Speeches & Floor Statements
Posted on January 30, 2009
Mr. President, next week the Senate begins the debate of the so-called stimulus package. I wish to talk about that for a few minutes. It is $1.2 trillion of borrowed taxpayer money to be spent in an effort to help get our economy restarted. Here is my position on it, and I believe the position of most Republicans and of some Democrats. We believe that in order for the stimulus to be effective, it should be reoriented on housing. First, fix the real problem: housing. If housing is restarted, if home values are stabilized, and if people are buying homes, that will do more to help restart the economy than anything else. Second, we should let people keep more of their own money. A true stimulus is permanent tax relief. If people have more of their own money in their pockets, they will have more confidence. They will be able to buy more. After reorienting toward housing, that will also help restart the economy. Since we are borrowing so much of this money, especially, we believe it ought to be oriented directly toward those items that would specifically create jobs now. It should not go toward good sounding ideas such as Head Start and Pell grants for college students that we may want to take up later, maybe as early as the following week, in a regular appropriations bill. So that is our belief: reorient the stimulus toward housing, let people keep more of their own money, and get the stuff out of the bill that has nothing to do with creating jobs now, in the next few months or in the first year. We know Americans are hurting. Every single Senator knows that. Our country's economic turmoil is hitting every family where it matters, in the family budgets. More than 860,000 properties were repossessed by lenders in 2008, more than double the 2007 level. Manufacturing is at a 28-year low. Tennessee is a State that relies heavily on manufacturing. The unemployment rate is 7.2 percent, too high. It has been higher. I can remember at a time when I was Governor of Tennessee in 1982, the unemployment rate was 12 percent, but 7.2 percent is too high. There were 1.9 million jobs lost in the last 4 months of 2008. The long-term unemployed, people out of work for 27 weeks or more, rose to 2.6 million in December of 2008. So there are a number of steps we need to take as a government, and we have been taking them. At a hearing this week, where the Presiding Officer and I are both members of the Budget Committee -- and we probably agree those hearings were excellent -- Douglas Elmendorf, Director of the Congressional Budget Office, reminded us of the steps the Government is already taking. The Federal Reserve negotiated the sale of Bear Sterns to JPMorgan Chase, $29 billion, to form a new limited liability company. Fannie Mae and Freddie Mac, the agencies that guaranteed half the home loans in the country, were taken over by their regulator and the Treasury put up $100 billion to stabilize that situation. The Federal Reserve extended $60 billion in a line of credit to the American International Group, the insurance company called AIG. We had a debate in October where on both sides of the aisle, two-thirds of Republicans as well as many Democrats voted to give the Secretary of the Treasury $700 billion to invest in troubled assets or to use in a variety of ways to try to keep our economy from going straight down. It has gone down, but it didn't go straight down; we believe this is partly because of the action the Congress and the President took at that time. What we had was, in effect, a wreck on the highway. There is an old Roy Acuff song by that title. I think that is the best way to explain what was happening. It was like a wreck on the interstate outside Knoxville and suddenly traffic is backed up all the way to Lenoir City or even Kingston. One lane was the money for the bank loan, the next lane was the money for your auto loan, and the next lane was for meeting payroll. As long as that wreck was on the highway, none of the money could get where it needed to go, and nobody could borrow on anything. It is better today than it would have been, but we still have a deeply serious problem. The law we passed in October temporarily raised the insurance for deposits from $100,000 to $250,000. Steps were taken to guarantee money market funds. The Treasury, Federal Reserve, and Federal Deposit Insurance Corporation announced agreements with Citibank and Bank of America. They created a liquidity program for the banking system. The Federal Government, in all of its variety of agencies, has been very busy since October using taxpayer dollars, where necessary, or the Federal Reserve balance sheet, or Federal Deposit Insurance Corporation funds collected from banks to try to create a situation in which our economy can restart. We know, having visited with President Obama and his team of advisers that they are thinking of even more things we may need to do. But next week in the Senate we will be talking about whether it is a good idea to borrow $1.2 trillion and spend it as the Appropriations and Finance Committees have recommended we spend it as a way of trying to restart the economy. What I am here today to say is: we believe there ought to be a stimulus, but we believe it ought to be reoriented toward housing, that it ought to be reoriented toward permanent tax cuts, and that we ought