Return to Transcripts main page

CNN Novak, Hunt & Shields

Interview With Bill Thomas

Aired November 17, 2001 - 17:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
AL HUNT, CO-HOST: I'm Al Hunt. Robert Novak and I will question the Republican leader on congressional tax policy.

ROBERT NOVAK, CO-HOST: He is Republican Congressman Bill Thomas of California, chairman of the House Ways and Means Committee.

(BEGIN VIDEOTAPE)

NOVAK (voice-over): Led by Chairman Thomas, the House a month ago passed a stimulus package, including major tax cuts for business.

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: Bill Thomas refused to really carry out a bipartisan process at the beginning of the bill, with Mr. Rangel and the administration. He then put together a very right-wing bill that frankly was way over to the side and extreme.

Now we can't even get a meeting between the four sides, the Senate and the House, to try to work out a bill that we can get done before Thanksgiving.

NOVAK: Senate Democrats drafted their own bill, with more spending and fewer tax cuts, but Democrats fell nine votes short Wednesday of the 60 votes needed to bring their bill to a vote.

SEN. BARBARA BOXER (D), CALIFORNIA: The Republicans in the United States Senate stopped that plan in its tracks yesterday, and I say to them, shame on you!

NOVAK: Bill Thomas, a community college professor who served four in the California State Assembly, was elected to Congress 23 years ago. This year, he became chairman of the tax writing Ways and Means Committee.

(END VIDEOTAPE)

NOVAK: Mr. Chairman, there are many investors, businessmen, entrepreneurs who in this shaky economy would like a stimulus bill. They'd like a tax cut. The fact that you're obviously in Congress going to go home for Thanksgiving without having passed it well after the September 15 (sic) attacks, isn't that a condemnation of both sides, Republican and Democrat and not being able to get together with a bill that they can agree on? REP. BILL THOMAS (R-CA), WAYS AND MEANS CHAIRMAN: I don't believe it is, Bob, because the House of Representatives more than three weeks ago passed a package, which was recovery and stimulus, and it passed with both Republican and Democrat votes. I think the problem has been that Daschle over on the Senate side won't let Senator Baucus, finance, Chuck Grassley, Republican on finance, Rangel and myself get together, given the jurisdiction of our committees.

He said that he has to have Bob Byrd at the table. The appropriators have to be at the table. The people who have authorizing committees have to be at the table. There is no way you can ever come to an agreement. If you had the just the finance and the Ways and Means Committee people siting down, we could come to an agreement. All of the leaders of the Finance and the Ways and Means Committees say, let us sit down, Daschle says no.

NOVAK: But what about Congressman Gephardt says, and you hear around, that the House Republican leadership, majority leader Armey, majority whip DeLay, barred a Senate/House bipartisan negotiation, is that not true?

THOMAS: No, that's not true. Simply not true. If you'll recall, they had enough confidence in me and then-Chairman Grassley and ranking member Baucus to allow us to go into a room with John Breaux and negotiate a $1.35 trillion tax package, and we didn't seem to have a problem then.

The problem is, they want to bring other people into the room who are spenders, and Bob Byrd with his $15 billion appropriation package. You can't come to an agreement without arrangement. We passed a bill out of the House that it was in the jurisdiction of the Ways and Means Committee. If Senator Baucus and Senator Grassley were allowed to come into the room, bringing with them the Senate Finance jurisdiction, we could give you a stimulus package over the weekend.

NOVAK: Sir, you have twice mentioned Senator Byrd, senior Democrat in the Senate, chairman of the Appropriations Committee, very powerful figure. He's insisting on a $15 billion spending program. Some of it considered to be pork. Is that too high a price to pay for a stimulus bill that the economy needs?

THOMAS: Well, why should you have to pay any price at all? Out of one side of their mouth, Daschle and the Democrats are saying, nothing can be permanent. Out of the other side of their mouth is, we can't sit down and even do temporary stimulus measures if we don't allow Senator Byrd in and his permanent spending program. At some point, the people have to listen to what the Democrats are saying.

