[Congressional Record Volume 147, Number 150 (Friday, November 2, 2001)]
[Senate]
[Pages S11408-S11411]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           ECONOMIC STIMULUS

  Mr. CORZINE. Madam President, today I rise to discuss a critical need 
for our Nation to unite in what I think is an immediate effort to 
strengthen our economy. This morning you probably saw that our Nation's 
unemployment rate jumped a full half of 1 percent to 5.4 percent--one 
of the largest increases in any given month in history. We lost 415,000 
jobs over the last month. Within that context, there are many more 
layoffs in the offing, that have been announced by companies, yet to be 
executed.
  GDP has declined. Consumer prices, actually, within the GDP numbers, 
declined for one of the first times since the 1950s. Manufacturing 
indices and other statistics indicate that we are in a recession.
  Over 40 years ago, the brother of the distinguished Senator from 
Massachusetts, President John Kennedy, issued a dramatic and now 
immortalized challenge to all Americans. He said: ``Ask not what your 
country can do for you. Ask what you can do for your country.''
  We are now having a debate about an economic stimulus program, about 
the state of our economy, and what we should do next. Four decades 
later, it is again time to ask Americans to come to the support of our 
country in a practical sense. This is particularly true for those of us 
in the Congress.
  Today, we have not one but two great challenges. First, of course, we 
need to win the war against terrorism at home and abroad. To this end, 
we are remarkably united. Most Americans are on the same page in 
responding to the Nation's needs.
  But at the same time, we need to reinvigorate our slumping economy, 
an economy profoundly impacted by the cowardly acts of September 11, 
and the subsequent uncertainty surrounding bioterrorism events. Here 
America's response is not quite so clear. To this challenge, we still 
appear focused on something more than the Nation's real needs.
  Let me be clear: My views of stimulus are premised on the near 
certainty that we are in the midst of a serious national recession and 
I think also, importantly, a global one. Increasingly, we see our 
neighbors across the globe suffering from much of the same kind of 
weakness we see in America. This view is shared by most economic 
analysts and political leaders. Today's report only reinforces that 
view.
  For all of us, the primary risks from this point forward are how 
deep, how much further will this economic erosion go? The signs, 
statistically and anecdotally, are everywhere that this will be a long 
and deep slowdown.
  Therefore, we need an immediate and substantial fiscal response. We 
need an insurance policy, and we need to put it in place now.
  I agree with what the President says: It is time for us to go to 
work. The question is, How should we organize that work?
  This economic challenge will require the same type of bipartisan 
cooperation, the same sense of resolve, the same sense of national 
unity that we have enjoyed in the war effort. In truth, that should not 
be all that hard. After all, when it comes to designing an economic 
stimulus package there is broad consensus among economists about the 
principles we should follow. Chairman Greenspan agrees. Bob Rubin 
agrees. And the chairs and ranking members of the Senate and House 
Budget Committees--Democrat and Republican alike--agree. We should 
follow those straightforward principles and get on with working out the 
details. This should not be a political argument but an objective 
pursuit of the most certain actions to reinvigorate our economy.

  In the short term, we need actions that quickly generate real 
economic activity, real economic growth. For the long term, we need 
actions that promote fiscal discipline. It is a simple formula, very 
simple: Short-term stimulus, long-term discipline.
  It should not be that hard if we are willing to move beyond 
ideological debates and special interests. In fact, as I have said, 
there is a fairly broad consensus among economists about how to

