It’s now just 29 days until voters head to the polls in Iowa. There's a clear new front-runner in the GOP race for president. The latest in national Gallop poll shows former House Speaker Newt Gingrich soaring to a 15 point lead over Mitt Romney, 37-to-22. Ron Paul and Rick Perry are trailing in single digits.
Joining me now for a first on CNBC interview is the aforementioned GOP front-runner, Newt Gingrich.
Mr. Speaker, welcome. We appreciate it very much.
Mr. NEWT GINGRICH: Thanks. It's great to be here, Larry.
KUDLOW: I want to ask you about Barack Obama on the campaign trail today, or whatever trail he's on. He's pushing his temporary payroll tax cut in order to have a permanent increase on millionaires and billionaires. And he says Republicans who oppose this are discredited, "you're-on-your-own style of economics." You're-on-your-own style of economics.' What is your response to that?
Mr. GINGRICH: I think we all have to recognize that the president is a student of Saul Alinsky. He represents a hard-left radicalism. He is opposed to free enterprise. He is opposed to capitalism. He's opposed to virtually everything which made America great, and he keeps using wild rhetoric that is simply false. I happen to favor keeping the tax cut because I like tax cuts.
KUDLOW: Why is that, though? That's a--you want to finance by higher taxes on millionaires?
Mr. GINGRICH: No. I want to finance it by cutting government.
KUDLOW: Well, that's what they want. They want to finance it with higher taxes on millionaires.
Mr. GINGRICH: But that's--but that's because--look, they know they want higher taxes on millionaires, they just need to know what this week's argument is. But they know what the answer is. My answer is government's too big. We don't have a problem of being undertaxed, we have a problem of being overspent. And so I would cut a tremendous amount out of the federal government. And I would--one of the things that we've developed with Peter Ferrara's help is a block grant program. There are 185 different federal programs to help the low-income American, 185 separate bureaucracies. Put them into two or three block grants, cut out all the federal bureaucracy, send it back to the states. You save hundreds of billions of dollars. The people at Strong America Now have a program on applying lean six sigma to the federal government. You can save, they believe, $500 billion a year through better government.
So my attitude is, I like the lowest possible taxes. If the Democrats want to give me a tax cut on working Americas by--on the Social Security level, fine.
KUDLOW: Yeah, but, Newt Gingrich, I'm going to challenge you on that. You were a close friend and associate of my mentor Jack Kemp.
Mr. GINGRICH: Right.
KUDLOW: We never believed in temporary one-yearlong tax cuts.
Mr. GINGRICH: Right.
KUDLOW: Whatever. They're just rebates. We believed in lower marginal tax rates which would improve after tax incentive to work and invest.
Mr. GINGRICH: I do, too.
KUDLOW: Are you going to sell me that this temporary one-year cut, which did nothing last year except waste money, is going to do nothing this year? Why are you so--why do you favor it?
Mr. GINGRICH: Look, I don't think...
KUDLOW: Why aren't you out there asking for pro-growth tax reform...
Mr. GINGRICH: I do.
KUDLOW: ...across the board?
Mr. GINGRICH: If you go to newt.org and you look at the things I recommend...
Mr. GINGRICH: ...you'll see lots of stuff I favor that's exactly what you believe in. All right? And I like pro-growth tax cuts. Listen, I'm for zero capital gains tax.
Mr. GINGRICH: I'm for abolishing the death tax. I'm for 100 percent expensing for all new equipment. I'm for a 12 1/2 percent corporate tax rate. I'm for an optional 15 percent flat tax on the--on the Hong Kong model. So I'm happy to match--you know, I was with you and Wanniski and Laffer and Kemp when this game started.
KUDLOW: Mm-hmm. That's...
Mr. GINGRICH: But, politically, psychologically, middle-class Americans sitting out here going, `OK, you don't want--you don't want to repeal the Bush tax cuts. You want to keep all those tax cuts. You say don't, don't let them go back up. But now we're going to let taxes go back up on every single working American.' I don't think psychologically you can make that case.
KUDLOW: All right.
Mr. GINGRICH: And so--and so I'd rather say to every single working American, `Not only am I with you, I want to pay for it by cutting out government waste, unlike Obama.'
KUDLOW: But the GOP has got to make that clear.
Mr. GINGRICH: Yeah, exactly.
KUDLOW: I mean, they really have to make--now I want to ask you a related question. I want to stay with President Obama for second. You can see with clarity on the campaign trail, and including this tax proposal which is about raising tax rates on the rich, is the whole election in 2012--if you're the candidate or whoever is the candidate against Obama, is it going to be about class warfare? Is it going to be about the 1 percent vs. the 99 percent?
