Jon Huntsman is still scraping bottom in national polls, but he’s finally rising in New Hampshire, a make-or-break primary state for the former Utah governor and U.S. ambassador to China. Here are some excerpts from a chat we had Tuesday afternoon as he visited Washington:
1. What do you think of President Obama invoking Theodore Roosevelt today in a speech about fairness and the middle class? How do you think about the income inequality issue?
The invoking of Teddy Roosevelt or anybody else is just political theater. … Income inequality is a symptom of a larger problem, an inability to actually get on our feet and compete. We are gummed up because of a broken tax code; we are gummed up because of regulatory measures that have stymied the free-enterprise system. … We can talk about the symptoms until we’re red in the face, but that means very little until we actually get a little bit of leadership that will bring about some serious structural change.
2. Your tax plan would drop the top rate to 23 percent and eliminate investment taxes. If you were the Republican nominee, how would you respond when Obama attacked you for cutting taxes for the rich? Do think your plan is out of sync with the public mood right now?
I would say that a President Huntsman wants to create a level playing field, he wants to create an environment that speaks to opportunity for all of our people. And that’s what we lack today. Who’s going to want to take a risk [to start a business]—even if you could get a line of credit from a financial institution—when the structural barriers are so significant and so impenetrable that you can’t break through? All I want to do is clean the cobwebs out of the system, clean the tax code like I did as governor of Utah where we delivered a flat tax.
[My tax plan] is going to lift our level of confidence; it is going to create more transparency in the marketplace and more predictability, and therefore it is going to eradicate the psychological barrier which exists today. We lifted the psychological impediment in Utah by changing the tax code. Our entrepreneurs became more active. Investors from the outside—as opposed to investing in Colorado, Arizona, or Texas—all of a sudden said Utah is on the move and for the first time in a generation or two it is taking an interest in its competitiveness. It put us on the map—just like this nation needs to be put on the map once again as an economic engine. When that happens, we will be a haven for investment, which we are not today.
3. How would you compare the optimism of the Chinese people, the urban ones at least, and Americans right now?
The Chinese are pretty optimistic, and growth rates of eight, nine, ten percent speak to optimism. … What fuels that optimism is the commensurate drop in America’s performance because they see they are about the only country left standing at that level of economic performance. It’s been a nationalistic boost for them. But they are moving into a period of some uncertainty as they move from an export-driven economic model to a consumption model. And lurking beyond that is a very restive population. Many of them are crying out for political reform, greater freedom for the individual, human rights, religious tolerance. All of these are becoming very real issues.
You also have inflation on the rise. What was the driver that led to Tiananmen Square? It was inflation. It got to 10 percent in the city centers, and that’s when everybody whacked out. That environment is present today, and so when you combine that and the unseen reality of tens of thousands of protests throughout the country every year that nobody hears about but are very real, there is a powder keg in the making in China. And as the fissures begin to be felt, they will manifest themselves in slower growth, in higher unemployment, in greater political uncertainty, and less investment flowing in. That investment will then be looking for an alternative, and it should want to come here to the greatest market in the world. We would be stupid if we didn’t recognize that and work toward preparing a competitive environment that spoke to the accommodation of that investment.
4. Should we do anything to alter our trading relationship with China, or is it better to focus first on getting our own economic house in order?
The Chinese do respect economic strength and they know we are hobbled today, we are in a hole. And until we get out of the hole and start paying down the debt and flexing some of our economic muscle once again, we’re not going to have the leverage at the negotiating table that we had in days past.
My first trip to China, I went with Ronald Reagan in the ’80s when I worked on his staff. And I watched him with great confidence go on Chinese television and speak to the people of China, something they don’t even allow today, to show how fearful they are of western influences from charismatic western leaders. And we were riding very, very high. President Reagan was there to sign the Most Favored Nation treaty with the Chinese. And I compare and contrast that to one of my last sit-down meetings with [China's] minister of commerce. And he turned to me at the end the meeting and he said, “Please don’t let your people in America lose their confidence because when you lose your confidence we all suffer.” And I thought, “This is a surreal moment. To have the Chinese reminding an American envoy that we need to keep up our confidence, the most confident, optimistic, can-do country the world has ever known?” It was a sad moment for me.
5. You’ve come out with a pretty sweeping bank reform plan. Do voters care about this?
We have a Sword of Damocles hanging over us with these banks that are too big to fail. We are setting ourselves up for disaster if we don’t recognize one of the lingering threats out there. I bring this up in town hall meetings, and they get it. They clearly recognize that we have an ongoing issue in terms of overall risk with banks that are too big to fail. They understand the part about capitalism not being capitalism without failure. That, I believe, resonates.
6. During the financial crisis, was there another way to deal with troubled banks other than capital injections?
I think a Resolution Trust effort where you take some of the underpeforming assets and you winnow them down to market value and you auction them off, something akin to a Chapter 11 bankruptcy organization, something akin to what we did after the thrift crisis of the 1980s, I think would have been a little more in order.
7. Many conservatives think the key to education reform is getting as many kids as possible in front of good teachers, whether that’s in public schools, private schools, charter schools, or whatever. Do you see teachers’ unions as an obstacle to reform?
I think they have become political movements and protectors of the status quo, which in our educational environment is a recipe for disaster. The teachers’ unions are not going to be advocates of reform and change. … But [education reform] has to play out at the state level. You don’t need to federalize this stuff. It doesn’t work at the federal level. It always gets gummed up in some bureaucracy.
8. How do we improve U.S. infrastructure without creating a “Big Dig” in every state and going way over budget? Is there an efficient, market-friendly way of going about this?
You have to take it out of the political milieu as much as possible because it always falls victim to crony capitalism. You’ve got to do some of it by government, like when it’s cross-state infrastructure. But then I think we have to be smart enough to privatize it or move it into private sector development as quickly as possible.
9. Some groups, like the Club for Growth, have been critical of your Utah spending record. Do they have a point?
I always balanced my budget. We tripled the rainy day fund. We delivered the largest tax cut in Utah history. We maintained triple-A bond rating status, which only two or three states can lay claim to. And driving all of that was that we became the fastest-growing state in America. Now, Utah hasn’t always been the fastest-growing state in America, but we became the fastest-growing state in America because our unemployment rate went down to 2.4 percent. And with all the people moving in, particularly from the broken state of California, it meant that we needed more roads, it meant that we needed more schools. We needed to expand our infrastructure. We had no choice. So if you look at where that was spent, it was on enhancing our infrastructure not building bureaucracy.
My take: What I found particularly interesting in the conversation is that Huntsman seems to have developed an economic theory of the case, a Big Idea. As he sees it, China is about to hit a rough patch which will present an opportunity for America to strongly reassert its global dominance, to make sure the 21st century is the American Century. But we need to be ready to grab it by dealing with all the problems—taxes, spending, the financial system—that have been left unattended for far too long. Not bad at all …