Q A: CORIN DANN INTERVIEWS FORMER INDIANA SENATOR EVEN BAYH
CORIN Senator Evan Bayh, thank you very much for joining Q A. Of course, you will be familiar to some New Zealanders. You were in New Zealand a couple of years ago now for the- last year, I should say, for the Canterbury earthquakes. Thank you very much for coming on the programme. We do appreciate it.
SENATOR EVAN BAYH, former Indiana Senator Great to be with you.
CORIN Tell us, how important is this election victory for America?
SENATOR BAYH Well, it's very important. Any time a president is re-elected, he has a little more political clout to get things done. Of course, as your viewers are probably aware, we're facing a big financial challenge here with the size of our debt and deficits. That's going to need to be addressed, and we still have a divided government, because the same voters that re-elected President Clinton [sic] also elected Republicans to control the House of Representatives.
CORIN So can that be solved? Because we've talked a little bit about this fiscal cliff, people are calling it. Can it be solved?
SENATOR BAYH Well, it has to be solved, and the markets will react. The stock market will go down, interest rates will go up, the dollar will sell off, and so all that has to be done by December the 30th. Although there is one school of thought that we might actually go over the cliff for a couple of days, see what the adverse reaction is-
CORIN So wait for the share market to fall 500 points to rally people into action?
SENATOR BAYH Well, it could happen, because back at the time of the financial crisis, we had to rescue our banking system. The Senate passed it 75 to 25 on a bipartisan basis. Went over to the House of Representatives. The House voted it down. The stock market dropped 700 points in an hour. And the House came back the next day and passed it.
CORIN Does President Obama not have some more leverage now, though? I mean, he has got a mandate, has he not? Can he not try and use that leverage a little bit?
SENATOR BAYH He has some leverage, but of course the Republicans in the House will say they have leverage too. And so the real leverage that the President has is, number one, he's not running for re-election, so he's freed from political concerns; number two, if nothing is done, if he just hold the line, taxes will go up on-
CORIN This is the Bush tax cuts, is it?
SENATOR BAYH Correct, the Bush tax cuts will expire. And so then the Congress will be voting not to raise people's taxes, because they will have already gone up, but instead will be voting to lower taxes somewhat back down. So that's the leverage that he has.
CORIN But of course there's the spending cuts that come in at the same time. So how do-? No one's arguing that you don't have to cut spending, right? It's just when you do it and how fast you do it.
SENATOR BAYH Correct. And particularly with regard to what we call our entitlement programmes - our retirement system, our healthcare system for the elderly and for the poor. And the thing about those is that relatively small- That's where most of the spending is going to be increasing over the next 20, 30 years. That's really what's going to be driving the deficit. The thing there is that relatively small adjustments today, if you compound them out over 20 or 30 years, lead to big savings. But in my party, the Democratic Party, those changes are very controversial. My guess is the President will step up and say, "Look, we have to do some of these things to save the programmes." That will get some of the most liberal Democrats mad, but he's going to say, "That's what we have to do to get this done," and it will be done.
CORIN Because if we don't get it done, is there a risk? We heard from Chris Liddell that it could tip the US into recession. Is that a realistic sort of proposition?
SENATOR BAYH No, I don't think so. I think, as I said, that the most likely outcome is that they announce a framework for solving this before December 31st. It can't possibly get done before then, but what they'll say is, "We'll have $2 in spending cuts for every dollar in additional revenue. We're going to completely reform the tax code. We're going to do this, this and this. And we're going to put all this off for six months to work out the details." I think that's the most likely outcome. Second-most likely outcome is the Republicans refuse to compromise, the President holds the line, you actually go over the cliff on January 1st, but on January the 3rd or 4th, they come back and they say, "OK, enough of that. We've solved it." And then they can go home to their constituents and say, "I didn't want to vote for this either, but you saw what happened in the stock market. You saw what happened to interest rates. I had to."
CORIN Sure. That's a short-term issue. What do you think a couple of the key big issues for President Obama in this term will be? What's he likely to target, do you think?
SENATOR BAYH I think he's going to have to spend most of his political capital solving our financial problems. Rewriting the tax code - that's huge. Dealing with spending across government - that's huge. Entitlement reforms - that's huge. If all this were easy or simple, it would have been done a long time ago. So you then have to, after he's used most of his leverage on that, ask where else is there a commonality of interest here. There's a big issue involving immigration in our country. The President will want to do it because it's good for the country-
CORIN Is this where-? Are we talking about illegal immigrants being allowed to stay? Is that what we're talking about?
