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WALLACE: Joining us now from his home state of Texas is the new chairman of the Republican Governors Association, Rick Perry.
And, Governor, welcome back to "Fox News Sunday."
GOV. RICK PERRY, R-TEXAS: Chris, thank you. It's good to be with you this morning.
WALLACE: What role do you see the Republican governors playing in the debate over the next two years and also in the 2012 presidential campaign?
PERRY: Well, hopefully one of the most extensive roles that they've played, and I'm talking about even more than in '96 when Tommy Thompson and Governor Engler were very involved with the health care legislation, particularly back on health care with the Medicaid, and we'd like to see block grants back to the states.
So we're going to be very involved with working with our counterparts -- not necessarily our counterparts, but our colleagues and friends in Washington as they devolve power out of Washington, D.C. back to the states.
WALLACE: I'm going get into more specifics in a moment, but I also want to ask you -- this is an overview question. You've just written a new book called "Fed Up!" in which you say that the balance between the federal government and the states is out of whack and needs to be corrected. How far would you go?
PERRY: It has been for some time. Once you read the book "Fed Up!" you'll, I think, agree that the federal government has centralized so much power and it's taken away the incentive to compete from a lot of the states.
States should be the centers of innovation, the laboratories of innovation, where people try out different ideas, and health care is a great example. This federalized Washington health care now may not work. Matter of fact, we know it won't work well in Texas, and I got an idea that other states can come up with better ideas, and we'll pick and choose what works best to deliver health care for our citizens.
WALLACE: Well, let's pick up on health care. You want to repeal the Obama reform plan. But 25 percent of Texans currently don't have health insurance. That's the highest rate in the country. Would you just let them go...
PERRY: And one of the reasons...
WALLACE: Would you just let them go without, Governor?
PERRY: One of the -- one of the reasons, Chris, is because of the strings that are attached from the federal dollars that come down here in our Medicaid programs.
As a matter of fact, that is one of our strong points to block granting, is we can create a better and more expansive insurance coverage and, obviously, the delivery of health care to more people without all of those federal strings attached.
You make exactly the point that we will be making in Washington -- is listen, do the things that you're supposed to do like securing our border, like delivering the mail, preferably on time and on Saturdays, before you get involved in things that the Constitution doesn't say one word about, like health care.
WALLACE: So I want to make sure I understand. Are you basically saying that on things like Medicare, Medicaid, that those programs should be ended and federal money should just go to the states?
PERRY: What I'm saying is that between Social Security, Medicaid and Medicare, there's $106 trillion of unfunded liabilities and not one dime saved to pay for them.
My children who are in their 20s know that Social Security is a Ponzi scheme. Medicaid -- we think we can save substantial dollars for the federal government and for the states if they'll allow us to implement that program.
For instance, it's $30 billion a year between the state and the federal government for one year of Medicaid in the state of Texas. We think we can cut that substantially, help our colleagues in Washington, D.C. balance the budget up there, and substantially help with us our budgetary issues here if they'll just trust the states to do what the states that -- our founding fathers actually foresaw was letting the states being the laboratories of innovation.
WALLACE: Would you do the same with Social Security? Would you end Social Security as a federal program?
PERRY: Let us work on Medicaid first. And while we're doing that, they can have the discussion on how to put our Social Security program on better and more solid footing.
WALLACE: But you know, I mean, when you say a Ponzi scheme, I mean, the fact is it's just a demographic fact -- I mean, when Social Security started in the 1930s -- and I forget the exact numbers, but there was -- there were seven or eight workers for every one retiree.
It just so happens now, because of the baby boom, that there are...
PERRY: It's the other way around.
WALLACE: ... more retires and fewer workers out there. I mean, it's not a Ponzi scheme in the sense of Bernie Madoff.
PERRY: Well, it probably is a -- is a program that even makes Mr. Ponzi feel pretty bad if he were still alive. The fact is our children know that the money that they're putting into Medicaid they'll never see. And they need to fix it.
And it is a Ponzi scheme. I don't know how you would explain it any other way than what you just did. There are fewer people paying into it and our kids are never going to see any benefit from it. Fix it and fix it today.
WALLACE: Let's go back to the -- one of the other prime targets of yours, which is bailouts. I know that you're very unhappy with them, but the fact is that General Motors just had a big IPO this week which paid back the federal government $13.5 billion of the $50 billion investment, with more to come.
And even a conservative Republican senator like Bob Corker of Tennessee, who was originally against the bailout of General Motors, now says, "You know what? It worked."
PERRY: I don't think government should be getting involved in private -- I mean, just to say that it worked is not -- to back up, I don't know whether it worked or not. And frankly, at the end of the day, I don't think anyone can say definitively today that the government wasn't out any money, or what have you.
Here's what's more important. Sending the message there are people out there or there are entities out there that are too big to fail is just wrong. It is wrong philosophically. It is wrong for a fiscal conservative to say that. And I -- you know, I disagree with the senator.
I think Washington made a serious mistake. The reason we have bankruptcy laws is to restructure, to make businesses more efficient and effective. And government needs to stay out of those things.
WALLACE: But let's look at the real world effect of this, Governor. There was a study that was released this week that says that government aid to General Motors and Chrysler saved 1.1 million jobs last year and 314,000 jobs this year.
You would have just let those people fend for themselves?
