On Thursday, House Budget Committee Chairman Rep. Paul Ryan, R-Wis., visited the Washington Examiner for a meeting with the editorial board. What follows is a transcript of the wide-ranging discussion, on topics including tax and spending policy, entitlement reform and the ongoing speculation that he could be tapped as Mitt Romney’s vice presidential running mate.

Q: To get things started, we were talking before you came about a question that the – our editorialists have pondered, scratched their head, pulled their chins over, and that is, why doesn't the Senate simply pass a budget of some sort, and get the monkey off their back?

Ryan: Oh, it’s easy. They don't want to show you what their vision of government costs. 

Q: As simple as that?

Ryan: Yeah. Look, when they run their numbers, and they’re not willing to take on entitlements of course – for lots of reasons. The kinds of tax increases you would have to see to, on paper, avert that crisis, are the kinds you’ve never seen before, clearly violating the, you know, don’t tax anybody under $250K. The other thing is, there would be real growth-destroying tax increases, and it wouldn’t fix the problem because it wouldn’t deal with entitlements.  So I just don’t think they – they would rather take the knock that they’re doing nothing, than actually show you what they would do if they could do it.

Q: Yet the President has produced budgets --

Ryan: But his budgets don’t meet any metric of actually fixing the problem. His budget has a $1.5 trillion net spending increase, only to be outdone by a $2 trillion tax increase, 1.9 – and a net result of $400 billion in deficit reduction over ten years. If we just did nothing, the debt’s projected to go up 78 percent. It goes up 76 under his budget. So the Senate wouldn’t be able to put a budget like that out because it’s so non-credible. And if you looked at the caucus they had last year, you know, in order to get it out of budget, they had to half and half, right, half tax increases, half spending cuts. Well, that means you’ve got this $4 trillion tax increase. They’d have to throw another $2 trillion on top of that. If you look at the budgets that the Democrats brought to the floor, they started with something like, what was it, $4 trillion, and they went up to $6 trillion in tax increases. The progressive caucus budget, they basically outbid each other on tax increases. And so the point is, mathematically, you never can actually fix the problem by chasing higher spending with higher taxes. It’s just technically not possible. And so if they’re unwilling to deal with these entitlements, which they are unwilling to deal with it, there’s really no end to it.  And they don't want to open up the healthcare law, which also does Medicare and Medicaid – changes those laws quite a bit.  So they’re stuck.

Q: Did Kent Conrad fold under pressure?  Do you think he actually intended to bring a budget to the floor?

Ryan: Yeah, I think – well, I don’t want to get into what Kent thinks, but            –

Q: No, I’d like you to do that. 


Ryan: I’ve known him a long time. No, I mean I think Kent was feeling quite embarrassed about the fact that the basic responsibility of budgeting, under the ’74 Act, which is pass your budget by April 15th, was not being done. It was reflecting poorly on him, and so I think he wanted to do a budget. And they just wouldn’t let him do it because if you do any budget that actually meets any decent metric of getting close to fixing the problem, you’ve got to come up with – the people say – I think it’s more, but they say $4 trillion. And that’s on top of the baseline. And they just weren’t willing to stomach that. 

They either weren’t willing to stomach the spending cuts, or they weren’t willing to show the country the additional tax increases that are necessary to fuel this vision. That’s what stopped them last year. They actually prepared something I think. And then they decided to bottle it up and not show the country. So that’s just – they’re just abdicating leadership.  And so our point is, we need new leaders, and then we’ll fix this problem. And we think we have, you know, a fairly narrowing window of opportunity to get us out of this debt mess. And it’s gonna be a debt crisis. Look what’s going on in Europe. It’s a cautionary tale of what will happen if we keep kicking the can down the road.  And all this talk about a “balanced approach,” my friends in the House, on the other side of the aisle keep saying “balanced approach” – that just means let’s start European austerity right now.  Balanced approach, by the way, these balanced approaches, they never balance the budget. They never, ever balance. They just say more tax increases. And if you just start keeping – if you keep the – the way these entitlements work intact, with little changes here and there, and then more tax increases, you’re just putting us on the European road to austerity, so that those kinds of packages won’t succeed in preventing a debt crisis. 

We’ll pass one round of austerity. That won’t work. Then the bond markets will get us.  Then we’ll do another round, then another round and another round, just like what Europe’s going through, and we will have chosen to go on the path of decline, and we’ll have a lost decade. So we see the President and his party basically practicing lost decade economics. The problem is we’re the world’s reserve currency, it could get even uglier for us. And we think we have one more great chance and opportunity, if the elections go the right way, to turn this thing around once and for all, and address it the right way up front, with real entitlement reforms, restructuring these programs, real tax reform to get back to growth. 

We want growth, we want opportunity, and we want reform, so that we fix this the American way, by renewing the American idea – limited government, free enterprise, patient-centered healthcare – instead of the European way: cradle-to-grave welfare state in decline, where it’s austerity after austerity, which means once these empty promises that the politicians have made to the voters, which both parties have done, they just become broken promises pretty fast. And then it’s just austerity.

Q: Mr. Chairman, your plan, how much of it can be done through reconciliation, because obviously the Senate is the big problem?

Ryan: Oh, no, it can be done through reconciliation. That’s the whole idea. The whole thing can be done through reconciliation. You can do fundamental entitlement reform.  Every time it’s been done, it’s been done through reconciliation. The whole thing can be done through reconciliation, so if your question is of the Senate, you know, we don’t have to have 60 votes. We have to have a solid 51. 

