Thom Hartmann: Welcome back, Thom Hartmann here with you. Stephen Moore on the line. The editor with the Wall Street Journal, editorial board member, senior economics writer with the Wall Street Journal and author with Art Laffer of “The End of Prosperity," and the follow-up book, “The Return to Prosperity." WSJ.com the website. Stephen welcome back to the program.

Stephen Moore: Hi Thom.

Thom Hartmann: I understand you are a big fan of Newt Gingrich’s, do I have that right?

Stephen Moore: Well I don’t know if I’d say I’m a big fan. I worked for him when he was speaker briefly and I knew him very well. I’m not picking sides in this race between Romney and Newt, but, there’s a lot of things to admire about Newt and there are a lot of things to not admire about him.

Thom Hartmann: Well he’s got this tax plan that will give millionaires a six hundred thousand dollar tax cut and will raise taxes on working people and middle class people. I am baffled by anyone thinking that this is a good idea. I mean he goes even farther than Rick Perry setting his flat rate at 15% and dropping corporate taxes down to 12 and 1/2%. Where, how do you expect to have a government if you don’t have any income? We’re at the lowest level of income into the federal government right now that we have seen since 19, since the 1930s, since the Great Depression.

Stephen Moore: Well, look, I mean I think his idea of an optional flat tax is something that’s going to be really popular with Americans. I mean the current tax system is, nothing can be worse than what we have right now.

Thom Hartmann: Well it’d be really optional with anybody who pays over 15% income tax, sure.

Stephen Moore: Oh actually anybody, actually everybody would have the option. Of like if you wanted to keep your mortgage deduction or your charitable deduction, you can stay in the old system. But if you want something simple and it takes about five minutes to fill out and you pay just, I think, it’s a 15 or 16% rate.

Thom Hartmann: But Stephen, the common sense thing here…

Stephen Moore: I think that that’s fair. Because look, what you do is you get rid of all the loopholes.

Thom Hartmann: Tell me if I’m wrong on this and clarify. Maybe I don’t understand this. My understanding is he’s going to keep all the loopholes and he’s going to say you can go with the old loopholes system.

Stephen Moore: Yes.

Thom Hartmann: And after you, after you go down to H&R Block or your CPA or you do it yourself, whatever. If you determine that you’re going to owe more than 15% you can say screw that I go with the postcard I’m only going to pay 15%.

Stephen Moore: Right.

Thom Hartmann: It seems to me like anybody who ends up doing their taxes and it looks like they’re going to pay more than 15% is going to say I’m going to go with the flat tax, and all of a sudden you’re going to have trillions of dollars, or hundreds of billions of dollars less money flowing into the federal government. And we’re right now, we’re spending, federal spending as a percent of GDP, is half of what Canada’s is, which is doing just fine, thank you very much, never had a bank crash, isn’t having a recession and is more like Togo. I mean we’re right there with Togo.

Stephen Moore: Well, look, our spending as a percent of GDP right now, federal, state, local is about 35, 36%. I don’t think Canada is at 70%.

Thom Hartmann: Canada is over 50% when you combine provincial and federal.

Stephen Moore: Okay so not 70, so not at 70 % and we’re at 35, 36%. So that’s just not true that they have half, that we have half the spending that they do. But …

Thom Hartmann: Well federal spending is 23%. And Canadian federal…

Stephen Moore: No, our federal, state, and local government spending in the United States is about 36% of GDP.

Thom Hartmann: No I said federal spending.

Stephen Moore: Okay but you have to look at all levels of government. And we’re at 36%, they’re not at 70%.

Thom Hartmann: Okay well let’s just take us up to them. 54%. You know, let’s just go for that.

Stephen Moore: Well I think you know Americans want smaller government, they want to cut the spending, they want more of it.

Thom Hartmann: I don’t think Americans want that. I think Americans want a national healthcare system and that’s what it would buy.

Stephen Moore: We just had an election in November of 2010 and people overwhelmingly said cut the spending, get rid of the bailouts, stop the special interest provisions.

Thom Hartmann: What percentage of American citizens who could vote voted in that election?

Stephen Moore: And I think, Thom, I would think you would like this idea of a flat tax. I mean you and I have talked about this for years. Rich people take advantage of all these loopholes in the tax system. Get rid of them. Just get rid of the loopholes, get rid of the special interest provisions. One thing about the Gingrich plan is that once you move into the, it’s not a life time thing. Once you move into the flat tax, you’re there for good. You don’t get to keep going back and forth. But I also think that a lot of Americans, middle class people, maybe pay more than 15% in their tax…

Thom Hartmann: Try the most of them.

Stephen Moore: But you know what, they’re so intimidated by the system and they hate all the drudgery of dealing with it they would just gladly spend 15 minutes, pay 15% of what they earn and be done with it. So I think you…

Thom Hartmann: Six or seven %, arguably 12 or 13% of what people are making in their first 110 thousand, first 108,600 dollars is payroll tax. Newt’s program doesn’t address that at all. This is only income tax.

Stephen Moore: Oh yes it does. He actually has a new system which allows people to take a big portion of their payroll tax and put that into a personal account so they can actually own the money so they…

Thom Hartmann: In other words, no more social security, no more medicare.

Stephen Moore: No, no, no. Not no more social security.

Thom Hartmann: You get to opt out of paying into social security and medicare in Newt’s plan.

Stephen Moore: You get to take a portion of your payroll tax, which is 15% right now, as you said the biggest tax that the middle class pays. And you get to put a portion of that into a private personal account and you get to accumulate interest on that amount.

Thom Hartmann: Well that’s a great way to destroy social security and medicare.

Stephen Moore: No, no, it’s basically just moves to an IRA type system so you actually own it. Because look, for young people, they’re not going to have social security when they retire.

Thom Hartmann: Of course they are. Of course they are. Stephen that’s, you and I both know that that’s not true. Social security system is solvent for 27 years and it will pay 70% of benefits forever. And if you did away with the cap it would be solvent forever. And you and I both know that.

Stephen Moore: All right, so the system is solvent for 27 years. My son is 23 years old. That means by the time he is 50 the system is going to be insolvent. So look, you know…

Thom Hartmann: That’s assuming we’re going to stay in a recession for 27 years.

Stephen Moore: Well you’re right about that. If we can grow this economy, I mean you’re speaking, preaching to the converted here. We grow this economy to 4% per year, we can then pay social security, we can pay medicare. I mean growth is the answer no question about that. But we’re not growing at that level. We’ve been growing at 2%.

Thom Hartmann: No it’s been a disaster ever since Reagan came into office. You know the three decades that preceded Reagan were all 3.2% growth. The highest in the history of the country.

Stephen Moore: Thom, yeah the ‘70s were such a great decade for the American people.

Thom Hartmann: 3.2% growth for the decade.

Stephen Moore: Thom, the worst four years for family income were the Carter years.

Thom Hartmann: Well I recall 11% unemployment under Reagan, you don’t recall that?

Stephen Moore: Yeah that was in ’82, by ’89 it was under 7%.

Thom Hartmann: Okay. Stephen Moore. Return to Prosperity is the book, WSJ.com. Thank you Stephen.

Stephen Moore: See you Thom, take care.

Thom Hartmann: Bye.

Transcribed by Suzanne Roberts, Portland Psychology Clinic.