April 12, 2016
By John Harwood
Kevin Brady, a congenial Republican from suburban Houston, wanted to take over the powerful House Ways and Means Committee after previous chairman Dave Camp retired in 2014. But he lost out to the fastest-rising Republican star of all — 2012 vice presidential nominee Paul Ryan.
Then political lightning struck. House Speaker John Boehner, frustrated by his fractious Republican caucus, decided to quit Congress last fall. Colleagues implored Ryan to take the speakership. Though he’d been eager to tackle the issue of tax reform under the committee’s jurisdiction, Ryan reluctantly agreed.
That cleared the way for Brady to get the job after all. Now, prospects for an overhaul of corporate or individual taxation or both rest with him, and he’s embracing the responsibility.
Brady, 61, discussed his hopes on the issue over breakfast tortillas at a cafe in his district. What follows is a condensed, edited transcript of the conversation.
HARWOOD: You realize that now the word “powerful” is permanently affixed to your name, because every news story about a Ways and Means chairman says the “powerful” Ways and Means chairman.
BRADY: Well, it does, but it always affixes to the title. And I think, you know, the committee is powerful because it can do big things. That’s what the committee is all about.
HARWOOD: You are literally a Chamber of Commerce Republican. Tell me what is the place for Chamber of Commerce Republicans in this party,
BRADY: I’ve spent my whole life before coming to Congress as a Chamber of Commerce manager. What that means is you help start small businesses, help them grow in good times and bad.
HARWOOD: But what do you make of this populist brushfire that we’ve got in the Republican Party that says, “Ex-Im Bank, no, that’s not helping us export. That’s special favors for business. Trade deals? No, that’s special deals cut by these businesses to help them at the expense of average workers.”
BRADY: You know, I think people are so frustrated by the last eight years of this administration, they’re striking out frankly at just about everything, just out of frustration.
HARWOOD: Including fellow Republicans.
BRADY: Well, they are. And I think this will pass. Because the truth is, with the right president in the White House actually unifying this country and focusing on what we need to do better, which is to create jobs on Main Street, give people opportunities, you know, I think they have a chance to turn that around.
HARWOOD: Every economist I’ve talked to says, “Yeah, if we can get to a consumption-based system rather than an income-based system, it would be good for economic growth. But you can’t get there.” Do you agree with that?
BRADY: Here’s my thinking. Since tax reform only occurs once a generation, let’s not tweak what we have and call it a day.
HARWOOD: Your Texas colleague, Ted Cruz, has got a business consumption tax. Some people call it an equivalent of a value-added tax. Do you like that approach?
BRADY: You know there’s real merit to that approach. And there’s real merit to almost every tax plan our presidential nominees have put together. And so what we’re hopeful for in the House is to bring out our blueprint later this year on what our principles and pro-growth tax reform would look like. It’s going to have elements that have been raised in those presidential policy positions.
HARWOOD: Dave Camp went through a process, came up with a plan you kind of liked.
BRADY: Yeah. Dave Camp, in my view, made tax reform inevitable, in the sense that he showed you could broaden the base and lower the rates and simplify the code and be competitive around the world and make it more understandable. So …
HARWOOD: Now wait, let me stop you on that. You say, “Made it inevitable.” Some people say he showed it was impossible because he laid it out and his own caucus shot it down in about five minutes.
BRADY: Well, it didn’t in my view. In fact, I don’t think it got the oxygen it deserved at the time. But he should …
HARWOOD: John Boehner said, “Blah, blah, blah, blah, blah” …
BRADY: Well, he did. But Paul Ryan is all green-light thinking on tax reform.
HARWOOD: OK. Do you agree, by the way, that tax reform can only be done with buy-in from both parties?
BRADY: You know, I think at the end of the day, it will be bipartisan. Maybe not at every step in the process, as we lay this out, but at the end of the day, the major changes in American government almost always require buy-in from both parties.
HARWOOD: Could you envision a tax reform that you could go along with that had many elements that you liked that did not decrease the top rate?
BRADY: That’d be difficult to accept, because I think that holds back investment, both by businesses, small businesses, and by families.
HARWOOD: Because there are some conservatives who are arguing that in the environment that we’re in now, that conservative tax reformers ought to focus on things other than the top rate.