Mr. GINGRICH: Absolutely.
KUDLOW: And what's your response? How will you rebut that?
Mr. GINGRICH: This is going to be the finest exercise in self-government in your lifetime. We're going to have the candidate of food stamps, the finest food stamp president in American history in Barack Obama, and we have a candidate of paychecks. And I'm going to make a simple case. You want class warfare, fine. You're going to get stuck on food stamps because it's going to kill jobs. You want really high tax rates? Fine. You're going to get stuck on food stamps because it's going to kill jobs. You want to watch America decay and China become the leading country in the world? Obama's got a model for getting you there. It's called Sal Alinsky's entire book.
Now, would you like to create jobs? The kind--I want to get equality by bringing people up. He wants to get equality by bringing people down. You know, Reagan use to have this great line about the British worker who stood by the road with his son or daughter, and a man goes by in a Rolls Royce, he says, `Someday we'll get him out of that car.' American worker stood by the side of the road with his son or daughter. A Cadillac went by and he said, `Someday you'll buy that car.'
KUDLOW: Ah, right.
Mr. GINGRICH: So I want to be the guy who says, `I want to help every American have a better future.' He wants to make sure that he levels Americans down so we all have an equally mediocre future.
KUDLOW: And yet, he is now calling himself a follower of Theodore Roosevelt, Teddy Roosevelt. And you have called yourself a follower of Teddy Roosevelt. And I'm trying to figure out--I know what his message is. Roosevelt did want to raise taxes on the--Roosevelt was a government activist. He was a regulator.
Mr. GINGRICH: Sure.
KUDLOW: But you're not. Why do you say you favor Teddy Roosevelt? And are you actually the conservative candidate that so many people are hoping you are?
Mr. GINGRICH: Well, first of all, there are a lot of different Teddy Roosevelts. He was a very complicated man. And the Theodore Roosevelt as president is very different than the Theodore Roosevelt in 1912 running for president on a very aggressive big government strategy. I like Roosevelt, first of all, because he was for conservation. I liked what he did in saving forests and saving national parks and doing things, caring about the inheritance we give our children and grandchildren of a wonderful country. I like the Roosevelt who is common sense about regulations. We got a food and drug act because back then there were no rules, and people were eating meat that was basically poisonous. People were literally dying from food.
When I was a kid, and we were stationed in Europe--my dad was in the Army—the sense that America actually had clean water was remarkable. I mean, I go anywhere in America, I'm relatively confident the water is good.
KUDLOW: But we don't--we don't lack for regulations.
Mr. GINGRICH: No.
KUDLOW: I mean, it's a different era than TR.
Mr. GINGRICH: But, no, it's a different era. But I'm just saying, but here was a guy who, as a pragmatic person looked around and said, `I want to fix these things. I want to find solutions.' He's also a great American nationalist. I mean, he's the guy who--the modern Navy was in part built by guys like Theodore Roosevelt.
KUDLOW: All right. I'm going to leave it there. Some people are going to say you're a big government conservative, a big government conservative rather than a small government conservative. I mean, why aren't you saying, `I'm a Ronald Reagan conservative.'
Mr. GINGRICH: I am a Ronald Reagan conservative.
KUDLOW: Or, `I'm a Jack Kemp conservative.'
Mr. GINGRICH: Look, I'm...
KUDLOW: I don't want to get stuck up on TR, but I just...
Mr. GINGRICH: Wait a second. Wait a sec--wait a second.
KUDLOW: I just want...
Mr. GINGRICH: Wait a second. I...
KUDLOW: You're a historian, and you're an intellectual historian. You know this stuff.
Mr. GINGRICH: Yeah. But you take a line out of context. I've done a movie on Ronald Reagan called "Rendezvous with Destiny."
KUDLOW: I understand.
Mr. GINGRICH: Callista and I did. We've done a book on Ronald Reagan. You know, I campaigned with Reagan. I first met with Reagan in '74. I'm very happy to talk about Ronald Reagan. And, in fact, I would argue that the 1994 contract was just Reaganism revisited. So I'm very comfortable. If you look at my speeches and things, I drive the left crazy by quoting Reagan.
KUDLOW: All right. We'll leave that one there.
Now, let me ask you some nastier stuff, not coming from me, but I want you to react. Big story at the top of Drudge today. Ron Paul is running ads slamming you, basically. OK? He's calling you hypocritical. He's saying you are an influence peddler for Freddie Mac and for drug companies and pharmaceutical associations. What's your reaction to that? He's running a lot of ads in Iowa.
