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Part Four: DeMint on budgetary and monetary policy

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Q: Senator, right now in the House they’re looking at a number of budgets: the president’s budget last night went down to a pretty broad, unanimous defeat; there’s an RSC budget; there’s a Progressive Caucus budget; and there’s the Paul Ryan budget. The Ryan budget seems like the on that’s most likely to path. What do you view as it’s shortcomings and – the Club for Growth has come out against it, for example – what do you make of those criticisms that they’ve leveled?

DeMint: Well, Paul has done some great work. I think he’s probably one of the best thinkers in the Congress today. We really don’t need to be critical of what he’s done. I think what he’s trying to do is find a balance that’ll pass, but a lot of us don’t think we’ll have 27 years or 9 years to balance the budget. And, frankly, I think Paul believes that if we can adopt some of these reforms we’re going to have a bigger revenue stream, we’ll come to balance quicker. So he’s not ignoring that. But, a lot of us believe that we need to promise the nation, ‘if you trust us again with a majority and the presidency, then our top goal is to balance the budget within 10 years.’ That’s a reasonable goal. I think it justifies some of the cuts, some of the entitlement reforms. The problem we have is if we reform entitlements and don’t help people understand that the reason we need to do that is because we have to balance our budget. If the budget never balances, then our moral authority to change Social Security and Medicare is diminished.

I think what you see from the RSC budget – what they call the Cut, Cap, and Balance budget – is consistent with what the Cut, Cap, and Balance bill was, [which was] that once the states ratify the constitutional amendment, we have to be in balance in five years. And that’s why they’ve got a five-year balance. But they take a lot of Paul Ryan’s ideas, just like we have – Pat Toomey’s doing the same thing in the Senate. The reforms that are needed – Paul has forced the debate on those reforms. He’s been the first lieutenant that went out and took all the bullets last time and he’s doing it again. And I think what that’s doing is kind of blasting the rock away so that some other folks can run through with some of these ideas without as much danger. So, he’s done the brave thing. But the cuts that are needed -- or, I guess, if there’s a weakness of his plan, it’s the cuts in discretionary and mandatory spending, non-defense. We have to do that.

If you see what RSC has done and what Rand Paul did in the Senate, like Medicaid block grants – if we just freeze it for five years at its current level you save a whole lot of money. And you don’t really have to go back and cut a lot of these programs but if you can freeze a few of them, you pick up trillions of dollars over the next ten years and come to balance. We’ve got to make those hard decisions. Rand actually eliminates some departments, which is where we need to go. I’m not sure that Cut, Cap, and Balance – the RSC plan – does that. So, we’ve got some good things to discuss and the fact that Republicans are doing all the  -- putting the serious ideas on the table, we hope the media will recognize it.

It's clear the president's not serious. His own party won't even touch his budget. The Democrats won’t even bring one up in the Senate because a budget reveals what you want to do and what you feel like we have to do. That doesn’t get near enough attention.

For them to sit on the sidelines and just take potshots at what the Republicans offer is what they’ve done for the last couple decades. Never has a Democrats done tax reform, social security reform, Medicare reform. This president is completely irresponsible. He's been in office three years. The problems that are facing us, that have us on the edge of the cliff -- he's avoided. It's a cowardly thing to do as a world leader not to address the big problems. And he thinks he can go into the election and fool the American people -- that he can take shots at what Republicans are suggesting and frighten old people -- America's not going to fall for that. That's what makes me feel good about the elections. Americans aren't stupid. They're going to see through the clutter that Republicans are at least trying to address the problems with some different ideas that we can sit down and debate, but the Democrats won't even show their hand with a budget. I really think it's disgraceful.

Q: Senator, the last time around the Democrats ran an ad showing Paul Ryan shoving an old lady off a cliff. But, he’s back and seems to have a more positive response this time.

DeMint: Yeah.

Q: Have they inoculated him in some sense – are Republicans not scared of that issue as much?

