A chat with Ron Johnson, pt II: trade and economics

In the second part of my interview, we discussed economic issues, especially trade.

I had hoped to go into a lot more depth on some domestic political questions as well, having hoped for at least half an hour to talk with Ron -- but we only had 15 minutes, so we ended things with the financial crisis.

In the interest of full disclosure, I should mention that Kristin Reusch and I knew each other socially through the UW College Republicans -- it in no way affected the content of the interview.

(Part One is here.)

LIB: Regarding China, moving maybe to trade policy: you have done quite a bit of business; your business does quite well with China, is my understanding. How do you think we can push American foreign trade interests in countries such as China that tend to be protectionist?

RJ: Well, I think you insist on free and fair trade. It’s in all countries’ interests, quite honestly, to have free and fair trade. I mean, it really works – any time the world has, you know, devolved into trade wars and stuff has not been good for anybody’s economy. So I think people that really study history and stuff will realize that we have to have free and fair trade. And the fact of the matter is, as China develops, we’re already seeing the results of that. I mean, they’re starting to have worker strikes. Their workers are starting to demand higher wages. You know, things, over time – and again, we’re impatient, you know, it doesn’t happen quickly enough for us, but quite honestly, over time things do equalize. Free trade will work beautifully. It just will.

LIB: “Fair trade” tends to be a fairly liberal catch-phrase – you hear it on the coffee shops in State Street. What is your understanding when you say “fair trade” – what is your understanding of that word?

RJ: I mean, you’re not gonna let people totally abuse the system and slap 100% tariffs on your goods. You know, so I think that’s just a matter of, you know – you’d like to have goods move back and forth without any tariffs at all. But, you know, I’m talking about equalized tariffs. If you’re going to have to have something for inspection purposes or, you know, there’s some legitimate reasons to have some tariffs on things, you know – there’d be one of them, for inspection. I don’t have a problem with that. But in general they should be extremely low and just kind of covering costs.

[I momentarily confuse candidate Johnson with this Ron Johnson, and then get back on topic]

LIB: What is your understanding of the roots of the economic crisis that we’ve been going through? Where do you think that came from, structurally?

RJ: Oh, it was totally caused by the housing bubble. The housing bubble was, in my mind, totally caused by government. It traces back to the Carter administration, when – again, laudable goal – they want to have people in homes. Great. But you can only have people in homes that can afford them, you know? So, when the Clinton administration came in, they kind of put that program on steroids, and the way they enforced it was, they go to banks and say, “Listen, you will make loans to these people, or, you know, we’ll accuse you of redlining and we’re going to sic the Department of Justice on ya.” OK, that’s were the crisis begins. So banks start making loans, but then the federal government says, “Don’t worry about it, we’ll let you sell those loans to Fannie and Freddie. Or Fannie and Freddie will guarantee those loans so you guys get to make your, you know, origination fees and all that kind of stuff,” so it’s just one big ol’ happy party. And what that ends up doing is it drives up housing prices. And it kept driving up housing prices ‘till the bubble finally burst. And to me, that was the cause of the financial crisis.

And then of course, the whiz kids on Wall Street, you know, have these mortgages; they’re being sold all over the place. “Well let’s package these things into mortgage-backed securities. We can take our cut on it.” And they start trading those things all over the place. And then you’ve got the sanctioned rating agencies of the federal government putting their little ratings, saying these are all triple-A. So that, all of a sudden, these very risky mortgage-backed securities are held by everybody. And again, a total – totally caused, quite honestly, by the federal government. You know, certainly propelled by the big banks, and you know, the traders and stuff, that were taking their cut on it, and then unfortunately kind of paid for by the American public. We paid big time for all of that.

But it kind of goes under Reagan’s maxim of, you know, government is more often the cause of the problem, not the solution.

LIB: That tends to suggest an answer, but let’s just make it clear – what would your suggestions be toward fixing the crisis that we’re now in?

RJ: Well we absolutely have to reform Fannie and Freddie, first of all. And that, truthfully, I would be looking back to banking rules and regulations back since the ‘60s, ‘70s and ‘80s in terms of things working. I would seriously take a look at these banks that are still termed “too big to fail,” and maybe we need to orderly break them up under anti-trust laws. And say – when an entity reaches a stage where they’re actually termed “too big to fail,” that if they fail they cause a systemic risk, it means you’ve already had a failure in regulation. And we never should have let them get to that level. That’s what you have regulations for, that’s why you have anti-trust laws – to prevent that from happening. So, it’s just another example of, you know, here’s the federal government, got all these layers of regulation, and it’s just very ineffective. People stepping all over themselves, and at very high cost.

[We’re interrupted to be told that “we have time for one more question”]

LIB: What is on your iPod right now?

RJ: Bunch of folk music.

LIB: Where to you get your news from?

RJ: Well, I get it from Kristin [Reusch, his media director, who sat in on the interview as well] now. I’ve always really gotten it from, you know, the Oshkosh Northwestern, the local paper, but really from the Wall Street Journal. Obviously, I listen to network news and, you know, Fox News and that type of thing, but where I have just religiously followed the news in terms of a compendium of information, it’s from the Wall Street Journal and particularly the final two, now it’s the final three pages of the Opinion section. ‘Cause you have – they’re discussing the issues, they’re discussing ‘em in a context of people stating their opinions, kind of a give-and-take, both liberal and conservative, and I’ve just always enjoyed that, you know, literally for the last 31 years I’ve been in business.

LIB: Well, thank you so much.