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Jewish World Review August 10, 2004 / 25 Menachem-Av, 5764

Bill Steigerwald

Bill Steigerwald
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Consumer Reports

The IRS & the $250 billion question … 10 minutes with House Speaker Dennis Hastert | Dennis Hastert of Illinois has had a wild ride since becoming Speaker of the House in 1998, starting with the Clinton impeachment and moving through the 9/11 attacks to our wars in Afghanistan and Iraq.

The former high school civics teacher and wrestling coach has documented his experiences as the third most-powerful person in the federal government in his new book, "Speaker: Lessons from Forty Years in Coaching and Politics."

In "Speaker," Hastert espouses pro-market, pro-growth policies that include urging President Bush to push for a new tax system that would eliminate the IRS and the income tax. I talked to Speaker Hastert Wednesday by phone from his offices in Washington.

Q: You're making headlines because you're proposing to basically remodel the federal tax system.

A: I think it's important. We've talked about it as Republicans for a long time. We need to look over the horizon. Democrats talk about outsourcing of jobs. We outsource jobs because we're not competitive overseas. We need to basically do three things:

We need to change our tax system, because with the income tax we have today, if you take a tree in a forest and move it to a widget that you're going to export overseas, you may go through six or seven or eight processes.

We have corporate taxes, and corporations pay taxes, but you may have seven or eight or nine layers of taxes embedded in a product. It could be that 20 percent or 25 percent of that product is actually embedded taxes.

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The other things we have are litigation costs that other countries don't have. We call that the "tort tax." And we also have regulation costs that most countries don't have.

When we try to compete with other countries, it's not our labor costs -- our labor costs are basically commensurate with the labor costs of Japan or Germany or France -- it's these other embedded costs that really kill us.

If we go to an ad valorem tax or VAT tax or a consumer tax of some kind, what you really do is relieve taxpayers of spending $250 billion to comply with IRS collections. That's what we spend every year just to pay our taxes.

Q: Which tax do you prefer -- the flat tax, the national sales tax or the VAT tax?

A: From my personal preference, either the sales tax or consumption tax or VAT tax are the best.

Q: And that would be like the Fair Tax, the national sales tax being proposed by various congressmen?

A: John Lindner is taking the lead on that in the Congress. We'll have to go through a process. But what I'm trying to get at is that we can reduce the cost of our products. We think we can bring capital back to this country -- in the hundreds of billions of dollars -- and jobs. The consequence of going to a VAT tax or a consumption tax is that you don't need an IRS anymore.

Q: I don't think there is anybody who doesn't work for the IRS who is against abolishing it. But is this thing doable? Or is it just another one of these things we libertarians and people who wish for limited government are always getting disappointed about?

A: If you don't talk about it, you don't get people excited. But I think if we control the House of Representatives and we have a Republican president who would sign this bill -- and I think the president would -- this is our one chance in maybe 40 years to get it done. And if you don't talk about it, don't focus on it, it'll never happen.

Q: You've talked to President Bush about this. What does he think?

A: I've talked to the president, and I've also talked to some of his people. The president is certainly noncommittal. I don't think this is one of the issues he wants to talk about in this campaign. I would talk about it, but this is the president's choice, obviously. He's focusing on terrorism and the economy, although I think this is a big part of the economy.

But I think that they have to be aware of this, and I believe it is something that they're having an internal discussion about in the White House right now -- whether they would move with it or how quickly.

Q: Republicans have been roundly criticized for being spendthrifts, especially since Mr. Bush has become president. Is that something you are comfortable with?

A: Well, you're never comfortable with what your criticisms are, but the facts are that when President Bush became president, we had a downturn in our economy. What people really talk about is the deficit and keeping the budget balanced. The first three years I was speaker, we paid down $550 billion in public debt, because we didn't increase spending. We used that surplus to pay down debt to help keep interest rates down.

In addition to the downtown, we also had a war with Iraq. We had a homeland defense issue, which we had to turn around in this country with some extraordinary spending and investment. Our defense spending and our homeland security spending, sure, it did give us a deficit.

But regular, other discretionary spending stayed with inflation, and last year and this year we have level spending -- zero increase in discretionary spending that isn't defense spending and it isn't homeland security spending. So we're doing this job.

If you want to make sure that we can handle the cost of our debt in the future, especially in Social Security and Medicare trust funds, you need to grow the economy. The best way to grow the economy is to do the three things I said. I think we can double the economy in 15 years. And all of a sudden what looks like mountains become mole holes.

Q: We have heard rumors that Congressman Bob Ney of Ohio is being groomed as your successor. Any truth to that?

A: You know what? I'm running for speaker again. There are a lot of good people -- even in Ohio. Bob Ney is a great guy in Ohio. Rob Portman is a great guy in Ohio. John Boehner is a good guy in Ohio. So there is a lot of leadership. The fact is that I'm going to do this job for another two years and as long as I can be effective at it. I'm sure someday there's going to be a lot of people looking to move up.

Q: What's the most important lesson you learned in coaching and wrestling that has served you best in politics?

A: Never take your opponent for granted. And the way to win is that you have to start early, you have to work hard, you have to train, you have to set goals and objectives. If you start three weeks before the election or three weeks before the tournament, it's too late. Perseverance.

Q: And in reforming the tax system, you're going to apply these same principles?

A: Absolutely. Sometimes it takes a long time. But we've been talking about this for a long time. It's time that we start to do something about it.

Q: Do you have the numbers to make this happen?

A: I think, L-rd willing, if we keep the majority in the House, I think we can pass it through the House. We need to encourage people to pass it in the Senate and then get the president to sign it.

The biggest negative here is that people are apprehensive, because it's the devil you know as opposed to the devil you don't know. I think it's important that we get this thing done, and we need to move forward and have that national debate.

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JWR contributor Bill Steigerwald is an associate editor and columnist at the Pittsburgh Tribune-Review. Comment by clicking here.

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© 2002, Bill Steigerwald