Mr. GINGRICH: You know, he's got to make up a lot of lost ground. He's going to say something. My reaction is, you know, I'm a 90 percent American Conservative Union conservative, lifetime voting record. I am the only person in your lifetime--the only speaker of the House in your lifetime who has balanced the budget for four consecutive years. I helped craft and pass welfare reform, the largest entitlement reform in your lifetime. Two out of three people went back to work or went to school. I helped pass the first tax cut in 16 years and the largest capital gains tax cut in history. Unemployment dropped to 4.2 percent. In the four years I was speaker, we—11 million new jobs were created. We went from a projected deficit over 10 years of 2.7 trillion when I came in. Four years later when I left, there was a projected surplus of 2.3 trillion over the next 10 years. That's a swing of $5 trillion.
KUDLOW: I think it's all...
Mr. GINGRICH: OK. So my point...
KUDLOW: I think it's all great, and I think it's all factual.
Mr. GINGRICH: OK.
KUDLOW: But I want to ask you, do you regret, in hindsight, do you regret working for Freddie Mac to defend their point of view? Do you regret working for the pharmaceutical companies...
Mr. GINGRICH: Well, I...
KUDLOW: ...working for the drug entitlement, which so many...
Mr. GINGRICH: Wait a second.
KUDLOW: ...tea party, grassroots, conservative Republicans were appalled when George W. Bush pushed through that entitlement. Do you regret working on that side?
Mr. GINGRICH: Let me draw a distinction. First of all, I do no lobbying. I have never done any lobbying. It's written in our contracts that we do not do any lobbying of any kind. OK? I offer strategic advice. I--by--the advice I offered Fannie Mae was in--or Freddie Mac, was, in fact, aimed at how do you help people get into housing, and how do you--and I don't think government-sponsored enterprises are inherently evil. I think they've been bad--these two have been badly run. I favor breaking them up into four or five smaller units each because I think they're unmanageable at their current size. But I don't think the concept of a government-sponsored enterprise, which is as old as the country, is an inherently bad thing.
Second, I was--I was for the drug benefit for a practical reason. When Medicare was developed in 1965, there were no pharmaceuticals that mattered, so they designed a health benefit that didn't take care of pharmaceuticals. We were in a position, and we said to people, `We will give you kidney dialysis for the rest of your life, but we will not help you get insulin.' Now, that's both inhumane, and it's really a bad health policy, and it's stupid fiscally.
KUDLOW: I liked--I loved the health. I love the science. I didn't like the fiscal side of it. It was never paid for.
Mr. GINGRICH: Well, I don't like that, but what we....
KUDLOW: And it pushed--put Bush behind the--I mean, it really helped spawn the tea party. And so I just wonder, in retrospect, would you rather not have been on that side or would you rather have had your own plan, which would have financed it properly.
Mr. GINGRICH: Well, no. I'd--well, first of all, I think we're going to have to reform Medicare. I led the Medicare reform task force in 1996. We saved $200 billion over 10 years. We did it so well that nobody opposed us. I mean, we've never gotten any credit for having saved Medicare in '96, but, in fact, we did. But we did it with AARP being happy and with Clinton not fighting with us; and, therefore, it became a non-event in this city.
I think you're going to have to rethink all health care. I helped found the Center for Health Transformation. But the two big sidesteps that you had in--that are important in the Medicare bill in 2003 were, we created a
Medicare advantage option...
Mr. GINGRICH: ...which really began to allow Medicare to reach in...
KUDLOW: The best part of the bill. The single best part of the bill.
Mr. GINGRICH: Well, and, we also created health savings accounts.
KUDLOW: Yes. Yes.
Mr. GINGRICH: OK. Those two, in my mind, were the beginning of the right direction. And I tried for five years and couldn't get the Bush administration to realize they had begun a transition that would, frankly, have pre-empted the Obamacare approach.
KUDLOW: All right. So the Ron Paul ad also attacks you for your TV ad with Nancy Pelosi on global warning. I interviewed Ron Paul. I said, `Newt has said it was a bad, dumb thing to do. Will you forgive him?' And I think Ron Paul forgave you for that.
Mr. GINGRICH: Good.
KUDLOW: But I am impelled, I have to ask you, regarding Nancy Pelosi, her latest charge...
Mr. GINGRICH: Sure.
KUDLOW: ...that she has new information on your ethics investigation years ago. What's your response to that?
