American Enterprise Institute

June 8, 2007

[Edited transcript from audio tapes]

9:45 a.m.	Registration
10:00	Introduction:	Christopher DeMuth, AEI
	Speaker:	Newt Gingrich, AEI
11:30	Adjournment

Proceedings:

Chris DeMuth:  Ladies and Gentlemen, can we come to order, please.  I am Chris DeMuth, President of the American Enterprise Institute and delighted to welcome you here this morning for a lecture by AEI senior fellow Newt Gingrich with a characteristically ambitious title – “Government of the people, by the people, and for the People: the Next Governing Majority and the Transformation of American Politics and Government”. 

Newt Gingrich represented the Sixth District of Georgia in the House of Representatives for 20 years and, of course, was Speaker of the House for two terms following his leadership of the Republicans’ triumphant Contract with America election in 1994. 

Since leaving the House, he has remained active in government councils, serving on the Hart-Rudman Commission, the Defense Policy Board and other bodies.  He has been a business strategy consultant, focusing especially on healthcare issues through his Center for Health Transformation and has recently founded an innovative political movement called American Solutions dedicated to building grass roots involvement in policy reform through, among other things, new interactive web technologies. 

He has authored a number of books on politics and policy in recent years, including The Art of Transformation with Nancy Desmond, Savings Lives and Saving Money with Dana Pavey and Anne Woodbury, Winning the Future: a 21st Contract with America, and most recently, last Christmas, Rediscovering God in America: Reflections on the Role of Faith in our Nation’s History.  He has also continued his long-time interest in military history through a series of wonderful alternative history novels with William Forstchen, including their best selling trilogy on the Civil War.  And now just last month, the beginning of a World War II series, Pearl Harbor: A Novel of December 8th.  Newt is a regular news and political analyst for Fox News Network and in addition to his AEI position, is a distinguished visiting fellow at the Hoover Institution in California. 

So how is it that this dynamic political leader, celebrity commentator and polymath author should be associating with a staid, wonky old think tank like the American Enterprise Institute?  Part of the answer is that he remains a professor, his first occupation, devoted to research and study and to intellectual contention as a discovery process.  Another more important part is that he combines the life of the mind with the life of the practical politician to a degree that is all together unique and astonishing.

To Newt, ideas about right policy are never pure abstractions, but must comport with the views, experiences and aspirations of regular men and women who live their lives apart from the worlds of politics of pundit hearing.  Impatient with the formal structures of government, politics and electioneering, he is incessantly concerned with devising new ways to promote active democracy and to draw true ideas and direction from the citizenry as a whole. 

Balancing leadership with populism can be a treacherous business, but it is the essential business of the political leader and no one does it with more panache and creativity than Newt Gingrich.  To those of us who work on policy reform mainly in our offices, it is greatly edifying and inspiring to have him in our counsel.  Please give a warm welcome to Newt Gingrich.

Newt Gingrich:  If you would like to know why someone like me stays at AEI, it is the sheer elegance and joy of having somebody of Chris DeMuth’s competence describe you as having panache.  I mean, only at a place like AEI could you get that sort of treatment.  And actually it occurred to me that the best way to understand this speech is that it is actually the third in a series that I’ve done at the American Enterprise Institute - not by design, but by evolution. 

The first was back on April 22, 2003 when I was beginning to be deeply concerned about the collapse of our national security apparatus and I gave what was then seen, I think, by some as a very stark and aggressive description of the failures of the State Department and the national security system.  I say to you sadly that that speech reads all too well today and that my various comments on things like dealing with the Syrians turned out to be sadly all too accurate. 

Then, on 9/11 2006, I gave a five year review of the global war on terror here at AEI.  To give you a sense of scale, we just finished a novel called Pearl Harbor, and the entire Second World War for the American experience lasts from December 7th, 1941 to September, 1945, less than four years.  We mobilized the nation, built a two ocean navy, built over 50,000 aircraft a year, over 100,000 armored vehicles in 1944. 

We liberated North Africa, Sicily, Italy, France, Belgium, Holland, Luxembourg, Norway, Denmark, conquered Germany, stepped across the Pacific.  Built the most expensive project of the war, the B-29, and the second most expensive project of the war, the atomic bomb.  Ended the war in less than four years.

It now takes 22 years to add a runway to the Atlanta airport. 

What struck me over this evolutionary process of moving from somebody who was working every day to try to get the Republican leadership on the Hill and the Republican leadership in the White House to be the forces of reform, to realizing that the problems are so fundamental and so large that they cannot be resolved within the normal political process, was the fact that I spent a long period where 40 percent of my time was on health and 40 percent of my time was on National Security. 

As I would go back and forth, I began to realize they were the same problems.  That if you want to know why CMS doesn’t work and why Medicare doesn’t work, study the CIA.  If you want to know why Homeland Security doesn’t work, study Medicaid.  They are all the same underlying essential problems.  And so I asked Chris if I could come today and make an introduction to a very complicated topic. 

To show you how complicated it is, I hope to come back later this summer, probably in July, and have a six hour workshop for those of you who can’t resist.  But do it because I think this a serious fundamental moment of reassessing America.  Now, my topic, “Government of the People, by the people, and for the People: the Next Governing Majority and the Transformation of American Politics and Government” was captured perfectly yesterday -- I say this with some hesitation with Ralph Hallow in the front row – in three op-eds in The Washington Post, please don’t tell Tony. 

The first was by David Broder, who wrote that the 18 presidential candidates who he observed take part in debates at St. Anselm College in New Hampshire, “displayed a remarkable ability to ignore the real world consequences of many of the policies they were advocating.”  The second was by George Will, who wrote of the Newark school system that while it spends $17,000 per pupil, which is 75 percent above the national average, that a full 70 percent of Newark’s 11th graders flunked the state’s math test. 

Will notes that Cory Booker, the new Mayor of Newark, pointed out to him that not a single elected official of the previous administration sent their children to public schools.  Let me note parenthetically that the failure of the Newark system is not the worst.  The failure of the Newark system is symptomatic of much of the rest of urban school systems.  Take Detroit, which the Gates Foundation said was the worst.  It graduates 21 percent of entering freshmen on time. 

That is, the Detroit school system today cheats four out of every five young people who enter their freshmen class.  Now to show you the scale of this as a human tragedy, if you are an African American male and you drop out of high school, you face a 73 percent unemployment rate in your 20s and a 60 percent likelihood of going to jail.  So fundamental school reform is as deeply humanitarian an issue as we have in the United States.  Comprehending this level of failure allows us to appreciate the third op-ed by David Ignatius, who wrote these words:

American today faces challenges that often seem too big to handle.  That is the measure of our failure.  We are a country that is not solving its problems, that cannot summon the will to break down the obstacles to fixing what is wrong.  This has to change, or America will enter a period of cyclical decline.

Now, my assertion is very stark and very direct.  It is impossible to achieve Broder’s desire for real solution, Will’s desire for real reform and Ignatius’ hope for an effective America in the current system, because the current system is broken.  In order to define broken, there are three standards. 

First, who do we serve?  Second, what do we value?  And third, how do we measure achievement?  It is clear that instead of serving the people, the machines of permanent government serve themselves.  It is clear what they value is to get our money for their purpose, even without serving us.  It is clear that their measures always excuse failure on their part. 

Over the 42 years since the beginning of Lyndon Johnson’s Great Society, the rise of an elite establishment that imposes political correctness, the increasing power of public employee unions and the emphasis of bureaucratism, the growth of lawyers, and the development of complex regulatory legalism have created a system that cannot work. 

I want to make this clear – this is not about reform. 

This system cannot work and cannot be reformed from within.  Bureaucratism values process more than achievement, legalism values follow the rules more than achievement, and political correctness values avoiding embarrassment more than telling the truth about failures. 

When you understand the intellectual framework and the interest group structure of the permanent government, whether in Washington, Sacramento, Trenton or Albany or other centers of power, it in fact works for the governing class and the elite establishment even if it doesn’t work for most Americans or for the country. 

