Ed Lane: Senator McConnell, this year may be the most significant political year in many. Issues that will or could be decided include future nominations to the U.S. Supreme Court, implementation of the Patient Protection and Affordable Care Act (Obamacare), control of both houses of the U.S. Congress and the 2012 U.S. presidential race. Assuming that former Gov. Mitt Romney (R) and President Barack Obama (D) are the standard bearers for their parties, who do you believe would be their most likely running mates?
Mitch McConnell: The reason I’d rather not comment is because, in the end, it almost never makes any difference who the running mate is. But let me say, and I confess to having said on several occasions in the past, that this year’s election will be the biggest ever. America is at a crossroads; its debt is now the size of our annual economy (GDP). That alone makes our economy look a lot like Greece’s. The Obama administration has basically, with 150,000 new federal employees, taken over regulating the entire American economy. Not just in healthcare and financial services with their newly passed bills, Obamacare and Dodd-Frank (Wall Street Reform and Consumer Protection Act) – but everywhere.
As a result, our economy has experienced the slowest recovery from a deep recession in American history. Previously, the case has been that the deeper the recession the quicker the bounce-back – until now.
The country is in serious trouble. I don’t see any evidence that President Obama is going to have an epiphany and go in a different direction based on the six months of discussions I, along with the Speaker (of the House John Boehner), had with him last year about the issue of deficit budgets and escalating debt. So, it is extremely important that the country change direction.
The November 2010 election was a national restraining order. The American people took a look at all the things that happened when the Democrats owned the government, and they didn’t like it. The voters didn’t like the fact that Congress passed an almost trillion-dollar stimulus bill and Obamacare. And they didn’t like the 43 percent increase in the U.S. debt. The voters took a look at all of that and said, “Stop it.”
The voters are going to make a major decision this November. Which way do they want America to go: to become a Western European country and continue in the direction of Greece, or do they want America to be an “opportunity society” that encourages business and applauds rather than condemns success?
If you look at President Obama’s campaign so far, it can be summed up by saying, “It’s not my fault.” The president has blamed the tsunami in Japan, the debt crises in Europe, Republicans in Congress, rich people, Wall Street and the U.S. Supreme Court. It’s anybody but him. The American people cannot be fooled into thinking that this election is anything other than a referendum on the president’s performance. The president has been in office for four years. How good was his job performance, and does it warrant the president being re-elected for another four years?
EL: Will the Patient Protection & Affordability Act be implemented or stopped?
MM: Americans have one intervening event between now and the election – the Supreme Court’s decision on the constitutionality of Obamacare. The court had three days of oral arguments; it’s been 40 years since the court has given that much time to a case. That’s the definition of a big case.
The argument is pretty easy to understand. Can the federal government, under the commerce laws, require you to buy health insurance because your failure to do so would adversely affect the healthcare cost of someone else? The plaintiffs are arguing, if the federal government may order you to eat carrots, could it also order you to quit smoking or lose weight? In other words, the plaintiffs are arguing that there are no commerce laws that allow the federal government to order you to do this. I don’t know what the Supreme Court will decide.
If the individual mandate violates the commerce laws, then the Supreme Court’s second decision is: Does it strike down the whole law or just part of it? We’ll have some understanding of where that issue is headed after the Supreme Court speaks.
Let’s assume the court says Obamacare is constitutional; it’s perfectly alright for the federal government to do this. Obamacare is still a huge mistake. In the past, there have been plenty of decisions that are not unconstitutional but were still the wrong thing to do. Obamacare is extremely unpopular – more unpopular today than it was when it was passed. It will be a major issue in the fall campaign, outranked, in my opinion, by joblessness, the sorry state of the U.S. economy and a rash of regulatory activity. Remember what former Speaker of the House Nancy Pelosi (D) said about Obamacare: “We need to pass the healthcare law so we find out what’s in it.”
The regulators are busy all across the board, but they’ve been particularly vehement in healthcare and financial services where there are two new laws, Obamacare and Dodd-Frank.
The Independent Payment Advisory Board (IPAB) is the panel that will decide, in a sense, who “makes it” and who doesn’t by rationing healthcare. IPAB doesn’t answer to anybody. There’s a similar agency under Dodd-Frank called the Consumer Protection Financial Bureau (CPFB) that also answers to no one and gets to determine whether a business is too big to fail or not. When CPFB thinks a business is too big to fail, the taxpayers have another bailout.
There has been an explosion of government far beyond anything America has done in the past. Federal spending is up to 24.5 percent of the U.S. gross domestic product.