You heard Barbara Boxer on that clip saying shame on the Republicans. I thought the purpose of a leader, Democrat leader Daschle, was to lead. Are you telling me they couldn't put a package together that couldn't get Olympia Snowe, that couldn't get Senator Chafee from Rhode Island? These are not exactly your right-wing Republicans.

NOVAK: They voted against it Wednesday. THOMAS: Exactly! They put together a partisan package.

HUNT: Mr. Chairman, Charlie Rangel, your ranking member, doesn't share your view that Tom Daschle shouldn't be in on that meeting. You're alone, as far as the Ways and Means Committee is concerned, so it's not just the Ways and Means Committee versus appropriators. Charlie Rangel says you're wrong.

THOMAS: I guess then what Charlie Rangel told me as recently as yesterday on the floor of the House wasn't true. He said he agreed, we ought to keep the scope to Finance and Ways and Means. He told me that personally. Senator Baucus has said that, and obviously Chuck Grassley agrees. I don't know when you talked to Chairman Rangel -- ranking member Rangel, but he talked to me yesterday and said he was in agreement.

HUNT: I was getting the question to Mr. Daschle...

THOMAS: When did you talk to Rangel?

HUNT: ... when you talk about the breakdown of any kind of bipartisan agreements, here is what you said about Tom Daschle this week, and I want to put it up on the screen for our viewers to see. You said and I quote: "He is either nakedly in opposition to economic recovery and assisting us in the war effort, because his political ambitions are so great that he's going to have to concede reigning power in the Congress," end quote. Do you really think that Tom Daschle, a three-year veteran of the Air Force, would oppose his country for his own naked political ambition?

THOMAS: Then tell me why they forced Senator Baucus to put out of his own committee a bill so partisan that even Olympia Snowe couldn't vote for it?

HUNT: So, the answer is...

(CROSSTALK)

THOMAS: No, I'm just questioning.

HUNT: No, I'm asking if you stand by that quote.

THOMAS: Why...

HUNT: Do you stand by that quote?

THOMAS: I want to know why Senator Daschle three weeks after the House passed a stimulus package continues to argue that it's the Republicans that are standing in the way. Why can't Senator Daschle put together a modest bipartisan package with the 10 or 15 Republicans who seem to go with the Democrats on almost every other measure if it's reasonable?

HUNT: You, Mr. Thomas, also this week accused the Democrats -- and let's put this up on the screen also, of, quote, this is Bill Thomas' quote, "using the harshest of their classic race-baiting, class warfare arguments." Race baiting, Mr. Chairman? What?

THOMAS: And class warfare.

HUNT: What's race baiting?

THOMAS: The argument that we were unwilling to provide the kinds of funds to assist those people at the lower end of the economic scale, and blacks and Hispanics as well. Those statements were made on the floor of the House. Today in the Saturday message, the senator from Michigan said that in the House package there was nothing for working people, nothing.

We have the same exact stimulus payment to low income people that the Senate has.

HUNT: That's race baiting?

THOMAS: No, that's class warfare. You had two terms in that quote, and I'm referring to the second one -- I already referred to the first one. She either is ignorant of the House package, or she's lying, and she can pick either one of those.

NOVAK: Mr. Chairman, even some staunch conservatives and supply- siders were upset with one aspect of your bill, and that is the -- in the alternative minimum tax, making it retroactive, which, in the opinion of these critics, has the effect of giving a cash payment to big corporations. And according to the Congressional Research Service, let's take a look at the payments. That amounts to 832 million for GM, 2.3 billion for Ford, 671 million for General Electric, 1.4 billion for IBM.

With 20/20 hindsight, do you think it was a mistake to have made those retroactive payments on the probably desirable repeal of the alternative minimum tax?

THOMAS: First of all, Bob, they're not retroactive. Ari Fleischer used that term in a news conference, and then realized he was wrong. And in a follow-up news conference, he said he was wrong, so they aren't retroactive.

In addition, they apply to more than 30,000 corporations. The dollar amounts you see there show you how insidious this is. The problem is, you figure your regular corporate tax -- this happens to individuals as well -- your regular personal or corporate tax, and then you do an alternative minimum. If your alternative minimum is higher than your regular, what you do is pay the alternative minimum.

