Howard Dean and Grover Norquist on the Successes and Failures of LBJ's Great Society

Event Description

Former governor of Vermont, Howard Dean, and Americans for Tax Reform's Grover Norquist, join Politico's Michael P. Hirsh, to discuss President Lyndon B. Johnson’s broad social agenda, the Great Society. Fifty years after the Great Society’s inception, the panelists reflect on the agenda’s economic and social legacy and envision its future. Fifty years after the Great Society’s inception, the panelists reflect on the agenda’s economic and social legacy and envision its future.

Event Highlights

Howard Dean on a strength of the Great Society:
“The genius of this country is, in fact, a lot of ability to do for yourself and work hard to succeed. But if you can't get everybody to the starting line then you can't succeed. And the reason for that is…income inequality. When enough people can't get to the starting line then they stop believing in the vision of the country. That is why the Great Society was important, because it was about getting people to the starting line.”

Grover Norquist on the social security system:
“Why do we have inequality of wealth in this country? Because we take the income that low-income people and young people make and we take it in Social Security taxes and we tell you it's savings, but it's not. If it was savings, low-income people would actually have savings. They'd have a resource to share with their family.”

Grover Norquist on granting states control over social programs:
“…governments can blow things up, but they're not very good at creating wealth…or creating new innovations going into the future. And the reason is, by definition, they're a monopoly. …there are fifty states…and they can take different approaches and this is why I think it's very important that we allow the fifty states to take different approaches and let's find out what works.”

HIRSH: Thank you all for coming to today's Council on Foreign Relations meeting.

The subject is the Great Society, its meaning and impact. I think, over the course of modern American history, there have been two great government revolutions, if you will, the New Deal and the Great Society, and a major counter-revolution and we're still dealing with the implications of—of all of them.

The Great Society, which was so named by Lyndon Johnson, first, in a speech he gave at the University of Michigan in 1964, embraced an extraordinary number of government programs that LBJ sought to use to address basically what he thought were the deficiencies left over from the Great—from, rather, the New Deal: Medicaid, Medicare, Head Start programs, consumer and environmental protections, like the—the Clean Air Act, the Voting Rights Act to deal with racial injustice.

It was an extraordinary array of programs enacted in—in a period of time that was just as extraordinarily short, by the 89th Congress, from January '65 to January of '67; basically that was when most of it was enacted. And that Congress has been deemed by historians to have been probably the most productive in American history. Grover certainly would—would disagree with perhaps the term used there.

And then for—you know, for those who doubt the so-called Great Man theory of history, I think it's interesting to note that—that LBJ's idol was FDR, was Franklin Roosevelt. He went into his accidental presidency, consciously intending to live up to the ideals, as he saw it, that FDR had put in place in the New Deal.

And for a very brief period of time in American history, LBJ, arguably, had as much power as FDR did in the very beginning stages of the New Deal, in terms of the—the vast number of Democrats that came to Congress and the impact of the 1964 election, in which an uber-conservative named Barry Goldwater was—was badly beaten in the worst landslide in American History, sending the conservatives for cover for the same period when many of these programs were enacted.

But, I mean, just as so many of these programs continue today, are debated today and, in fact, I—you know, we're going to lace our discussion today with the State of the Union address by the President last night, in which Obama, you know, kind of, in some respects, laid out his own vision for addressing deficiencies left over, as he perceives it, from what hasn't worked since the Great Society.

But as the—the concept of the Great Society lives on, so does the backlash, the counter-revolution, if you will. We all are somewhat familiar with how it ended, overspending, Vietnam, the—the disaster of the late Johnson Presidency, followed by—into the 1970s, the period of stagflation, all of which, of course, laid the groundwork for the Reagan revolution, which is the counter-revolution I was referring to.

And that way of thinking, right up to the present day, right up to the Tea Party, is also a legacy that we're dealing with, even though Reagan himself failed to roll back government. No other Republican president has.

We know Richard Nixon, for example, after taking over from LBJ, quickly sought the center and embraced many Great Society programs. And of course, right up to President George W. Bush, who not only did not roll back Medicare, he added prescription drugs to that program.

So in so many respects, despite the rhetoric of counter-revolution, we have seen a failure to really roll back the Great Society and that's one of the things we're going to be discussing today.

And for that discussion, we could not have two—a better cast of characters—let me put it that way, than Governor Howard Dean, former governor of Vermont, of course, and former chairman of the Democratic National Committee, who will be taking the affirmative--no.

And Grover Norquist is president for the Americans for Tax Reform, but is known to all of us, perhaps, and has been for many years as what I would say is the chief scold of the—of the Republicans and conservatives in Washington, in terms of—of his attempts to—to continue to roll back government.

And I—even though what we have here may be more in the nature of a debate than a typical CFR discussion, we are going to try to keep it a discussion as much as possible, rather than turning it into something that might foreshadow what we're going to see in the 2016 Presidential campaign.

So, with that, I want to start out. Governor Dean, perhaps you could just give us your overall assessment of the impact of the Great Society then and now and—and how its—its legacy lingers on.

DEAN: Sure.

This is going to be a hard one to—so you're going to have to cut me off and I'm not going to be offended if you do.

HIRSH: I'll (inaudible).

DEAN: So, let me—I actually, now, as part of my many part-time jobs, teach foreign policy at Yale at the Jackson Institute, which means I also have to teach American history, because a lot of kids don't know a lot about American history. And I've learned a lot, just preparing for the—for the class.

I—I hated Lyndon Johnson. I was a student in college when he was lying to us about the Vietnam War. And I was a fairly low number in the draft. In fact, I actually had the physical and flunked it. And I now believe Lyndon Johnson was one of the five great presidents in American history, simply because I judge presidents by what they achieved and the—and the changes they made and the changes have been extraordinary.

I also look at this from a sort of a human evolutionary point of view. I think, while we all have a libertarian streak, particularly in America, whether we're Democrats or Republicans. We also have a communitarian streak. And over the last 10,000 years of American history, I think we've become more - I mean of—of human history, I think we've become more communitarian.

So I actually see—see the—the—the Roosevelt, the New Deal and the Great Society as an evolutionary movement in the world, because of course it's happened in other countries as well, which means we—we actually—it's a—it's a fundamental difference in philosophy that I think we have with—with the Republicans and the true libertarians.