And let me say it was as much my analysis of Sacramento, Trenton and Albany as my analysis of Washington that led me to this conclusion.   For example, while Detroit schools only graduate 21 percent of their entering freshmen on time, that would assume that their most important metric is how well they serve the students.  But the fact is that the bureaucracy is paid on time. 

So from the standpoint of the bureaucracy, the Detroit schools are a very stunning success and they prove it every time they issue a check.  This calls to mind Jerry Pournelle’s iron Law of Bureaucracy.  He said, quote, “In any bureaucratic organization, there will be two kinds of people, those who work to further the actual goals of the organization and those who work for the organization itself. … The Iron Law states that in all cases, the second type of person will always gain control of the organization and will always write the rules under which the organization functions.” 

Today there exist an alliance of left wing intellectuals, comfortable public employee bureaucracies and lawyers that sustain the interest groups who are winning, even if it is against the values, the beliefs, the traditions and the interests of the vast majority of Americans. 

In fact, precisely because they represent a minority seeking to hold power, they have to adopt laws which are more and more restrictive of the citizenry.  And I think McCain-Feingold can best be seen as the first effort since the Alien and Sedition Acts of the 1790s to attempt to censor the American people.  I want you to think about this.  The Alien and Sedition Acts were passed by the Federalists in order to shut up the Jeffersonians. 

And if you listen to the debate in the House and Senate, it’s quite clear.  The incumbents wonder why those citizens should be allowed to say things.  As one Senator said recently, “Now we can tell the bigots to shut up” and McCain Feingold is one of the instruments by which they attempted to do it.  It is amazing to see those who are elected believe that they are superior to those who elect them; it is fundamentally a violation of American history. 

This system of self-reinforcing power can never be reformed from within, but that should not lead us to despair.  Because the Founding Fathers provided for precisely this kind of problem to be solved by the will of the American people. 

The proposition for this speech is simple – you cannot solve America’s problems within the structure of government and the structure of politics that currently exist and are broken.  And no campaign that begins with these structures and accepts the principles of these structures has any hope of solving America’s problem. 

The Founding Fathers understood that it was possible for the machinery to become broken and observed in our very founding document, the Declaration of Independence, the right of the people to fundamentally overhaul their system of government.  Quote, “We hold these truths to be self-evident: that all men are created equal.  That they are endowed by their creator with certain unalienable rights.  That among these are life, liberty and the pursuit of happiness.” 

Now that part almost all of us have heard routinely, but we seldom go beyond that:

That to secure these rights, government are instituted among men, deriving their just powers from the consent of the governed.  That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or abolish it, and to institute new government, laying its foundation on such principles and organizing its power in such form as to them shall seem most likely to affect their safety and happiness. 

Notice that safety comes first. 

For the ninth time in our history, we are at a magic turning point where there has to be a fundamental eruption of the American people to simply break the power structure that represents the past.  Anything less than that would lead to decay and ultimately a dramatically weaker, smaller and more vulnerable America.  Happily for America, with the singular exception of the Civil War, every reform movement has been peaceful, political and decisive. 

The Jeffersonians replaced the Federalists despite, I might note, the Alien and Sedition Acts.  This was the first great peaceful act of transition in human history.  The Jacksonians replaced the existing establishment.  The Lincoln Republicans eliminated slavery, but at an enormous cost.  The Progressives replaced the agrarian model of the 19th century.  The New Deal replaced the center right majority that had governed the country for most of its history.  And Reagan and the Contract with America marked the first great step back from the redistributionist society that was willing to appease Communism. 

Understand the scale of what is being proposed.  Because if not on this scale, it will not succeed.  Now we find ourselves in the following situation.  In 1986, the American people were told if we were to accept amnesty, we would gain control of our borders.  And I suggest you read The Reagan Diaries as to why he signed the Simpson-Mazzoli Act in which he said, “We have to control the border.” 

The establishment lied to us. 

The message to politicians was that the American people simply had to accept the failure; but the message to politicians and the American people should be: change or expect defeat. 

Let me make this clear.  When people go home and explain failure, we need to hire new people who are willing to change the failure.  This was captured for me by Secretary Chertoff who said recently about the impending immigration bill that the proposal, quote, “bows to reality.”  I think this was the most significant psychological revelation of a powerful figure recently.  Bows to reality.  The American people are now being told we must bow to reality. 

But we Americans know that bowing to reality is the opposite of our tradition.  We look at the failure of the border and say, “We refuse to bow.”  We look at the failure to rebuild New Orleans and say, “We refuse to bow.”  We look at the failure in New Jersey to identify three illegal terrorists who were here for 23 years, despite 75 interactions with the police in the last six years and say, “We refuse to bow.”  We look at the holding of five American hostages in Iran and say, “We refuse to bow.” 

All those who are willing to bow to failure after failure after failure have a current system they can work with.  It will fail and they can bow.  But for most Americans, this is not an acceptable future.  Most Americans believe that we hire leaders to change reality so that it fits our values, not to change our values to fit the current failed reality. 

We must be honest about the size of the challenge being proposed.  Refusing to bow and insisting on changes on this scale will be very hard. 

Refusing to bow to King George took a seven year war. 

Refusing to bow to the Federalist domination forced Jefferson to invent the Democratic Republican party. 

Refusing to bow to the Eastern establishment’s domination forced Andrew Jackson to invent the most expensive campaign ever seen until that time in the election of 1828. 

Refusing to bow to slavery caused the most difficult war and most painful casualties in American history. 

Refusing to accept the status quo led the Progressives into an 18 year struggle to force the modernization of government from 1896 to 1914. 

Refusing to bow to the Japanese attack on Pearl Harbor led to the demand for total victory and required the most extraordinary four years of effort in 20th century America. 

The rise of Ronald Reagan and the passage of the Contract with America was a 35 year process from the Draft Goldwater Committee of 1963 to the Balanced Budget Act – I’m sorry, 1962 – to the Balanced Budget Act of 1997.  So both from my studies as a historian and from my personal experience as a citizen involved in self-government since August of 1958, I say to my fellow Americans who know we must do better, who know we must defend and strengthen our values, who know we must defend our country, we will have to roll up our sleeves and prepare to engage in whatever level of struggle it takes to replace government by special interest, government by an elite establishment and government by over-weaning bureaucrats and lawyers with government of the people, by the people and for the people. 

Let us remember in describing the cost of preserving government of, by and for the people, President Lincoln, who said, in dedicating the first national cemetery at Gettysburg, said, quote, “It is rather for us to be here dedicated to the great task remaining before us, that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion.  That we here highly resolve that these dead shall not have died in vain.  That this nation, under God, shall have a new birth of freedom.”

For our generation, what does that “new birth of freedom” look like?  To achieve this new birth of freedom, we must have both the principles and a process for a movement of change. An American Solutions movement of change. 

And I will now introduce both the principles and process and talk briefly about the academic intellectual requirements.  Later this summer, I will expand upon this in, as I said, a six hour workshop, because it is really this complicated, it is really this fundamental.  This is not about a 30 second commercial; this is about a fundamental replacement of a failed intellectual structure, a failed interest group system and a failed process of politics, and that is not something that one handles glibly or briefly. 

First, I want to talk about the principles and values on which such a movement should be built; second I want to talk about the process of the American people building such a movement; and finally I will discuss the intellectual effort required to inform and empower a generation of solutions.  In order to achieve the successful America that we all desire for ourselves, our children and our country, an American solutions movement must be clearly committed to three fundamental areas of change. 

First, from the politically correct values of our elites back to the fundamental values of the vast majority of Americans. 

Second, from an increasingly ineffective and incompetent system of bureaucratic failure and destructive government policies to the systems that work and policies that work in the 21st century. 