Q: Solid?

Ryan: Yeah, I mean you’ve got to have people who –

Q: You can have 50 --

Ryan: Well, you can have 50, plus the – yeah, you got to have 50 plus the VP, yeah, yeah, so yes, you have to have a solid 50.  Thank you.

Q: And you’re at 41, yesterday.

Ryan: Well, yeah. I don’t see those practice votes necessarily as completely indicative of what it will be next year. I don’t want to get into who voted and how and all that stuff, but look, I hear great things about this lady in Nebraska who won the primary. She sounds very promising. Wisconsin, I feel pretty good about our Senate race.  I don’t know who is gonna win, but whoever wins, I know each one of these people running, they’re gonna be the right vote for this sort of thing.  And I feel pretty good about beating Tammy Baldwin.  So I feel like we got great pickup opportunities, I really do.

Q: You mentioned the Vice President.  Are you being vetted right now by the Romney campaign?

Ryan: I’m not gonna get into that. I’m not changing any of my answers. I get asked this every time I walk down the street. I’m not gonna give any new answers. I’ll let them comment about this.  If I’m not gonna get into any of that. I’m not here to talk about that.

Q: After spending two bucks on parking?


Ryan: I know. I’m still ticked off about that. I had to go into this beauty salon to get change to feed the meter. Nice ladies down there. If you need to get a haircut, go right down there and to the right. They’re very nice people.

Q: Among a VP’s duties, are being ready to be President, making decisions on foreign policy and so forth.  You’ve been a member of the House for – your’re in your 14th year.  You have to deal with this somewhat, but how do you keep up with what’s going on in Afghanistan and Syria and Mexico?

Ryan: I go there.

Q: What do you read?

Ryan: I go there. I read. I mean I’m a big Bernard Lewis fan. I’ve read all of Bernard Lewis’ books, and I read a lot of his books on this topic are. I formed the Middle East Caucus in early 2000s. On Ways and Means, which is a trade committee, I was point guy on the MEFTA.  This is an arcane idea.  We used to like doing trade agreements.  And the MEFTA is the Middle East Free Trade Area Initiative, which is to create, we believe – and this was a good idea back in the Bush Administration. Get free trade agreements with these moderate Muslim countries, to integrate our economies. You have to require rule of law, women’s rights, you know, enforceable contracts. Yeah, but it’s been languishing, so I worked on the Moroccan Agreement, the Jordanian Agreement, the Omani Agreement, the Bahraini Agreement. I negotiated all the implementing legislation on that with the Democrats. So I spent a lot of my time over my career, traveling to the Middle East. That’s probably where most of my travels have gone. I was in Afghanistan last December; I’ve been there a few times. I spent a lot of time reading about the military, reading up on foreign policy. 

But I’m not – let’s not have these auditioning questions.  I’d rather talk about this other stuff. But yeah, you have to take these votes seriously. I’ve been voting – I’ve been in Congress since 1999. So I came into Congress before 9/11.  What 9/11 did to me, like most other members of Congress, is it woke us up to appreciating foreign policy and studying it quite a bit. 

Q: Let me ask the question a little bit differently.  Is it – whoever the Vice Presidential candidate is, is it – does it give the Republicans an advantage to have somebody who is fluent talking about these fiscal issues, and can – it’s not a trick question.  I mean,  it could be Bobby Jindal, it could be – but how important – usually, the Vice Presidency, you know, like Joe Biden wasn’t expected to do that kind of detailed policy analysis.  This time around, with everybody viewing it as this very pivotal election --

Ryan: The biggest crisis facing this country in a generation is a fiscal crisis, and it’s our fiscal policy. And our fiscal policy is on a collision course with our monetary policy. That is the biggest crisis – that’s the biggest existential threat, threatening our country in a generation. It’s all hands on deck, as far as I’m concerned, with fiscal policy. I’ve spent my – the better part of my career, trying to get us to this moment, to get our party right on these ideas, so that we can actually execute these solutions. It’s no good being a conservative, and just giving great speeches at AEI, if you actually can’t move the center of gravity of the debate, and put these ideas in practice. 

So that’s basically what I’ve spent my time on. When I put my first Roadmap bill out there in 2008, during the Bush Administration, I got eight co-sponsors, eight people willing to put their hand on the stove. In 2010, I got 14 co-sponsors, and the NRCC told everybody running for Congress, stay away from this.  They counseled all these people, whatever you do, don’t embrace this thing, don’t talk about it, don't talk about Social Security and Medicare. But what happened was, all these candidates did that. So I spent all my time talking to people running for Congress around the country about how do you talk about this, what this is, sending them talking points. 

Now, we’ve passed it two years in a row. So we’ve moved the center of gravity. We’ve – the Tea Party, thank heavens for that, and the freshmen that came, we’ve been willing to put our votes up on taking on these third-rail programs, and now we’re gonna get to the point where we have to execute these ideas, and that means we have to have one more election, to ask the country very specifically, this is the vision we’re seeking. This is where Obama’s taking the country. Vote for us and we’ll implement this vision. So we have an affirming election, so we can actually have the moral authority and the obligation to put these things in practice in 2013, to dodge the bullet of a debt crisis before the bond markets get us. 

And we think we have kind of a narrowing window of opportunity to do this, so we really believe we need to give the country a very clear choice of two futures.  Now I can do that where I am right now, and that’s what I’m doing. So, as far as I’m concerned, I’ve got a great job, and I’m in a good position to make a difference, and I think I’ve done that, and that’s what I’m focused on. So I’m not trying to audition or say this position or that position. I think we’ve done a lot right now where we are, and I want to see this thing through.