I believe that we are recognizing, as human beings, that we have a responsibility to each other. It's not just every person for themselves, that bald capitalism without rules doesn't work and that there have to be a set of rules to make capitalism work. And the question is then, in the constraints of what we've agreed to, how do you make it work.

So I think there never has been a counter-revolution. There's a lot of talk about the Reagan revolution, but as Michael pointed out, there's not been much real change. And I think—I happen to be fiscally conservative.

Grover would probably disagree with that, but actually I was—I was once ranked fourth in the country in terms of fiscal responsibility when I was governor and they told me they had to redo the results five times before they'd release them and I was still number four in the country in terms of my conservatism.

They couldn't believe it, but I think fiscal conservativism is actually—is actually compatible with a—an aspect of responsibility for each other, because you can't—if you can't fund the programs, you shouldn't have them and you eventually have to cut them.

So I do think Johnson transformed society. I think it was part of an evolutionary transformation and I think it's for the better. Now, do we have to fix some of these programs? Are they going to make us broke? Yes. We do have to fix some of these programs.

I am very interested in how we fix them. I'm not interested in getting rid of them. I'm not interested in privatizing them. I'm not interested in turning them back to the states. And I think there'll be a lot of discussion today about what we should do to fix these programs.

And I will just say, leading into what—whatever Grover may say in rebuttal, something that he's probably going to agree with, we—we cannot continue on the current fiscal course that we're on. My view is that we ought to, as Bill Clinton famously said about welfare, we ought to mend it and not end it.

HIRSH: Grover?

NORQUIST: Yeah.

You mentioned the two periods of—of—of government expansion. It's actually rather tight, the—between the '34 and '36 election, you saw Social Security and Aid to Families with Dependent Children. And between the '64 and '66 election, we saw the Great Society spending programs, Medicaid and Medicare.

The federal government right now spends 20 percent of Americans earned this last year. It was 24 percent before we got the sequester and wrestled the President on that but not allowing him to raise taxes up to 24, but to bring spending down to 20. But of the 20, half—10 percent of everything you earn and half of federal spending was created in two two-year periods, so in four years of American history.

So when some of our friends on the left talk about the consensus, if you grab power for two years at a time and run things through, you can pass some very consequential legislation and they did. In '66, the Republicans won back in a wave and then in '68 they did.

This—we're supposed to be—we're supposed to be in the middle of the third wave. This was Obama's hope that this would be another period where we jump up government spending on a permanent basis. And it's very interesting to watch the different reaction, both by Republicans and by the general electorate, after the creation of Obamacare ACA.

The public remains opposed to it and remains unhappy with it, would like to see it dramatically changed, altered, gotten rid of, and it didn't get a single Republican vote. Unlike the previous periods where you had a bipartisan march towards bigger government, we now have in the Republican Party, post-Reagan and post-Tea Party, a party committed to, actually, smaller government.

We didn't have that before, if you watched eight years of Bush and eight—and four-and-a-half years of Republican Congresses during the eight years of Bush's presidency. During that period, he just kept spending money, and not spending money and spending less money wasn't even on the to-do list. When you talked to the guys there at the 'strategery group', not spending more money wasn't ever on the list. They called—no, they called it the 'strategery group' themselves, they at least had a sense of humor, not other things.

On the costs of the Great Society, well, we spent $20 trillion on—since 1964, in inflation-adjusted dollars on welfare programs, 17 percent of personal income in the United States now comes from means-tested welfare programs, not Social Security, where you pay in and theoretically getting something back or Medicare, but where you just get something because you have low income with nothing else necessary.

This last year—'12—2012, $700 billion spent but of course the real challenge is that we can't afford this very well now and we certainly can't afford it in the future. Social Security has a $10.6 trillion unfunded liability. That doesn't mean $10.6 trillion owed sometime. That's the present value of the unfunded liabilities that we have in Social Security alone. Medicare, somewhere between $28 and $35 trillion in unfunded liabilities.

When Medicare was built, the costs in 1990 were 644 percent higher than they said they were going to be when the government put them in. Turns out it's only 150 percent if you adjust for inflation, so they're only off by 150 percent then.

Looking forward, here's a quote from Paul Ryan in 2011, talking about the Congressional Budget Office, run by Democrats. "The CBO has a model where they measure the economy going forward and they're telling us that the entire economy crashes in the year 2037. Their computer simulator cannot conceive any way in which the economy continues, given the entitlements that we have."

2037. You can see that. Some of us may live to see it.

And so when we talk about, you know, was this a good idea, one, these are the costs, and then we get—you can have a longer, different conversation about what the costs were in human lives and families damaged and neighborhoods damaged, and what benefits there were or weren't.

And then the other thing to talk about, you know, is, what else could we have done? Theoretically, everyone agrees we need to—we need to change things before we hit the wall in 2037 or sooner. Why didn't we do this in 1965? Why are we waiting till now to do this? Why six years of Obama saying he wanted to fix entitlements and nothing? He just added to entitlements, like Bush.

So that's—as—as you look forward, you can go through the—the—the costs and the alternatives as we move forward, because I—I think we can fix things and I think we will.

HIRSH: I mean, very briefly, before I give Governor Dean a chance to respond to that, do you want to just sort of sum up what you think were the opportunity costs?

And again, we don't talk just purely in economic numbers here, because this was a program to transform society specifically to deal with income and racial divides, education divides, and a—you know, listening to the President last night, he—his community college program. I mean, in a much smaller scale, he's trying to deal with the same thing. So could you just briefly address what you think our country would be like if we hadn't done the Great Society?

NORQUIST: Well, I'm looking at the seven-minute speech that LBJ gave when he announced at—at Ann Harbor the—the Great Society, this is the same speech that Obama gave last night. You could take the whole thing without changing a word, because there are no dates, except fifty years from now.

He has to be judged on it, by the way, in fifty years. And they haven't exactly accomplished what they wanted to. It's actually much more aggressive than you said. I mean, they've—they've got plans for our leisure time. They've got it—they're worried about unbridled growth in the economy, have to do something about that. Love to have growth of any kind, bridled or not. I mean this is—we're going to be condemned to a soulless wealth. Wealth to start with would be good.