And third, from uncertainty about danger in the world and confusion about the value of public safety to a clear recognition that the world is dangerous and the first obligation of government is to defend America and our allies and defeat our enemies, and to enforce the key principles of the oath of American citizenship.  Quote, “That I will support and defend the Constitution and laws of the United States of America against all enemies, foreign and domestic.” 

First, let me discuss the core sense of values, and here I want to make a key point about the concept of American Solutions.  This country is sick and tired of being told about Red versus Blue.  It is fundamentally a false model brought about by the desperate need of the left to pretend that it is in the majority and the incompetence of the right in representing the majority.  It takes both sides to have gotten to a Red versus Blue model. 

Let me give you some examples.  I want you to tell me what the Red versus Blue argument is here.  91 percent of all Americans favor the right to say “One Nation under God” in the Pledge of Allegiance.  So when the 9th Circuit Court irrationally defies all of American history and says that it is unconstitutional to say “One Nation Under God”, it is at worst a 91 to 9 position.  How can you possibly say it’s Red versus Blue? 

There is Red, White and Blue at 91 percent and an occasional nut.  I mean, how can you describe this as Red versus Blue?  And yet, in The New York Times it is described as though they were two equal forces.  The second example – 89 percent believe that American workers should have the right to a secret ballot election before being forced to join a union.  The greatest single strategic mistake that the Democrats in the House made this spring was forcing through a vote to strip American workers of the right to a secret ballot. 

And if the average American understood that that vote had passed in the House, the Democrats would be in danger today of losing the majority.  I don’t say that as a partisan comment, I say it as a question of majority.  If 89 percent of the country believes you ought to have the right to have a secret ballot election, probably the number who believe you should not have that right is in the 8 or 9 percent range.  Now, this is Red, White and Blue versus union bosses.  But it certainly is not Red versus Blue. 

The third example, 93 percent of the American people, more than “One Nation Under God”, 93 percent believe that every American should have the right to know price and quality before they make a decision on healthcare.  So if we were to propose that Medicare ensure that every senior citizen know price and quality before they made a decision, would that be a radical market-oriented conservatism, or would that simply represent 93 percent of the country? 

And yet you know how it will be portrayed in The New York Times.  One or two more examples, a recent serious issue – 85 percent of the American people believe English should be the official language of government.  Now at 85 percent who believe English should be the official language of the government, how could that be the Red position, which is how it will be interpreted by the elites?  It is clearly the position of the vast majority of the American people, including by the way, most Hispanics, most Vietnamese, most Chinese.  I mean, people who come to America want their kids to become American.  Only the elites are confused about that. 

You have to be very rich and very comfortable to be confused about whether it’s good to become an American.  Finally, 78 percent of the American people believe we should abolish the Death Tax because they instinctively know that it’s wrong to require someone to go to the IRS and the undertaker in the same week.  I just give you these five examples because I believe it is possible to combine these things: the core values of an overwhelming majority of Americans. 

I learned from Ronald Reagan who learned from Franklin Delano Roosevelt, great leadership in a free society is defined what the American people truly deeply believe in and to articulate and advocate that in a way they can understand.  This is not pandering, this is not opportunism; this is an effort to lead a free society in articulating its own values so that it is, in fact, working for itself.  That is the heart of a culturally free society.  And yet America feels divided because the elites desperately have to seek to maintain power while only having a minority of support. 

Now in addition to these broad positions, there is a second part of creating the principles of a movement as it relates to values.  And here I want to say that we need to have a serious intellectual argument across the country.  I believe the lessons of American history are central to American civilization, and I believe that we live in an American civilization that is quite distinct from Europe. It has different values, different structures, different patterns. 

And that, in fact, it has been the most successful synthesizing system in the history of the human race, that allows people to come from anywhere in the world, from any background, and achieve an extraordinary future. 

Now, I will give you a minor example – I had lunch yesterday with Carl Lindner in Cincinnati.  Carl and his brother and sister in 1940 opened a convenience store, and on their first day, did $8.28 worth of business.  His sister likes to note that is because they didn’t open until 2 and was confident that they would have done better had they opened at the beginning of the day.  $8.28 in 1940.  Last year Carl Lindner personally donated more to Cincinnati than the entire United Way.  In one lifetime.  That is an American capability.  Very hard to achieve in Europe, almost impossible to achieve in Africa or in Latin America.  To rise from being very poor to being the center of philanthropy in your community.  It is, in fact, what Andrew Carnegie wrote about in his memoir, that it’s the right system.  Create the wealth and then direct it in ways that lead others to the chance for themselves to follow in your footsteps. 

So I want to suggest to you that part of the principles of creating an American Solutions movement has to be to learn from American history.  To recognize that for 400 years, literally 400 years this year, we have been developing a series of principles – principles of the work ethic, of incentives, of creating a larger pie, of economic growth, of personal responsibility, of entrepreneurship, of an effective market, of limited government, of relying upon science. 

And when I say these things, these things go back to the core of America.  To understand the rise of modern America, study Benjamin Franklin as scientist and entrepreneur, not merely as diplomat and politician.  To understand Washington’s role in scientific agronomy, look at Jefferson’s interest in science, look at the Patent Office being put into the Constitution. 

This system is based on fundamental beliefs that together we create a larger, a more profitable, a wealthier, a more successful future.  Prior to 1932, the driving pattern of America was unequivocal – incentivize the growth of a bigger country, don’t punish those who are successful.  And after 1932, it was flipped on its head.  And so, part of what we are looking at, and let me take just the work ethic.  When they landed in Virginia having erected a cross at Cape Henry and given thanks to God for their safe journey in 1607, they found that they were in a new world.   And the new world required real work. 

And John Smith created the core underlying fabric for 400 years of American success when he said to the gentlemen in the group who were refusing to work, because they were gentlemen, quote, “If you do not work, you will not eat.”  Which is, in fact, a paraphrase from St. Paul in Thessalonians.  And from that point onward, there was an underlying American assumption: people had an obligation to go do something. 

Interestingly, the Founding Fathers in the Declaration of Independence say we are endowed with the right to pursue happiness, which is actually a Scottish enlightenment phrase meaning the pursuit of virtue and wisdom.  But notice he uses “pursue” – no right of lawsuit if you are unhappy, no federal department of happiness, no program for redistributing happiness, no guarantee that you will be happy - the right to pursue. 

There are several books that helped educate me about this.  Marvin Olasky’s The Tragedy of American Compassion is as brilliant as any work I know in explaining all of the core values of the 19th century charitable workers, all of whom believed in the work ethic and all of whom believed giving money to the poor destroyed them.  It’s a fascinating work.  And he describes from the Great Society onward how the modern left-wing social welfare state gradually corroded the core values that had historically made America a country that focused and emphasized success. 

Amity Shlaes has a new book that comes out next Monday, The Forgotten Man, which I commend to all of you.  Because it is a brilliant intellectual study of the underpinnings of the New Deal transformation of moving America from concern for producing more to redistributing.  Fundamentally different models.  She quotes William Graham Sumner who at Yale was the great theoretical economist of how free enterprise should work. 

From his essay which is called, this is interesting – it is Sumner who invents the term “the forgotten man,” not FDR.  It is FDR who takes the term and twists decisively its meaning.  And as Amity Shlaes points out, this is as important as any single intellectual moment in American government and politics.  Here is what Sumner said in his original essay:  Quote:

 These illustrations bring out only one side of my subject and that only partially.  It is when we come to the proposed measures of relief for evil, for the evils which have caught public attention, that we reach the real subject which deserves our attention. 

As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X.  Their law always proposes to determine what C shall do for X, or in the better case, what A, B and C shall do for X.  As for A and B, who get a law to make themselves do for X what they are willing to do for him, we have nothing to say except that they might better have done it without any law. 

But what I want to do is to look up C.  I want to show you what manner of man he is.  I call him the forgotten man.  Perhaps the appellation is not strictly correct.  He is the man who never is thought of; he is the victim of the reformer, social speculator and philanthropist.  And I hope to show you before I get through that he deserves your notice both for his character and for the many burdens which are laid upon him.