EL: Do you feel corporate managers, small-business owners and entrepreneurs are not expanding their businesses because of uncertainty in the future economic and regulatory environment? Are they being fiscally conservative and holding cash reserves rather than investing their capital?
MM: Regulations. Litigation. America is becoming not very business-friendly. Just as soon as America becomes a place that people no longer think of as the place to do business, we’ve got a problem. That’s happening already. In my extra job as the Republican leader, I move around the country quite a bit and interact with people employed in the private sector. I always ask and request for a show of hands, “Is America still the best place to do business?” No longer do I get a unanimous response. That’s a tell-tale sign. In the global economy, every job doesn’t have to be in the U.S.; America is no longer the only secure and business-friendly place in the world to invest money.
EL: Could you comment on the U.S. energy policy?
MM: It’s non-existent. The Obama administration’s energy policy is to play venture capitalist with our tax money by investing it in companies like Solyntra (which went bankrupt in 2011) that are not commercially viable. The federal government lost more money in that one company than Kentucky received for roads and bridges in the trillion-dollar stimulus.
Gasoline is $3.75 to $4 per gallon, and the president has been running around trying to make it look like he’s in favor of additional American production. The facts are that on land controlled by the federal government, production is down 14 percent. The increase in U.S. oil production has been on state-controlled and private land and is all related to new technology, hydraulic fracking and horizontal drilling the president had absolutely nothing to do with.
Further evidence is the president’s delay of the Keystone XL Pipeline, the single biggest private-sector construction project in America, that would have put 20,000 people to work almost immediately and bring oil and gas from our friendly neighbor Canada instead of from Venezuela and Saudi Arabia. This administration has no energy policy other than to promote highly expensive electric cars that people don’t want to buy and to give our tax money to high-risk green energy companies that are not that commercially viable.
EL: The General Services Administration and the Secret Service have both received criticism from Republicans and Democrats alike for alleged waste, fraud, mismanagement and in some situations, immorality. How widespread are these problems in U.S. government and who should be responsible?
MM: Both are now being investigated. A larger problem is the U.S. government is way too big. It has too many federal employees and is spending way too much money. In addition to that, you’ve seen the statistics that indicate the average public-sector worker makes more than the average private-sector worker. When you and I were younger, the feeling was that if you went into the public sector you were making a financial sacrifice, and you were going to live on less than somebody who went into the private sector.
The GSA and Secret Service incidences need to be investigated, and people need to be fired who were responsible for it. The larger question is why is the government so big? Why is it now more profitable to work for the taxpayers than it is to work in the private sector?
Government compensation is all out of kilter. That infection has gone from the federal level to the state and local sectors, too. State government (Kentucky) and the mayor of Lexington (Jim Gray) are wrestling with pension problems. Government is so excessively generous with public employees, not only in terms of what they are making now but also what they may receive in terms of retirement packages. If you look at the unfunded liabilities of state and local governments across the America, they have huge problems, too.
There’s a missing person in every negotiation. You have the elected official and the union leader. The missing person is the taxpayer. It’s pretty easy for the current officeholder to promise things that are going to be given down the road because he or she won’t be around to have to deal with it.
EL: What is the likelihood one party in the U.S. Senate will have a veto-proof majority after the fall elections?
MM: Zero. At the end of the election, the U.S. Senate is going to be really close, one way or the other. Either the Democrats are going to have a narrow edge to be the majority party or Republicans will. It would take 67 Senators to be veto-proof. Most votes in the Senate require 60 yeas. The Democrats had 60 votes when they passed Obamacare, ran up the debt and did all the things they did in the previous Congress. But neither party is likely to have that kind of blowout election and the 67 votes needed to override a presidential veto.
EL: The so-called “Bush tax cuts” may be eliminated, Social Security withholdings are slated to be increased, and a number of other tax rates will rise at the end of this year. What should taxpayers expect on Jan. 1, 2013?
MM: It may surprise you, but it may actually be an opportunity for Congress to get back at the table and solve some of the problems we couldn’t resolve last year in the endless discussions related to deficit spending and debt that the speaker and I had with the president. Generally, it takes some kind of precipitous action or crisis to get a solution. We thought the president’s request for Congress to raise the debt ceiling would provide that opportunity. We were not able to get the kind of deal that made a real significant difference. At the end of this year, the Bush tax rates are expiring, and whoever the president is, this one or the next one is going to have to raise the debt ceiling again. It takes the perception of a crisis situation to actually pull Congress back together. How the election comes out will have a big impact on how these issues are resolved. This is a big election.
EL: A recent vote on the “Buffett Rule” to increase the minimum U.S. income tax rate for individuals earning over $1 million in ordinary and capital gains income recently failed in the U.S. Senate. Can you explain the vote?