I mean this is just—I mean this is Savonarola. This is not a guy who just wants to increase GDP two percent. This is a guy who's in—in—going to be in charge of your soul through the government, but we're going to do it by having working groups and White House conferences and meetings, but the solutions to these problems do not rest on a massive program in Washington. Really, what part of the thing that they did wasn't a massive program based out of Washington.

On, you know, damaging? Well, I passed out a comparison of what happened when Reagan was president, in terms of workforce participation. As the economy grew, more people came back into the workforce and workforce participation grew.

As this economy has recovered, workforce participation has fallen, which is why the only reason the unemployment numbers are going down is because of the number of people quitting looking for work. If you counted them in, it would be 10 or 11 percent as we move forward.

The cost to the United States we have today—I—I did pass out this chart. Poverty was falling up until they passed the Great Society. And then, according to the government's own statistics, static for fifty years or little higher than it was when they did it.

The Governor wants to argue their statistics or their definition of poverty (inaudible) they can. Those are the government's numbers. It is not something that was a problem. It wasn't getting better, it was getting significantly better rapidly and then it stopped getting better after they did that.

The number of men who left the workforce as a result of this program and immediately after, 16 percent of men over twenty were not working or looking for work in 1965, when they started passing these bills, it's 28 percent today.

If you look at people between twenty—men between twenty and sixty-four, six percent of the civilian, noninstitutionalized men were out of the workforce when they passed these laws. Today it's 17 percent.

The damage done to heads of households, the damage done in how—what the government has done there, the lack of progress on the poverty rate all suggest to me that it—and then you can track crime and government spending, crime and the enaction of all these laws and make your own decisions.

HIRSH: OK.

Well, Governor, a lot of bold claims there, starting with President Obama as Savonarola. Maybe you want to...

NORQUIST: Oh, no, no, no, that was LBJ as Savonarola.

HIRSH: Ah, LBJ...

(CROSSTALK)

HIRSH: Obama's mini-Savonarola.

Go ahead, sir.

DEAN: You know, I—we're speaking a foreign language here. What I look at was why Social Security started and why Medicare started.

When Social Security was started, it was actually started in the states, because the Depression, not—as we are not taught in school, did not start with the 1929 stock market crash. It started in 1926, when the agriculture markets began to crash all over the world, not just in the United States.

And old people, who were surviving on their farms, because—and they couldn't work anymore, had nothing and were literally in danger of starvation. That's what—Kansas and Nebraska and places like that is where Social Security started.

What—what Roosevelt did with his 'let's try—keep trying stuff until something works', which is basically what he said, is he looked at other programs and these programs came from the states and he adopted them and created a national program for Social Security.

I think Social Security has been incredibly important, because I think a—a—a minimum standard of living is important in this country. We have, in my view, the greatest problem in this country today, that the greatest threat to democracy is the gap between those at the top and those at the bottom.

Not because I'm against making money, I'm actually very interested in it. I think capitalism is the greatest system we've ever—has ever been invented. But like every other system, if you have no rules, the whole system collapses and it very nearly did in 2008.

So if we're going to have a system where it's possible to make large amounts of money, which it is, which I think is a good thing, we've got to have a system where everybody believes that it works for them. And that's the danger to this country right now.

Eighty percent of the people in this country have not seen a raise for the last twenty years. Almost all the wealth that's been accumulated in this country, particularly coming out of this recession, has gone to the top 20 percent.

Now the - I don't have a problem with people being rich and people not being rich. I do have a problem with people not affording the basic necessities, which we've more or less fixed in this country for—basically. We'd have arguments with some of my more liberal friends about that.

What I have a problem with is if 80 percent of the people, the system—believe the system doesn't work for them. It doesn't matter if you argue that it does work for them, because if they believe it doesn't, the whole system is dead.

That would be a terrible shame for this extraordinary country that we've built over the last 235 years. So I think a—some sort of minimal standard of living. I was the first governor in the country, by two weeks, beating Tommy Thompson by two weeks, which I'm thrilled to say, who did welfare reform.

Why did we do welfare reform? Because I fundamentally believe you shouldn't get something for nothing, unless you really are disabled. That's not the same as saying there shouldn't be some kind of minimal standard where everybody can participate.

The reason that healthcare costs have been so outrageous and the Medicare projections, as Grover pointed out, are so outrageous has very little to do with Medicare. It has to do with the fact that the healthcare industry is completely out of control. Why? Because the economics doesn't work and why is that? Because you pay me to do as much stuff as I possibly can to you, whether it works or not. There's no other system in the world that works like that. You've got to have a basic fee-per-patient system. If you keep paying me to do stuff, I'm going to keep doing it to you.

And that's why the medical costs have gone up at three times the rate of inflation. The reason Medicare is out of control is not because Medicare is a bad program, it's because healthcare costs are out of control and we have to be serious about dealing with healthcare costs.

So I—I defend this system of basically a minimal standard of living. Healthcare came in under Johnson because healthcare costs were driving older people not to be able to be adequately taken care of. Life expectancy's gone up dramatically. I won't claim it's only because of Medicare, but that certainly had a lot to do with it.

Medicaid has turned out to be the most effective way of expanding access to healthcare. We used it twenty years ago in my state and every kid in my state under eighteen has had health insurance for twenty years.

So I am a—I am not a person who believes we ought to keep spending more money on social programs and I agree in principle with the dilemma that Grover laid out. We've got to deal with this stuff. We have a—a budget problem that isn't going to go away unless we make some fundamental changes. But I'm not philosophically interested in dismantling the Great Society.

HIRSH: Just before I let Grover respond to that, I just wanted to follow up.

I mean what you laid out, all the problems we're dealing with today, starting with inequality, poverty, I mean doesn't that mean that the Great Society failed in the end if it just...

DEAN: No, it means that—it means that the rules of capitalism have been skewed.

If you look at what von Hayek actually wrote, the penalty in a capitalist society for making big mistakes has to be failure. We don't have that penalty in this country. This is what Elizabeth Warren's talking about. I think that conservatives ought to love Elizabeth Warren.

It's perfectly plain to me, not because I'm an Elizabeth Warren liberal, or you can call me whatever you want. It's perfectly plain to me that if you have ten or fifteen or twenty institutions around the world that, if they fail, the entire western economic system collapses that you have no choice but to bail them out, unpopular as that was.

