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CNN Novak, Hunt & Shields

Interview With House Ways & Means Chairman Bill Thomas

Aired April 20, 2002 - 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.
MARK SHIELDS, CO-HOST: I'm Mark Shields. Robert Novak and I will question the Republican Party's congressional leader on tax policy.

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

(BEGIN VIDEOTAPE)

NOVAK (voice-over): Acting at President Bush's urging, the Republican-controlled House passed a bill making permanent the tax cuts adopted last year.

REP. TOM DELAY (R-TX), HOUSE WHIP: A vote against this bill is a decision to bury the middle class beneath a wave of new taxes at the end of the decade.

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: This is the definitive vote in this Congress on whether you want the economic plan to be permanent or whether you want to save Social Security, stabilize Social Security and ensure that it will always be there for every citizen.

NOVAK: The bill faces a cool reception in the Democratic- controlled Senate.

Bill Thomas became chairman of the tax-writing Ways & Means Committee last year, his 23rd year in Congress. A former college political science teacher, he served four years in the in the California state legislature before coming to Congress.

(END VIDEOTAPE)

NOVAK: Mr. Chairman, in the debate Thursday, in which you passed the permanent tax cut bill, pretty much along party lines, one Democrat after another said by making this tax cut permanent, not having the tax going back to the old rate in the year 2011 that you will rob the Social Security system of all that money. Is it true that that money comes out of Social Security that you're cutting the taxes with?

REP. BILL THOMAS (R), CALIFORNIA: Well, Bob, certainly they were all on message; the problem was the message was not a truthful one. The Social Security trust fund by law can't be touched. We are taking about surpluses. The Social Security trust fund is sound until about 2030.

The problem is, of course, it's such a large fund and such an important fund that you want to make sure you have, as the Social Security trustees say, a 75-year lead. We do not now have a 75-year lead. We will be addressing that. We will make changes, and we will secure Social Security. At the same time, we could, of course, do Medicare and prescription drugs and make the tax cut permanent. All those are possible.

NOVAK: Mr. Chairman, the chairman of the Federal Reserve Board, Alan Greenspan, now says that the economic recovery will be gradual. I'm sure you hear the same thing I hear from business people that they think it's going to be a pretty flat economy. Now, with this bill that you passed, the permanent bill -- I think we all agree it's not going to get passed in the Senate -- but there's something that will be passed, and will be signed by the president. Is that necessary now, that kind of a tax cut, to give another boost to the economy and really have a vigorous economy?

THOMAS: Well, it wouldn't be giving a boost. It would be assuring what we have. And of course, any time you deal with tax policy, as you well know, Bob, what you want is certainty, you want assurance. And when you have an open-ended drop-off of certain provisions of the tax code, it's difficult, especially like estate tax.

NOVAK: What I'm asking -- do we need another tax cut is what I'm asking, over and above of what you have now?

THOMAS: There could be selective ones, as we did with the stimulus package, to help business. Consumer demand seems to be holding pretty strong.

SHIELDS: Mr. Chairman, you're a student of history, and this is the first war since the Mexican-American War the country has entered without either a tax increase or a draft. I'd like to know where the universality of sacrifices in this war on terrorism?

THOMAS: Well, I think everybody has a mental set, especially relating to what happened in New York. And as you know, Mark, today a lot of people don't deal directly in it. We have a voluntary service. But given communications and the ability to, in essence, be there when you're not, I believe more people have shared instantaneously in one, the shock, and two, the remorse, and then now the slow recovery.

SHIELDS: Well, looking at the question of companies that are putting profits over patriotism, as it's been described, talked about companies like Ingasol-Rand (ph), a New Jersey company, a very profitable company, operating under American law with American protection, American courts, American law enforcement, did a bogus registration of their incorporation in Bermuda, to avoid, as it proudly proclaimed, $40 million in taxes.

Now, your counterpart in the Senate, Chuck Grassley of Iowa, has really gone ballistic on this subject and says it has to be corrected. What's your point on putting profits over patriotism? THOMAS: Well, first of all, it's hard for me to believe you'd call it bogus if they can actually save some money. And what we're saying is that our tax laws are so outmoded that somebody can create a foreign company and have an American subsidiary operating under it, and make a profit.

That shouldn't be a complaint about the company. That should have us look at our U.S. tax code and say, why can't people stay in the U.S. and still be U.S.-owned? The alternative was either to go bankrupt or to have foreign ownership.