But it isn't the final payment. It is a loan to the government. It is a tax-free loan to the government, that when your regular taxes are higher than your alternative minimum, you can then reclaim those credits. None of those credits are retroactive. They're always applied to the next tax year. They simply aren't retroactive, Bob.

NOVAK: Well, just to cut through all the difficulties, a lot of people feel that the most effective tax cut you can make are to the individuals so they can -- particularly the higher bracket individuals -- so they can invest and get the economy going. Why was it then that you did not speed up the income tax cuts of your previous bill for the higher brackets, only for the lower brackets, while you were giving these benefits to corporations?

THOMAS: We didn't speed them up for just the medium bracket. The 10 and 15 percent rate was set in that bill that was passed. The 28 and 27 are supposed to go down to the 25 percent rate in 2006. We brought those back.

NOVAK: But there was no speed-up for people over 28 percent.

THOMAS: Number one, the spokesperson for the administration said they didn't -- they weren't going support that. That was given away by the administration. Secondly, from a political point of view, Bob, you have to put a package together that will get the majority of the votes. Had that portion, whether or not theoretically I agree with you, which I do, it doesn't make any difference if you can't get the votes for it. And putting that in the package would have lost Republican as well as all of the Democrat votes that we had.

So it would have simply not made the package passable. Our job is to make law, not profound theory.

HUNT: Mr. Chairman, you a minute ago chastised the appropriators for wanting permanent spending increases, as you put it. As you know, about a month or so ago in talking about a stimulus package, Alan Greenspan of the Fed, Bob Rubin, the former treasury chairman, a bunch of Nobel prize-winning economists and the ranking GOP and Democratic members and chairmen of both budget committees said that any provisions should be temporary. They agreed with you on the spending side.

But when it came to tax cuts, you changed your tune, including that huge massive tax cut for wealthy corporations and the alternative minimum tax. You made those permanent. Why is it OK to make it permanent for tax cuts, but not for spending?

THOMAS: Well, I didn't chastise them, I was simply saying that Daschle said everything should be temporary, but then he was including permanent. So he said one thing and was doing another.

If you're going to have any impact on some of the taxes, like the alternative minimum tax, it makes no sense to suspend it for a year or two and then continue it. You either eliminate it or you simply look somewhere else. Clearly, in the area of depreciation, we did make it temporary, and it makes sense.

HUNT: Three years.

THOMAS: Yeah, and expensing 30 percent. Look what auto makers did in October, they dropped interest rates to zero, enormous purchasing of automobiles on an annualized basis, 21 million cars, one of the highest three years in history. So when you change the game, it does stimulate people to do things.

We did that with depreciation, but on the alternative minimum tax the argument is simply do it or don't. It doesn't make any sense to do it for just a period of time.

HUNT: Mr. Chairman, we're going to have to take a break now, but we will be back in just a minute to talk to Bill Thomas about Social Security and unemployment compensation, and possible tax reform.

(COMMERCIAL BREAK)

NOVAK: Chairman Thomas, many conservatives, supply-side economists believe the best thing you can do to stimulate the economy is to have cuts in the capital gains tax, and in fact Alan Greenspan thinks it ought to be repealed. But the very small, though desirable, cut in the capital gains tax in your bill is going nowhere because the president won't give it any support. Why won't this administration support that?

THOMAS: Well, you'll have to ask them that, Bob. I'm in favor of repealing capital gains. I think you ought to reward people significantly for taking risk, and time value creates a reward for the risk.

But in putting this package together, one of the things that we had to do, again, was put a package together that would pass. And the Democrats -- that's one of the holy grail positions of the Democrats -- there can't be any kind of capital gains, and the one that we put in was rather modest. It repealed the Bob Rubin gimmick that was put in the last time that created a 20 percent rate if you held assets for five years. And by repealing that, it dropped the effective rate to 18 percent. It was a modest, reasonable simplification of the tax cut.

NOVAK: But it's not going anywhere, is it?

THOMAS: Yeah, I think it will.

NOVAK: You think it will go anywhere?

THOMAS: If we'll ever get together with the Senate, I'll argue that's a pretty good piece of legislation.