to take out of this so-called stimulus anything that doesn't stimulate jobs now. Let me try to give an idea of how much money $1.2 trillion is. It is more money than we spent on the Vietnam War in today's dollars. This comes from an article in Politico this week. It is more money than we spent on the invasion of Iraq. It is more money than we spent on the entire New Deal in today's dollars, and a lot more money than we spent on the Marshall plan. It is nearly as much money as we’ve spent on NASA ever since it started. It is a lot more money than we spent going to the Moon. This is a lot of money. We throw dollars around up here. Years ago Senator Dirksen said: A billion here, a billion there, sooner or later it adds up to real money. This is a trillion, a number that is hard for us to imagine. It is borrowed money, which I will get to in a moment. Let me give one example of how I have been trying to describe how much money $1.2 trillion is. The Presiding Officer was Governor of Virginia. I was Governor of Tennessee. I looked around the Budget Committee the other day and almost every member there had been in State government in one way or another. In other words, we used to deal with real dollars. We couldn't print anything. At the end of the year, we had to balance our budgets. Sometimes we had to veto $25,000 programs for epilepsy. I had to do that in 1981, 1982, and 1983, when we had an economic turndown. That is why this amount of money is hard for me to get my arms around. I think it is hard for most Americans. Let me give you an idea about how much money it is. The previous Governor of Tennessee, one who came after me, Governor Sundquist, thought we needed a State income tax. He recommended Tennessee should have a State income tax. It was about 4 percent. It would have raised about $400 million a year. There was never a more unpopular act in our State than the Governor Sundquist proposal that we have a State income tax. Many people said he was courageous for recommending it, but it was rejected. People wouldn't even invite him to dinner for a few months. I would, but many other people wouldn't. That was $400 million a year. The State of Tennessee will receive almost $4 billion of this money. I am sure it will make life easier for the current Governor and the current legislature, but think about that. The State only collects close to $12 billion a year in State tax dollars, and it is going to get $4 billion over the next 2 years from this so-called stimulus package. This would be the equivalent of imposing about a 20-percent new income tax on the people of Tennessee for 2 years to raise that same amount of money. There would be a revolution in Tennessee if we did this. That is the amount of money we’re talking about. We are not talking about giving the State of Tennessee $40 million or $4 million or $400 million. Its shortfall this year is $900 million, which is the worst it has ever had. We are talking about shipping $4 billion of borrowed taxpayer money to Tennessee. My point is, that is a lot of money. There is another aspect to this amount of money. I listed a number of things that the Federal Reserve Board and the Congress have done to try to create a better economic situation, to get housing going, to help stabilize banks, and even to deal with automobile companies. Almost all of those dollars we used either came from the Federal Reserve Board, which is not part of the Federal budget, not part of taxpayer dollars, or it was an investment. In Tennessee, people don't like the word "bailout." It has come to be right up there with the top number. I voted twice, because I thought our country needed it, first to give President Bush, then to give President Obama the amount of money he needed to actually invest in banks or non-finance companies so we could get the credit moving again. But in that case, we were investing dollars. We were not spending dollars. We hope and believe that we will get almost all of those dollars back for the taxpayer. When those dollars are put in a bank, for example, they pay 5 percent or 8 percent or even 10 percent interest, in some cases, back to the taxpayer. Maybe we will lose some of that money, but we don't intend to. It is not our goal. That is the purpose of it, investment. In this case, this is money gone. This is borrowed taxpayer dollars, more than $1.2 trillion. I get to $1.2 trillion because the Senate bill is $900 billion, and the interest over the next 10 years is another $300 billion. That is the real cost of the stimulus package over the next 10 years. It is borrowed money. Let me go to the borrowed money part. We print money in Washington. We Governors cannot. That is one of the adjustments you make when you come here. It just takes a little while to do, and I understand the difference. The truth is, there is a reasonable level of debt a strong industrial country such as the United States can tolerate and still continue to grow. As the country grows, the debt reduces as a percentage of our output. While it might be important for the State of Tennessee, as we always did, to balance our budget and almost never have any debt -- and we did not even have an income tax -- the Federal Government structure is different. I recognize that. But there is some reasonable limit to the amount of debt we should have, and there are good reasons there is a reasonable limit to that. I