Now, that was an America which thought you should design policies to encourage the forgotten man to be more productive, not design policies to transfer wealth from others to a forgotten man who has not been productive.  Fundamentally different core social contract and one which up to 1932 had made us the most dynamic and most extraordinary society in the world.

Now, it is captured in a Ronald Reagan story, that Reagan used to say that in Britain, when a working man saw a Rolls Royce go by he would say to his son, “Someday we will get that person out of that car.”  In America, if a Cadillac went by, the working man would say to his son, “Some day you will own that car.”  David Ignatius captured this in a novel in which he describes a union organizer who has named his son after Carl Sandburg because he wants him to grow up to speak for the poor.  And his son decides to get rich. 

And Ignatius says that what his father didn’t understand is that it is the dream of every steel worker to own the mill.  Now this again is a return to a different America.  An America, by the way, represented by the number of self-employed people today, which is far larger in California than the number of union members.  But it’s an America where everybody is allowed to dream and everybody is allowed to work hard and everybody is allowed to learn from their mistakes. 

Very different than an America that assumes that some have and therefore they should give to those who don’t have.  A fundamental different debate over the nature of America.  Now I am intrigued and believe this is doable because I just watched it happen.  I do a newsletter which, if you are interested in getting, you can go to newt.org and sign up for it.  It’s free and it comes out every Monday.  And about three weeks ago, I wrote “A French Lesson for Republicans”, and it’s about the election of [French President Nicolas] Sarkozy, which I think is the most important political event this year and one which every would-be Republican presidential candidate should study carefully. 

Sarkozy was serving in Chirac’s cabinet.  Chirac has been president for 12 years.  The country is totally tired of him.  By any normal political science model, Ségolène Royale, the left wing candidate, should have won.  There is no model by which he should have lost.  But three years ago Sarkozy began to be different. 

First of all, he is different.  First generation French, his father came from Hungary, just his name is different.  He is very pro-American, both his daughters were sent to school in the United States and he defended it very aggressively in public.  And he began campaigning on only three things – you can come to France, but you must learn to be French; I will enforce the law; and the most intriguing theme, which I think fits exactly this point about the work ethic, think about a presidential candidate on the following slogan:  The French will have to work harder. 

And they had a national dialogue and the average person said if we’re going to survive in the world market and we’re going to deal with our unemployment rate and we’re going to have a better economic future, gosh, maybe we will have to work harder.  But he then – this is why we are creating an American Solutions movement - he then translated it into I think the most ingenious modern suggestion about how you break out of a welfare state that has a 35 hour work week. 

If he just went in and said – “Oh, why don’t we move it up to 40 hours”, he would have been involved in “Why are you oppressing the workers?”.  He didn’t say that, he said “Fine, keep the 35 hour work week, but if you want to voluntarily work more than 35 hours, all overtime is tax free.”  And they will presently have a provision, because they are going to win the legislative election from everything I’ve seen, which is in about two weeks.  And they will have, he’ll pass a law that makes overtime tax free. 

Now, I am working right now with Ken Kies and some other people to develop a proposal to match the French.  I’m not going to go beyond that, just let’s just match the French.  If you are a worker, we probably ought to cap it at $100,000 or $150,000 and we can argue over this.  But if you are actually working, this is not earned, you know, this is not rents.  If you are out there working, whether you are a self-employed small business person or you are a – and there is a way to figure out and calculate the hours – then why shouldn’t we say let’s match France – and if you work more than 40 hours - in our case it’s 40 not 35.  But if you work more than 40 hours, why not make it tax free?  This means every young couple who is willing to work hard will have the money to buy that house.  It means families who want to work hard will have the money to put away for their children’s college.  It means people who want to work hard will have the money to put away for their pension because it won’t be going to the government. 

Now it will lead to a hue and cry; I mean, can you imagine the screams from the Left?  Because they think it’s their money.  How can you take this money from government?  But I think that’s the fight we want.  Do you want to redistribute the pie or do you want a bigger pie?  Do you want to incentivize behavior, or do you want to punish behavior?  This is just to give you an example, because I think that Sarkozy begins to create the right kind of choice.  And I think the debate over the nature of America’s future and the core cultural values of America is the debate the Left will win least easily.  Once you get down to the basics, it is impossible for the Left to sustain their core values in public. 

Now, the second zone I want to talk about is changing government from the world that fails to the world that works.  And I cannot be too explicit about this.  And this is the evolution that began for me at this podium when I gave the speech in the State Department in 2003 and it just got worse every month after that.  And for me, the final breaking point was December of 2004 when I took 53 hours of briefings on Iraq and the War on Terror and concluded at the end of that, a) that this machine is just broken, and b) that amazingly, it’s as broken at CMS on Medicare and Medicaid as it is at the State Department and the Defense Department, and it’s a system-wide.  And then Katrina came along after that.

And from that point on, I didn’t see how any serious person could pretend that the American government can function.  Just take the example two weeks ago of the man with tuberculosis who shows up at the border after five and a half years of effort.  The computer says two things: do not let him in, and deal with him only in a [bio] hazard suit.  Now most of you probably would have enough concern for your own survival that if you saw the computer say to you don’t go near him unless you are in a hazard suit. 

And we had a guard sufficiently untrained that he made a personal judgment that he didn’t think the guy looked sick.  Now this is the quality of your government defending you.  By contrast in 1942, the Nazis landed eight spies, four in Long Island, four near Jacksonville, Florida.  They landed the four on Long Island on June 13th and the four near Jacksonville on June 17th, 1942.  We had arrested all eight by June 28th. 

And Roosevelt then instructed that there would be a military tribunal and that they would be executed before the end of the summer and then said flatly to the Attorney General that he would not honor the writ of habeas corpus.  And two of them got commuted sentences and six were executed.  That was a country that was serious.  You now have a country so unserious that a direct warning about tuberculosis isn’t noticed. 

The next time you take your shoes off; just think to yourself thank God that you don’t have a communicable disease, because you have gone through an airport where you have no reason to believe that they would have a clue.  It’s this serious, it is this fundamental.  Now, here is what I mean – there is a world that works and every one of you lives in it, and there is a world that fails, and every one of you lives in it.  Just two examples – how many of you have ever gone online to follow a package at UPS or FedEx? 

Just raise your hand – virtually the whole room, right?  I want to make this case – this is not a theory.  I’m in a think tank, I have a PhD, this is not a theory.  It is a fact that in the world that works, you can track packages in virtually real time.  In fact, by the right investment of information technology, the right corporate culture, the right reward for incentives and punishments, you can train people so that literally millions of packages are tracked in real time. 

Now here is the world that fails.  The federal government cannot today find somewhere between 10 and 20 million illegal immigrants, even if they are sitting.  So several million packages a day while moving, several million people while not moving.  Now, to me that leads to a very obvious proposal which is that we send a package to every person who is here illegally, UPS and FedEx delivers them, we track them on the computer.  [Laughter]  You see, if Chertoff would call me, we could fix a number of these things very fast. 

But let me give you the second example.  And I am using these very simple practical examples because I want you to understand how core the difference is.  This is not some abstract theoretical thing – this is something you personally experience every day.  How many of you have ever gotten money out of an automatic teller machine outside the U.S.? 

Again, a pretty well traveled crowd, not a theory, right?  Callista and I were in Berlin a couple of weeks ago, walk up to an anonymous machine, 24 hours a day, 7 days a week, put in a plastic card, punch in a four number code, it reaches out 4905 miles, it finds our account, verifies that we exist, validates that we have money, translates it into Euros at a slightly bad exchange rate, but better than the hotel.  It took 11 seconds.  Is that about your experience? 

Okay, so this is not a theory.  You are prepared to believe in the accuracy and the security of an ATM to open up your account across international boundaries – that’s the world that works.  Over here is the world that fails.  In California, there is a lawsuit involving a hotel that dismissed 13 people who had illegal documents and had an injunction against them because California state judges do not believe illegal documents are a firing offense.  And one of the 13 was the 42nd person to use the same Social Security number. 