SHIELDS: But is it fair? I mean, a doughnut shop in Bakersfield or a mom-and-pop drug store doesn't have that option that a big company does with its corporate lawyers.

THOMAS: No, but that's why we are trying to provide expensing and helping on depreciation. And frankly, we'd also like to help most of those people, because the doughnut shop and the mom-and-pop shops really pay on personal rates, and we'd like to make those permanent.

NOVAK: Mr. Chairman, the secretary of the treasury, Paul O'Neill, this past week said that the government is reaching the point where it's not going to be able to borrow money because it's exceeding the debt limit. Congress has not acted on the president's repeated request to pass the debt limit. Now, you as the chairman of the Ways & Means Committee, this is your baby, you can -- you pretty much have control over that. What are you going to do about that, considering the urgent plea by Paul O'Neill?

THOMAS: Bob, I've been in Congress for 25 years and I've watched us deal with the debt ceiling limit. We will deal with it. Secretary O'Neill, who I believe is doing an outstanding job, this is his first time around in terms of dealing with the issue. The president is going to be offering a supplemental very soon on emergency situations.

There is no need to vote without providing a broad support structure from many, many members. I've been in situations when we've had to vote three and four times to get the debt ceiling raised. We will do it. We will do it in time. We have never defaulted, and we are not going to.

NOVAK: When you say a support structure, tell me, congressman, if I understand you correctly, to say that you want to attach the increase in the debt ceiling to some appropriations for the war against terrorism so that the Republicans can vote for higher debt payments, because we are fighting the war on terrorism, whereas as I understood it, the administration wanted just a clean, simple debt ceiling bill. Have I got that correct?

THOMAS: It's not just the Republicans; there are a number of Democrats who will do the right thing as well. It's just that why should you have to have a stand-alone vote when it isn't necessary?

SHIELDS: President Bush has emphasized and restated his support for a prescription drug benefit under Medicare for seniors. And first of all, where is it? And certainly, any benefit that is written -- I'm sure it's certain that members of Congress would not ask seniors to pay more than they do, which is 20 percent of the cost that members of the Congress have prescribed for themselves for prescription drugs. Could you give me an answer?

THOMAS: Yeah, Mark, we have in the budget that we passed $350 billion over the next 10 years for Medicare modernization and prescription drugs. The Ways & Means Committee, which shares jurisdiction with the Commerce Committee, is currently meeting and working on that product.

We will have it out available for inspection by the middle of May. And as you rightly indicate, one of the more popular structures would be the so-called 80-20 payment structure. We are working on a responsible prescription drug bill that we can pay for that offers new drugs for seniors at a price they can afford.

SHIELDS: Is 80-20 a possibility?

THOMAS: Eighty-20 is definitely a possibility.

SHIELDS: A Bill Thomas possibility?

THOMAS: We're working on it.

SHIELDS: OK.

THOMAS: It's all a matter of numbers, and we'll see where we come out, but that's our goal.

SHIELDS: OK. We have to take a break, but when we come back we will ask Bill Thomas, Chairman Bill Thomas, about Social Security and health care.

(COMMERCIAL BREAK)

NOVAK: Chairman Bill Thomas, we have a commission appointed by President Bush which has proposed a very ingenious approach to Social Security, with private retirement accounts. The chairman of the Republican Campaign Committee, Tom Davis, doesn't want to see that on the floor. We had the majority leader Dick Armey here, says he doesn't want to see it on the floor. But you -- are you saying that it's possible that you might force the Republicans to vote on that this year?

THOMAS: Well, I wouldn't force the Republicans to vote on anything. First of all, no one's talking about privatizing or private accounts. We are talking about personal accounts. That is, you would still have all the securities that the current Social Security system has...

NOVAK: But they might vote on it?

THOMAS: ... but that they would be directed toward individuals.

There's a possibility that if we can get a plan, get it through the Social Security subcommittee. Clay Shaw of Florida has been an excellent subcommittee chairman, working on a product he believes has been perfected. We may bring it to the full committee, and it may come out.

We have a lot of other issues to deal with first, as I said with Mark, Medicare prescription drug bill, which is one that's due up right away.

