Ted Simons: Good evening, and welcome to "Horizon," I'm Ted Simons. Same-sex partners of state employees won a battle in federal court today. A three-judge panel of the 9th Circuit Court of Appeals upheld a lower court's decision to block an Arizona law from taking effect. That law, passed in 2009, would have repealed health care benefits for same-sex partners of state employees. Those partners became eligible for benefits in 2008, by an executive order issued by then-governor Janet Napolitano. In today's ruling the Court of Appeals says Arizona's law violates the equal protection provisions of the U.S. Constitution. No word on any appeal as yet.
Ted Simons: Growing jobs and cutting debt and improving the national economy were some of the topics I discussed recently with U.S. Representative David Schweikert, a Republican representing Arizona's 5th Congressional District.
Ted Simons: Thanks for joining us tonight on "Horizon."
David Schweikert: Always good to be here.
Ted Simons: I want to start with the dim and distant past, and it still has a lot of folks talking. I want to know where you stood on the debt ceiling debate and why.
David Schweikert: I was one of the no votes at the end. A lot of that was based on what we saw a couple of weeks later with S&P. A lot of the world markets made it very clear we needed to demonstrate the future of bending our debt curve. Where a lot of folks had -- I got caught up in the political rhetoric of that. Do you remember how many speeches there were, that we were going to default? We were never going to default. It meant we wouldn't have paid the interest or the refinance on a bond that came due. A more honest debate would have been what do you do with the spending that exists because of borrowing.
Ted Simons: Just the debate, the fact that there was so much fussing and fighting over this, was part of the reason they downgraded it?
David Schweikert: It's a little more detailed than that. Because of how difficult it was to change future spending obligations. It was less about that moment in time. It was about how does this harken for the future.
Ted Simons: Debt ceiling raised dozens of times over the years, why was it necessary now to add those contingencies? Why wasn't Congress all over this in the past 10 years?
David Schweikert: Very simple answer. This became the first time the issue about future sovereign debt and the scale -- remember, two weeks ago we hit 100% of GDP growth debt. We're now at a level of debt coverage that would have been unimaginable a decade ago. The playing field changed, and the discussion of raising more borrowing capacity also changed.
Ted Simons: But was it worth it to keep that discussion in the mix with the debt ceiling discussion? Which basically is us honoring our commitments. Why can't you do A and then go on to B?
David Schweikert: If you're saying we're trying to avoid future and higher interest rates, it was less about the debt ceiling. It was about, what's my visibility. If I'm going to buy a 20-year, 30-year U.S. debt instrument, am I going to get my principal back, get it paid off. And understand, this type of 6 fussing back and forth, I'm going to make the argument it's actually healthy. We're finally discussing the really difficult issues of entitlement, of the state of our debt, the demographics of our country. We're going to keep doing this because these issues just don't magically go away.
Ted Simons: I don't want to spend too much time on this. But the other side would argue there is time for that discussion, just not when it's time for us to honor our commitments.
David Schweikert: There was never the possibility we weren't going to honor our commitments. Once again, the debate that really would have been honest and healthy from the administration and those of us in Congress, what do you do with the 40% of our federal spending that exists solely by borrowing?
Ted Simons: And let's keep that line of conversation going here. There are some who say if you really want to lower the debt, something has to be done, not a massive increase, not a crazy increase, but even a slight increase on the wealthier families, individuals in America. How do you respond to that?
David Schweikert: I would first respond, some of those folks that say that haven't done the basic math. The scale of the problem is off the charts. And I hear these people say, we just need to take away those tax incentives for corporate jets. Then you show, you realize that would take care of 15 seconds of borrowing a day. Or fossil fuels. That takes care of 2.2 minutes of borrowing a day. If we got rid of the now Bush-Obama tax cut extensions for every American, it takes care of 28 minutes of borrowing in a day. You need to do what the President's own deficit commission talked about. It is time for a much broader, flatter, fairer tax system, and time to get rid of the lobbyist tax carve-outs, the specialty deductions.
