Mitt’s Moment: TIME Talks to Romney About Business, Budgets and Beliefs

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Managing editor Rick Stengel and senior correspondent Michael Crowley spoke with the Republican presidential candidate on Tuesday for the Sept. 3 issue of TIME, now available online to subscribers. A lightly edited transcript follows.

RICK STENGEL: So I thought I’d begin jumping off from your dad. The rationale for your candidacy is, I’m a businessman. I know how to fix the economy. I’d love for you to talk about the kind of perspective you have as someone who wasn’t a businessman in the way your dad was, the CEO of a manufacturing company, but someone in private equity and a consultant. What are those attributes that you have that will help you as President in a way that’s different than the conventional view of the businessman?

MITT ROMNEY: Well, consulting offered me an opportunity to see a lot of different businesses in different regions of the world, to see how textiles were being affected by foreign competition, how technology was changing. Telecommunications I was involved with in the very early days of what we now call fiber optic. At that time, we called it optical wave guide, which had been developed by Corning. I had the chance to work in heavy manufacturing with Outboard Marine Corp. [which made] Johnson and Evinrude engines. So I got a chance to work in a number of different industries and see how they were being affected by global affairs and how they made decisions. And I don’t know that that was particularly different than the experience my dad had. His was a very in-depth — he was working in manufacturing and also competing with international firms. I think regardless of one’s experience in the private sector, you gain an appreciation for how decisions are made by business people, how competition works, the impact of incentives on consumer behavior. And how you solve difficult challenges.

One thing I’d note also about the experience in the private sector and that is a recognition that if you stand still, if you keep doing what you’ve been doing in the past, you will be passed by others. In the private sector, there is always innovation. There’s always change. There’s always improving productivity, and if you’re not leading that, you’ll be passed and ultimately go out of business. So there’s an urgency to constantly update and renew and to rethink your enterprise.

As I look at government, in some respects because people in government don’t recognize that they are in a competition with governments of other nations, they tend to think there isn’t a need to change the way things have been done. And there’s not a need to become more productive, which means more output per person. Instead, we add more and more and more people. Businesses don’t add more and more people unless they’re growing, unless they’re selling more product, reaching more consumers. Government grows without bounds because it can, and at some point it weighs down the entire nation.

STENGEL: If you look at the regulatory environment for the banks now — and there are basically five big banks that, in terms of assets, disproportionately outweigh everybody else — is there a situation of moral hazard now related to those banks? And what would you do to reform the financial sector? Would you bring something back like Glass-Steagall?

ROMNEY: I think Dodd-Frank has contributed to a concentration of banking assets in the hands of a small number of banks. By designating certain banks as being too big to fail — strategically important banks — it makes it more difficult for the banks not so designated to attract customers and to expand their business. What you’ve seen as a result is a concentration in the hands of a handful of banks that now has greater systemic threat than what even existed before.

The right course was not to say that this handful of banks will be protected by the government, implying therefore that all the rest of the banks are on their own, because smart depositors will all move toward the banks that are protected by government. It had the opposite effect of what was advertised. What was advertised was that we would keep the too-big-to-fail banks from getting bigger, but the result of the legislation is just the opposite.

What we need to do is to make it easier for the community and local banks and regional banks to succeed and thrive, because they, after all, are the places where small and medium-size businesses get their funding. So the whole idea of designating a handful of banks as the government-protected too-big-to-fail banks is the wrong course.

Now, we do need to have regulation in the banking industry. Extensive regulation is appropriate in an industry that has such an impact on the overall economy. We have to look at what the causes were of the last crisis and take action to prevent those causes from reappearing. What kinds of things come to mind include capital requirements, levels of leverage which are appropriate and inappropriate, banks maintaining risk in assets which they gather. Specifically, I’m referring to the idea [that] if a bank originates a loan or a mortgage that it should be on the hook for some portion of the loss if that loan or mortgage fails. These kinds of provisions, I think, would be directly applicable to the kind of crisis that we experienced before. There are others who suggest, Well, let’s go back to Glass-Steagall and separate commercial banking from investment banking. But interestingly, that was not a cause of the last crisis. Trying to solve problems that did not exist may be counterproductive.

MICHAEL CROWLEY: Critics are saying the math in your budget does not add up. The Tax Policy Center issued a report that your campaign was critical of. But they’ve gone back and rerun the numbers, taking into account some of the criticisms from your campaign, using some new assumptions, and they say the three conditions of cutting taxes — revenue neutrality and not raising taxes on the middle class — can’t coexist. And Erskine Bowles also said this — someone I know you have respect for — in the Washington Post. What are these critics missing? Why is their math not adding up the way yours is?

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ROMNEY: The basic foundation and premises of my plan are No. 1, we don’t reduce taxes or the share of taxes paid by the highest-income individuals. The highest-income individuals will get to pay the same share of taxes they pay today. No. 2, we won’t raise taxes on middle-income families. Middle-income families will not pay a greater share of the taxes either. So those are the beginning principles and the most fundamental principles.