Q: On that note, I hate to be Debbie Downer, but let’s say –

Ryan: That’s all right, everybody else does that around here, so I’m used to that.

Q: Let’s say Obama wins re-election, but it’s a mixed message, right.

Ryan: We don’t think about that.

Q: Okay --

Ryan: There’s no plan B.


Q: If Obama is re-elected, but it’s a mixed message, we have a Republican House –

Ryan: Yeah, that’s a good question.

Q: And I don't know if you saw Tom Coburn’s recent interview in the Washington Post, where he said he thinks Obama is willing to go much further on entitlements.

Ryan: I’ve been hearing that for four years. I never see it though.

Q: If Obama and the Democrats agreed to a Ron Wyden- Paul Ryan Medicare deal, and they also agreed to get rid of loopholes, and lower rates, would you be willing to move on revenues from the current policy baseline?

Ryan: I don’t think it’s in our interest to be negotiating with ourselves, through the media or anywhere else. Everybody who says give us more revenues, none of them are willing to do entitlement reform. They have yet to embrace any fundamental restructuring of entitlements. So what’s the point of negotiating with yourself on these issues, if those who are claiming for more, more, more revenues, refuse to embrace fundamental entitlement reforms, which just means those high revenues chase higher spending?  So I don’t like – I don't want to get into hypotheticals, when nobody on the other side – when they just want to demagogue entitlement reform, but not embrace it.

Q: Have you had the conversation with Ron Wyden then?

Ryan: Yeah, Ron and I talk about entitlement reform all the time, and tax reform. We talk about the idea of a broader base, lower rate. I’m not going to speak for Ron Wyden on this, but all I say is he – he strikes me as sort of a Bill Bradley type guy. And Bill Bradley, you know, was a key force in the ’86 tax reform, key force in a lot of these reforms. I see Ron as a reformer, who wants to get things done, and who is not opposed to markets. He’s not opposed to free markets and those types of things. We don't talk about levels of revenues and all of this. 

Don’t forget that in our budget, revenues rise. I mean revenues go from – you know, they went down in the tank to 14 percent of GDP. They go up to between 18, 19 percent of GDP. Here’s the problem. Spending is projected to go from 20 percent, to right now, about 24, and then up like a rocket from there. It goes to 40 percent of GDP by the time my kids are my age, and then it goes to 80 percent at the end of the century. 

So let’s not get wrapped around will we go from 19 to 20 percent, or 21 percent of GDP, when those who are asking for that are totally complicit with government going up, and doubling, and then doubling again. Give us the commitment and the votes on entitlement reform, to get government back down to 20 percent of GDP, then let’s talk. But don’t just say give us more revenue, and we won’t give you any entitlement reforms or spending cuts. That’s just not the way to negotiate.

Q: Now, on this subject of revenue, one of the criticisms of your budget was that you bring down tax rates, which you say will be paid for by broadening the base, but it doesn't specify how the base would be broadened, what specific loopholes and deductions and so forth.

Ryan: Yeah, but you know how budgets work, Phil.  I mean, this is a budget resolution.  As you know, a budget resolution is the architectural outlines of our fiscal policy, and it sends those instructions to the committees to get to work and fill in the details. That’s what Ways and Means is to do. So as a member of Ways and Means, you don’t put all these details – we didn't put every infinitesimal detail and premium support in our budget.  We had a quite lengthy letter with CBO, so we can get our scores. But then that’s Ways and Means. 

Like this Farm Bill, we said get rid of direct payments, cut $35 billion from the agricultural title of the bill, and the Ag Committee figures out exactly how to do it. Same goes for this, so that’s just the nature of how budget resolutions work. And what Ways and Means wants to do is do this in public, not in the back room. We don't want to do some horse trading on tax expenditures. We want to do this out in the public. Let’s examine which ones matter the most. There is fiscal space left for some tax preferences, with this bracket structure. There’s just not a lot of fiscal space. And then you have to ask yourself, which ones matter, and who should get them. And in the what and who, that’s how you broaden the base and bring the rates down, and you can do it in even a static basis. Now our revenues show that because growth will – the CBO baseline even gives us more growth. Growth and base broadening gets us those revenue levels that we have in here.  I think revenues will go much higher actually because if we actually do tax reform and lock in fundamental entitlement reform, which is long-term debt reduction, which will help us in the near term for our economy, and interest rates, I think we’ll balance the budget a lot faster. And we put out this alternative growth scenario that shows three different scenarios and how that would happen. But it’s not the Budget Committee’s job to specify those loophole closers. That’s the Ways and Means Committee’s job. 

And what [House Speaker John Boehner, R-Ohio) tried to do at this Peterson thing the other day, is lay out the process on how we’re gonna decide all this, which is we will extend the current code for a year, so that there’s planning and certainty, so that people who are really worried about this train wreck at the end of the year, know our intentions.  And our intention is to give them another year of the current code, and then I have a fast track procedure that will – it will be super-reconciliation on tax reform. And we want to set up the dynamic to actually execute tax reform, a la 1986, in 2013. And that is the period in time, in which we will go into all of this stuff.

Q: You had mentioned the Medicare stuff, basically, the – your plan last year, and the plan this year, waits ten years to kick in, essentially.

Ryan: Yeah, just like last year.