Ted Simons: A lot of people think those do need to be addressed. Saying these corporate jets and other things are miniscule, some of the tax cuts and spending cuts that the Republican Party is pushing so hard on, those are miniscule, as well. To really balance things out, get rid of just about most of the government.
David Schweikert: You do have a math problem out there. We keep having this debate that's only within the discretionary part of the budget. The discretionary part of the budget, if you pull the military out and over here is entitlements, it's about 12% of the budget. There's a sort of fantasy world out there -- and I get these from both sides. Folks say get rid of foreign aid. If you wipe it out for every category, it's about five days of borrowing. It doesn't take care of the problem. You need to have an honest discussion about the scale of this. One of my great hopes is for something like this super committee that will start to have meetings soon. Will they also propose a tax system, an optimal tax system that Republicans and Democrats I think are both now talking about, that will do that lower marginal rate, get rid of some of the gamesmanship, help us grow the economy and become a job creator.
Ted Simons: How do we become a job creator when it seems like businesses are sitting on cash because they are uncertain of what's going on? There's no doubt about that. Do they need more tax breaks? Or do they need customers? Do we need to get money in the hands of consumers?
David Schweikert: It's a combination of all of the above. The number one thing in the last couple weeks, we've been going up and down the district meeting with employers and educators and different folks in the community. From the job creators, number one, they don't know the rules they are playing under. What regulatory environment? What's coming out of Dodd-Frank? What's the capital requirements? What's happening with the labor relations board?
Ted Simons: Are these small businesses or big businesses?
David Schweikert: It's a combination of everything. Small businesses want to know how to get the loans from the community bank. If it's the larger business, they are worried about the labor rules or some of the EPA rules. It's up and down the scale. 9
Ted Simons: Let me tell what you I've been hearing. I've heard from small businesses, as well. We do shows and get discussions back and forth. Getting banks to cooperate is a major factor there. I'm hearing that regulations are not necessarily choking their businesses. Taxes are not necessarily choking their businesses. They are mentioning insurance and a major factor and mentioning no customers, no demand.
David Schweikert: I kept hearing over and over, no certainty. The regulation may turn out to be just fine. That's a quote from a community bank saying, it may be just fine. But I'm afraid to engage in a multi-year loan facility if I turn around and six weeks from now FDIC has finished writing the reg they were supposed to finish almost two months ago, and now I'm not in conformity with that rule. It all multiplies on itself. You can do things both that come out of the real estate market, the regulatory market, the banking market. Do they start to create that multiplier effect so you have those customers? My great hope is when we get back to D.C. that becomes the focus: What creates that economic growth.
Ted Simons: One more thing small businesses are concerned about, they keep hearing about tax carve-outs and loopholes for the larger corporations. They are saying, I'm having trouble making my payroll and no one's walking through the door. They are not seeing fairness there.
David Schweikert: They are absolutely right. The tax code is an abomination. If you think about the 68,000 pages and the pages of definition, it's a document that's been designed by special interests, very effective lobbyists in the past. It's a tax code designed by politicians choosing winners and losers. We need to change it, particularly for a state like Arizona or a Congressional District like Tempe and Scottsdale where you have lots of entrepreneurs, lots of up-starts. How do they compete against the large competitors that are able to take those tax advantages.
Ted Simons: I believe Republicans championed back in the past, now it looks like it's on the chopping block or it's targeted. How do you explain to folks that you're looking at the $40,000 or less crowd as someone you want to clamp down on, as opposed to those who make a whole lot more?