So if people go back and try to assess our plan and ignore those two principles, they’re obviously making a mistake. When they create assumptions as you pointed out, this Tax Policy Center says we’re going to put some assumptions in place, it’s like no, no, no. Start off with those assumptions. The key assumptions are the highest-income people don’t pay a smaller share and middle-income people don’t see any tax increase and also don’t pay a greater share of the tax burden.

Then we look to say, All right, if we bring down the tax rates, marginal tax rates by approximately 20% and at the same time limit deductions and exemptions for people at the high end, we anticipate seeing two effects. One is that there will be by virtue of limiting deductions and exemptions additional revenue, despite the fact that the rate has come down. And No. 2, there will be additional growth.

And I know that many in the modeling community do not want to assume growth with changes in tax policy. I do. I happen to believe that lower marginal rates encourage higher economic growth, put more people to work, bring more businesses with more corporate profits, and all of these things contribute additional revenue.

CROWLEY: Would it be fair to call that supply-side economics?

ROMNEY: I’m not sure that’s the term I would use. What I would point out [is] that for decades people have spoken about dynamic scoring of tax policy. Let’s look at it in the reverse. Let’s say, for instance, that we were to increase the tax on capital to 90% of capital gains. Nondynamic scoring would say there would be no change in the amount of capital gains achieved and therefore there would be a huge increase in revenues. Dynamic scoring would say, in fact, if you’re going to tax something at 90%, people aren’t going to do much of it and you’re not going to get much revenue.

As a matter of fact, with capital gains taxes, a lot of studies have shown that if you raise the rates, you actually don’t get more tax revenues because of the dynamic effect of reducing the amount of capital gains people recognize. So my plan likewise takes into play, takes into account the growth impact of changes in tax policy and as we have modeled it. It’s been — this is an effort that’s been led by Glenn Hubbard, former chairman of the Council of Economic Advisors and now dean of the Columbia Business School. We look through our model, look at the growth effect as well as the additional revenue impact of reducing or eliminating certain deductions for people at the high end, and we’re able to achieve the revenue targets that we seek.

STENGEL: Could you be more specific about those deductions and which ones you would eliminate? I’ve been reading some of your interviews lately, and I feel like you’re sneaking up on eliminating the home-mortgage deduction for high-net-worth individuals. Is there something you’re willing to say that’s more specific about which deductions you would eliminate?

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ROMNEY: I know our Democrat friends would love to have me specify one or two so they could amass the special interest to fight that effort.

STENGEL: Could you do three or four?

ROMNEY: There are a wide array of ways to limit deductions and exemptions for people at the high end, and those options are ones which would be worked out with Congress on a collaborative basis. I’ll note that Simpson-Bowles likewise took an approach of saying, Look, these deductions and exemptions can be limited in a way that is approved by Congress. They did not go into the specific line by line as to which ones would be limited in which way but said that’s something to be developed through the normal legislative process.

And there are a number of options that people have spoken in the past about, where one might say the total deduction you’re going to get is limited by a certain amount and you can choose: Is it your home mortgage? Is it your charitable contribution? You can make it a combination of those things. That’s one model.

There’s another model that says there’s a certain deduction we’re not going to continue for people at the high end. There’s another that limits all the deductions at a certain level. There’s a whole array of ways of limiting deductions for individuals at high-income levels. And that’s a choice that would be made in consultation with Congress.

STENGEL: And you’d be open to some of the situations that you describe?

ROMNEY: I would be willing to discuss a wide array of options with members of Congress, recognizing that we want to maintain provisions that encourage housing, charitable contributions and health care.

CROWLEY: Governor, your campaign allowed reporters into church services on Sunday. And I wonder, is that an indication that you feel that you might want to be opening yourself up a bit more, allowing the public to get to know you better and particularly to see a bit more of your religious life?

ROMNEY: You know, this is just one of the interesting things that happens in the media, and I’ll say this parenthetically, our church services are always open. The media is always able to come into our church services. I didn’t invite anyone in. I didn’t speak to anyone in the media. They happened to follow me where I go, and they’ve been in our church services many times in the past and probably will in the future. So I don’t make any invitation to the media to ever be with me. [Laughter.]

That being said, people are certainly free to learn more about my religious beliefs and the practices of my faith and what role I’ve had in my church. You know, I do recognize and I feel very comfortable with people taking a good look at how I’ve lived my life, and obviously my faith is a big part of that. For quite a number of years, I was very involved in being a pastor of a congregation where I attended church, and I had pretty extensive interaction with a large number of individuals and families that were the potential beneficiaries of my counseling advice. So that’s obviously part of my life, which I expect people to take a look at.

STENGEL: Are there any misconceptions that Americans have about your faith and your church that you feel like, Gee, I wish people only know X or I wish they didn’t think Y?