If you don't bail them out we all go back to living in conditions that were before the Great Depression, which includes some people in this room who are reasonably well off, as happened in the Great Depression.

So you either have to have a lot of regulation, which I'm not that crazy about, or you have to have rules in capitalism which let capitalism really work. And capitalism hasn't worked as well as it could have. It has worked well enough to lift this country to the—the highest standard of living, essentially, in the world, if you adjust for demography and so forth and so on.

But it hasn't worked well enough so that we've taken the kinks out of it, so there can be adequate distribution of wealth. We're not talking about socialism or making sure everybody pays a 90 percent tax rate, as they did when LBJ was president. We know that doesn't work.

But what I do believe is that in a capitalist society there have to be rules so that everybody has some skin in the game and some investment in making capitalism succeed and that's the danger I see in this country.

HIRSH: Grover.

NORQUIST: Yeah. You sound, in defending these programs, that we're going to fix them, like my Republican friends who say "The Iraq war wasn't a mistake, but we're never doing that again". And I think you have to go back and look at the damage that these programs did.

They made things worse than they would have been, OK? They took half of the government over—today. Social Security, for instance, if—this was not an idea out of Kansas. It's an idea out of Germany. Social Security was thought up by our friend who unified the German state. And the whole—his project, it doesn't transfer well over here.

Social Security isn't an investment program. We're now, today, in the states and private sector's almost all shifted over, with the exception of some unionized companies, from defined benefit plans to defined contribution plans, 401ks, IRAs.

And if you don't have that you do end up with people making all sorts of commitments into the future and the workers get screwed and the companies go bankrupt and consumers get cheated. And the private sector has largely shifted that over.

We're—now we're going state and moving from defined benefit plans, where politicians would promise you the world today, because by the time you collect an uncollectable and unpayable pension, because it's promising more than the government's willing to take, I'll be dead or out of office and it's somebody else's problem.

So states—Utah's completely shifted over to defined contribution. A number of other states, Michigan, at the state level, completely shifted over back in 1990 and more and more states are moving in that direction.

Had we done Social Security that way, we wouldn't have a $10 trillion unfunded liability. If you fixed—Ryan and—Congressman Ryan and Senator Sununu put forward a plan that the Social Security actuary went and rated.

And he said look, if you'd phased in allowing you to take your FICA taxes and putting them in a 401k that you control and people over fifty-five stay in the old system, everybody else moves over to the new one, by 2024, we'd have $7 trillion in those accounts.

Why do we have inequality of wealth in this country? Because we take the income that low-income people and young people make and we take it in Social Security taxes and we tell you it's savings, but it's not. If it was savings, low-income people would actually have savings. They'd have a resource to share with their family.

They would be able to handle those and $7 trillion, fairly evenly spread out across the country, so the Social Security that everybody's in, would dramatically change the inequality that, in terms of wealth accumulation in this country, Social Security created and made possible and made it difficult for people to save for their future, particularly—I mean, rich people can save for their future, but low-income people find that Social Security takes their money and they can't.

And by the way, you could not only do that, but drop the FICA tax from what would be 20 percent if nothing was done, down to five percent in order to deal with disability and some of the non-saving portions of Social Security.

If we look at Medicaid, if we block-granted that to the states, as we have done with Aid to Families of Dependent Children, I know—under Clinton, Clinton did this. I know that the left says the world would end. Well, they all said that when—when Clinton signed the third bill that the Republicans passed to move Aid to Families with Dependent Children, now TANF, out to the states, so you have fifty states trying fifty different things.

What—what our friends at the state have missed is that one of the reasons governments don't do very—governments can blow things up, but they're not very good at creating wealth. They—or creating new innovations going into the future. And the reason is, by definition, they're a monopoly.

The advantage of states over the federal government,it's not this 'closer to the people' stuff. I'm not any closer to the mayor of D.C. than I am to the president of the United States, in terms of being able to call him on the phone and suggest something.

But there are fifty states—some say fifty-seven, but at least fifty and they can take different approaches and this is why I think it's very important that we allow the fifty states to take different approaches and let's find out what works.

And I think it's obvious that defined contribution pensions are better than defined benefit pensions, in terms of being stable and creating wealth for all Americans, not just the Kennedys and the Rockefellers. And that's the missed opportunity. The number of heads of households, people who are out of work because of these programs are devastating there. But what Social Security has done in replacing savings and telling poor and middle-income people you can't save because we're taking your money, promising you it's being saved in West Virginia somewhere, but it's not, has created tremendous inequality and the fact that we have very bad job creation in this country.

That's one of the reasons why low-income people are not doing better. We need to be having more jobs.

HIRSH: Brief—very briefly, before we go to...

DEAN: OK, so here's the central dilemma of the argument that we're having, what do you do about the outliers?

So in the—in the case of Social Security and defined contribution, I'm not unwilling to look at that, but the problem is what do you do about the people who are taken advantage of or end up in some investment scheme.

We know there were a lot of people who lost their IRAs in—in the 2008 recession, because of a lot of the chicanery on Wall Street and some of it was just bad luck. Or maybe they just made bad investment decisions and they don't have an IRA. What do they retire on if there's nothing to fall back on? And what is our obligation to keep them from starving? Do we have one?

Same is true of states. Texas is my—my favorite example. Lot of people moving into Texas, Texas' economy doing really great. Twenty-two percent of the kids, in spite of CHIP, have no health insurance in the state of Texas, 22 percent. Now those are American kids, not just Texan kids. I think I have a responsibility for those kids as an American.

So the question is, in this, in this area where every—everything has devolved and everything is—is let's let the states, what about the people who screw up and what about the kids who don't get health insurance? What obligation do we have as a nation to those children?

So I think it's easy to say oh, well let's decentralize. Let's have defined contributions. There are situations we have to talk about and you have to deal with. We have to define our responsibility for each other. What is it? Do we have any? Because I think if we don't, we're not a nation. We're certainly not going to be a great nation.

The last point I want to make is I would disagree with the idea that we don't foster innovation or anything. You know how we foster innovation and wealth creation in this country? I agree, the government doesn't do it. No, I don't agree with that.

