor of continued support for them?
Gary Johnson: I've been to Israel several times. I've met with Netanyahu. I get the sense that Israel could care less about foreign aid. I'm opposed to foreign aid. I would draw a differentiation, though, between foreign aid and military alliances. And we should be a military ally with Israel. We should also be looking at our worldwide military aid and military alliances, in the context of their cost effectiveness in our vigilance in the war on terror.
TCR: What would you do about Pakistan?
Gary Johnson: I would really love to understand what's going on there. But speaking about foreign policy without knowing exactly what the particulars are...if you want to give me what you think the particulars are, I can respond based on that premise.
TCR: If we pull out of Afghanistan, maybe the problem will go away. Are you opposed to continued foreign aid and military aid to Pakistan when that happens?
Gary Johnson: I can't really speak intelligently on that because I don't know how much money we're spending there and what we're getting for that money. How effective that spending is. I don't get the sense, from my vantage point, that's it's being spent effectively at all. That it actually makes the situation more unsafe, rather than safer.
TCR: I know we're near the end here, but I want to go back for one more question about the surveillance state. It seems like it's exploding, with more and more control over our lives, and less and less freedom. How can we even start to reverse that?
Gary Johnson: Well, rolling it back is one thing, but stopping it in its tracks is another thing, and that's very doable. It's what I did in New Mexico. I stopped onerous rules and regulations, and by that I mean those that end up costing us time and money and have no benefit whatsoever. So don't underestimate the executive ability to positively impact rules and regulations. Because I controlled all the agencies in New Mexico, because I controlled all the boards and commissions, rules and regulations got better, on a daily basis. The same thing applies to the president of the United States, head of the executive, controlling the agencies.
Clearly, Obama has no idea of the effect he's having, with the people he's appointing to all these positions. And they putting into effect rules and regulations willy-nilly, that have us in this complete state of uncertainty. There was absolute certainty in New Mexico that rules and regulations weren't going to get worse, they were going to get better. And they did.
TCR: All right, I see we're out of time. Just quickly, one last question. What's your position on gun rights?
Gary Johnson: I believe that the right to bear arms is guaranteed by the US Constitution and that we should preserve this fundamental right. I openly advocated concealed carry as governor. It was a new concept at the time, but I felt the statistics showed it would result in less crime.
TCR: Thank you, Governor.
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