SENATOR BAYH We've got 12, 13, 14 million of them. And so the question is do we give them some sort of permanent status, allow them to pay a fine, learn to speak English, you know, agree not to break any other laws, that sort of thing. Or on the far end of the Republican Party, they really want to throw them all out of the country. That's not realistic. The business community isn't for that. But there are some, and that's why Mitt Romney was damaged in this campaign - because in the Republican primaries, he was forced to take a very inflexible stand. So the President will want to resolve this because the country needs it. It's a legacy item for him. The smart Republicans will think they lost the Hispanic vote by 40%. They'll be thinking, "Gee, maybe we should be getting something done here to get this off the table." And so I think there's a real- Also education reform. I think there's some real potential there to get some progress made. The President has shown he's been willing to be a reformer, not just always agree with the teachers unions on those issues. And so there's some potential there for working with the Republicans. Other that than, I think he will be- It's common for presidents to be very aggressive in foreign policy or in regulatory matters. There, financial services regulation, healthcare regulation and beginning to deal with global climate change through the regulatory process.
CORIN Can I pick you up on that climate change one? Because he did sort of allude to that in his speech, and I just wonder, with this superstorm Sandy, whether that might become more of an issue in the US - a little bit more push towards a cap and trade. We call it an emissions trading scheme. Is that something that could happen?
SENATOR BAYH No, not really cap and trade. You couldn't get something like that passed through the Congress, particularly with the Republicans controlling the House. So that's just not going to happen, but there are some things you can do- the President can do by himself through writing regulations that will make the use of fossil fuels, particularly coal, that have much higher levels of CO2 emissions, really make them much less economic. And instead we would be focusing more on natural gas, in particular. We've seen a revolution in our country - huge quantities of natural gas now. That's much more environmentally friendly. And he has indicated he intends to push for more renewables - solar, wind, geothermal, those sorts of things. But that's still a relatively small amount of our energy production.
CORIN Sure. President Obama and Hillary Clinton as Secretary of State have certainly focused a little bit more on the Pacific and into Asia - into our neck of the woods. Do you expect that to continue and those ties that we're seeing between the likes of New Zealand and the US to get tighter and tighter?
SENATOR BAYH I think so. I just got back from Europe and our friends there are a little anxious about the so-called Asia tilt, and I assured them that the United States is capable of, what we would say in our country, walking and chewing gum at the same time - being able to do more than one thing. So it's only natural that as Asia continues to be increasingly important from an economic standpoint, with the rise of China - that raises some natural security concerns - it's only natural that the United States will focus increasingly on Asia. At the same time, we value our relationships in Europe. We don't intend to ignore them. We hope that they get their economic house in order. They face some real challenges there. But the short answer to your question is yes, there will be much more cooperation and attention to Asia than has been the case, even in the recent past.
CORIN It's complicated, though, with China, isn't it? Because New Zealand, for example, has a very close- a growing relationship with China and the US, yet there's that tension between the two superpowers as well, so it puts little countries like New Zealand in a difficult spot sometimes.
SENATOR BAYH Well, I think you'll managed to navigate it, and our relationship with China is a fairly complex one. We respect them. We want them to be a part of the global economy, the community of nations where we resolve our differences peacefully. At the same time, we're large economic competitors. When we have such a large trade imbalance between two countries, historically that's led to frictions, and so we'll work our way through that as well. I think the real concern is I don't think you'll find protectionism in the United States. The real concern is that there are many- there's so much rapid change in China, the tendency there will be to emphasise nationalism and Chinese speaking about the US, and that could flame tensions.
CORIN Just on that protectionism issue, I mean, you see the Trans-Pacific Partnership full-steam ahead now under President Obama still?
SENATOR BAYH Oh, I think so. Absolutely.
CORIN Are we likely to see a bit of a delay, do you think, as things- the inauguration and that type of thing, or is it possible that the negotiations can just carry on as normal?
SENATOR BAYH I think they would carry on. The real problem is that until we get our budget and financial challenges resolved, there's not much oxygen in the room for anything else.
CORIN Just finally, Senator, how would you describe America at the moment? We hear of red state, blue state, the divisions. How would you describe it?
SENATOR BAYH Well, it's very closely divided. The presidential race was 50 to 48 - just a two-point difference. So the Senate's Democrat, the House is Republican. But we face major challenges, and so we've got to be able to break the gridlock that we've suffered from, and I think the real key here is that we begin to think and act again as Americans first, rather than Democrats or Republicans first.; liberals or conservatives first. We have to resolve our differences of opinion if we're going to meet the challenges we confront. I'm convinced we will, but it's not always going to be a pretty or easy process.
CORIN Senator Evan Bayh, thank you very much for coming on Q A.
SENATOR BAYH Great to be with you.