[[Page S11409]]

achieve these goals. For example, to maintain fiscal discipline, any 
stimulus package should include items where costs are primarily 
temporary; otherwise, the incremental benefit of new spending or tax 
cuts could be more than offset by higher interest rates which undermine 
housing, business investment, all kinds of activity in the real 
economy.
  Permanent tax or spending programs undermine our long-term fiscal 
health. And we already face a serious erosion in our budget baseline 
and long-run risks because of the demographic sea change that is coming 
in the next decade.
  Another point that would be obvious to most economists is that 
targeting benefits to those with modest incomes will be more powerful 
in stimulating the economy than benefits targeted to those with high 
incomes. This isn't a matter of ideology or politics; it is really just 
common sense. It is basic economics, particularly in the short run. 
People with lower incomes have an objectively measurable higher 
marginal propensity to consume.
  If we give a dollar to those who are stretched financially, they are 
likely to spend it. By contrast, if we give a dollar to those with 
significant wealth and assets, they are likely to save it, particularly 
in uncertain times. So if we want to generate economic activity now--
the whole point of a stimulus package--the most efficient approach is 
to target aid to those who need it most.
  There are several ways to offer tax breaks for those with modest 
incomes. Frankly, I am skeptical about the policy that seems most 
popular in Washington--maybe on both sides of the aisle--and that is 
giving out rebates.
  Most economists will tell you that one-time rebates do not work that 
well because people tend to save their checks, unless they are 
unemployed. This certainly was the case this summer when only 20 cents 
on the dollar was spent of the first round of rebates. That is not 
getting much bang for our buck, but it is consistent with past 
experience. And I think it should guide us today as we put together our 
stimulus package.
  Clearly, there are more effective ways to stimulate the economy and 
benefit those with low and moderate incomes. I think the principle 
ought to be: How do you get one dollar of benefit flowing from one 
dollar of tax activity?
  In my view, a better approach would be to reduce payroll taxes for a 
short period, perhaps a year or two--what I would call a payroll tax 
holiday, or a partial holiday. This would target working Americans and 
promote needed consumption by increasing take-home pay. And we should 
offset any reductions in trust fund revenues with a commitment to 
replenish those funds from the general fund once the economy gets back 
on track and budget surpluses return.

  Changing a person's income stream over a period of time changes how 
they think about their spending patterns and what their budgets are 
about. It tends to lead to greater expenditures than one-time shots.
  Similarly, we could expand the 10-percent rate bracket to apply to a 
wider range of incomes. Right now we stop it at $12,000 for a married 
couple. I think we should move it up to $20,000. This also would 
increase take-home pay for a broad range of low- and moderate- and 
middle-income families, and would provide the kind of stimulus that 
would change how people budget. Senator Bob Graham and I have advocated 
this change since the first of this year, and I think it is an idea 
that still should fit in a stimulus package. At a minimum, we could 
bring forward the full 10-percent bracket that still has some facets 
yet to be implemented.
  Another way to stimulate consumption would be to establish a sales 
tax holiday, as some of my colleagues have proposed. This approach has 
a lot of merit and could be effective in promoting economic activity--
again: one dollar of expenditure will lead to one dollar of activity--
if it is limited to a short duration, and if we can overcome the 
significant administrative hurdles and uneven application of sales 
taxes across the Nation. Certainly, sales taxes weigh most heavily on 
low- and moderate-income Americans. In fact, I think sales taxes define 
the idea of regressive taxation.
  Beyond providing tax cuts for those who have modest incomes, most 
economists would tell you that to inject money into the economy most 
rapidly, the best approach--contrary to a lot of political hype--is for 
Government to spend money directly, as long as we are able to implement 
such plans quickly. Can we get the shovel in the ground in the short 
run or are we going to have debates? Are we going to have long-term 
planning? If we could, we could get the real bang for our buck: one 
dollar spent, having real stimulus in the economy now. I especially 
think this is a far more attractive way to stimulate the economy than 
having additional tax cuts for the wealthy--sort of a trickle-down 
view. Savings is an admirable process for the long-term objective. It 
leads to growth in the capacity of the economy. But we have a shortrun 
need, with a very weak economy today. Programs that will promote 
savings over some long period of time will not strengthen our economy 
today. It can really run contrary to what we need to accomplish today--
stimulus. The Government can make, though, investments that can put 
money into the economy immediately.