NOVAK: A lot of people, sir, feel that the greatest stimulation to the economy over the long haul would be to get rid of the income tax system, and go to a sales tax system. Your predecessor, Congressman Bill Archer, he advocated but never -- he did get some support. Down the line, is that something you're interested in?

THOMAS: Well, I think the income tax side was for the personal income tax, with the progressive rates, is as much of a social policy as it is a revenue driver for the U.S. government. But on the corporate side, the corporate income tax, which is supposed to kind of mirror the personal income tax, really doesn't make a lot of sense today.

We are in a trading world, where the world's largest importer world's largest exporter, and we suffer a lot -- foreign sales corporations provisions just a most recent example -- with our tax system on corporations in the world today. There I think we can change that significantly. And by replacement revenue, taxing them differently, we can make them more competitive and we can grow better.

HUNT: Mr. Chairman, the stimulus package that you would like to push negotiations with the Senate is very generous to corporate America, but not quite as generous to laid-off workers. The Congressional Budget Office calculated that you are right, it would give some aid for an extended unemployment compensation. They calculated about $4 billion over the next couple of years through the state. That's only about one-seventh that what was given during the recession of 10 years ago. Were are you so stingy to unemployed workers?

THOMAS: Well, first of all, the amount in the House-passed bill was $9 billion for unemployed...

HUNT: They said the states will only use about $4 billion.

THOMAS: ... and it's directed to the states. Because over the last 10 years we've moved a number of pieces of legislation. You have to look at what's already in place and which is triggered automatically once people begin to be laid off.

I found it ironic that one of the first things the Democrats argued for was an extension of the unemployment -- another 13, another 26 weeks, when people were barely going on unemployment, and they hadn't used up the very generous 70-plus weeks that was already there. You have to look at what's in place and what is automatically triggered.

The quickest way for a stimulus is to get it to the states to assist the states. Remember, they're going through revenue restrictions as well. So what we were trying to do was to help relieve some of the administrative costs at the state level, and let them -- since they're partners with the federal government -- help them pay both the unemployment insurance, and also assist in health care.

HUNT: People like Nobel prize winning economist Joe Stigwood (ph) says that if you have more generous unemployment compensation benefits extensions, that's the most stimulative package you can possibly have, or type you can possibly have, because it's only 50 percent of their lost wages on average, and they have to spend it to subsist.

THOMAS: Al, I'm ready to sit down with the Senate Finance chairman and the ranking member...

HUNT: So you're flexible in making more changes.

THOMAS: ... to talk about unemployment compensation. That comes under the jurisdiction of Senate Finance and Ways and Means, but the Senate can't get its act together to get to conference. The House passed more than three weeks ago a provision, which, as you say, doesn't have as much as you would like, but it's got it in there.

The Senate is the problem. Why can't the Senate get its act together and come to a conference and let Senator Baucus make that pitch to me? And I bet you, in the interest of moving along to get a stimulus package, I might be a bit receptive behind closed doors.

NOVAK: Mr. Chairman, two quick things, two other pieces on the Ways and Means agenda, dispose of quickly. The Trade Promotion Act, used to be called fast track, giving the president authority to negotiate trade agreements -- where is that going?

THOMAS: I think we will pass it. It's going to come up the second week we are back. We've now set a specific date, December 6. We just passed yesterday off the floor of the House, with Charlie Rangel and myself as co-sponsors, an Andean-Caribbean-African trade bill, which was so popular that it passed on a voice vote. It's now over on the Senate. I'd like to see if Senator Daschle can move a bipartisan, unanimously-agreed-to bill off the floor of the House off the floor of the Senate.

We think it will pass, why? Doha was successful. The new ministerial at Doha following the disaster in Seattle, in which President Clinton made sure, by pushing the labor provisions on the Third World, that it would be a disaster. We delivered a successful round. Now the president has to have that trade promotion authority to be able to make sure that the agreements that were made on this new ministerial are actually able to be implemented.

NOVAK: We have less than an minute before we're going to take another break. Quickly: Is the president's Social Security reform, with a modest (UNINTELLIGIBLE) privatization -- is that a dead letter now? President Bush never mentions it anymore.