We do it because we provide the absolutely essential creative framework, which is the rule of law. That is the great genius of American and the great genius of our constitution. We don't do the innovation. We set a—a—we set forth a table that millions and millions of people come to this country to do their innovation, because we have a predictable rule of law. And that, we need to focus on.

What the rule of law says is that the table is level for everybody, whether you're rich or poor or in between, no matter what your circumstances are, if you're willing to work hard and play by the rules, you can make a lot of money and do well.

If we lose that and if we lose people believing that, then that's when we're in trouble. Right now, I don't think we're in trouble. We've got some things to do. Financially, we've got a lot of work to do. We got to make some tough decisions. I think the fundamental nature of this country is still sound.

NORQUIST: But I think in the spirit—in the spirit of bipartisanship, I agree there's a role for the government in providing rule of law and protecting property rights and right of contracts so that people don't cheat each other.

HIRSH: Let's open it up to Q&A. Please wait for the microphone to come to you and stand and state your name and affiliation and try to keep things as concise as possible. We have less than a half an hour for this.

Yes, sir, right over here.

QUESTION: Chris Broughton, Millennium Challenge Corporation.

Great discussion, gentlemen, thank you for being with us here today.

First, I want to start with a quote of Paul—by Paul Krugman, "the United States government is turning into an insurance company with a standing army".

The second piece is really political. It's the political challenge that we—don't think we delved into enough about tackling entitlements, which both of you I think recognize the fiscal threat to you and it's really the NIMBY problem, which is general used in environmental terms, but not—"not in my benefit yo", you might say in the entitlements context.

So the first piece of that is there've been lots of proposal, Bowles-Simpson, Rivlin, et cetera. None of them have moved forward. There's also the element that when we think about those entitlements, it's actually a resource transfer from blue states to red states.

I'm getting to my question. I'm going quick.

HIRSH: Good.

QUESTION: So the first is how do you tackle the entitlement problem? And it's both a red state and a blue state. Everyone benefits, right?

And - and—and the second piece of it is it's also structural to the United States economy, right? So, Grover, you were talking about the comparison to the Great Society and conditions then and now and—and—and the role of entitlements in that.

But one could argue it's actually more just the structure of the economy, globalization, mechanization, shift from manufacturing services, has far more to do than—than the entitlement programs in terms of the structure of jobs and employment and so forth.

So how do you think about those, both the political problem and also the structure of the economy? Thank you.

NORQUIST: Look, you—when you said...I would argue that these programs have made the situation worse, not better, because there were alternatives—ways to spend those resources. It could have been done, in some cases, with fifty states competing to do it differently.

I realize that the modern Democratic Party does not like the idea of allowing states to make these decisions, because, as you look at it, there are twenty-four states with a Republican governor, Republican House and Republican Senate.

This is shortly after the election, when the New York Times announced the modern Republican Party had ceased to exist in the world. And there are now seven states that Democrats run completely. Half the country lives under a Republican governance and one-third of that—one-sixth lives in—under Democratic governance.

If you look at the blue—the blue states, their statespeople tend to leave and the red states, their statespeople either have been moving, too, for a while or continuing to move to. So we—we can tell what works and what doesn't.

That's why I suggest that when we discuss what's going to work and what doesn't, we take a look in two years and four years and six years, because these red states are staying red for the rest of the decade and the blue states staying blue for the rest of the decade and maybe another ten years.

And we will actually have a—a controlled experiment. Had this conversation with a nice lady who runs the Nation magazine and she turned green, because she doesn't think that if you take her ideas and you do them in a state it'll work.

Really stupid ideas can only be done at the national level. If you have...

(LAUGHTER)

... you have a really stupid idea and you do it in Massachusetts, like government-run healthcare under Dukakis and then the repealed it as soon as he lost the presidential election, because it was just for show. We're not going to live under this. You can't do that in a state.

Vermont just went through a similar conversation about government-controlled healthcare. So there's a reason why fifty states are better than a federal government for looking at these sorts of projects. And even better is 300 million Americans minding their own business, doing their own stuff.

HIRSH: Thank you, Mr. Jefferson. Yes.

DEAN: I—I—I...

NORQUIST: There's nothing old about the idea of the Constitution.

DEAN: I do like the quote from Paul Krugman, which I hadn't heard, even though it is a bit of a unrelated, it reminds me of John McCain's quote about Russia, a—"a gas station posing as a country."

I mean, I—I don't like talking in sound bites and I really don't like Washington talking point speaking-ese, but when you get a really good one, you just got to repeat it.

(LAUGHTER)

Look, I think we do need changes in entitlements. And the question is how can we make this—this—these programs survive?

I've already talked about why I'm not supportive particularly of giving the states more flexibility. I was when I was governor. I was the head of the National Governor's Association, but I've since—Texas has really just thrown me for a loop.

Here's a state with rising economy that's bragged about by its governor, which not only has 22 percent of all its children with no health insurance, they're 48th in the country in terms of educational achievement in high school.

I mean I—I—I don't—we can't risk having the third—second—third largest state in the country—second largest state in the country, population-wise. We can't risk having that many people get out of high school who are ignorant.

And so just think there is a federal interest in making sure there's a minimum level of—I support the common core. I don't—I have some problems with some of the testing. Maybe we can look at that. The idea that nine times nine is something other than eighty-one in states if they choose not to test for it is insane.

Mississippi used to dumb down their tests to make sure that an adequate number of people passed it to satisfy the Department of Education. This is crazy. We are one country and if we're not one big country, we're not going to be the most powerful country in the face of the Earth.

Part of the reason we're as powerful as we are is because we have 310 million people that can generate wealth for common cause among the fifty states. So I—I just think this notion—I'm very willing to look at the federal programs and see if they can't be changed. I supported the sequester.

The reason I supported the sequester was because I thought that no way was anybody ever going to make those cuts if they had to vote on them. I'm serious about budget cutting. But I'm not serious if we can all punt and hope that somebody at the local level—what makes you think that the local government is any more effective than federal government?

We get madder at the federal government, but, you know, I've seen the legislature in some of these places.

NORQUIST: Because—because you can leave.

HIRSH: Yeah, there's an argument for accountability there.

Let's—let's go to...

NORQUIST: I'm sorry, one second.