NOVAK: Long-term, though, sir, the Social Security system is in such bad shape long-range that this private accounts is not going to do -- personal accounts -- is not going to do the trick. You're going to have to either increase taxes or reduce benefits to save the system down the line, isn't that the truth?

THOMAS: Not necessarily. It's a question of the time value of money. If you can get them started soon enough and get a better rate of return, you can provide enough for individuals through an increased rate of return. As you know now, you get virtually nothing in the current system.

Both President Clinton and President Bush have looked at it, and even Clinton walked away from raising taxes or cutting benefits. Those are not options. We've got to figure out a way to multiply the money faster, a higher interest rate, with a very high degree of security. That would be the solution.

SHIELDS: Mr. Chairman, the 10-year projected budget surplus is gone, or at least vanishing. Enron...

THOMAS: (UNINTELLIGIBLE) not, but it's OK.

SHIELDS: But I mean, the 5.6 that we based upon last year, the sort of rosy scenario. The Enron came along, the stock market hit a rough patch. You can understand why some of your Republican colleagues are a little skittish to talk about -- they don't want to hear the word "privatize." Personal accounts I know is the time- tested, focus group-tested word rather than privatization. They don't want to go near that third rail in a political year, do they?

THOMAS: Well, actually the reason I use "personal," Mark, is because that's the accurate description of what we are doing. We aren't privatizing them. We are giving an identification to an individual with control over the money. They're not really privatized.

And anybody, especially in this governing majority that's been responsible, would look at a serious and well constructed proposal. And by the way, Mark, it just shows you what one year can do. If you'll remember last year, we had a recession and we had that significant event on September 11 and the aftermath. That does affect revenues. We are going to be coming out of it. We are going to stimulate the economy. It is going to grow. And next year, the numbers projected then forward over 10 years will change dramatically, almost as dramatically as they did downward from last year, and we will be in a surplus as soon as '04, and assuredly by 2005.

SHIELDS: Numbers that have changed, and not to your advantage, or to the advantage to the country, has been those of the cost of health insurance. We saw it doubling in California. We are seeing it across the country, doubling from last year. Means more people, more companies not offering packages, more uninsured families. What is Bill Thomas, the House Ways & Means Committee and the Congress going to do?

THOMAS: Well, I'll start with Bill Thomas, and I think I can deal with the Ways & Means Committee. The Congress, it's a bit more problematic, because, frankly, Mark, the current system, the employer- based system is fatally flawed.

One, not all people are employed; and two, you're right, when the company decides it isn't worth it, then the employee doesn't get it. I believe ultimately the solution is to have an empowered consumer who is knowledgeable with the wherewithal to purchase health care. That requires a number of different changes, but one thing we can do fairly quickly is to create a tax credit available to those who through no fault of their own don't have health insurance, the unemployed, those who lost their jobs because of overseas job loss, and we are trying to do that in the trade adjustment assistance.

We presented a program. It was rejected by the Democrats in the stimulus package. We will try to bring it back in the trade adjustment assistance, and see if Mr. Daschle will let the unemployed have an opportunity to use tax credits to get health insurance for themselves.

NOVAK: Chairman Thomas, the situation that we have in the world on trade is the United States officials have been for years telling the third world is that you can only go to free trade, get rid of terrorists, you'll have a good economy. How is our credibility, the credibility of the United States, when President Bush has ordered a tariff on steel?

THOMAS: What you've got, Bob, is a very difficult situation. There is no free market anywhere in the world in steel, and until and unless we face the situation the way the president has now crafted it...

NOVAK: (UNINTELLIGIBLE) on that.

THOMAS: Well, I would have preferred we had a world market in steel, but since we don't, the president has created a window of opportunity to change the United States production of steel and address the world over-supply. If we don't correct the world over- supply and the inability of the U.S. to produce steel competitively, we will have a very, very long-term serious problem.

The president's step is an interim one. It creates an umbrella under which we can make changes. I think the president did the only thing he could do, and he did it as well as anyone could have done it. And you'll see that by the fact that he will have a bipartisan vote in support of the changes he's trying to make in this area.

SHIELDS: Mr. Chairman, the alternative minimum tax on individuals, it was corporate action last fall, but the alternative minimum tax on individuals is really a time bomb. We are talking about projected in 10 years that one out of three American taxpayers. What's the remedy? What are you going to do about it? Is it as serious as we believe it is?

