CNBC "CNBC Reports" - Transcript
CNBC "CNBC REPORTS" INTERVIEW WITH GOVERNOR MARK SANFORD (R-SC); GOVERNOR JIM DOYLE (D-WI) INTERVIEWER: LARRY KUDLOW
SUBJECT: STATES SEEKING ECONOMIC BAILOUT ASSISTANCE
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MR. KUDLOW: We talked cars a little while ago. Let's not forget banks. Now let's go to the states across the country. We welcome South Carolina Republican Governor Mark Sanford and Wisconsin Democratic Governor Jim Doyle.
Thank you, gentlemen, very much.
Mr. Sanford, you're a celebrity today because you're in The Wall Street Journal with an excellent article. You say it's a very dangerous direction towards a bailout mentality. And the title is "Governors Against State Bailouts." You and Rick Perry of Texas. Dangerous? Bailouts? Please explain.
GOV. SANFORD: Well, the simple premise is this. The ultimate stimulus in this country is the entrepreneur, the kid working in a basement, really producing the product of tomorrow. And the reason that that market-based system works is people believe that if they play by the rules, they're prudent in their decisions, they don't take on too much debt, they make the right decisions, they ultimately get rewarded. And if you do the contra, you get punished.
Well, we're moving quickly after bailout after bailout after bailout to a political-based economy wherein it really doesn't matter if you produce the best mousetrap or the best product. But if you've got the best lobbyist in Washington or if you squeal the loudest, you'll get bailed out. And so the people who may have been prudent, may have frankly made, you know, very judicious decisions don't get bailed out, they get left behind. And the folks who made relatively poor decisions, in some cases, do.
And so I think we're at a tipping point with regard to upsetting that delicate balance that has driven our economy for the last 200 years.
MR. KUDLOW: All right. Governor Doyle, you heard Governor Sanford. And I want to ask you, I mean, President-elect Obama is being very magnanimous during this honeymoon period. He's willing to bailout Democratic and Republican governors. Are you one of them? Do you think this is a good idea? Or do you agree with Mr. Sanford that we're going the wrong direction?
GOV. DOYLE: Well, let's be clear, Larry, on what the idea is. The governors did not come to Philadelphia, where we met at the president-elect's request, not at the governor's requests, not with hand in hand. We came in the spirit of cooperation to work in a way to help stimulate this economy. The infrastructure -- and most of the infrastructure is done through the states by private companies, by the way, who are building the roads and the bridges and the rail lines.
And most economists agree that right now what this economy needs is real stimulus to get it moving again, money into the pockets of hardworking people, not a check that goes out to everybody but a job.
And we in the states have the opportunity, through our infrastructure, through our transportation and utilities and other infrastructure responsibilities that we have, to really help pump a good deal of money into the creation of jobs very, very quickly in this country. And that's what we were there to talk about.
MR. KUDLOW: I appreciate that, Governor. But I want to tell you, I do not believe new transportation bills are going to create either new factories or permanent new jobs or the discovery of new technologies with risk capital. And I want to get you to respond. I think what we need is a strong business tax cut, across-the-board reduction in the marginal tax rate, on large and small businesses, maybe even a business tax holiday. That will create permanent jobs. That will create new investment. It will also help consumers because businesses don't pay taxes, consumers do. Why not go for that? Wouldn't that be something new and refreshing? Would that be "change" to coin a phrase?
GOV. DOYLE: Well, let me say the two positions are not inconsistent at all. And in fact, we can really be creating jobs in building roads and bridges and improving our infrastructure. I agree. And in Wisconsin, we have a very strong tax policy of early seed-stage credits and of other efforts to really help entrepreneurs take that risk at the beginning.
Much of our economy in Wisconsin is increasingly built on new businesses that come out of the scientific research happening at our university, at the University of Wisconsin.
MR. KUDLOW: Governor Sanford -- I'm sorry to interrupt, but we're running out of time. Governor Sanford, the governors complain that they've got big budget deficits because business is slow. Okay, we're in a recession, that's what happens. So in your judgment, given your opposition to these federal bailouts, what is a state governor to do with a 5 (billion dollar) or 10 (billion dollar) or $20 billion budget deficit?
GOV. SANFORD: Really, what we just did a couple of weeks ago in South Carolina. We actually cut $450 million worth of spending. And that fits with what individuals are doing. It fits with what businesses are doing. And so it may be old-fashioned in this world of bailouts, but I think it's been proven to work over time.
And I think we've got to look, again, big picture, much more holistically at this idea of economic stimulus. If every recession could be avoided simply by printing checks and printing money in Washington, D.C. and sending money across the country, we wouldn't have any recessions. It's much more complicated than that.
So I think you gotta look at sustainability of spending. We've got real problems in the way we're stacking up debt. I think you gotta look at world trade and open trade because 80 percent of what's happening in the world is happening outside of our borders. I think we gotta look at competitiveness, things like card check which would be disastrous from the standpoint of competitiveness.
And so I just think that you gotta look much more broadly than simply to Washington, D.C. for money when we think about this notion of how you stimulate the economy.
MR. KUDLOW: So regarding taxes and other reforms, you're saying help comes to those who help themselves. That's what I'm hearing.
GOV. SANFORD: That's the first place to start. With all due respect to California, California government grew by 95 percent over the last 10 years while even the federal government grew by but 71 percent. They well-out-paced a whole bunch of other states and the federal government. And so why should taxpayers in South Carolina or a whole host of others, whether Wisconsin or other states, go to bailout a state that has not made the prudent decisions that some other state policymakers have?
MR. KUDLOW: Governor Doyle, just to round this out in the last 50 seconds or so, according to an AP story today, you want to raise taxes in Wisconsin. You want to raise taxes on hospitals and oil companies, which doesn't seem like a great idea given the fact that oil prices have plunged. But why don't you defend that.
GOV. DOYLE: Larry, I want to do two things. One is I don't want to raise hospital taxes. What I want to do --
MR. KUDLOW: Is this story incorrect, sir? This is an Associated Press story.
GOV. DOYLE: What it doesn't tell you is that the hospital assessment is a way that we actually capture $400 million more in federal money and are able to pay the hospitals a better rate than they're currently receiving.
And on the oil companies, yes, I believe the oil companies, as opposed to the taxpayers of Wisconsin, should share and participate in paying for the cost of the roads that they make a fortune off of cars that drive over our roads.
MR. KUDLOW: How much state taxes do these oil companies pay? You know, they pay a fortune in federal taxes. Oil companies, at the height of the boom, were really government-spending's best friend. Now that prices have plunged, do you think you want to get them? Maybe you should give them a rebate because prices have plunged.
GOV. DOYLE: Oh, I think they've done pretty well. And what we're asking them to do is in a very, very, very small percentage share in the costs of making sure we have good roads in Wisconsin so that people are using their product.
MR. KUDLOW: All right. We're going to leave it there. Many thanks, Governor Sanford, South Carolina, Governor Doyle of Wisconsin. I appreciate it.