Mr. GINGRICH: Well, first of all, it tells you how political she was on the ethics committee. And it tells you--I called it a Christmas gift. And she can't--if she releases any of it, she has violated the rules of the House. But it also, just a reminder, that committee was extraordinarily partisan. The job of the Democrats was to get Newt Gingrich. They couldn't beat any of our ideas, so they decided to try to beat the messenger. And I think it actually will help people understand what happened in that period and how much of it was partisan.
KUDLOW: She--all right. Granted. But she's saying that she's not going to give unpublished information. She's going to help people cull through the public information. Is there anything in there that you can imagine that's going to pop out?
Mr. GINGRICH: We turned over a million pages of material. We cooperated in every way. They published a report. One of the things that made her mad was I said, at one point in a planning session--this was in the documentary turnover--that, you know, Bill Clinton might well decide to sell out the left and sign welfare reform, and if he did there's nothing we can do about it.
KUDLOW: She didn't like that.
Mr. GINGRICH: Well, she said, `Why would you say that?' I said, `Now, don't be mad at me. It's Clinton who sold you out, not me.'
KUDLOW: But didn't you help cut that deal?
Mr. GINGRICH: Of course I did, because it got us welfare reform.
KUDLOW: All right. Let me go on. Final point. And I appreciate your being here. Mitt Romney. Romney says you don't understand the economy and you can't recover it and grow it because you spent your entire life in professional politics. What's your answer to Mr. Romney?
Mr. GINGRICH: You are the worst possible questioner.
KUDLOW: The worst.
Mr. GINGRICH: You and I worked together with...
Mr. GINGRICH: ...with Richard Rahn, Jude Wanniski...
KUDLOW: I understand. But I'm doing my job.
Mr. GINGRICH: ...Art Laffer. I'm just saying.
KUDLOW: I'm doing my job.
Mr. GINGRICH: But you're a witness to this. I was part of Kemp's little cabal of supply-siders who, I think, largely by helping convince Reagan and then working with Reagan, profoundly changed the entire trajectory of the American economy in the 1980s. You can make an argument that I helped Mitt Romney get to be rich because I helped pass the legislations that...
KUDLOW: Not a bad argument. Have you ever made that argument to him?
Mr. GINGRICH: I am as of right this minute. Just occurred to me.
KUDLOW: You--you're the incentive models, the lower tax rates, the smaller government and the welfare reform...
Mr. GINGRICH: That's right.
KUDLOW: ...helped make him rich from Bain Capital.
Mr. GINGRICH: He should be thanking me. He should be thanking me because I did the macroeconomic things necessary to make his career possible.
KUDLOW: Yeah. Well, I'm going to get a response on that.
Mr. GINGRICH: I bet you will.
KUDLOW: I want to ask you--regarding Bain Capital, this is a tough time. I mean, the country has turned against Wall Street.
Mr. GINGRICH: Yeah.
KUDLOW: Against the Wall Street bailouts. Because Mr. Romney was successful--and I say God bless him he was successful--can he win as a financial guy, as a Wall Street guy?
Mr. GINGRICH: Sure.
KUDLOW: Is that a big issue for him?
Mr. GINGRICH: Sure. Can he win against Obama?
KUDLOW: Can he win against you in the Republican primaries?
Mr. GINGRICH: No. But that's--I hope not.
Mr. GINGRICH: I can't--I can't sit here and offer advice on how he coul beat me.
KUDLOW: Well, you've done well. You've already said you've helped him.
Mr. GINGRICH: Look, I think Mitt Romney's a very smart man. I think—I think that he--any Republican could be proud to have him as their nominee, and I think he'd be very formidable against Obama. I happen to think I would be a better candidate than Mitt, but that's, I mean, we are, after all, competing here. But I'm not going to say anything negative about him. I think he's a terrific person. And, candidly, we, all of us who believe in free enterprise, have to be committed to explaining to people that the process of improving the economy, the process of becoming more competitive, the process of being more effective in the world market is best done in the private sector by people who, literally, in the tradition of Adam Smith, while following their own interest, create a dramatically better general interest. And we can't allow socialist and left-wing radicals to browbeat us and seize the moral high ground. Because they represent the future of poverty and impoverishment, and destruction and food stamps, and that isn't a good enough future for any American.
KUDLOW: And economic freedom is a moral issue.
Mr. GINGRICH: It is a moral issue, and it's at the heart of freedom. If you don't--the Founding Fathers almost wrote in "the right to property" instead of "the pursuit of happiness."
KUDLOW: That's right. That's what it was. Thank you. Newt Gingrich...
Mr. GINGRICH: Good to be with you.
KUDLOW: ...former speaker of the House, Republican front-runner. We appreciate you're here...
Mr. GINGRICH: Thank you.