Q: But the different is that this year, you allow people the option to take their premium support dollars and purchase – buy into –essentially buy into traditional Medicare.

Ryan: Fee for service, but it’s circumscribed here, premium support within the Medicare exchange on par with all the other plans, right.

Q: So if – essentially –

Ryan: Yeah, why not start it – why not let people in early?  I think that’s a good idea.  I think those are the kinds of details you fill in when you’re doing Ways and Means implementation, which is the (age) 55 and above is a clear cut conversion over. What we’ve always envisioned, and what our letters have specified is when we start that, let the older people, the older cohort, if they want to, jump into the premium support system. 

There are other people like Alice Rivlin, who say well, just start it now on a voluntary basis, and let people go into it. I think that’s worth considering. I don’t know how that would work from an actuarial standpoint. But when we start the premium support system, what we do is we allow, if they choose to do so, a person who is above that cut-off period to go into the premium support system if they want to. And that’s voluntary, so I suppose you could start the voluntary basis earlier. On paper, it doesn't save you that much because of the way the Medicare baseline grows right now.  It grows at below GDP .5 right now, for the next ten years. And then we think competitive bidding will bring the rates down below the cap. But because CBO can’t score that, you’ve got to have this cap in there. The actuaries at CMS tell us they think competitive bidding will bring prices down, just like it did in Part D.

Q: But I’m just saying more just politically, I mean if you pass a budget, and let’s say your budget passes to reconciliation in 2013, and it doesn't fully kick in, in terms of the premium supports until 2023, then there’s a ten-year period where Democrats can take over Congress and could repeal it and so forth, before it actually – and it never gets implemented.

Ryan: Yeah, I mean I understand that point. What we’re trying to show here, and it’s a very important point, is we have this little window of opportunity before austerity hits.  And what I mean when I say that is, if we go now and reform entitlements, now meaning within the next two years, we can guarantee current seniors get the benefits that were promised to them. If we keep waiting, that guarantee will go away, and then because the numbers will compound so far away from us, then we’ll have to cut current seniors in real time, which is what they’re having to do in Greece and other European countries. 

So the point we’re trying to make here is not eat your peas, go to the dentist, you know, buckle it down. No, we’re trying to say if we go now, we can get economic growth and prosperity going again, tax reform, reg reform, you know, get rid of all the bad things that have hit the economy, the uncertainty, and everybody who organized their lives around this program, who are in retirement, or who are about to retire, we believe we can still cash flow those commitments if we reform it for the next cohort coming in. If you keep kicking the can down the road, you’re not going to be able to do that. So I think it’s a compelling point, which is the sooner we act, the more secure people are in their retirements; the more we delay, the more all bets are off. And so that kind of – your point more or less sort of – you know, it penetrates that point, it violates that premise, and I think it’s a pretty compelling premise, which is give us the ability, meaning the Presidency, the White House, the Senate and the House, to fix this stuff now, and we can do it prospectively on our terms as Americans, in our timeline because if we keep going down the President’s path, then it’s all bets are off, it’s austerity, and in 2014, 2015, we’re cutting everybody’s benefits in real time. We’re cranking up taxes to please the bond markets, slowing down our economy, and we are in a lost – not just a lost decade—a lost generation, stuck in decline mode.  That’s the point we’re trying to make.

Q: And the cutoff point that you keep mentioning is when the bond markets catch us.  When is that? 

Ryan: I don’t know, but I don’t want to tempt it.  The sooner – it’s all confidence and trajectory.  You mind if I just do this? [At this point, Ryan stood up and walked over to a white board and drew a rough graph demonstrating the growth of the debt to GDP ratio over time if nothing is done and under his plan.] Its all – it really is, it’s confidence and trajectory.  So right now, our debt, you know, is going like this, and it goes like this over the – I mean it’s ugly. And that’s CBO. What we’re saying is, you know, we’ll borrow money, because we’ve got boomers coming. We’ve got healthcare costs going up, boomers coming in. We have 100 percent increase in the retirement population, and only a 17 percent increase in the taxpaying population that pays for that population. We call it the pig and the python, you know, in our – it really is, it’s this bull rush movement into the system. And we can do that. And that’s, you know, basically, boomers. It’s what you and I were just talking about. [Points to Philip Klein.] If we lock in this debt trajectory, over the century, we’ll dodge the debt crisis and the vigilantes.  But it’s got to be real.  It can’t be gimmicky stuff.  It can’t be a little tax increase here, a little benefit trim there, and the promise of spending caps later, and commissions and stuff like that. It’s got to be, did we change the laws that are creating this – this open-ended defined benefit system of really empty promises, that there’s no way the government can cash flow. The economy shuts down in like 2031 in the CBO’s model, it just stops because the debt gets so bad. 

So it’s all about confidence and trajectory, meaning, did we get the trajectory of debt going like this [points to line on chart in which debt trajectory levels off and begins to decline over time], and are we confident we’re going to meet that trajectory? And the only way we can be confident we meet that trajectory, is we literally change the laws that create that, and that is the nature of these entitlements, from going to an open-ended defined benefit system, to a circumscribed defined contribution system, and we can do that more on our terms as a country, more for the poor, more for the sick, less for the wealthy. It’s really sort of defined benefit for the poor, with defined contribution on top for everybody else. And if we pass those laws, meaning rewrite the entitlement laws, we’re confident we’re gonna get that trajectory, and then we get the dividend. Then we get the bond markets saying, , ‘You know what, put your money in America. That’s the place to go because these people in Europe and everywhere else, they’re not doing that.’  So I really see a growth renaissance in this country, because we preempt austerity, get the fiscal dividend ahead of time. We stay the world’s reserve currency.  We do tax reform so we’re competitive. And I really see a growth renaissance in this country because everybody else is a basket case nipping and tucking and raising taxes, and raising their VATs and trimming these – but they’re still open-ended entitlements, they’re welfare states, their unemployment rates are chronically double digit. We won’t. We get this trajectory locked in place, the bond markets will reward us, the currency will be strong, and we’ll get growth. So to me, that’s the secret to our success, and we’ve got to win this election to get that.