DeMint: Oh, there are still some of them who are scared. But like I said, Paul Ryan ran out there and took all the flames and arrows and came back alive. As a matter of fact, he gained a lot of national notoriety and it actually became – Republicans who disagreed with him were stigmatized, which was a pretty good move. So, I think he’s emboldened a lot of people. But also I think some of the media that never took the time to actually report what he was doing has had to face the fact that if you don’t do anything, Medicare is gone. And that’s the option Democrats have always tried to hold on to, is we don’t have to do anything. I think more and more Americans know we have to do something.

And Paul has come back to which is something which is more politically viable, which is give people a choice: you can stay on this plan where you’re not going to be able to find people a doctor, or you can get on some private insurance. The Democrats will use it in this election, and I think we’ll just see whether or not the majority of voters have the discernment to realize – I think more and more are questioning because they know that the president has not told them the truth.

Q: There is one Democrat who has addressed this, at least somewhat , Senator Wyden – is he ostracized by his side? Has he been embraced by your side?

DeMint: Yeah, he’s ostracized, but – he’s been willing to move a little bit, but he insists that you have to keep the government program. In some ways, that’s okay, because once people realize that you can’t find a doctor on Medicare, traditional Medicare, because they don’t pay doctors enough to see you, I think you would see a private plan shift – unless we have some hooks in it that basically subsidize traditional Medicare but we don’t subsidize the other to try to prop up the government plan. Ron’s been willing to take a few chances, but he won’t vote for the Paul Ryan budget because of the other things. So, he’s probably the most willing of the Democrats but very seldom will he vote with us.

Q: Senator, you said earlier that monetary policy might be even more dangerous than the debt, and we all know the debt is a huge problem. Could you explain that?

DeMint: It’s hard to separate them, because a lot of what we are doing with monetary policy that is irresponsible is trying to cover up the irresponsible fiscal policy that we’ve made in Congress. The Federal Reserve has printed money and bought over half of our debt in the last two years. That’s something they’re not supposed to do, but they’re doing it through intermediaries and so it’s technically legal. And then, of course, the quantitative easing basically is buying our own debt. It obscures what the interest rates would be if we were actually taking our treasury’s to market in a real market.

But the printing of money, it looks reasonably good now as far as inflation and interest rates, but it’s only because the euro has been in so much trouble. I think we’re going to see over the next year or two some real problems because there’s not enough credit available in the world, if you do a world-wide analysis of available credit, and then the demand of credit that’s expected not only from the US but other countries. I mean, there’s not to many other places to go. There’s not another $10 trillion to borrow.

So, our central bank as well as the Europeans are going to be forced to somehow deal with our lack of political will with monetary policy. And you can tell that in the hearings with Bernanke, how they’re thinking. He’s trying to manage economies all over the world with monetary policy. I just think at some point people are going to question our ability to pay back our debt. I think interest rates are going to go up, which again affects us on the fiscal side as far as just the cost of maintaining that debt. To me it just feels like a game of musical chairs where the music’s playing, [but] at some point it’ll stop and somebody’s not going to get a seat.

Q: Senator, a parochial issue: dredging Charleston Harbor, where does that stand?

DeMint: Well it’s going to happen, but it’s going to happen without a parochial earmark. And what we’re doing is forcing the Corps [Army Corps of Engineers]and hopefully the Congress to come up with a package of how do we maintain our ports around the country. I know Lindsey Graham is working with Haley Barbour and others who have your ports along the Mississippi as well as some of the senators who are on the West Coast to go to some system that’s criteria-based rather than politically-driven where –

Charleston collects harbor fees, which – we collect enough harbor fees to dredge our own port and take care of it. So does California. And now that they can’t just direct money to Charleston, with an earmark, hopefully we’re going to come to a solution of how that’s funded. And I think the Corps is starting to find their discretionary money and they’re looking at Savannah and Charleston and some other ports that need to be dredged. So, it’ll happen but my hope is that we end up doing some rational reforms of how we do it that are more permanent, that are not reliant on us up here to get an earmark to keep the Charleston port at the depth that it’s supposed to be. Because whenever that kind of leverage is available – that the only way I’m going to get money for the port is to vote for a Bridge to Nowhere, which is how it’s worked for years, and that’s how we got $16 trillion in debt. We’ve got to begin to fix those programs and do things the right way

Q: Senator, thank you very much.

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