THOMAS: No, I don't think it is; the commission is still meeting. And as September 11 set a number of things back, I believe it set the commission back. But I believe they're going to report, and they're going to have a package recommending to Congress.

HUNT: Sir, in about 10 seconds that we have left, several Democrats say you're so eager to go to conference with Senator Baucus rather than Senator Daschle because you know you can roll Max Baucus.

THOMAS: No, that's not true...

(CROSSTALK)

THOMAS: No, I'd be ready to go to conference with Mr. Daschle -- he's on the Senate Finance Committee -- if he would simply limit the scope of the conference to Senate finance and ways and means.

HUNT: So Daschle's OK, but not Byrd, right?

THOMAS: Byrd is an appropriator.

HUNT: OK, all right...

THOMAS: If Byrd wants to come and visit the conference and leave his appropriations spending packages behind, fine.

HUNT: We're going take a break right now. But we'll be back in just a minute with "The Big Question" for Bill Thomas. (COMMERCIAL BREAK)

HUNT: "Big Question" for Bill Thomas. The "National Journal" said the other day that you consult periodically with Ken Keyes, a former staffer and now a very big-time K Street lobbyist whose clients did very well in the recent tax package. And he said it was an act of patriotism.

Your fellow Republican colleague John McCain, however, this week, talked in that context about -- he said, and I quote, "lobbyists who wave old glory while they loot the treasury," end quote. Your reaction.

THOMAS: Well, Ken Keyes made the quote, and you're going to have to ask Ken Keyes. What we did was look at what we thought was good policy. The repeal of the alternative minimum tax, I think, makes a lot of sense in helping to stimulate business. The depreciation makes a lot of sense.

What we did we did because we thought it was a recovery and stimulative package. The quote you gave me was Ken Keyes, so ask Ken Keyes.

NOVAK: Mr. Chairman, Milton Friedman, the Nobel laureate, says we'll never have tax reform in this country because of the symbiotic relationship between the lobbyists who want a complicated tax system, and the congressmen who get benefits from the lobbyists. What do you think of that?

THOMAS: That might be OK as a general statement, Bob; but I think, especially when you look at the international situation now, where you could never have a Chrysler-Daimler, it would be -- a DaimlerChrysler, there are enough people who are aware now that we are at such a disadvantage in the area of trade -- and trade is the 21st century -- that I believe a lot of people will come together and talk about replacement revenue.

You can't just eliminate the corporate tax code, but you can certainly change it. And I think if we go through that process a lot of people will be surprised. People are willing to be taxed if it's smart and appropriate.

NOVAK: Chairman Bill Thomas, thank you very much.

Al Hunt and I will be back with a comment after these messages.

(COMMERCIAL BREAK)

HUNT: Bob, there is no tougher or smarter legislator than Bill Thomas. But he's got a thing about Tom Daschle. Tom Daschle spooks him for some reason. And I'm sorry, the Senate majority leader's going to play a bigger role in any find product, even than the Ways and Means Committee chairman.

NOVAK: Well, I think that Congressman Thomas is a compromiser. I think he's willing to adjust himself. But I think he is really determined that Bob Byrd is not going to bring in his collection of pork into those negotiations. We'll see if he prevails on that.

HUNT: He gave a very artful answer to my question about Ken Keyes, his former staffer, and John McCain's quote about him. But, in fact, the problem with Bill Thomas' bill is it became a playground and a piggyback for the rich K Street lobbyists.

NOVAK: Al, the problem is the income tax system, which has to go. A lot of past chairmen -- Wilbur Mills, Bill Archer thought there had to be reform; it's very hard to get it. But maybe Bill Thomas is tough enough to have real tax reform.

I'm Robert Novak.

HUNT: And I'm Al Hunt.

NOVAK: Coming up at 7:00 p.m. on "CAPITAL GANG": the latest on America's new war and airline security legislation with Democratic Senator Joe Lieberman, plus military tribunals with former U.S. Attorney Joe DiGenova.

HUNT: "CNN Saturday" is next. Thanks for joining us.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com