Q: Does Mitt Romney get this?

Ryan: Yeah.  That’s why I endorsed him.  He and I have talked about this so many times. I mean, he gets this.  I really believe it’s  ’80 all over again, just different problems, which is, you know, we can get a renaissance back in this country.  We can turn growth back on, and we can really lock this stuff down. And we’ve got a pretty narrow window of opportunity before we’re into this austerity mode.  So to me, that’s the key.

Q: Between Governor Romney getting it, and Governor Romney campaigning on it, because I mean the way you put it there –

Ryan: He gave a great speech on this in Iowa just the other day.  He gave a great speech in Appleton when I was with him in Wisconsin, on this.  He’s talking about this a lot. Yeah, they asked us to go on the Sunday shows.  I specifically don’t tend to go on these Sunday shows by choice.  They asked us to go talk about this on the Sunday shows, so they’re asking – they want us talking about this stuff.

Q: But this can be an optimistic message, I mean the way you just put it there.

Ryan: Yeah, that’s my point.  I mean it’s – this is not – my point to Phil [Klein] is, we’re not selling root canal economics here.  We’re selling growth, we’re selling opportunity, and we’re selling, ‘let’s fix this now, keep the promise to my mom, your mom, you know, so that we can actually get these things done, and then those of us who are younger, you know, you want to have something you can count on.’  That stuff, there’s no way we’re going to get these benefits when we retire, let alone my kids, if we keep going down this path.  When the government makes empty promises to people, it’s another way of saying it’s lying to people, and that’s what’s happening. 

And both parties have done this, so I’m not just saying, you know, Democrats bad, Republicans good.  This is a plan to have the government keep its word to the people who have already retired, or who are about to retire, and then the rest of us who are, you know, ten years away, 15-20 years away from retiring, to reform these programs, so there are things we actually can count on, and to do it in a way where we dodge the bullet of the debt crisis, we have a good tax system, we have a good regulatory system, we have a sound currency, where we can really grow.  And that is how America gets its mojo back, gets back on a path to – that’s why we call our budget the Path to Prosperity.

Q: You said there was no plan B, but in fact, if there is only one –

Ryan: Plan B is austerity. 

Q: Is anybody, you, anybody in the Republican leadership thinking or planning for that, making contingency plans?  Or is this just gonna happen if it does?

Ryan: It’s not that hard to think it through.  It’s not that hard, it’s just – you know, it kind of depends on if we get the Senate, I think.  It depends on the three – how much leverage one gets, I think.  If you control all of Congress, you’re in – the Senate is such a graveyard.  And so – it really is.  I mean they can – they can bottle up stuff so easily.  I mean look at what they’ve been doing the last couple years.  So I think that plan B hinges on the composition of divided government.

Q: Congressman, even with their backs against the wall in Greece and France, the voters have kind of decided not to go this – the route of cutting benefits.  How will American voters be any different?

Ryan: It’s a really good question.  So, I see two tipping points coming in this country: this one – the debt tipping point [points to graph], which is bond markets take over, interest rates rise on us, and the situation literally, we lose control of it.  Interest then becomes our biggest government program.  The second tipping point is that sort of cultural tipping point of more takers versus makers in America.  And if we have a majority of Americans, net consumers – net takers of government benefits – who have oriented their lives around a permanent dependency, then we’ll be in the European mode.  And it’s really, really ugly.  And we lose our greatness, we lose our prosperity, we lose the opportunities in society, and we lose the notion of upper mobility. 

If we go now, and fix this problem now, we reinstate opportunity economics, upward mobility, and a safety net that is designed to get people back on their feet, and not lull them into lives of complacency and dependency.  This is why we emphasize welfare reform so much in our budget.  When we did welfare reform in the 1990s, we only reformed one program, cash welfare, AFDC.  There [are] literally dozens of other welfare programs that have not been reformed.  And so you know, we’re witnessing those other programs just completely proliferate, and making it harder for people to be rewarded for getting back on their feet again.  So what we’re proposing is, you know, block granting these programs, time limits, work requirements, job training reforms, with vouchers for job training. [You] got 49 different programs sort of across nine different agencies, and so we really believe that we still have a welfare state that needs to be rewired towards self-sufficiency, upward mobility, and that is there for people who truly cannot help themselves, but as a temporary aid of support wired to get people back on their feet, on the way to self-sufficiency.  And if we miss this opportunity to do that, then I think what you say about Europe is what will happen here, and we’ll miss this chance. 

We’re still a center-right country.  Most Americans still believe in the American idea.  They still believe in the American dream of making a life for themselves.  They have a horizon they’re looking for, and they think their kids are gonna be better off.  While we still have a majority of men and women in this country who believe in that, we owe them this vision, this implementable solution, so that they can pick it in the election in a very affirmative real way, so that we have the obligation of implementing it.  And that’s what this is all about, as far as I’m concerned.