think it is important to understand exactly what the debt we have is. USA Today did a story last year that talked about each family's share of Government debt and Government obligations. By "obligations," I mean what we owe for programs such as Medicare, what we owe for Medicaid, what we owe veterans. It is real money. It is money we are obligated to pay. It comes down to more than $500,000 per family a year. So I think the way to talk about this stimulus package is: Should we ask every American family to increase their $531,000 debt in order to spend money for a stimulus package to try to restart the economy? I believe we should increase our debt for some purposes, such as restarting housing or permanent tax cuts -- that actually allows people to keep their own money. Or possibly increase our debt for programs that would, perhaps, actually do things in the next 6 months or 12 months to stimulate the economy. There are roads, and bridges, and national park maintenance that could happen right now that would create jobs that would be genuinely simulative. But that is a very severe test we should ask the American people. Mr. President, I ask unanimous consent the USA Today article detailing the obligation every American family owes be printed in the Record following my remarks. Now, there is another problem of running up too much debt. At the hearing where the Acting President pro tempore, the Senator from Virginia, and I were at earlier this week, I asked a question of the three witnesses: What can we learn from the rest of the world about how much debt is too much debt for the United States of America? The general answer was, today our debt is measured at about 40 percent of our annual gross domestic product. The estimates they gave suggested if the stimulus packages and if the other things that are going on continue to happen, we will be up to 60 or 70 percent of GDP. If the entitlement growth -- the automatic spending we have in the Government from Social Security, Medicare, and Medicaid -- keeps growing, and we keep adding at the rate we are doing, we will soon be at 100 percent of GDP. In other words, every year, government debt could equal everything we produced in this great country of ours -- which produces 25 percent of all the wealth in the world every single year. We forget how fortunate we are. Twenty-five percent of all the wealth in the world, every single year, is produced in the United States of America and distributed among just 5 percent of the people in the world, which is us, those of us who live here. So we would have to take all that production for a whole year and use it to pay off our national debt. Those economists who were testifying before us said that is too high. Forty percent is OK. They thought 60 percent is getting into a little bit of a problem. Eighty percent is too much, and 100 percent is a real problem. The practical problem is, as that number goes up -- for example, as the entitlement spending goes up and other debt goes up -- it squeezes out our ability to do anything else. I worked last year across party lines with Senator Bingaman and many others, and Senator Warner worked in the private sector in this way, to try to do something about American competitiveness. We put into the law that we needed to double our investments in scientific research, and if we wanted to keep this high standard of living, we have a lot of work to do in high technology. If we keep spending all the money on welfare, Medicare, Medicaid, Social Security, and debt, we are not going to have anything left for the great universities in the country on a yearly basis or for investments in our future. Those are annual investments. We will be squeezing them out. That is another problem with debt. With a lower debt, we have more money for not just the investments in our future but for our national parks, our clean air, and the other things we need to do to have a desirable country. Let me go back to the stimulus package and ask: What do we need to do? We need to, in the words of Senator Gregg -- and I believe it is fair to characterize Senator Conrad, the chairman of the Budget Committee, in the testimony this week -- we need to reorient the stimulus package toward real estate, toward housing, and toward credit having to do with banks. First, fix the problem: housing. Every big mess has a way into it, and I believe -- and many on this side, and I think some on the other side also believe -- the way into it is housing. How would one fix that? Well, one suggestion by Glenn Hubbard -- former chairman of the Council of Economic Advisors and now at Columbia University – is have the Treasury back, for a period of a year or 18 months, a 4-percent, 30-year fixed rate mortgage for creditworthy customers. In other words, a bank in Nashville would say to you, if you are creditworthy: We will give you a 30-year mortgage at 4 percent. If today's prevailing rate were 5.2 or 5.3 percent -- which it is in the marketplace -- the Government would make up the difference, and it would probably guarantee the loan. That would create a new demand for housing. I was talking with someone in the mortgage business yesterday who pointed out that for one of our large lenders in America, when the rates went down naturally after the Federal Reserve action a few weeks ago, the number of mortgages issued by that bank quadrupled. So if we