Now consider the difference between your bank recognizing your PIN and only your PIN, and the fact that Social Security not only didn’t recognize number 2, number 3, number 4, they still haven’t recognized number 42.  Now, what is the answer?  First of all, the answer is very profound.  What I am describing is not going to be easy, it’s not going to be simple, and the number of interest groups opposed is going to be amazing.  But here’s how you do it, you ask the following questions of government at every level.  And by the way, what I am describing is not about the presidency. 

There are 511,000 elected positions in the United States.  This is about all 511,000.  It is about school boards, county commissions, city councils, sheriffs’ office, the state legislature.  The presidency is only one of the 511,000.  In that setting, you ask first who do we serve?  Second, what do we value?  Third, how do we measure it?  Fourth, what are the principles that work?  And fifth, how do we change from failure to success? 

Very straightforward and hard . It’s been done, by the way.  I commend to you Rudi Giuliani’s extraordinary achievements as Mayor.  Today, because he introduced [COMPSTAT], there is 75 percent less crime in New York City than in 1993.  It is the safest large city in the United States; it is four times safer per thousand people than the city of Houston.  And you can read Giuliani’s Leadership or Bratton’s Turnaround or Michael Lewis’ Moneyball and you get a pretty good idea of how metrics apply – metrics is at the heart of what I am describing: measuring accurately what you are worried about.  Making sure you are focusing on what matters. 

In fact, I would argue that General Lute, who testified yesterday, his primary job is to ascertain the correct metrics for Iraq and Afghanistan and to insist on changing the system until we get to those metrics.  And if he does anything less than that, his job will be a failure.  If he does it right, it will be a historic job, and it will be extraordinarily difficult. 

If he does it wrong, it will be just one more layer of red tape in a system that already has too many layers.  But blocks to these changes are bureaucratism, legalism and political correctness.  But I think across the country, from D.C. to Sacramento to Albany to Trenton to local governments, we can make these changes.  The simple test, and this is how you measure it, a market-oriented, entrepreneurial system that is based on science and technology consistently produces four values.  And you can ask every government in the country, “Can you meet this test?”.  More choices, of higher quality, at lower cost, with greater convenience.  Think again the ATM story.  Think of the FedEx UPS story. 

So when people tell you that we are going to have hard choices in healthcare, know that means they are being stupid.  You don’t get hard choices in healthcare unless you insist on government making the choices, in which case I guarantee you, you’re going to get hard choices.  And I will come back to that in just a second.  Let me – I want to repeat this: more choices of higher quality at lower cost with greater convenience – that is the hallmark of the world that works. 

The world that works is Drucker, Demming, Juran. It is market-oriented; it is entrepreneurially driven; it is science and technology based.  It is the Toyota Production System.  It is lean manufacturing, it is Six Sigma.  None of it is magic.  All of it is known and there are millions of people in this country who know how to operate in the world that works.  And every government in this country should create an advisory council and transformation half of whose members have to come out of the world that works. 

And you will overnight change the dialogue about public policy in America because they will raise things like incentives, metrics, actually knowing what is going on, accountability, change.  Fundamentally different than the way in which we have done things over the last 50 years. 

Let me give you a quick example in health.  It is possible, it is absolutely possible to design a free market-oriented system by which every single American is covered by health insurance.  But the question is what health system are we insuring?  Very quick numbers.  These are from Secretary Levitt.  He has sleep apnea.  He is going to leave Utah to come to Washington.  He calls his insurance company.  He has been using a machine for six years to sleep at night, he needs two new machines: one for his home, one to travel, because he’s going to have a federal job and travel all the time. 

The insurance company says, “No, no, we’ll sell you one, $950 dollars, your co-pay is $190.  You have to go buy the other yourself.” 

[Levitt] is irritated, but he goes online.  Same machine, same company, $375 dollars.  He calls back, “Great news.  We can buy – ,” (Remember this is a country of shoppers.  What I’m trying to drive at here is the core cultural definition of America.  Here is a nation of shoppers, with a health system of non-shopping.)  So [Levitt] says, “Great news, we could buy two machines for $750 dollars.  My co-pay will be $150.  We’ll both be happy.” 

Answer:  “No.”  (Now, don’t you understand how stupid the current system is?) “No.  We have a long-term contract.  It’s $950.  Your co-pay is $190.” 

Levitt sent a letter to the CEO that day saying, “I’ve dropped your insurance because I don’t want to be associated with a company this stupid.” 

Now, I’ve used that story for two years.  Levitt recently told me a new story which I have permission to share with you.  He decides he’s turned 60, he and his wife need a colonoscopy which is a very important preventive care.  And so he gets on the phone himself to measure episodes of care.  Famous Washington hospital, Doctor A, $6,750.  Same hospital, same room, same equipment, Doctor B, $5,750. 

But he knows from Jack Wennberg’s work at Dartmouth, that the highest value lowest cost hospital in America is Intermountain Healthcare in Salt Lake City.  And so he calls back home, and they say, “$3,300 dollars.”  And so for the last three months I’ve been going around telling this story.  That Levitt and his wife could fly home first-class, see the grandkids, have the colonoscopy, and save $2,000 dollars apiece.  Two days ago, I see Brent James, who is a surgeon who is the leading IT person at Intermountain Healthcare, and who has a briefing on healthcare I recommend to all of you, and it’s a work of genius. 

Brent James is sitting there and I’m telling this story, and James says, “Actually, if you want to do it at the clinic as an outpatient, it’s $900.”  Now, I want you to look at these numbers.  Because this is what you’re caught up in.  Public policy debate in Washington over how to finance $6,750 when you can get it done for $900.  This is just stupid.  It’s not liberal, it’s not conservative, it’s stupid.  And it’s time that we cut through the stupidity. 

Well, a couple more quick examples.  Humana did a study in Milwaukee, and this was announced by Congressman Paul Ryan a year ago, and nothing is done.  In Milwaukee alone within driving distance you can get a heart procedure for $46,000 or $103,000 in the same city.  Now, which one are we financing?  By the way, the $46,000 is higher quality.  Consistently in healthcare, less expensive hospitals are higher quality, more expensive hospitals are lower quality.  It’s the opposite of buying jewelry and Ferraris. 

Third example.  You want me to have 100 percent coverage for insurance in America?  Fine.  Do you want the Iowa insurance rate of $3,300?  Or the New Jersey rate of $1,404?  That’s for a family of four.  For a family of four, I can insure them for $3,300 in Iowa, $1,404 in New Jersey.  Maybe 10 percent of the difference is cost of living.  All the rest is political pork at the state legislature.  Do you think I’m exaggerating?  The difference for a family of four between Maine and New Hampshire:  Maine is three times as expensive. 

Now, you start talking about a national program for health insurance.  Do you want me to insure you at the New Hampshire rate, in which case I can cut your taxes?  Or the Maine rate, in which case I’ve got to raise your taxes?  Which one is it?  And why?  I mean, it is this dumb.  This is not an intellectual problem.  This is common sense, get the data out in the open, and go back to markets and give people a chance to choose, and make sure they have the information.  And if you know price and quality information you will make rational choices. 

Here are the real numbers in aviation.  The cost per passenger mile of an informed public online buying their own tickets in a market that had easy entry, went from 23 cents per passenger mile in 1978, to 12 cents in 2003, in constant dollars.  Because it is the nature of markets in a science and technology based entrepreneurial system, to produce more choices of higher quality at lower cost with greater convenience.  Period.  And if it’s not doing it, it’s because the government is a destructive agent, intervening. 

So I believe this can work and by the way, in addition to Giuliani – let me be fair.  Governor Romney did before his governorship at the winter Olympics is a great example of the ability to turn things around and be different.  What Pete Wilson did after the Northridge earthquake, where he incentivized the rebuilding of the most important bridge in Southern California, brought it in way ahead of schedule, way under budget.  What was just done in Oakland where they had the same problem. 

