01 Jun 2005
One-on-One with Grover Norquist
President, Americans for Tax ReformTopics:
Grover G. Norquist (MBA ’81) may not be a household name, but he’s definitely a Washington institution. As president of Americans for Tax Reform, which he founded in 1985, Norquist has aggressively championed an antitax philosophy that has become a central tenet of the Republican Party. His Taxpayer Protection Pledge, a promise never to raise taxes, has been signed by President George W. Bush (MBA ’75) and most Republican members of Congress. But his influence extends beyond tax issues. Since 1993, Norquist has hosted in his D.C. office a weekly strategy session with conservative activists, a standing-room only gathering that now numbers 120 attendees. Across the country, he has established similar weekly meetings in 47 states, each aimed at rallying conservatives at the grassroots level.
Over the years, Norquist, 48, has raised more than a few eyebrows with his provocative rhetoric. A master of hyperbole, he once declared that he wanted to “reduce government to the size where I can drag it into the bathroom and drown it in the bathtub.” Rhetorical flourishes aside, his stock in Washington has never been higher. As a confidant of presidential adviser Karl Rove, a friend since their college days, Norquist has direct access to the White House and served as an architect of the President’s first-term tax cuts. His ultimate goal: a permanent Republican majority that will oversee cutting government spending by half over the next 25 years.
How would you describe your job?
I do political organizing, and I try to have my issues and candidates earn 60 percent of the electorate. Political organizing is not niche marketing. While winning 2 percent of the electorate makes you a nut, 2 percent of a lot of industries would make you rich.
After twenty years at the forefront of tax reform advocacy, what achievements would you like to be known for?
My single most important achievement was creating the Taxpayer Protection Pledge, a promise never to raise taxes. Since 1986, we have asked all candidates for the House, the Senate, the presidency, state legislatures, and governorships to sign the pledge. Today, 222 members of the House, 46 senators, the President, more than 1,200 state legislators, and 6 governors all have signed. And that has changed the modern political process to where there’s a guardrail that stops elected officials from raising taxes. With the Pledge, we branded the Republican Party at the national level as the party that will not raise your taxes.
What are your tax reform priorities for the second Bush administration?
Year one, kill the “death” estate tax. Year two, replace IRA accounts with an expanded system of Retirement Savings Accounts, making RSAs available to all Americans and the contribution level as high as possible. That would begin the process of ending the double taxation of savings and investment. Year three, go to first-year expensing for business investment so that when a company buys a new computer or a piece of equipment, it doesn’t depreciate it over a number of years. Year four, extend all tax cuts scheduled to expire in the next ten years.
Isn’t getting the federal deficit under control more important than enacting more tax cuts?
The deficit is an uninteresting and unimportant number that is the difference between two very interesting and very important numbers: how much money the government spends and how much it collects in taxes. Those are both important numbers. The difference between the two of them is not important.
The budget surplus years during the 1990s provided a moment of clarity on deficits. The Republicans went to the Democrats and said, “You used to oppose our tax cuts because of the deficit. Will you help us cut taxes now?” And the Democrats said, “No, we were lying. We’re just for higher taxes.” And then the Democrats went to the Republicans and said, “You were against government spending programs because of the deficit. We now have a surplus. Will you help us spend the money?” And the Republicans said, “No, we were lying. We were against the spending.”
So you had this moment of clarity: Republicans said, “Spend less.” And Democrats said, “Tax more.” They were at complete loggerheads on what to do. But everybody was honest about what they were trying to accomplish.
Then we had the economic slowdown of 2000 and 2001. And now both sides are again confusing the hell out of themselves and other people. Republicans say they’re against the deficit, meaning they want to spend less. Democrats say they’re against the deficit, meaning they want to tax more. And neither one cares a whit about the deficit nor should they. It’s the size of government that is the cost of government.
So what do you do about the deficit?
You rein in the cost of government in two ways. First, stop spending so much. Second, reduce the cost of government by half in the next 25 years. We want to drop the cost of government by four measures: spending as a percentage of GDP, regulatory burden as a percentage of GDP, total government employees, and property owned by the government. Those four measures are completely doable over a 25-year period.
Excluding the military, the three major expenditures of the government are education; health care; and retirement security, meaning Social Security and federal, state, and military pensions. You do not cut any of them. You can reform them to where they aren’t even a government program anymore.
So your goal is to go beyond President Bush’s proposal to partially privatize Social Security?
Well, everyone would have an option. If you want to stay in the old program, you can stay and earn a 1 percent rate of return on your investment. But when you get to be 65, don’t come and whine to the rest of us. It is not possible for the private sector to do less well than 1 percent a year over the course of somebody’s lifetime.
Wouldn’t privatizing Social Security destroy the government safety net that helps millions of poor people make ends meet?
There’s no guarantee behind Social Security. Congress can do anything it wants to Social Security any day it wants. When you own assets, like treasury bills and mutual funds, the government can’t take that away from you. Tomorrow Congress could reduce Social Security payments to zero.
Are you concerned about the projected $2 trillion in government borrowing that may be necessary to cover the Social Security funding gap created by the President’s partial privatization plan?
No. The unfunded liability of Social Security is $12 trillion. So to borrow and spend $2 trillion to fix a $12 trillion problem is a very good deal.
With privatization, are conservatives out to undo the most important social program of the FDR administration?
Well, FDR thought Social Security had to be pay-as-you-go to start. But he believed in twenty years or so it would shift to a fully funded system, which is what President Bush is talking about. So, to shift from defined benefit to defined contribution pensions is not a repudiation of the idea of protecting old people. It is actually modernizing it and making it real.
Is President Bush going to win on this?
I think it will be difficult. But it will happen in the next seven years. Republicans will pick up Senate seats in the 2006 elections and again in the 2008 elections, giving them at least sixty votes. So we may get it in 2009, or we may have to go through one more election cycle.
Did HBS prepare you for your career in Washington politics?
The work I did at the business school was extremely helpful, especially the problem solving you learn with case studies. They provide experience that would take years and years to accumulate otherwise.
Class of MBA 1981, Section B