Q: Let me just jump in.  It’s hard for me to sit here and listen to this, and to be on the Hill every day, and see how you guys take one step forward and three steps backwards.  What do you envision happening in sequestration at this point because there’s another example of Congress totally backing down on planned cuts that both sides initially agreed on.

Ryan: The plan was the super committee was supposed to come up with a savings.  And our guys on the Super Committee put three different plans on there, which were summarily rejected and no counter offers made.  I think the Super Committee was wired for failure from the beginning when the President started issuing his veto threats.  That tipped me off right away that this is not gonna be an exercise that’s gonna be fruitful.  So we said this was never our intention to do it this way.  We just put – we reconciled $315 billion of savings to pay for $78 billion of sequester cuts, for one year.  And we like that ratio.  It’s about four to one, and so we’re saying – same with the taxes. 

We’re gonna vote on tax policy this summer, so we feel like, in the House, it’s our obligation to say exactly what we’ll do with these sort of train wreck issues.  Now we don’t expect them to get acted on because the Senate’s doing nothing, and the President’s campaigning.  So at least we go into the lame duck with a position that’s very clear, and then the lame duck – my guess is whoever wins the election is really in the cat-bird seat to determine what happens in the lame duck.  Now we wrote the sequester, and without getting into the technical parts of it, it was basically turning Gramm-Rudman back on. 

And Phil Gramm actually wrote a pretty good op-ed in the Journal – I don’t know, six months ago or something like that.  We believe we have an opportunity to put in cuts, cuts to replace the sequester, quickly in January.  Without getting into all the Senate minutia, but – so if we win, then we think we can replace those cuts with other cuts, and also on taxes, even if the President – if he becomes lame duck, and the Senate’s lame duck, and they don’t want to extend the rates, we’ll do it retroactively.  That’s me speaking for myself, so that’s plan A.  And then we’ll do what I just said, you know, in 2013, with all these things, all these reforms.  So that’s plan A.  Plan B then is – I think it’s who runs what?  Do they run the Senate, do we run the House, is the President there?  Then it’s a negotiated settlement.

Q: They’re not going to get their tax increases, and you guys aren’t going to get your cuts.  I mean, it’s just going to be a stalemate; I think automatic sequestration seems inevitable in some ways, you know?

Ryan: No, I don’t know.  I don’t know if I’d say that.  It’s definitely possible, that’s for sure.  I mean it’s going to happen in law, it’s happening.  But when Leon Panetta comes to the Hill and tells us it hollows out our military and it’s a shot to the head – I think those are his words – you know, that’s pretty harrowing.  And more to the point, there’s so much – we haven’t touched mandatory spending since 2006; 61 percent of our budget is off-limits and on auto-pilot.  And the last time Congress got any savings out of that slice of the budget was 2006, and we got $40 billion over five years.  I mean this is ridiculous. 

So we just brought a bill to the floor the other day.  It gets 116 over five years, I think is the number – 315 – no, it’s 160 over five, 315 over ten.  We passed it easily.  I had dinner with Denney Hastert like two years ago, you know, after he was speaker.  I mean you know, what did you learn, you know, you had one of those sort of post-exit interview kind of dinners, and Denny – I’ve known Denny – his district is near mine.  I said what was the hardest thing you ever had to do when you were speaker?  He was speaker for eight years.  He said, ‘oh, by far, the DRA was the hardest thing I ever had to do.’ 

That was the – we wrote it in 2005, passed it in 2006, cutting $40 billion out of mandatory spending over five years was the hardest thing in eight years he had to do.  That just shows you how pitiful our Republican majority used to be.  And it shows you –

Q: He presided over that famous Part D vote that lasted all night, too.

Ryan: Yeah, right.  No, I know.  And the hardest thing was the DRA, which is the last time Congress went into mandatory spending.  We should be doing that every single year.  So you know – so when we went into this side of the budget, I mean looking at food stamps, all we’re saying is you have to be actually eligible for them to receive them.  And now, you know, we’re getting – I’m getting nuns picketing me, and all this stuff.  Come on, I mean, you know, the per child tax credit:  You actually have to be – have a Social Security number to get it, you know, radical ideas.  It’s like the end of the world.  We can find the savings.  That’s not the problem.  It’s just do we have the will and do we have the votes, and we’ll see.

Q: Now on healthcare: Republicans ran on repealing, replacing Obamacare, but talking to a lot of Republicans, I feel as though the idea of repealing Obamacare has become an easy proxy for having actual plan to reform the healthcare system.

Ryan: Oh, you mean ‘repeal’ is synonymous with ‘replace’ in people’s minds, is that what you’re saying?

Q: Yeah, you know, people talk about repealing Obamacare, and don’t get to the replace part.  Now next month, the Supreme Court is gonna rule, and we’re gonna know what the outcome of that is.  If the Supreme Court does overturn Obamacare, the immediate focus is going to shift on to what are Republicans going to do to replace it.  Now I know that you’ve –

Ryan: I’ve been pretty specific on all that stuff, yeah.

Q: You’ve unveiled plans and so forth.  Where do you see the – because we keep hearing things about Ways and Means working on things with energy and commerce and so forth.  Where do things stand?  Do you think that Republicans are ready to unite around a healthcare alternative sometime before the election, and specifically, importantly, if Obamacare gets overturned?

Ryan: It wouldn’t be an interview with Phil Klein without a provocative question on healthcare.

Q: We were all waiting.