Krugman was wrong. I—I—I really apologize for not pointing out...when I quoted Krugman, I failed to point out that he was wrong.

The fed—the federal government is a Ponzi scheme for the standing army, not an insurance company.

HIRSH: OK, very good. Let's go to...

(LAUGHTER)

Let's go to a question over here, Mike Haltzel. Please be succinct.

QUESTION: Yeah, thank you.

I'm Mike Haltzel from Johns Hopkins.

Guys, terrific discussion.

Look, the one thing we haven't—that you folks really haven't done very much is put the foreign in the Council on Foreign Relations. I'd—unless we think we live on an island and other people's experiences are completely irrelevant, and I don't think either one of you think so, I think we have to look at it.

I love my country, Mr. Dean, as much as anybody and we're successful in many ways. But we're not so successful in many ways, whether it's life expectancy or infant mortality or—or scores of our—of our students. You can argue about how that's—you know, there are some variables there, but the fact is we're not perfect.

You talk about Social Security, you alluded to Bismarck and said it's just not transferrable. It—it strikes me, we're—the last time I looked at OECD statistics, we were the third-lowest taxed of all the thirty-four—I think Mexico and Chile were taxed lower than we were.

So the vast majority are taxed more and yet these countries that tax more and presumably redistribute more have better—I'll use the value word, distribution of wealth than we do, yet you're saying we ought to go the other direction. I just don't understand that.

And—and so, my question—I'll just stop and say could you both maybe discuss a little bit about international comparisons? And I'm saying this, I—I know at a time when Europe's having problems, so I lead with my chin, but that's largely because of...

HIRSH: Let's—let's go to that, yeah, particularly since the President, in his speech last night, I think made a big point of saying, you know, we're—we may not be great, but we're doing better than everyone else.

NORQUIST: Yeah, look, our government sucks less than all the others.

(LAUGHTER)

And I think we should be proud of that.

HIRSH: End the discussion right.

NORQUIST: Our government...

(LAUGHTER)

It is a matter of patriotic honesty to point that this government, for all its failures, is less horrible and is less destructive of economic growth and human happiness than most other governments you can think of in the world throughout history, if not all, OK.

And the problem is it could be all net positive. It doesn't have to have all of the negatives. We've made some real positive. We've cut but we have a lot more to do. Europe is saddled with a VAT, which is the difference between the United States—Europe is the United States plus a VAT. Each country is about that much bigger a state than ours.

People—trust people. People move to Texas, oh, Texas is no good. Well, you can take a look at it if you—not mentioned is Texas is a high immigrant state. Immigrants in Texas test better than immigrants in other places, as does everybody else.

But they have more of the immigrants and they don't test as well as other guys. But if you're doing apples to apples on immigrants and so on, you are getting—Texas does a better job of educating them than other states.

If you're from really close to the Canadian border, as Moynihan pointed out, things can be different. But if you want to do apples to apples on—on how well states are doing, the fact that people move there from other states tells you something about how—what people thinks works and what it doesn't.

Same thing with people coming to the United States. Europe does not do immigration very well. That's why they're the past and we're the future. China and Japan don't do immigration well. They're going to have real problems maintaining the sort of social welfare transfers as they get older, before they get rich, as they have declining—continuing declining labor forces and ours can be expanding as much as we want to.

HIRSH: So let—Governor—Governor, do you—do—do you agree that...

DEAN: I think it's—I think it's—the point is well taken. I deeply appreciate that question.

Let's look at what we do well and what the Europeans do well. They have a much higher index of—of wealth equality, if you'll say that. And it is borne out of the fact that education levels and borne out of infant mortality. It's even borne out of happiness measure, however that—even I will admit that's a little squishy soft social science. And they have more redistribution of wealth. So they do some things very well and some things not so well. I think this is a much more dynamic economy. The Europeans know that. I'm fascinated by the German economy.

You know, we have labor problems here from time to time. France has labor problems here from time to time. Germany mostly doesn't. Why? Because they have a model for integrating unions and investor—and investors in corporations, which I think is the envy of the world and we ought to adopt it here.

We can learn from Europe: Europe can lean from us. I was in Europe not long ago and I was scheduled to come home on a Lufthansa flight and I was told, "oh my God, there's going to be a Lufthansa strike in the next days" and I was leaving the day after, so I'm in a panic.

I don't know what to do. I'm sure the airport is going to be a disaster. Oh no, they only go on strike for one day, because they—when they get serious in the labor negotiations, that's how they let the management know they're very upset.

I mean, so no productivity was lost. Lufthansa didn't use—lose a bundle of money and the labor unions realized that that was to their advantage too, because they could get more if the company did better.

I mean we need to start looking at European models. The—I—one of the fool—most foolish things Mitt Romney said last timein a long list, was that—was we don't want to be like Europe. We don't want to be like Europe and we're not Europe.

And I absolutely agree that they have done a lousy job integrating immigrants and—and they're paying a huge price for that now. And we struggle with that. We do better than anybody else in—on the face of the earth.

But there are some things over there—we ought not to blanketly dismiss everything they do in Europe, because there are some things they do, particularly the things that result in the indicators that you just talked about, and labor relations, which we could learn a lot from and we should learn a lot from, because it would make our economy stronger.

HIRSH: Let's go back to this side of the room, if there are any questions on this side of the room.

Gentleman right over there.

QUESTION: Yeah, Ted Alden from the Council on Foreign Relations.

Wanted to push a little harder on the defined contribution idea, because I think in—in the private sector, in a lot of ways it's worked well. It's better for the companies in terms of cost control. For people who are paying into the plans, market returns have been pretty good.

But we know that most people are not saving nearly enough for retirement: certainly not putting aside enough money to ensure any kind of security in retirement. Why is that going to work better on the Social Security side? Are you—are you talking about a sort of mandated contribution? Everybody's going to have to do this and it's going to be managed privately. How do you prevent people from not looking after their own futures, in effect, in the way they ought to.

NORQUIST: Yeah, I think when—that all the plans that are talking about reforming Social Security along the Chilean model or some others, would take the present amount of money the government takes from you and gives to somebody in Wyoming next week and instead requires you to take that same amount of money and put it into a 401k for yourself.