David Schweikert: That one I have not heard, I hear lots of things. The fact of the matter is we're walking into a year where it looks like 51% of our population will pay no federal income tax. Now, that's obviously a whole series of cascade and economic financial reasons. I have not heard that come across my desk. But if you're going to create a much flatter, fairer tax system, hopefully by having those lower and adjusted marginal rates will actually benefit everyone. 11
Ted Simons: The reason I bring that up, we hear this a lot. We're hearing the house is basically looking to protect the rich, protecting the wealthy. And when it comes to folks who don't pay any taxes right now, in some part because they make such little money, the idea is to keep them off public welfare and keep them in those jobs. The House is not looking after those folks, they are looking at the wealthy. Warren Buffett is saying “tax me more”. The bottom line is, it sounds to me like there can be movement on the upper end. But it sounds like, again, Republicans in the House don't want any part of that.
David Schweikert: Yeah. I'm going tell you it's absolutely not true. First off, you've got to be careful what is sort of a political talking point. I know you hear that, that's actually political gamesmanship, about the 2012 election. If someone's willing to sit down and look at the tax code, and the categories where does revenue come into government, how do you juxtapose the fact that the top 10% of income earners represent 70% of the federal income tax? Okay. The federal personal income tax over here is 70%, represented by the top income earners. You may say that's fair. If you look at the skewing, the actual math doesn't match the political rhetoric.
Ted Simons: How that is skewing compared to what we had in the past?
David Schweikert: Step back 10 years ago in 1999, different president, different economics, that was almost 10 points lower. 12 The top 10% was only paying closer to 60%, 61 disperse, 62% of the total federal personal income tax revenues. It's substantially higher today than it was a decade ago.
Ted Simons: Right now the wealthiest Americans pay more in terms of GDP and the overall tax than in recent years?
David Schweikert: Yeah, it's more complicated than that, like everything. They represent a higher percentage of the revenues brought in. Some of that is because many of our middle class and lower middle class have had so many struggles right now. If the debate is, we want to find a population to punish, fine, that's a different debate than I want to engage in. I want the debate that says, what's the optimal tax system that creates jobs and creates economic growth? For some folks, they will have to give up a little bit of their political gamesmanship and rhetoric and start to do the math.
Ted Simons: Will others have to give up a little bit of their low tax rates?
David Schweikert: I don't think so. Some businesses have been able to through lobbyists create favorable tax situations for themselves. They may lose those. The balance is they will also goat participate in a an environment with lower marginal rates.
Ted Simons: Last question: We've had a good dialogue regarding a lot of economic and tax issues. It seems as though, from a distance, we look to Washington, we don't see much in the way of civil discourse or straight dialogue. We see a lot of name-calling, finger-pointing, gamesmanship as you mentioned. A lot of folks don't think -- it's a bunch of children back there on Capitol Hill to be quite honest with you. How do you respond to that?
David Schweikert: It's actually a great question. Some of it is true, but some of the theater is when the television cameras are turned on. I've had occasions where I'm doing a two-up with Democratic acquaintances or friends and the rhetoric is just silly. The second the camera turns off we're back at our offices teasing each other, saying I can't believe you said that. There's actually, particularly on the tax subject, I actually believe from the partisan sides, both Republicans and Democrats are much closer on that than maybe any other major issue in Washington. But think of the scale of the problems we're attacking. When you start to look at multitrillion dollar growth and debt, at the end of this decade we may be over 20 trillion. The scale of what you're debating has changed from past years.
Ted Simons: And last point here, we talked about this before starting the interview. We've got some serious business coming up in a month or two regarding a number of issues.
David Schweikert: Great. September could be one of the most fascinating months in modern history. We still don't have a budget so we need to develop a continuing Resolution or magically have the Senate do some work. We will have the Republican house having a regulatory and job proposal. We will probably see the Palestinian authority walk into the United Nations and ask for statehood recognition. We may have the transportation extenders, FAA extenders, the gas tax, all of this is crashing down at the same time. The super committee is starting to put together its data and work. I have a feeling we will be talking later in September.
Ted Simons: You'll be a busy man in a month or two.
David Schweikert: This is always fun.
Ted Simons: Good to see you.