  Unlike a dollar in tax cuts, a dollar of investment, as I said, can 
yield a full dollar's worth of economic activity now. If those 
investments are wisely targeted, they can also expand America's long-
term capacity and productivity and have a multiplier effect, if you 
will, through job creation through the exporting and purchases that are 
necessary to implement the programs. A very straightforward, simple 
concept is that if we put money into the economy, it will generate jobs 
and generate activity and lead to growth in the economy. We need to do 
that.
  If you look at the productivity growth of America after we 
implemented our national highway program in the 1950s, we went on for 
about 20 years and we had the highest productivity rates at any time in 
America's history other than in the last 5 years. So there is no 
automatic correlation of Government spending leading to a decline in 
productivity or growth in the economy. We had one of the healthiest 
periods in our history, and I think we need to follow that concept in 
the current environment.
  These investments can be made to happen quickly. They can be 
implemented quickly. If we ask our young men and women to stand tall in 
Afghanistan, if we want to celebrate the heroism of our first 
responders climbing the stairs in the World Trade Center, we also ought 
to get it together so that we can move quickly on those investments, 
those actions that will benefit our Nation now.
  There are many ways to use Government spending to stimulate the 
economy. The most important in today's wartime environment is to make 
investments that increase our Nation's security, particularly our 
homeland security. We need to make a major commitment to fight 
bioterrorism by strengthening our public health system, buying 
vaccines, and investing in laboratory testing and research. We need to 
beef up security for our Nation's airports, rail systems, and ports. We 
need to provide substantial new resources to our law enforcement 
agencies and our firefighters. There has been a bill circulating in 
Congress for the last 4 years called the FIRE bill--$3.5 billion worth 
of requests for fire equipment for our Nation's first responders. And 
we have appropriated a mere $100 million once in that period of time.

  There are enormous needs for us to follow. In New Jersey, we have 
literally hundreds of millions of dollars of requests for resources in 
these public security, public safety, public health arenas. Let me be 
clear. These are not porkbarrel projects. They meet real needs and 
serve the public beyond the current economic situation. So we are not 
only stimulating the economy today, but we are setting up a stronger 
society for a long period of time to come; and these are investments, 
just as investments in the private sector, and can have high rates of 
return. We can have high rates of return in public sector investment. I 
think we need to do that.
  I commend the distinguished Senator from West Virginia, Mr. Byrd, and 
the distinguished assistant majority leader, Senator Harry Reid, for 
their leadership in putting together a package of investments that 
ought to be a part of any stimulus program. Frankly, I

[[Page S11410]]

think it ought to be a bigger part. Their proposal provides for $1.6 
billion for local police and firefighters, $1.7 billion for Federal law 
enforcement, $2.4 billion for airport, mass transit, and Amtrak 
security, and additional funds for nutrition and other programs.
  In fact, I personally really do believe we should have gone larger 
with that program. I might have slightly rearranged it. But this is the 
direction we should be taking as a nation if we want to make sure we 
stimulate our economy now and provide for the public safety and 
security. This initiative will provide that real stimulus, and I hope 
we all will come together on this program and get out of this dogma of 
complaining and denigrating the idea that public investment doesn't 
have real public return. These dollars can be spent now, and they can 
be spent on very important projects that will serve our Nation.
  Beyond the types of investments proposed by Senators Byrd and Reid, 
another effective way to use Government spending to boost the economy 
would be to expand our system of unemployment insurance. For example, 
many States now fail to provide benefits for those seeking part-time 
work, such as working mothers who need to spend part of their days with 
their children. Today's unemployment report shows that over the 
last year, those who work part time have lost those opportunities. It 
has grown to over a million persons, most of whom are women. This 
discrimination against working moms, by leaving them out of the 
unemployment system, is both bad social policy and foolish economic 
policy. We ought to do something about it.