Ryan: Yeah, so SCOTUS – we see three scenarios, you know, [the health care law] doesn't get struck down at all, and the status quo continues; part of it gets knocked down, the mandate; and then the whole thing.  And so those are slightly different variations, which require different responses, but the point is we do feel obligated to articulate our vision for replace.  Now do we want to cram though – we had nine weeks of sessions left.  Do we want to cram through our own 2700-page vision?  No, I mean that’s not – that’s what the country hated.  But do we believe in patient-centered healthcare and market-based medicine, you know, a lot of us have put a lot of time and effort into this, yeah. 

There are a lot of people with different ideas, and so number one, I think our nominee is gonna have a lot to say about this, and that’s really important.  Number two, we’re all discussing these contingencies, and how we best articulate our vision.  And I don’t think it’s a good idea to put out some big bill, thump it on the table, that’s thousands of pages, and then try ramming it through.  That’s precisely the process that angered the country so much. 

So I think what we’ll probably – hopefully – do, is put out a vision for how we think we should fix this thing, and all the catalog of solutions that are out there, and we’ve got lots of them, you know, whether it’s insurance reforms and risk pools, and pooling mechanisms, tax treatment of healthcare, you know, the things that we think are necessary to get at the root cause of health inflation, get the patient-centered system back in place.  And there are different ways of doing it.  Tax treatment of healthcare, people like – some of our folks really like deductions, some of us like the tax credit route. 

There are various ways of doing that. I don’t think we’re gonna settle specifically on one bill because there are a lot of people who have different ideas on how to do this.  I think the nominee will have a lot to say about that, but I think what we will aspire to do is put out a vision on what a patient-centered healthcare system looks like.  And that vision is the replace side of repeal, which is what we want to execute in 2013. 

Q: You mentioned a few times, the need to get a mandate this election, to get something really specific in place.

Ryan:Well, I mean we’ve voted on this budget, which has more detail than anybody’s resolution that’s passed in modern history, so we’ve –

Q: But have created a platform, had it ratified in an election, and then implemented.  Bill Clinton was speaking at a fiscal policy summit earlier this week.  And he brought up Wisconsin and the Tea Party Congress, the 2010 –

Ryan: Oh, did he – is that the Peterson thing?

Q: Yeah, he mentioned the Wisconsin elections and the 2010 elections as examples of the same thing, which is the American people not really taking ownership of government, and they talk about how terrible these politicians are, but they voted them all in.  And the line he said was that we respond to thematic visions a lot, without really paying attention to the details.  He was saying, you know, give Scott Walker some back-handed credit.  He said he was gonna do this, give the Tea Party Congress credit.

Ryan: He did. Yeah, I campaigned with Scott all in 2010.  He said he was gonna do this.

Q: They said they were gonna do it, and now they did it, and now there’s this backlash, and they’ve been – it’s because they haven’t really – I forget if he said they haven’t been checked in or paying attention to the details of what these politicians said they were gonna do.  They just responded to the broad strokes.

Ryan: I’ve been running on these ideas since I’ve been in Congress.

Q: No, but he was saying – he was saying they run on the ideas, but then the Americans aren’t checked in and paying attention.

Ryan: Oh, I think they’re paying attention more than ever before.  I think the left is obviously in reactionary mode, lots of demagoguery.  They’re not even running against Scott’s reforms now at home; they’re just trying to trash Scott Walker.  They don’t even say it was wrong to do this collective bargaining change, because you know what, it’s working.  It’s bringing in school reform.  They’re getting better teachers.  They’re saving money.  Property taxes went down for the first time in 12 years.  So the actual reforms that Scott put in place, the actual policies, they’re really popular, they’re working. 

No, they really are, and so I mean it’s all the other stuff.  They’re just trying to destroy him to get the power back, so my point – I didn't hear the Clinton speech – is when people actually see the specifics of these reforms, and they actually see what these ideas are and get by the demagoguery, they’re popular.  So what I tell conservatives is, do it.  Follow through and we will be well rewarded, and more importantly, we’ll save the country from becoming Europeanized.  And so, you know, that’s my lesson, which is say what you’re gonna do, get elected, and then do it, and then show how it works.  And that’s – we’re in the middle of that phase. 

I mean Scott got everything because the whole entire legislature – he got the Senate and he got the Assembly, and he got – and he won.  So Scott – we call this Act 10.  He got his plan in place, and thankfully, there’s been a year now, where the results are really working.  We don’t have that.  We’ve got to divide a government situation.  It takes two election cycles for these things to filter through the system.  And so we got half way through.  We got to the 50-yard line, now we’ve got to finish the job in this election.  And then we have to – but we have to go to the country with these solutions, so they know very clearly who we are.  Obama ran on hope and change, and vague platitudes, and whatever you thought he was.  We can’t do that. 

We can’t just say we’re against him because he’s bad.  We’ll say that, but we also say here’s what we’re for, and here’s what we’re gonna do, so that when we win, we’re more accountable to making sure that we do it.  That’s my biggest fear, is the second worst thing that could happen – the worst thing is Obama gets re-elected.  The second worst thing is we do win, and then we lose our nerve.  We go with big platitudes.  We don’t fix the problem because we want to just stay in the majority.  That’s the mindset we had the last time we were in the majority.  That’s the second worst thing that could happen.  In order to prevent that from happening, you got to run on a mandate.

Q: Chairman Ryan, can you – can I get back to this magic point here [on the graph].  I mean the Democrats have managed to successfully win a kind of public relations war on [saying] what the Republicans want to do is cut your benefits in entitlement reform.