BRADY: I’d have to disagree, and here’s why. Besides businesses investing, when individuals, after they make that dollar, they have three choices. They can spend it, they can save it, which is good as well, but they can reinvest it back in the economy. And earners, not just high earners, all along the scale do that. I want to encourage families and environments to do more of that. And so on that side of the ledger, let’s look at those pro-growth packages.
HARWOOD: You have been a proponent of altering the mandate of the Fed so that they do not have a dual mandate of focusing on inflation, but also full employment. You want to get rid of full employment part. Why do you think that that would be wise for the Fed to do, especially given the low-inflation environment we’re in now, and is that a big priority of yours to move that?
BRADY: You know, it is a priority, although now, as chairman of Ways and Means, I’m really focused more on the fiscal side of issues, than monetary. But I look into history, whenever the Fed’s focused on a stable dollar, when they fight inflation or deflation effectively, that’s when our economy grows.
When they try to do too much, which in my view they have been for too long, they muddle that assignment. Frankly, they don’t have the tools to juice this economy other than for very short periods. I think they ought to be out of that business and laying the foundation, the true foundation, for economic growth — protecting the purchasing power of the dollar over time. That actually grows the economy.
HARWOOD: Well, let me ask you about the actual record. Ben Bernanke, appointed by President George W. Bush from your home state, steered for most of the relevant period Fed behavior during the crash and in the immediate aftermath of the crash. Given what’s happened now, how the economy’s growing, how the labor market’s improving, and how we don’t have an inflation problem, doesn’t the evidence tell you that they did a good job?
BRADY: Would say otherwise. Here’s why. The Fed contributed to the financial crisis, keeping interest rates too low for too long. I give them credit for responding and stabilizing the economy and the financial sector during the crisis. But then they tried to do too much with quantitative easing that went on forever, just dramatically exploding their balance sheets.
And so in my view they’ve contributed to two things: a very lackluster, 2 percent growth for America, which we can’t settle for; and secondly they got Wall Street booming. Main Street and middle-class families? Not so much.
HARWOOD: Trans-Pacific Partnership — is that going to get done before President Obama leaves office?
BRADY: You know, I hope so. But it all depends upon whether the White House can resolve some of the policy decisions they made. It’s an important agreement. Asia-Pacific region, that’s where the customers are at …
HARWOOD: You’re for it?
BRADY: I haven’t declared that, but we’re examining it right now. I know the value of us being in that region, playing by U.S. trade rules — critical to economic growth.
HARWOOD: I realize you haven’t declared, but let’s be real, you want this to pass, don’t you?
BRADY: If the White House can solve the problems — and there’s about four or five key ones left — and build support, I’d like to see this move sooner rather than later. But the substance and the support is going drive it. That will drive the timing.
HARWOOD: But do you mean go and renegotiate with 11 other countries?
BRADY: No. I say solve the problems.
HARWOOD: You’re talking about implementing legislation and that sort of thing?
BRADY: It’s not unusual in any trade agreement, when it’s been signed, to go back and work out problem areas. And this is no different.
HARWOOD: And this can be done either legislatively, through the implementing legislation, or some executive …
BRADY: You know, normally it’s been through discussions and actions by other countries saying, “This is how we intend to implement this.”
HARWOOD: Bernie Sanders says the economy is rigged. He says it’s rigged for Chamber of Commerce and big business — by people like you.
BRADY: Well, I’ll tell you, most of my families and small business believe our tax code is rigged against them, that it isn’t understandable, it isn’t fair, it’s too complex, it drags them down. Why don’t we tackle that problem and solve that?
HARWOOD: I want to ask you about the congressional baseball game. I was looking at the results. Every year that George W. Bush was president, Republicans won that game. And every year that Obama’s been president, the Democrats have won that game. Is it congressional baseball that’s rigged?
BRADY: No. It’s not. This is a game that’s been played since 1909, Republicans versus Democrats. It raises a ton of money for charity. It’s real baseball. This is hard-charging baseball. I’ve broken a shoulder playing in that game. And I love it. I love that sport, I still love playing it. But Democrats have a tough team and a great pitcher.
HARWOOD: You got an answer for Cedric Richmond this year?
BRADY: The answer is we’re going to win this — just like the Astros are going to be in the World Series. Republicans are going to win the congressional baseball game.