By the way, if you took the contractor that Wilson used and the contractor that Schwarzenegger used and assigned both of them the border, it would be done in less than a year.  If you had an incentivized program for the border, you would finish the whole thing in less than a year.  It’s just – of course, you wouldn’t do that because then you would have done that.  And what Mike Levitt did when he was Governor in order to get the highways built around Salt Lake City for the winter Olympics – again, it was incentivized.  They came in ahead of budget, under budget, ahead of schedule. 

We do know how to do this, it’s just that we don’t do it. 

We do know how we fought the Second World War – it’s just we don’t do it. 

So we have to apply back to making America work again by relentlessly, unendingly, establishing – communicating our values, developing a vision to implement those values, establishing a metric system for knowing whether or not we are getting those values and then establishing strategies for those metrics. 

Now one example or two quick examples – when Giuliani established [COMPSTAT] for the New York Police Department which required them to go outside to the private foundation and get $1 million to have a computer for every precinct because, of course, they didn’t have it in the budget.  So it took a public/private partnership to have the computers. 

And the precinct captains, of the 75 precinct captains, three out of four retired in the first year, they couldn’t do it.  George Catlett Marshall, in preparing for the Second World War, retired 55 general officers and 245 full colonels in an Army that was very small.  Eisenhower goes from lieutenant colonel to three star general in 18 months because Marshall’s clearing away everybody who can’t do their job.  Compare that with Katrina.  I mean, if we are serious – this is real change. 

If it’s real change, it’s going to be a real fight, enormous interests of great power are going to feel deeply threatened. 

Let me say very briefly, and I apologize for going so long, but I think this is important, the third section is protecting America.  And here I think that there are some very key questions.  I think this is a debate that we have to have as a country.  I would just list three questions – is the world dangerous?  It’s clear on the Left that they are not sure.  If you listen to their language and their rhetoric, they genuinely are not sure the world is dangerous.  They think America is, but they are not sure the world is. 

Second, do we have enemies?  Are these simply problems of communication, sort of Cool Hand Luke on a world scale?  Or, in fact, did Mahmoud Ahmadinejad mean it when he says he expects Israel to disappear and he expects us to be defeated?  Does Chavez mean it when he goes to the U.N. and says that the time has come to defeat the American empire?  Do the terrorists mean it when they say that they want to kill as many of us as they can, and if they can get nuclear and biological weapons, they will kill millions of us. 

That’s a very serious question.  Is somebody planning to blow up JFK a matter of national security, or a threat to our civil liberties because, after all, why should the FBI intervene when they haven’t yet blown it up?  Very fundamental test question. 

Third, is protecting America from nuclear and biological attack the first priority of government?  It’s very straightforward. 

If you read the Constitution, if you read the Declaration of Independence, these are folks who fought a war for seven years.  They were really big on safety.  They really thought that the world is dangerous and the number one reason we form government is to be physically safe.  Well, we need that debate as a country.  If there aren’t any enemies, then why do we have all of this intelligence and defense?  But if there are real enemies, maybe we should ensure they succeed. 

Very fundamental – that’s why this week, I encouraged every radio station on June 6th to play FDR’s [D-Day] prayer of six and a half minutes.  FDR understood we had real enemies.  He thought, as he put it, that paganism could, in fact, destroy our civilization.  He believed that we were defeating evil.  I just want to suggest to you this is the most fundamental test case for us to survive as a country. 

If we are going to survive in the short run, we have to defeat terrorism.  If we are going to survive in the long run, we have to fundamentally transform education, fundamentally reinvest in science and fundamentally transform litigation, regulation and our system of health and energy or we will not compete with China. 

So we have a long-term national security challenge from China and we have a short-term national security challenge from the irreconcilable wing of Islam.  Unless we are prepared to have a national debate and decide meeting those two challenges is essential to our future and we should do what it takes to meet those two challenges, I think we are faced with a very grim process. 

Now in terms of creating a movement, the process will include leading a workshop later on this summer expanding on these details and laying out the principles intellectually.  By July, we will have a wiki up and running where people can come on themselves and participate in creating and developing solutions. 

On September 27th, the anniversary of the Contract with America, we will have a workshop nationwide.  We already have a thousand sites that have signed up for it.  It will be available on the Internet for anybody in the whole country, open to Democrat, Republican or Independent.  We will repeat it on the 29th of September, which is a Saturday, so that people who had to work on the 27th could do it.  In January, we will produce a book called Solutions for America. 

All of that assumes that at places like the American Enterprise Institute, that we can arouse the intellectual energy to meet the challenge.  The fact is, for us to create a successful movement that replaces the power structure of the failed system, we have to be able to re-center the intellectual principles back on things that have worked historically in America, on the principles of Adam Smith, on the writings of Alexander Hamilton, on the works of people like William Graham Sumner and Schumpeter and on the works of people like Drucker and Demming and Juran. 

Second, we need to aggressively re-enter the academic world and be prepared to argue it out with the Left.  Their models are wrong, their principles are wrong, their facts are inaccurate.  It is essential for us to be cheerful about taking them on head to head and engaging them and insisting that academic freedom actually means that both sides get to be in the same stage. 

Third, we need to re-educate the news media.  We’ve had a long stretch of the news media sliding into believing that Left-wingism using the language of the Left, describing the models of the Left, and we need to be fairly enthusiastic about sharing with them the idea, as I said awhile ago, that the UPS/FedEx model is a fact, not a theory.  That ATMs internationally are a fact.  They know this, because they use them themselves. 

I think you might be surprised at how many reporters over the next few years, not as easily with some newspapers’ editorial boards, but how many reporters might be willing to engage reality and discuss it.  Margaret Thatcher said it correctly when she said first you win the argument, then you win the vote.  We’re at the edge of a great national argument about the nature of America, the future of this country, the challenges we have to face and the scale of change we have to win.  If we win that argument, within a decade, this will be a radically more energetic country with dramatically greater incentives, with an enormous investment in science, a dramatic improvement in the learning system and a capacity to lead the planet unrivaled by any country in human history. 

If we lose the argument, we will continue to decay, continue to be governed by those who seek our tax money for themselves and continue to explain away failure and bow to a failed reality.  Inventing the solutions requires the principle development of the intellectual framework within which we can invent wave after wave of new solutions.  It won’t be the work of a week or a month or a summer; it will be the work of a decade or more. 

But I think it’s the work that has to be done, I think it is the reason that places like the American Enterprise Institute exist and I think there’s an entire generation of scholars prepared to engage.  And that the scholars, combined with the actual implementers and entrepreneurs, can form both the argument and the proof of principle that at every single level in all 511,000 elected offices can lead America to a remarkable future.  I look forward to your questions.  My leader is coming up here to protect me by only selecting questions that will be judicious, informed.

Chris DeMuth:  If you could just wait until the microphone comes around, introduce yourself briefly and we have several roving microphones.  Yes?

Questioner:  Mr. Speaker, what kind of space program does the United States deserve and what might it lead us to develop?  How did we get to this point of such atrophy?

Newt Gingrich:  It is a perfect case study, by the way, and this is where I think, if we can re-engage the intellectual community, you raised a wonderful question to study.  I did a book in 1984 called Window of Opportunity and one of the chapters is on space.  I worked with a number of the then younger members – this was 23 years ago – younger members at NASA. 

We envisioned that if we had sustained the momentum of Apollo, where would we have been by 1984?  It’s a chapter worth your looking at sometime. 

Well, I will give you my core vision about science. It’s three components.  We have to radically enhance young people learning science.  We have to dramatically expand the capacity to keep learning science your whole life because my expectation is you’re going to get between four and seven times as much new science in the next quarter century as the last quarter century.  Which just means literally, even if you are a PhD in physics, your rate of obsolescence means you have to learn endlessly, and we have no models for effective and efficient continuous education.  And third, we have to rival process with prizes and let me very briefly explain this. 