Ryan: I think we’re gonna win that exchange, but go ahead – so conceding the point.

Q: I mean so far, they have.  Can you win – can you drive home – I don’t want to call it scare politics, but if you come home and go to the voters and say, ‘it’s not if we – it’s if we don’t do something that you hurt’ –

Ryan: I just did six town hall meetings last week on that very point, explaining, ‘look, we either fix this now on our terms in our own way as a country, or the situation gets really bad, and then we’re in crisis management, and then everybody’s getting cut, everybody’s getting hurt, we’re pulling the rug out from under them.’

Q: I’m talking about seniors – I mean you were –

Ryan: That’s what I’m talking about, so I say this in town hall meetings to seniors.  I say look, here’s what we’re proposing.  First of all, it’s not all that radical.  Second of all, when people realize the status quo is not going to stay, and actually, the status quo means we go off the cliff, and we have a plan to prevent that from happening, reasonable people think, you know, okay, well, then do it.  How do you win a district that went from Clinton, Dukakis and Obama, and I’ve been running around these entitlement reforms, really specific entitlement reforms, since I got started – and how do you – I took Les Aspen’s seat, you know, it was – I mean he knows the district, just ask him. 

I mean how do you win in a district like that?  I have to have cross-over voters.  And you win by just being really honest with people about what’s going on and what you’re trying to do.  And they cut you slack – they give you the benefit of the doubt because you’re really clear about it.  You say why you’re doing what you’re doing, and people – I have so many people that say, you know, you’re more conservative than I am, but at least you’re trying and I can see that you’re offering solutions, and I’m willing to give you the benefit of the doubt.  I have more conversations in stop-and-go in the grocery store like that, than the other kind.

Q: I’m really talking about the effectiveness of saying to his senior, 65-year-old, that three year’s time, if we don’t do something, your benefits are going to get cut.  I mean I think the macro picture –

Ryan: Yeah, I mean that’s what I say.  This thing gets out of our control, and then it’s European – if you look at my Power Point I did my last town halls, I say, here’s where we’re headed; Europe is already there; and here is what Europe is doing, you know, pension cuts, healthcare benefit cuts, you know, raising taxes, youth unemployment is this, regular unemployment is that.  That’s what austerity is. 

That’s what you do when you keep kicking the can down the road, the bond markets have turned on you, and you have to do crisis management.  That’s what will happen to us – our country, if we don’t prevent this from happening.  And what we’re saying is get ahead of this problem now, and the kinds of reforms we’re proposing are – which is we’ll hold you harmless, and we think we can – to your earlier point, we think we can if we go and reform these things soon.

Q: That’s the thing, I mean getting back to the Scott Walker point.  You had mentioned how the – Scott Walker, you think is gonna win, and one of the things that happened is that because the collective bargaining reforms went into effect –

Ryan: That’s his saving grace, like Kasich didn't have time for – in there, you can recall the law not the guy, but Kasich didn't have time to show that it was working.

Q: That’s what I’m saying, so getting back to my question earlier about letting things kick in earlier.  I mean is the fear that basically if you say – you know, ten years, none of these fundamental reforms are gonna go into place, does that allow Democrats to demagogue that for a decade?

Ryan: I don’t think so because I think – especially on Medicare, this is bipartisan.  Now, it’s not bipartisan with Obama and Reed, but it’s bipartisan with Ron Wyden and Alice Rivlin and others.  And I talk to a lot of other elected Democrats who like the idea, but won’t say so publicly because the fear of getting shot in the back by their party – and no I’m not gonna give you their names because I need to work with them, and I don't want to hurt them.

But the point is Phil, this is a bipartisan idea, so I really, really believe with the right leadership in place, especially on this particular entitlement, there is a – (former Democratic Senator from Lousiana) John Breaux is the guy who started popularizing this idea from the Clinton Commission.  It came from Brookings.  I think this is an idea that’s bipartisan that will stick, and I don’t think it will be undermined. 

Q: You sound pretty confident about the recall election June 5th.

Ryan: I’m nervous about it.  No, I’m nervous about it.  I’m nervous about it because it’s close.  The polls look good right now, but the avalanche is still coming and it’s all about turnout.  And the reason I feel pretty good about turnout is – did you look at the turnout numbers on the primary? It’s pretty impressive.  There was no reason for a Republican to really go vote.  And so Scott’s votes in a primary that really was inconsequential, was bigger than Falk and Barrett combined. 

And in Racine County, which as you know, is our lynchpin swing county, you know, we had more Republicans turn out than Democrats did, and Van Wanggaard is in a big match with John Lehman in a recall election there.  So based on performance, on turnout ballot, I feel voter intensity is – it’s equal on both sides, but I’m nervous about it because this is execution, this is turnout, this is too close to call.  But I would rather be Scott Walker than Tom Barrett at this moment.

Q: They’ve got to count the votes in Brookfield?

Ryan: I’m not gonna comment on that.

Q: Congressman, for 2012, what does this mean for –

Ryan: It’s a momentum maker or breaker for either side.  If we lose, it’s – we suffer a momentum loss.  If we win, it’s a huge, huge momentum maker for us.  You’ve got to give the other side their due: if they win this thing, if they beat Scott, then they’ve got great momentum going in the fall.  And if they lose it, they lose a lot of momentum going in the fall, same with us. 

Q: Chairman Ryan, thank you so much.