were to say to the American people: If you are creditworthy, you can buy a house; you can get a 4-percent mortgage for a principal residence, and we are going to keep that option open for a year. That will cost us some money. That could be part of this stimulus. It would create demand in housing. It would create liquidity. It would get banks lending. We believe it would make a real difference. It would be a better way to start the stimulus package. A second idea, as Senator Isakson and others have suggested, is to create a tax credit for home buyers. We would say $15,000. So if you are sitting around thinking today, well, homes in Richmond have actually gotten down to a pretty good level, and I like that house -- you could get a $15,000 tax credit when you buy the house, and when you file your income tax return, you get $15,000 back. This is real money, and you do not have to pay it back. If you had a combination of a 4-percent mortgage and a $15,000 tax credit for the next year, maybe we could get housing stabilized, maybe we could get demand stirring, and maybe we could get people confidence that there is liquidity in the market. That might not solve every problem, but it is the place to start. We would say first, fix housing. That is the way to restart the economy. Senator Gregg has suggested we take some of the Federal Deposit Insurance Corporation's ideas about helping people who are stuck in houses that are about to be foreclosed on and help to relieve those foreclosures. There may be a way for us to encourage servicers for all of these mortgages out across the country to modify the loans as some banks are now doing. By modifying the loan, they simply say to you: What can you afford to pay? As long as you can pay that and pay the interest on a regular basis, we will change the loan to fit you. That way there is no foreclosure. The loan does not go bad. The houses on that same street do not go down in value because your house is foreclosed on. We suggest we should spend the next week talking about reorienting the money that we seek to spend to stimulate the economy on housing first. Second, we suggest the next component of a stimulus package should be tax relief that would help create jobs now. My own view is that temporary tax relief is nice. I like having the money in my pocket, but it does not stimulate very much. Permanent tax relief, the economists tell us -- money you can depend on for the future -- builds confidence and stimulates the economy. For example, the small business expensing provision, which would spur investments by doubling the amount that small business owners can immediately write off on their taxes for capital investments and for purchases of new equipment in 2009. Another example is the bonus depreciation provision, that would be helpful. Middle-class tax relief -- this is the permanent tax relief I was talking about -- by lowering the 15-percent bracket to 10 percent and the 10-percent bracket to 5 percent. Those are examples of permanent tax relief or business tax relief that could help create jobs now. Third, we should not spend this kind of money on many of these programs. We should not borrow this money when each family already owes over a half a million dollars. We should not borrow the money to spend on programs we do not have to have. That is not a wise use of our dollars. We ought to take all of that out of this stimulus bill. For example, there are small examples: buying new cars, money for contraceptives, rehabilitating off-road trails, honey bee insurance. We can find items like that which don’t create jobs now. But the fact is, I am more concerned about the $190 billion of entitlement spending, the automatic spending that is in this $1.2 trillion. Every estimate is that $130 billion, $140 billion, $150 billion of that will never get out of the budget. The House put in almost $100 billion of new Medicaid spending for the States. Well, Governors and legislators are going to like that except we are never going to be able to reform the Medicaid Program. The Federal contribution to it is so rich that States cannot afford to take a fresh look at it. What is Tennessee going to do after it gets $2 billion -- $1 billion a year -- for the Medicaid Program for the next 2 years and, then, in the third year, gets zero of that money? That sort of money ought not to be in a so-called stimulus package. We need some truth in packaging. If it stimulates -- and all of us can think of things that do -- then put it in; if it does not, keep it out. Historic preservation fund grants, I love those, but they are not going to stimulate jobs in the next few months. Head Start, I was the principal sponsor of that. Pell grants, I was a college president. Next week, after the stimulus, we will be talking about how much we can afford in our budget to increase those. Federal spending for Pell grants has doubled in the last 6 years, but those things do not belong in a stimulus budget. Some things do. There are highways that can be built. There are Corps of Engineers project that can be completed. There are National Park Service infrastructure projects that can be worked on next month. These are important improvement programs. That would help stimulate as well. We should be able to make an intelligent distinction between those things that can actually stimulate and those things that are just good-sounding