  Similarly, we should increase the level of unemployment benefits if 
we want to make sure that those who are temporarily out of the job 
force have the ability to continue to function. The unemployed are 
almost certain to spend money we offer them. Again, $1 expended gets $1 
of input into the economy. So beefing up their benefits is just good 
stimulative economic policy. This is where we should be helping out, 
not focusing on those who have already done well and are well situated 
in the economy.
  Unemployment expenditures also have the advantage of when the economy 
grows, they go away; they are temporary. They meet a need, but when 
they are no longer necessary because people go back to work, they end. 
We really should be focusing on making sure that our unemployment 
compensation system is updated for the 21st century, brings more folks 
in and is more appropriate for the circumstances of today. It is a real 
stimulus program. We have supported corporate America through any 
number of tax and safety net programs. It is time to focus on people. 
Under current circumstances, this is a classic win-win.
  Another way to use Government spending to improve the economy is to 
help the unemployed, or other Americans, afford health care. That is 
why I support proposals to increase support for those who lose their 
jobs and who should buy health care through COBRA extension also. It is 
good health care policy and good economics. It will certainly avoid the 
runup of expenditures on uninsured at hospitals, charity care that will 
follow if we don't have these systems in place.
  After all, when people lose their jobs, they should not be forced to 
choose between basic needs such as housing, education, health care, and 
senior support at home. They should confidently be seeking future 
employment, and this program should be robust, in my mind. I believe 
strongly that we ought to be offering a 75-percent payment in support 
of COBRA premiums. Again, this is money spent today that goes into the 
economy and will be stimulative as we go forward.
  Beyond tax cuts for those with modest incomes, and direct Government 
spending--and I see the two leaders of that concept on the floor today, 
and I want to make sure they know I compliment them on their 
suggestions--there are tax breaks for businesses that can help, 
provided that they are well-designed and they produce an immediate 
corporate response.
  In particular, I support providing tax credits to encourage 
businesses to make investments in the short-term. Recently, Bill Gale 
of the Brookings Institution suggested that we provide the most 
benefits to those who make such investments in the very short term--
say, by the end of the first quarter of 2002--and then gradually phase 
out the benefits over the remainder of the year. This is a very simple 
concept. If you are going to have a sale, you want to encourage people 
to use it now. I think this makes great sense.
  It is an encouragement to businesses to speed up investments in the 
public sector. It would target benefits to many businesses that already 
have plans on the table. They are just holding them off because of the 
uncertainty of the environment and the times.

  I also make clear that this is a one-time benefit and would reduce 
political pressure to turn the Tax Code into a permanent support 
program that may be unneeded in the long run.
  The final approach to economic stimulus I want to mention is the 
critical need to address the fiscal problems facing our States. There 
is an article in the paper today that shows across this Nation our 
States are moving into budget deficits, maybe out of poor economic 
planning, but the reality is that many of the steps they will be taking 
can be countervailing to the steps we may take at the Federal level.
  It does no good if the Federal Government provides significant 
stimulus and the States move in just the opposite direction; they 
offset each other. We may very well be moving into one of those 
situations.
  Unfortunately, because of the rigid balanced budget requirements, 
many States are looking at significant spending cuts and/or tax 
increases. We need to consider ways to prevent this conundrum.
  I would support establishing targeted revenue sharing to States in 
need--and I do mean targeted--so that this money is not used for 
further tax cuts. They would be serving the particular needs that 
Congress may have mandated in other areas, and we ought to be very 
clear about it.
  Ideally, such a system could work both ways: Shifting money to States 
during times of economic slowdown and shifting money back during 
periods of economic growth.
  Having said that, given the need to act quickly, it may be the more 
practical way of accomplishing this is through the Medicaid match 
provided to the States. This would use an existing regulatory structure 
and could be implemented very rapidly where a revenue-sharing program 
might take longer to be implemented.
  In any case, we cannot ignore this conflict that may very well negate 
the efforts we take here and having the States be a drag on our economy 
just when we need most to lift up the economy.
  All the proposals I have outlined today would provide real help to 
our economy, and most economists would agree, I believe, we should 
structure a program that errs on the side of being aggressive as 
opposed to wondering whether we are dealing with serious downside 
risks.
  We need an insurance program against the kinds of actions that we 
measure, that were reported today in the unemployment statistics, and 
we see across the Nation. I believe we ought to make our mistakes by 
being certain that we have a strong economy, as opposed to being 
insecure about that. I hope we will take that into consideration, and 
if there are choices to be made, I believe we ought to do those on the 
stimulative side now.
  While I believe we should pursue those stimulative short-term 
policies, we should take affirmative steps to address fiscal imbalances 
in the long term--again, the basic formula I talked about: short-term 
stimulus, long-term discipline. In particular, it is critical that we 
revisit--and I truly believe we must revisit--the tax cut that was 
enacted earlier this year. If left fully in place, this legislation 
will drain significant revenue from the Treasury and, in the long-term 
context, substantially weaken our financial condition just as the baby 
boomers are about to retire.
  I know many of my colleagues believe these tax cuts were affordable 
when we debated them earlier this year. We can have a debate about 
whether they were or were not at that point in time, but the times have 
changed and they have changed dramatically. We now face a substantially 
weakened economy, dramatically lower productivity in our economy, and 
huge