Bob Walker and I actually did a two day seminar at the National Academy of Engineering on this a couple of years ago.  I am for investing much more in science.  I think that we should triple the size of the [National Science Foundation] budget, for example, but I am not for a purely peer reviewed, internally oriented.  I mean, I look at NIH and I think we get much less productivity out of the National Institute of Health than we should.  I think it’s largely bureaucratic. 

So why would prizes matter?  Prizes matter for two reasons and the first is they allow anybody to compete for the prize.  Peer review systems, by definition, screen out everybody who a) doesn’t have the right degree and b) can’t fill out the paper and c) isn’t very patient.  There is a second reason that prizes help.  Great breakthroughs by definition involve cumulative failure.  Peer review is a failure avoidance process or a failure minimization process. 

A specific example – the Wright Brothers left Ohio every year to go to Kitty Hawk where they learned from the weather service was the best place, had the best wind to fly.  They would take enough wood to rebuild the airplane five times a day because their working assumption was the plane would crash.  The Smithsonian got $50,000 to build an airplane the same summer of 1903 and the Smithsonian designs a very complex airplane, which it launches from a catapult over the Potomac. 

Now just think about this – to me this is the perfect example of bureaucratic science.  Nobody sat down and said if it doesn’t work the first time, how will we rebuild it?  Because of course, when it crashed in the Potomac, it sank.  Now NIH, NSF, NASA are all in the risk avoidance, paperwork heavy system.  I would like to see us put up a $20 billion prize for the first team that gets to Mars and back. 

Just put the prize over here and say we’re going to continue all the NASA stuff, and here is how I would quantify it.  The morning they get there and back, we quit the NASA Mars program.  Now if you took the amount of money that NASA plans to spend over the next twenty years to get to Mars, my guess is that that $20 billion prize will save you a minimum of $120 billion, because somebody will be there and back about 40 percent of the way into the NASA program. 

A closing example on prizes – Lindbergh flies from New York to Paris for $25,000.  The prize was established in 1919, it took 8 years for somebody to win it.  So that is how – I would re-energize space in a dramatic way. 

Questioner:  Hi, I am Mitchell Whiteman.  How would you deal with what is going on in Detroit and Baltimore and other cities with schools?  You mentioned it earlier, what is a solution?

Newt Gingrich:  I think the first solution is to insist that schools be productive or that you replace them, and that is just a head on fight.  I mean, you decide what matters more, the bureaucracy or the students.  I mean, the fact that nobody goes to the middle of these cities and says why are our young men going to jail instead of to college and why aren’t you changing buildings that failed? 

I would say that Newark is a good example where you are seeing real change.  The KIPP schools [Knowledge is Power Program], a private school system, is a system which graduates and sends to college 85 percent of the applicants in a poor neighborhood where the public school next door collapses.  So I think you have to have fundamental change.  I will say, by the way, that what the Chancellor of New York, what Chancellor Klein is doing where he has actually gotten 1300 principals to sign an incentive contract despite the union is a very interesting step in the right direction.  Because he is establishing – I mean he is not an educator.  I mean, he comes out of the anti-trust Division of Justice.  He is establishing real metrics for performance.  But I think you’ve got to have – if you are not prepared to talk about real metrics for performance and you are not prepared to talk about real change, I think the idea of putting more money into these school systems is basically destructive of the children involved. 

Chris DeMuth:  A question here?

Questioner:  What you are talking about carries you through January with the book that is far more interesting and promising than anything the presidential candidates are doing.  At the same time, you have indicated that you planned perhaps to join those candidates sometime a few months from now.  So is that going to interfere with your schedule of getting these things done, which actually goes –

Newt Gingrich:  What I have outlined here today is vastly more important than anything that I would accomplish, at least in the short run, if I were a candidate.  I hope to give all of those candidates a copy of the book as soon as we have the galleys.  Hopefully one or more of them will take up the book.  Look, on our side of the aisle, there are three or four candidates that could easily fill this vacuum and could adopt these ideas, and I don’t want to get into picking and choosing.

But we try to work with every one of the presidential campaigns, we try to give them all of the ideas of American solutions.  On health issues, I’ve worked with a number of Democrats, as you know, including Senator Clinton.  My attitude is that our job is to create the principles of the movement, create a generation of solutions, create a checklist for voters and then say openly to people in both parties here is an opportunity for you to be a lot smarter. 

I mean, you can be for a dumb system or you can be for a smart system, it’s a pretty good test of a candidate if you say to him do you want to be for the smart system or the dumb system and then pick the dumb one.

Questioner:  Well, the follow-up is, does that mean that you have changed your mind?

Newt Gingrich:  No, my position is unchanged.  On the 30th of September, after the two days of the workshops, Callista and I will sit down with our family and others and look at it.  If there is a real genuine vacuum, we may feel compelled to run.  If there are people who have filled that vacuum and are campaigning on solutions of appropriate scale, we will be happy to keep giving them ideas and start to work on the second annual workshop for 2008. 

Questioner:  Mr. Speaker, Lynnwood Bragen.  I was wondering, with your emphasis on choice, low cost, convenience and quality, what is your opinion of your fellow Georgian’s proposal for a fair tax as a substitute for the income and all other federal taxes?  How would that fundamentally change the culture that you are talking about of the interest groups in Washington?

Newt Gingrich:  First of all, the fair tax would – I have two caveats to the fair tax advocates.  The first is, you have to repeal the income tax amendment or you can’t get to a fair tax.  Because if you give Congress an ability to have both taxes, they will take it.  The second is, you really have to be clear that there is an enforcement mechanism.  I mean, you do not eliminate a revenue service with a fair tax because you have to enforce taxes at the level of the transaction of the businesses. 

Having said that, I think as a theoretical matter, a fair tax – a tax on consumption, I believe, is actually better than an income tax as a method of incentivizing people to be productive and to increase their effort in their work.  So I look favorably on the general idea of a fair tax.  I also candidly think, and I wrote an introduction to his new book, I think that the idea of an optional flat tax, which Steve Forbes wrote about last year, is also worth looking at. 

Several states have now adopted optional flat taxes and given people a choice, because that way you avoid the whole fight over home mortgage deduction, etc.  You say that look, you decide which one is better for you, but if you want simplicity and certainty, here it is.  So I would look at some kind of fundamental change and I think that, I would not rule out fair tax as one of the options.

Chris DeMuth:  Two more questions over here and then we’re going to move.

Questioner:  Mr. Speaker, Julian Tepper.  I admire the CQ C2 formula that you had, the cost, quality, choice and convenience.  It is brilliant – it is more brilliant than simple.  However, I think you have a growing oppositional group of our citizens who now are in the 7th grade and who, within that ten year period you are talking about, will be the people you want to rely on, and they will come into this fear oppositional.  Because, and you being a historian, if you sit in on their history classes, you will see, as you already know, no doubt, that what they learn about how our government works, how a bill gets passed is totally at odds with what just happened, for instance, in the immigration bill sphere. 

So what do you propose to get into the values of the system of education at this point, even as low as the 7th grade, because these are the people you are going to be relying on.  They are going to vote in the 2012 election, to make them less oppositional and more able to carry out the kinds of things that you are in favor of so they can vote for these advisory committees and in these 500,000 plus elections. 

Newt Gingrich:  I don’t want to sound like a Pollyanna, but the left has been actively working, I guess, since Dewey began writing in the ‘20s.  The left has been desperate to reeducate Americans out of this nationalist American centered Puritan tradition, Jamestown, all of this stuff and the left has done everything they could to create amnesia in America.  As a number of people can tell you, books like 1776 sell like hotcakes and the fact that there is some magic morning people wake up – and this is true even for very young kids. 