things that we might vote for if we had the money and if we did not have to borrow so much of it. That is our third suggestion about what we should do. One other suggestion -- here is an area where we actually have potential, I believe, for bipartisan support. We should do something, when we debate the stimulus package, about automatic spending, entitlement spending, and by that we mean Social Security, Medicare, and Medicaid. As I mentioned earlier, by the year 2015 -- not so far away -- that will be close to 70 percent of our budget. In other words, when we come here, we get to vote to appropriate 30 percent of the taxpayer dollars we spend because almost 70 percent is automatically spent on those entitlement programs. That is forcing our debt up to 100 percent of gross domestic product. We had a breakfast on Tuesday here, the bipartisan breakfast we have on Tuesday mornings. It is a chance for us to get together across party lines. It was evenly divided, actually. There were 24 Members who came. The whole subject was the Senator Conrad-Senator Gregg proposal to create a commission that would come up with a way to deal with Social Security, Medicare, and Medicaid, and present it to us. We would vote it up or down, and some way we would be forced to deal with this entitlement growth problem. Senator McConnell, the Republican leader, said in a speech a week ago today that he was ready to deal with the entitlement programs, but he was disappointed it was not dealt with in the last 2 years. He pledged to President Obama he would give him more support on dealing with it than the Democrats gave to President Bush during the last few years. You will remember President Bush tried in the beginning of his second term to deal with Social Security. He wanted private accounts. The Democrats said no to private accounts. So they just went down their parallel tracks and never got anywhere. Somehow they never got together and said: Well, let's drop private accounts, or let's try to do this; we can't do that. President Obama has made clear he is serious about this. Senator McConnell has made clear we are serious about it. We have a Conrad-Gregg proposal. We had 24 Senators meeting last Tuesday. We are meeting again next Tuesday. We believe something ought to be in this stimulus package that at least begins the process of dealing with entitlements in the long term so we can say to the American people: Yes, we are going to borrow some amount of money -- maybe hundreds of billions of dollars -- to stimulate the economy, and we know it contributes to the debt, but we are at least taking a step toward dealing with the long-term excessive debt we are experiencing in our country. Finally, after listening to the Budget Committee hearings this week, the conclusion I came to was that I wish we were doing it all now. Here is what I mean by that. I spoke a little earlier about all the things we have tried to do since October at the Washington level -- some by Congress, some by the Federal Reserve, and some by the Federal Deposit Insurance Corporation -- to restart the economy. Whether it was dealing with the banks or the auto companies or troubled assets, there has been a lot of effort here. After listening to the testimony in the Budget Committee, it seems perfectly obvious that we are going to have to do more. We are going to have to do more in housing. We would like to suggest we at least start addressing housing in this stimulus package, but if we don't do it here, President Obama and his team are going to have to recommend some steps for us to take in housing because that is how you restart the economy. Everyone who looks at the Nation's banks and financial institutions knows we are going to have to do something there. We passed a bill in October called the Emergency Economic Stabilization Act, providing money to Treasury to address troubled assets. We thought it was going to be used to go get those bad assets off of the bank balance sheets so they could get back in good shape and lend again. That is what happens when banks fail or get in trouble. In normal times, the FDIC swoops in and takes the troubled assets out, sells them to another bank, and it closes on Friday and opens on Monday. Depositors are protected, and sometimes stockholders lose, but we go on and barely notice it. However, that is not what the money we passed was used for. It was used, basically, to give money to banks to capitalize, and the reason, apparently, was they were in such bad shape, they had to have it. So maybe it wasn't a bad thing to do, but it wasn't what we thought was going to be done, and now we still have the problem of bad assets. We asked the witnesses: How many troubled assets do we have in all of these banks? They said $1 trillion or $2 trillion. I am not talking about a stimulus package; I am talking about troubled assets in financial institutions in the United States. We said: Well, then, what are we supposed to do about that? They suggested that the ideas we are likely to hear -- they did not represent the administration, but the administration is listening to many of the same people -- was that they may recommend, for example, some entity that will actually take the troubled assets out of the banks at some price, and then the banks are free to go ahead and with confidence start lending again. And we can start borrowing again, the economy