So the reason people don't save enough is that the—the government lies to you and tells you it's doing the saving for you. And so that kind of Ponzi scheme displaces real savings and so I think that's one of the great things that we could get the government to stop doing.

It's not a good idea for the government to lie to people. It's not a good idea to steal their money. It's not a good idea to tell them there's money when it's not there. The idea that somebody might cheat you, when the guy talking to you has a $10 trillion dollar present value of its unfunded liabilities or $25 trillion to $35 trillion on Medicare.

What? You're not allowed to be part of the conversation if you've stolen $10 trillion or $25 trillion, $35 trillion from people and told them that they were going to get it back when they're not, under this Ponzi scheme that they've set up. Let's cut our losses on that, take care of the people that the government lied to.

Let's us be honest with the older people and everybody under fifty-five let's move over and give them that opportunity. And yeah, I would—I do think that it would pay, at least at the beginning, as you move forward, to require at least until they've saved up to a certain amount of money that they could be sure to take care of themselves in case of an accident or old age that they could do that.

(CROSSTALK)

NORQUIST: One second.

When I look at the German workforce, I include the Turks. So people that talk about how happy they are I think should include everybody in Germany, not just some.

DEAN: So I have a—just a quick question for you about how you would handle the question of people who, for whatever reason, don't save enough, whether they get screwed by a Bernie Madoff or whether they didn't save enough and it was their own fault.

So what do you do and what's our responsibility in a defined contribution program for the failures?

NORQUIST: Well, I think two things. It—the—in terms of having a safety net for somebody gets wiped out by something, I think you can look at that when you're talking about one or two percent of the population or a fraction, and somebody could do the calculation on what percentage of 401ks have turned out to be fraudulent.

When you're comparing that with 100 percent rate of fraud under the government program, it seems to me from going from 100 percent to 1 percent and you go, hey wait, there's 1 percent here. We've been fifty years with 100 percent.

I think that there should be a little sense of humility on the part of the government who did that. And this bifurcation of Vietnam and the Great Society strikes me as—as a nice trick, but it doesn't work. The same—you should read that speech that Johnson gave.

We're going to have smart people get together in a room and make these decisions on your life and so on. That included the draft. That included Vietnam. It was just the whiz kids. They weren't whiz kids who did this. The whiz kids did Vietnam.

You know, I mean the same...

(CROSSTALK)

NORQUIST: ...the same government hubris leads to...

(CROSSTALK)

DEAN: OK. Let me just insert one...

(CROSSTALK)

DEAN: ... one line.

HIRSH: Very quickly.

DEAN: All I did was ask one question to get that response, so I—you know, right now the fraud rate in Social Security is zero percent.

NORQUIST: From the government. They promised there's $10 trillion they've promised you that isn't there. That's the fraud.

DEAN: So far—so far, every single person has been paid. Now we can argue about what's going to happen in the future, but to say that Social Security is 100 percent fraud is, it's very funny and amusing but it's certainly not true.

HIRSH: I'm glad that we brought it back to...

NORQUIST: The—the—the—the—if—if the guy—the guy who runs a Ponzi scheme, if Madoff had said oh no, I'll get you eventually, I promise. He hadn't cheated anyone until it got caught. Everybody'd got paid up to a certain point.

HIRSH: Government—government as Bernie Madoff.

Let's go back over here. And I—and I'm glad that we brought it back, Grover, a little bit to the legacy of the Great Society itself, because I would like to try to finish up on that.

Yes, sir.

QUESTION: Hi. Scott Moore. I'm an international affairs fellow here with the Council.

So I appreciate that this debate has revolved quite a bit around evidence. I—I feel the need to point out, though, the case against the Great Society relies on trying to prove a counterfactual here. We don't know what would have happened without the Great Society.

And to return to a previous question, which I think was very important, if we look around the world, we tend to see that some of the most effective social spending programs are forms of conditional cash transfers, which, if I'm not mistaken, would be typically derided here in the United States as handouts.

So my question is, do we—do we really have the courage to have this debate about the evidence and what works and what doesn't? Thank you.

DEAN: I hope we do and there's a fascinating article, which I think actually may have been in Foreign Affairs, I can't honestly remember. But it was about six or eight months ago, about a project in Kenya, which—in which the—the donor organization just gave cash to people, with no accountability.

And they did that because our USAID model is a great organization, but it fundamentally makes people more dependent, not less dependent. And they just decided to experiment. And it turned out that people used it to improve their lives and their productivity.

I—they did not go out and spend it on drugs and gambling and all that good business. They went out and put a new roof on their house or educated their children.

So it's a fascinating question. I think you'd have a really tough time, from a political point of view, trying to convince either American congresspeople or their people who they represent that this was a great idea and we ought to—ought to switch over any family support to a system like that, because I think you'd get the same kind of stuff about now that you're drug testing and all this other business.

But we ought to be fooling around with ideas like that and see what works and what doesn't, because right now, I would never argue that we couldn't improve. And there is some field work that, in fact, shows you that outlandish—what appear to be outlandish ideas, which I would have thought was outlandish until I read the research, turns out to be not such an outlandish idea and it's worth pursuing.

NORQUIST: But remember, one of us up here says "let's have fifty experiments". I'm willing to have real experience and compare. The status position of well, we're going to try things, but the federal government will make one big lurch in this direction for fifty years and that won't work. They'll be another big lurch in that direction.

Governments don't react very rapidly. Governments have moved to defined contribution slowly, OK. And that's—it's not a liberal idea, by the way. I mean the—the new lady governor from Rhode Island, I'm sorry. I don't remember her name, but she did significant reform on their pension, defeated the unions in the primary and one in the general.

San Jose, left of center Mayor, similar reforms. OK, this—these New Deal, Great Society programs are crowding out all the resources that I think should be in people's hands and the liberals think that they'd like to spend, but they first have to pry it out of—of—of those programs.

I think we ought to have competition among the ideas and, yes, let's look at Europe. I mean I think we have a lot to look at Europe. When people talk about the United States as unique, they're usually talking about good things, OK. Like not having the government run the steel mills or not having a draft, usually.

But we're the—we're the country with the dumbest tort laws in the world and we should look at Europe and—and other countries. We should look at Sweden for school choice. We could look—look at Sweden for their policies on—on the death tax, like not having one.