PERRY: I don't -- I don't think -- I think your study is looking at one thing. The state of Texas, over the course of the decade of the -- of the 2000s -- 850,000 net new jobs created during that period of time.
We have low taxes, low regulatory climate, a legal system that doesn't allow for over-suing and continue to have a great skilled work force because we got accountable skills. And then we get out of the way. The federal government ought to try that.I guarantee you this country's economy would go roaring back to life if they saw a president of the United States and a Congress that understood how the free market actually works and not having government interfere with the free market.
Let it work, and I'll promise you jobs will be created and our economy -- fix the tax system -- all of those things together. Devolve all of that power in Washington, D.C. and let the states become the laboratories of innovation. That's what you're going to hear out of these governors.
And I got to think there are Democrat governors out there that don't want Washington down micro-managing the states.
WALLACE: OK. Let's talk about Texas, because you're quite right. I mean, I did some research. You have the lowest -- one of the lowest tax burdens in the U.S. and you have led the country in private sector growth over the past decade.
On the other hand, you're facing a state deficit of $25 billion over the next two years, and you're saying you're not going to raise any taxes. So how are you going to deal with that shortfall?
PERRY: Well, one thing I will take you to task on, Chris, you got a better crystal ball than anybody down here, unless you're just throwing numbers at the wall. And with all due respect, that number will not be known until January when our comptroller does make the official estimate. There's a lot of guesses.
But the fact is here's how we do it, just like we did in 2003. We faced a $10 billion shortfall. And we can't deficit spend in Texas. We got a constitutional amendment to our Texas constitution, something that the federal government should have in place as well.
But we will prioritize what's important -- keeping the economy, obviously our taxes, our regulatory climate, legal system, et cetera. We're considering the concept of loser pays here to make our legal system even better for the business men and women in the state of Texas.
But we'll prioritize what's important -- public safety in our -- in our education system -- and then we'll reduce spending, just like we did in 2003. We reduced our spending...
PERRY: ... filled a budget gap of $10 billion, and didn't raise taxes. We won't raise taxes this time in Texas.
WALLACE: But, Governor, let's take a look at the Texas budget. Education accounts for 55 percent of state spending. health care, 25 percent. Public safety -- you just mentioned -- 10 percent. That's 90 percent of the budget.
You're going to cut that by $25 billion? And that's the number that's out there, sir. PERRY: Here's one of the -- well -- and again, I disagree with that number, but that's beside the point. Here is what I would do for starters. Block granting the federal government's Medicaid dollars back to us, $30 billion, 18 out of the -- you cut that in half and we think that we can get pretty close to that. That's $9 billion of savings for the federal government, $6 billion worth of savings right there for the state of Texas.
Listen, we've done this before, Chris. I greatly respect your focus on our budget and what have you. We've done this before when we've had to make the tough decisions in the state of Texas. We're not going to raise taxes. We're going to reduce spending.
And I will tell you at the end of the day Texas will be better off, Texans will be better off, and we will continue to lead the nation in the creation of jobs and wealth, and this country will be better off from it.
WALLACE: We're running out of time, but there are a couple of other issues I want to talk with you about, so I'm going to ask you to do kind of a lightning round of quick questions, quick answers.
In your book...
WALLACE: ... you criticize not only Democrats but also Republicans. And I want to put up what you say about former President Bush, your predecessor as governor. "The big government binge began under the administration of George W. Bush," and you say his "compassionate conservativism was a near-complete capitulation to the welfare state."
PERRY: Well, look. President Bush will go down as a great president because he kept us safe and took the fight to the Islamic terrorists, and for that we will be forever grateful. But the fact is when you look at the spending from the bailout, when you look at Medicare Part D, when you look at -- listen, I don't agree that Washington, D.C. should be the epicenter of things like health care or education. I think it needs to be devolved back to the states.
That's where in my book -- and I -- that's where the Tenth Amendment in the Constitution focuses. So we disagree on what Washington's role should be. I hope somebody will stand up and run for the presidency of the United States and say, "I want to make it as inconsequential in your life as I can." That, I think, is a winning strategy.
WALLACE: All right. You brought up running for the presidency. You have repeatedly that you are not going to run for president. Why not, sir?
PERRY: I think being the president -- or, excuse me, being the governor of a state like Texas or, for that matter, Oklahoma or New Mexico is a more pivotal job in the future. I do indeed hope there's someone that says, "I'm going to go to Washington, try to get back to our constitutional roots, devolve this centralization of government back to the states." So why would you want to be up there if the action is down here in the states?
WALLACE: And just one last question along those lines, and we're running out of time. When you took the job as head of the Republican Governors Association, did you have to make a commitment that you would not run for president?
PERRY: Oh, I've made that commitment every time I've been asked, and that commitment still stands. I don't want to be the president of the United States. I do want to work with these governors across the country to make the states more pivotal, more powerful, as they should be.
WALLACE: Well, my guess is your appearance today is going to only make you more attractive, Governor, not less attractive, to a lot of people looking for a potential GOP candidate.
PERRY: Well, I hope -- I hope I look attractive for Republican governors and Democrat governors who believe truly that the Tenth Amendment says what it says, that the states are where the power should be.
WALLACE: Governor Perry, we want to thank you so much for joining us, and please come back.
PERRY: Thank you, Chris. It's good to be with you this morning. Yes, sir.
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