THOMAS: Mark, it's serious now and it's going to get more serious. In 1993, the tax increase that the Democrats always like to brag about that produced the decade of nirvana -- that laid the seeds for where we currently are.

Today, to fix the individual alternative minimum tax, it takes about a $.5 trillion. And if we don't begin addressing it, over the next five years it will take three-quarters of a trillion, and you can see what happens with the math.

We never should have done what was done in 1993. I lay that at the foot of the Democrats. However, it is a country-wide, system-wide problem, and we need to address it. One of the ways you address it is to get on top of it, that is don't let it grow, and then begin to pay down the difference between the ordinary tax rate and the alternative minimum tax rate.

SHIELDS: We have to take a break. When we come back, we will have "The Big Question" for Chairman Bill Thomas.

(COMMERCIAL BREAK)

SHIELDS: Bill Thomas, "The Big Question." Your home state of California, renowned for its political future of the country, its ethnic diversity -- and yet that diversity seems to all be on one side in the congressional delegation, with Latinos, Asians, Hispanic, African-Americans, Democrats, (UNINTELLIGIBLE) women. I'm just asking, the state is renowned for diversity. Can a conservative, card-carrying conservative businessman like Bill Simon stand a chance to win the governorship?

THOMAS: Yes. He's running against Gray Davis. And Bill Simon's job is to make sure that people know Gray Davis the way they should know Gray Davis. If Bill Simon can define Gray Davis rather than Gray Davis defining Gray Davis, he has an excellent chance. We can't take four more years of Governor Davis.

NOVAK: Congressman Thomas, I want to ask you a question and I like to ask the chairman of the House Ways & Means Committee every chance I get: How long will it be, how long, oh Lord, before a Republican House of Representatives and a Republican Ways & Means Committee will start a serious effort at comprehensive tax reform?

THOMAS: I would love to tell you, Bob, that we are going to do it this year. I believe we have moved to the point where there is no real alternative. You saw recently the Europeans slap us in the face with our subsidy. Our current tax system is out of date. We are ill- equipped with the current tax system to fight the war of the 21st century, which is going to be truly an economic war, hopefully fought peacefully through trade.

We have to be prepared for that, and we are not with our current tax code.

NOVAK: Do we need a national sales tax?

THOMAS: We need a tax that we can (UNINTELLIGIBLE) at the border so that we can impose tax -- we are the world's largest importer and the world's largest exporter, and we need to do something to get us in sync.

NOVAK: Sounds like a sales tax to me. Thank you very much, Chairman Bill Thomas. Mark Shields and I will be back with a comment after these messages

(COMMERCIAL BREAK)

NOVAK: Mark Shields, Bill Thomas has never been called a right- winger, a conservative, or even a supply-sider, but he is a tax cutter and a tax reformer, and he knows that sooner or later the Republicans are going to have to get on the dime if they still control Congress and try to reform this terrible tax system.

SHIELDS: Well, Bill Thomas also knows that Republicans are in charge of Congress and they've got to deliver, and he was pretty blunt about delivering on prescription drug benefit, Bob, and even accepted those magic words of a possibility of an 80-20, where the government would pick up 80 percent of the cost of prescription drugs, just as it does for our members of Congress an senators.

NOVAK: I've known Ways & Means chairmen, or watched them at least, all the way back to 1957, Jerry Cooper (ph) of Tennessee, I knew Wilbur Mills (ph) very well. Bill Thomas, if he stays around on the job, could be one of the really great Ways & Means chairmen because he knows the territory and he is very self-confident. He's telling Paul O'Neill on the debt limit, listen, Paul, I've been around, you haven't, I can get it passed, don't worry about it.

SHIELDS: Well, I will say this, that Bill Thomas, again, is more candid than most people in positions of power, and he was on the alternative minimum tax. He said that it's a time bomb out there on individuals -- $.5 billion, Bob, I think that puts the kabash (ph) on any of your favorite tax cuts coming up, Bob. No question about it.

NOVAK: I'm Robert Novak.

SHIELDS: I'm Mark Shields.

NOVAK: Coming up next on "CAPITAL GANG" at 7:00 p.m.: Colin Powell's trip -- success or failure? The Senate delivers a defeat to President Bush's oil drilling plans. And the pope summons cardinals to the Vatican. Plus, our "Newsmaker of the Week," Senate Republican leader Trent Lott of Mississippi.

SHIELDS: Thank you for joining us.

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