So there are a lot of things that Europe does well. There's a reason it's standing. The reason Scandinavian countries are still there with high tax rates, they do a bunch of stuff well. We should do that and pass on the things they do less well.

HIRSH: Very interesting, some areas of agreement here.

Let's take just a couple more. Yes, sir.

Please stand and say your name...

QUESTION: Nick Eberstadt, American Enterprise Institute.

Governor, since the fraud word came up and since you're a medical doctor, I wanted to ask you about the disability programs.

When you as a doctor see that more people are getting disability payments than working in the manufacturing sector, when you see that the healthiest generation of American workers in history is also the officially most disabled, how do you respond to that? How do you think that through?

DEAN: I'm—I'm willing to evaluate programs. What I'm not willing to do is do what the Republicans just voted to do in the house, which is to blindly cut stuff without knowing what you're talking about.

If there's a big disconnect between, OK, there's problems in the disability program and then, OK, so we're not going to transfer $32 billion to support the program. I think it would be nice to actually have some evidentiary data and some thoughtful look at what needs to be done.

Nobody should be in favor of people getting something for nothing. It's not only bad for the country and the taxpayers, it's really bad for the people who are getting the something-for-nothing, which is why I was interested in welfare reform.

On the other hand, I think this blind sort of attacking this welfare queen pink Cadillac stuff is incredibly destructive. It's foolish and what it does is put the other side, which is me, on the defensive so we—we instinctively resist all the reforms.

Why not have a discussion before we start dropping legislation like that and then try to come to some sort of an agreement? I think we could agree that there might be people on disability that don't really need to be there.

I think the solution is probably not cutting the living hell out of the whole program, so that—that—let's just say the 90 percent of the people who do need to be there are getting 18 percent less. That's the kind of policy—the problem that we have in this town and in this country right now is that nobody wants to look at the middle and acknowledge that the other side might be right about part of the issue and they have—do the same for you.

NORQUIST: I—let me just promise on Boehner's behalf that if a Democrat comes up with a piece of legislation that moves in that direction, I think we could get a vote on it in the House. But when the other team puts out nothing to—and then criticize the Republicans for not doing it differently, I think you then have to say where is the Democratic Party's willingness to have any reforms at all? We've had six years without reforms and the next two years is evidently fantasyland.

And I think it would pay to have a Democratic Party that is, at the national level, looking at reforms. At some states and some local governments, San Jose, Rhode Island, we're seeing those reforms at the state level. Why? Because states live another—next to other states and they have to behave or everybody does leave.

HIRSH: Just one more quick question and then we're going to have to finish up.

Yes, ma'am.

QUESTION: Thank you. Esther Brimmer now at George Washington University.

I'd like to go back to the foreign policy case for actually being one society.

The real legacy of the Great Society is not all the—only the specific programs which we've been talking about today. It's the idea that we are one country and that we're responsible for ourselves as an entire country and that everybody's life in this country matters.

So it seem to me when we think about the foreign policy case that not only do we need, in the 21st century, a society where no one is hungry, everyone gets an adequate education because innovation comes from everywhere, and that everybody is able to participate in a—an economy which would—gives them an equal chance to get to the starting line.

That's what makes us a great country. Ultimately, in the 21st century, we will need not only a great economy and a great military, but the power of attraction has made the rest of the world want to follow the United States.

That's the legacy of the Great Society. Thank you.

HIRSH: Any—any final thoughts on that?

NORQUIST: Yeah. That's the legacy of America's success is, the Great Society impeded that, slowed it down and damaged it, didn't help.

We are the country that people want to model ourselves off and that is, as the governor said, providing the rule of law and providing an opportunity where people are safe. Nobody comes and steals your stuff or hits you on the head and, other than that, leaves you alone.

I worry a little bit about this 'one society' thing. Really? What religion are we all going to be? You know, what do you mean, one society? I—I—when the government decides—again, read this Lyndon Johnson thing. He's going to worry about our soul. He's going to worry about our walking out in the—in—in the fields. He's going to worry about our leisure time, the government's going to get involved it.

You know, I think the government can and should protect everybody and—from—from getting hurt by somebody else or robbed by somebody else, protect their house from being broken into or—or their car. But after that, they should leave people alone and the challenge is, the government has done so many things, it's become damaging to human program progress, slowing economic growth.

I mean this is a very, very—I passed this out, but this is the difference between the Reagan growth from when—from depths of the recession, and the Obama growth from the depths of the recession. This is 10 million jobs. This is a lot of income and wealth that middle-income people don't have.

Ten million people are not going to be the Rockefellers, OK. There's going to be 10 million people getting their first job or getting a job that they don't have now. The damage done by these bad policies—these destructive policies compared to Reagan's, are 10 million households where dad or mom doesn't have...

(CROSSTALK)

HIRSH: Governor Dean, you have the final word.

NORQUIST: ... a job.

HIRSH: Final word, very briefly.

DEAN: I would agree with Esther.

I think the key to the Great Society—we didn't spend a lot of time on this, was in fact the notion of getting everybody to the starting line. There was a whole percent of the population who were not only not at the starting line, but they weren't allowed to vote.

And I think everybody has to fully participate. And fully participating, this is where I—this is where I am not a libertarian. Full participation is not 'OK, everybody gets to vote'. Full participation is you have a decent school system in your neighborhood that's just as good as the school system in my neighborhood.

Full participation is—is you—your kids get to go to college, just like mine get to go to college. Otherwise, you're not at the starting line. And when you can't get to the starting line, you never get to the finish line.

The genius of this country is, in fact, a lot of ability to do for yourself and work hard to succeed. But if you can't get everybody to the starting line then you can't succeed. And the reason for that is, going back to what I said about income inequality. When enough people can't get to the starting line then they stop believing in the vision of the country.

That is why the Great Society was important, because it was about getting people to the starting line.

HIRSH: (inaudible)

(CROSSTALK)

NORQUIST: That was the goal. The reality was the opposite.

(APPLAUSE)

HIRSH: And the debate over the Great Society lives on, clearly.

Thank you very much.

I want to remind everyone that this has been on the record.

Thank you, gentlemen, for a very enlightening (inaudible).

NORQUIST: You kept talking about...

END