goes again, but then we still have this entity over here. If it is going to buy $1 trillion or $2 trillion worth of bad assets, where does it get the money? Some of it is going to come from the taxpayers. How much of it? One witness said as much as we can afford to put in. So maybe $500 billion, $600 billion, $700 billion, $800 billion more dollars, not to spend as the stimulus package does but to invest in assets that we hope to sell for at least as much as we paid for them. That could happen. We might lose some money, we might make some money, but we are not spending it. But it is a lot of money, and it is taxpayers dollars, and there will be a lot of concern in Virginia and in Tennessee and in every State when we have to do that on top of what we have done before - on top of this stimulus. So why aren't we considering that today? Why aren't we considering that bad bank or what we are going to have to do about troubled assets? So I think a better way to do it would be to say: Let's bring in the amount of money for troubled assets -- is it $500 billion? -- let's bring in the money to reorient toward housing, $200 billion or $300 billion, and then let's see what projects really do stimulate. Let's do it all together, and then let's see how much money we are talking about so that we are not surprised and the people we represent are not surprised. I would like to see us do it all at once. So next week in the Senate is a very important week. There is a good deal of talk about bipartisanship. We appreciate President Obama's efforts on that. In my view, he and his team have been genuine in their outreach to Republicans. Just because we don't agree with their ideas doesn't mean there is not a bipartisan spirit here. And as time goes on, maybe we will get into a situation where even though the Democrats have enough votes to pass most bills and we have enough votes to stop cold some bills and to slow down any bill, that is not the way we work. If we come up with a better idea, maybe the majority will adopt it and create a bill that builds confidence in the country. President Bush technically didn't need Congress's approval, except on appropriations, to wage the war in Iraq. Some of us thought it would be better if he had it, though, so Senator Salazar and I, along with 17 Senators and about 60 House Members across party lines, suggested that we adopt a resolution approving the principles of the Iraq Study Group as a way to conclude the war in Iraq honorably. President Bush didn't like that, and Majority Leader Reid wouldn't bring it up for a vote. We might have been the only group that unified Senator Reid and President Bush on the Iraq war, but we couldn't get it done. I think it is a shame we couldn't because Secretary Rice and Secretary Gates told me not long ago they thought where we were going to end up in Iraq Under Secretary Gates' administration is about where the Iraq Study Group said we should. If we had adopted that as a Congress, perhaps the war would have been easier, and our enemies would have gotten a clearer message, and our troops would have gotten more support, and President Bush would have had a more successful Presidency. So we won the election, and we passed the bill. That is the recipe for passing many bills, but it is not the recipe for a successful Presidency. I think President Obama knows that, and that is why he has gone out of his way to visit with us and talk with us. I hope -- with the stimulus package, with entitlements coming down the road and health care plans coming down the road -- that the ideas we have on this side of the aisle, if they are good, are adopted on the other side of the aisle and we genuinely can work together in a legislative way. I think that can happen, and I would like for it to happen starting next week. Next week is important for the Senate and important for the American people. We on the Republican side of the aisle believe we need a stimulus package, but we believe it needs to be the right stimulus package. First, it should fix the problem, and the problem is housing. That would help restart the economy. And we have specific ideas about how to do that which I have suggested. Second, we should let people keep more of their own money. That means permanent tax cuts. That is a way to build confidence. Third, because we are borrowing this extraordinary amount of money and because we have other requirements for borrowed dollars, we should be very careful about what we borrow and what we spend it for and only spend it for those items that genuinely stimulate the economy and create jobs in the very near term. That is the truth in packaging. If we adopt those three principles, then I think there will be genuine bipartisan support next week for a stimulus. If we don't, there won't be. That is why we have the Senate. That is why we have the debate. That is why I think we are here. Mr. President, I ask unanimous consent to have printed in the Record following my remarks an article by R. Glenn Hubbard and Christopher J. Mayer detailing the proposal for a 4.5-percent mortgage loan over 30 years. I ask unanimous consent to have printed in the Record as well an article from the Wall Street Journal this week called "A 40-Year Wish List" as an example of the kinds of items that are in the stimulus bill that ought not to be if we are careful about the money we are borrowing to spend.