I mean, despite the best effort to be brainwashed, a couple of things happen to them.  First of all, they look around and there is a world that works and a world that fails, and that is stupid.  I mean, I am like Reagan, I have enormous faith in the average American, so the average kid goes down and says let me get this right. 

I can have instantaneous service 24 hours a day at my ATM or I can try, as my daughter tried the other day, to get a passport at the State Department and be told that the emergency call number probably doesn’t answer, but you can send an email and they will get back to your email in two to four days.  Now you look at these two models of convenience and you go okay, which one do you think works better? 

Now everybody dumb enough to think that this model works better should be a liberal and I am perfectly happy for everybody in America who is sufficiently self deceptive that they think, for example, that the Detroit schools are really good, we shouldn’t say bad things about the Detroit schools because “they’re public.”  Fine – I mean, if you can brainwash yourself to that extent, there has never been more than 30 percent of the country that has been convinced of any of this stuff. 

So after all of the efforts of the NEA and all of the efforts of the liberal academic establishment and all the brainwashing, they go out.  One quick example – we had 1500 radio stations play FDR’s prayer on the 6th of June.  I was describing this last night at a dinner with a group of CEOs, one of whom said – oh yes, my wife just emailed me the prayer.  Now this is spreading just by people sharing with each other. 

So young people who had never thought about FDR, never thought about D-Day, never thought about the idea a president could actually pray with the entire country for six and a half minutes began getting educated.  Now I didn’t make them come to the Gingrich history class, I just let them listen to it while they were driving down the road listening to Neal Boortz in Atlanta or listening to Sean Hannity or listening to a variety of other people, Bill Bennett. 

But I’ve been told by all of the guys who did it the effect has been amazing of people sending in emails.  I think what we have to be is be cheerful and enthusiastic about going out and telling the truth and then winning the arguments.  Then the average person, like a consumer, will go “I got it, I have these two choices.” 

Questioner:  Jackie Kucinich with The Hill newspaper.  The Republicans have been in the minority for about five months.  Do you think that they are on the path to retaking both Houses of Congress or one in 2008?  If so, what are they doing right and if not, what else could they be doing?

Newt Gingrich:  I think two things, because it’s always a binary relationship.  I mean, your relative opportunities are in part a function of your opponent.  If the Republicans run a stand pat presidential candidate who ends up being on defense for all of September and October and who is seen by the country as representing four more years, then the fact is, Republicans are not going to regain the House or Senate, period.  If they run a Sarkozy like figure, and several of the candidates could be a Sarkozy like figure, if the country decides you get real change by voting Republican next year, I think they easily can take back the House.  It’s harder to take back the Senate because of the mathematics of who is up for reelection, but I think the House actually could come back, and for two reasons. 

If they are not absolutely crushed at the presidential level, Boehner is a great team leader.  Boehner put together the Contract with America event and was conference chairman when I was Speaker.  He is an instinctive competitor; he is deeply committed to getting back in the majority.  The fact that stylistically he is a quiet manager leads people, I think, to significantly underestimate how determined he is.  So the Republicans have a chance on their side. 

But the other side is, I have been really surprised at the mistakes that the Democrats have made.  This vote on stripping the secret ballot from American workers is potentially just poisonous.  The vote for the largest tax increase, including repudiating the abolition of the death tax is very hard to carry in the 61 districts that Bush carried that have Democratic members. 

The vote to make Samoa with 53,000 people equal with an American Congressional district and in the Committee of the Whole, nobody understands it, it has never been explained.  Americans say you really think that 53,000 Samoans equal 750,000 Americans?  It works in San Francisco because who cares, but in the rest of the country, this is an absolutely nutty provision.  They’ve racked up about seven votes like that which a relatively clever candidate would just drive them crazy with and I think pick up – in a neutral year or a pro-Republican year, the Republicans will regain the House.

Chris DeMuth:  We have time for a few more questions.

Questioner:  I am Robert Guest from The Economist magazine.  Mr. Speaker, I wonder if you think that the Republican Party might possibly nominate either someone who is pro choice or someone who is a Mormon or someone who is in favor or the kind of immigration reform that just seems to have stalled in the Senate.  I mean on those three things, how big a disadvantage do you think those things are?

Newt Gingrich:   Two out of three. 

Questioner:  Which ones?

Newt Gingrich:  By the way, since you are from The Economist, one of the books that most shaped and informed my thinking on this is The Right Nation, which I think is a very, very shrewd analysis of American civilization and how different it is from Europe and one which I think is pretty accurate.  I knew that would make your morning, but it would make The Economist as an institution happy. 

Look, I think it’s very up in the air. The reasons are straightforward.  Social issues really matter and I would not underestimate this.  Social issues really matter, right to life really matters.  There are a number of places, for example, where I disagree very deeply with Mayor Giuliani.  But in a world where a nuclear weapon could eliminate an American city in seconds, he has a very strong case to make. 

Now whether or not he can extend that and can make it compelling enough to win the nomination, I don’t know, but he has certainly done better so far than people would have guessed.  Governor Romney is a very serious person who is working very hard to develop a presidential campaign.  You didn’t mention the third person who I think is likely to be in the final three, and that’s Senator Thompson, who has been here as a visiting scholar, and is a great guy.  And I think he will be very formidable also. 

I do think Senator McCain carries both the burden of McCain-Feingold, and now the burden of the McCain-Kennedy Bill.  And I think in a sense he actually, of those four, if you’re handicapping, you’d say he has the greatest challenge in the Republican Primary of explaining those positions.  But I think it’s a long way off.  And as you know because I’ve said over and over, I think it’s absurd to run this early. 

The American people make very complex decisions.  And I think that they are going to intuit starting in January, who do they need to actually get them through the scale of change we have to have?  And if we don’t offer very bold, very dramatic contrast both to the current situation and to the Left, we’ll lose.  Period.  If on the other hand, one of those candidates is able to articulate a very serious and very deeply thought out platform of fundamental change, I think that the American people could decide that that’s a person who they believe knows where they want to go, knows how to get there, is prepared to get there, and it is radically closer to where the American people are than is anybody on the Left. 

Chris DeMuth:  One last question.

Questioner:  Mr. Speaker, I’m a Health Care Management major at the University of Alabama, and we’ve studied a lot about CMS, and pay for performance and process improvements in general, so I appreciate you talking about that.  Do you think the pay for performance model based on rewarding process improvements is the right model?  Or what would you suggest as improvements in the details of the plan?

Newt Gingrich:  I think in the long run you want to pay for performance based on outcome.  And I think you want to find what are the right measures of price and quality.  And that’s essentially finding a way to decide how to report information on episodes of care. 

I mean, transaction based systems don’t work.  And in fact if you’ll notice, the average doctor’s fee per transaction under Medicare has gone up between 1 and 1.5 percent a year, while the actual gross payments have gone up around 12 percent a year.  And the reason is, when you slow down the rate of fees, people find other countervailing ways to raise their income. 

You start posting information about real price and real quality, for achievement.  So let’s say you have diabetes, and you want to know, you don’t just want to know, “What do you charge me for a visit?”  You want to know, “What’s your record over five or ten years?”  You know, how well do you help people keep their blood sugar under control?  How well do you help people avoid going blind?  How well do you help people avoid having amputation of limbs?  We don’t have any mechanisms today for this kind of quality information, but we’re going to develop them. 

I think that the rise of these massive information systems and these databases, we’re right at the edge.  We’re doing actually a conference at the Center for Health Transformation on electronic epidemiology in July.  Because we think all these databases are going to make it possible to start having that kind of information where you as a potential patient can look at an array of information in a totally new kind of way.

Well, let me just say, I just want to close and say that I am very, very grateful both to Chris and to The American Enterprise Institute for this opportunity, because there is a, I think, an ability to come here and to share ideas and to be coherent and to try to develop ideas.  And a lot of this has been informed by a series of panels and workshops I’ve been part of here at AEI.  So, I’m thrilled that you allowed me to come and do this. 

Chris DeMuth:  Newt, thank you very much.

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