MM: The Buffett Rule vote was to raise taxes on investment income, and the Congressional Budget Office said that it would produce about $5 billion a year in additional (federal) income. Just to put that into perspective, it would take 250 years for that revenue to cover this year’s deficit. In other words, it wasn’t a serious proposal. Almost all of my members voted against it. The president sold it in terms of deficit reduction, but it was a political gimmick.
Congress needs to pass a tax reform bill. Let me give you a couple of statistics. Under the current tax code, the top 10 percent of taxpayers already provide 70 percent of the revenue for the federal government; 45 to 50 percent pay no income taxes at all. The U.S. already has the most progressive tax code in the world. Having said that, the tax code is a mess. It is time to do comprehensive tax reform again like the one (President Ronald) Reagan and (Speaker of the House Tip) O’Neal did. The new tax code ought to be largely revenue neutral. The idea is not to raise taxes but to try to get the code into a more competitive form.
EL: What are the key initiatives and issues you are working on that are of special significance to Kentucky?
MM: I’ll give you an example of something we were able to do that made a difference to about 100 people. The organization called Prison Industries decided they were going to start making jackets for the Air Force, which would have put out of business a company in Olive Hill; it had 100 hardworking people making jackets for the Air Force and another camouflage-type apparel for the Army. I raised hell about it, and miraculously enough they stopped. That work was going to be stolen by prisoners in effect, whom the government pays very little, and would have destroyed 100 private-sector jobs.
The larger questions are also relevant. Kentuckians are also a part of America, and we’re suffering from an even higher unemployment rate than the U.S. national average. An improved economy would greatly benefit all Kentuckians.
EL: How effective has Rand Paul been during his first year as Kentucky’s junior senator?
MM: Quite effective. He’s very passionate about spending and debt, very energetic, offers a lot of amendments, is easy to be around and has a great sense of humor. He’s well liked by his colleagues, and in a business like ours that’s so people intensive, personality is important. He’s helped focus attention on debt and deficit. Rand is a very constructive part of the U.S. Senate.
EL: What impact will EPA regulations have on the cost of electric utilities and the coal industry in Kentucky?
MM: There’s a guy who runs a utility company in Cleveland who was in the office the other week. He shut down four power plants and laid off hundreds of people in the wake of new EPA regulations. You’ve seen what the EPA has already done to utility rates in Kentucky. The Kentucky Public Service Commission had to approve significant increases in utility rates to cover new EPA mandates. One of Kentucky’s aces in the hole was having the lowest utility rates in the country. The EPA is running amok, but it does not have new legislation or an excuse as is the case of healthcare and financial services. With the EPA, it’s just additional activity by new regulators with a new attitude. There’s no question the EPA wants to put the coal industry out of business.
EL: The U.S. Postal Service is being squeezed between the high efficiency of worldwide package shippers and the free and immediate electronic transmission of documents over the Internet. What is the future of the post office; is it going the way of the buggy whip and the Polaroid camera?
MM: That is a very good question, and the Postal Reform Bill is on the Senate floor as we speak. It’s a tough problem. I don’t know in the end how it’s going to come out, but people are very concerned about losing rural post offices and Saturday delivery. The post office is in trouble, and Congress is going to have to decide how to save it. Its biggest competition is the Internet. More and more people are simply paying their bills online, and that’s a trend we anticipate continuing.
EL: Do you have a comment on Rick Pitino and the UofL Cardinals, and John Calipari and the UK Wildcats?
MM: It was just one exciting year to have two Kentucky basketball teams in the NCAA Final Four. Both coaches did a great job. Rick took a team that didn’t have a single player who made first-, second- or third-team All-Big East (Conference teams) into the Final Four. What Coach Cal did was equally remarkable because it was always said you couldn’t win with “one and done” kind of players, and he did.
Coach Cal has a lot of pride in his players. He was in my office one day, and I was kidding him about making millionaires. When asked about making millionaires by Sports Illustrated, the coach was quoted saying, “Mitch McConnell asked me, ‘How many will leave this team, do you think?’ I said, ‘Seven – five starters and two seniors. If we play well, they’ll all have opportunities.’ The senator said, ‘You are creating more millionaires than a Wall Street firm.’ ”
The coach is very proud of his player’s success, and should be. Most of the youngsters he has made quite wealthy come from very difficult circumstances, and he has helped them find their way to much more comfortable lifestyles, not only for themselves but for their families.
Ed Lane (edlane@lanereport.com) is chief executive of Lane Consultants, Inc. and publisher of The Lane Report.