ROMNEY: I’m sure there are many misconceptions about any religion, but I feel it’s the responsibility of the faith itself to clarify any of those misconceptions. My run for office is devoted to the needs of the nation and not to the need my church might have to clarify positions.

CROWLEY: A quick question about the campaign. You said President Obama was running, I believe the phrase was, a campaign of hate. Do you think President Obama hates you personally? And how do you feel about him now?

ROMNEY: [Laughs.] I think that the President’s campaign has taken on a course of divisiveness and attack which is very different than the campaign of hope and change which he described in his first run for office. And in some cases, it’s super PACs that are working on his behalf, but he refuses to distance himself from what they’ve said, and I’ve been accused by super PACs or by his campaign of a whole series of things which I think are taking the campaign into a very low and unfortunate place.

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When I became the presumptive nominee of the party, the President called me and congratulated me and said that he thought the nation would benefit from an honest and open debate of the issues in the course forward. I agreed with him. But I have yet to see that from his campaign. Instead, it has been one attack after the other — one accusation — all of which or most of which have been distortions or misguided. And I think it’s beneath the office of the presidency to engage in a campaign of the nature that he has pursued.

My campaign is focused on his policies and on the failure of those policies, in my view. And I’ll continue to point out our differences in policy and things I think he’s doing wrong from a policy standpoint. But I will not waste a campaign attacking him as an individual. I’ve not tried to divide Americans between one class or another or one location or another or one occupation or another. I happen to feel that we are united as a nation, and that’s a source of strength. And the divisiveness and the personal character assassination, I think, is an unfortunate course, and I don’t think it will be a successful one.

CROWLEY: And you hold him personally accountable for that character assassination?

ROMNEY: Well, I’m responsible for what happens in my campaign. He’s responsible for what happens in his. And if people in my effort say things that I find repugnant or offensive, I will correct those things, remove those things and make sure that people know I disagree with them.

STENGEL: Let’s go to policy for a second. By the end of this year, the first troops will start coming back from Afghanistan, according to the plan President Obama has outlined. Is that too soon? Would you keep more troops there? How is your policy as far as Afghanistan is concerned different than the President’s?

ROMNEY: There are some similarities and some differences. I concurred with his decision to add surge troops to Afghanistan. I also concur with the timetable of bringing our troops home by the end of 2014.

There are some differences. I would not have announced publicly the withdrawal date of the end of 2014. That is something I would have kept between our military and the Afghan military and political leadership. I don’t think the Taliban and other forces ought to know the precise timetable of our plan.

Secondly, the drawdown on our surge troops, which begins in September, was the wrong timetable. The military asked the drawdown to begin in December, not September. The reason for that is that the fighting season is in full bloom in September, and withdrawing troops during a fighting season puts those troops, according to our military, in greater danger. I would have brought down those surge troops on the timetable proposed by the military, not a political timetable.

The next point is with regard to the campaign and re-election of [Afghan] President Karzai. That election should have been overseen by international and U.S. teams to make sure that it was seen as being credible and uncorrupted. It was not. It was seen by the Afghan people as being a corrupt election, and any counterinsurgency requires confidence on the part of the people that the individuals they have selected are legitimately elected. That was another mistake.

I’ll mention one more difference, a mistake, and that is when the military commanders suggested the surge troops needed to carry out the mission they’ve been given, this 40,000 in number. I would not have decided to give 30,000 instead. So those differences, 30,000 instead of 40,000; a public announcement of the withdrawal date as opposed to a private goal; withdrawing troops in September as opposed to December from the surge; and overseeing a fair and uncorrupted elections, those are differences that would have been part of my plan for Afghanistan. I think the President’s decisions put our mission there at greater risk than had we pursued the course I would have preferred.

CROWLEY: You said your aspiration would be to defeat the Taliban. I think this came up in a debate. Do you think that is still a possible goal? In other words, a defeat that you would define as forcing a surrender of the Taliban on our terms, as opposed to a negotiated settlement where we would not get everything we want — is that still possible, given the realities of the military situation in Afghanistan?

ROMNEY: What I would like to see in Afghanistan is that the Afghan troops are able to maintain the sovereignty of their nation. I do not expect the Taliban as an organization or as a group of people are going to disappear. They will continue to be certainly in Pakistan, and I presume they will continue to be in certain corners of Afghanistan. But I want to see the Afghan military of sufficient capacity and strength and know-how to be able to defend the sovereignty of their nation and keep it from being overrun by the Taliban.

CROWLEY: We would like to ask one news-of-the-day question. I’m sure you’re anticipating this. [Regarding] a Senate candidate in Missouri, Todd Akin — we’re familiar with your statement essentially repudiating his remarks — do you think he needs to get out of that race and allow another candidate to take his place?

ROMNEY: I think I really said what I want to about the topic, which is that I can’t defend what he said. I can’t defend him. I think his remarks were offensive and inappropriate and wrong. And I hope he gives very careful consideration today to the course ahead and takes action which will be in the best interests of the things he cares most deeply about.