[[Page S11411]]

costs for a long-term war against terrorism.
  Given these changed conditions, I hope some of my colleagues will 
reconsider their views on the full tax-cut package and recognize the 
need to suspend some of the provisions that are set to be implemented 
in the future.
  By the way, 65 percent of those cuts come after year 5 because, as 
most economists would agree, maintaining fiscal discipline in the long 
term is just as important as stimulating the economy in the shortrun.
  Unfortunately, while there is broad, if not universal, consensus 
among economists about the principles that should guide fiscal policy, 
many in Washington think they know better, and they are pushing 
proposals that, in my mind, simply make no sense and really do 
challenge whether we are all working together in an economic sense to 
strengthen this country the way we are working in our war on terrorism.
  The House of Representatives and Senate Republicans are promoting a 
stimulus package that would do very little to immediately stimulate the 
economy. The House and Senate Republican bills masquerade the stimulus, 
but they are both little more than an ideological repetition of 
programs designed to help those who need it least and favor special 
interests--a giveaway with limited economic benefits.
  According to an analysis by the nonpartisan Center on Budget and 
Policy Priorities, the House bill would provide between 80 and 90 
percent of its tax cuts to higher income taxpayers and corporations. It 
is just the opposite of how we get stimulus into the economy today.
  The bill eliminates the corporate alternative minimum tax, or AMT. 
AMT is designed to prevent corporations from avoiding taxes entirely 
through the use of deductions and various other tax benefits. Repealing 
the AMT will not generate real economic activity. There is no guarantee 
it will do anything other than change the bottom line of the 
corporations.
  Many corporations may well apply some of these savings to reducing 
debts, mergers, acquisitions, or increasing their bottom line, but 
there is no guarantee they will invest. That might benefit the 
shareholders, but it will not stimulate the economy.
  The House and Senate Republican bills would also reduce capital gains 
taxes. Reasonable people can and do disagree about the effect of such a 
reduction on long-term economic growth but, regardless of one's view 
about the ultimate merits of reducing capital gains taxes, I do not 
know a single economist who would argue that it is a powerful way to 
stimulate economic activity in the short term, at least compared with 
any of the other possible approaches.
  This same analysis applies to other provisions in the House and 
Senate Republican bills. It would accelerate a reduction in tax rates 
for those with higher incomes, just the opposite of where we should be 
for our long-term economic stability. We need to focus on how we are 
going to manage our fiscal affairs when these baby boomers start 
retiring.
  Accelerating a reduction in tax rates is going to exacerbate a 
problem we already put in place with this previous tax cut.
  In any case, regardless of one's view about the merits of cutting 
taxes for those with higher incomes, it is simply not credible to argue 
that of all the possible approaches to stimulating the economy, these 
are the most beneficial, and one cannot argue these are the most 
powerful. Such a claim is just not credible and does not relate to 
objective facts.
  I also emphasize the provisions in the House bill are not temporary 
measures; they are permanent tax cuts with huge long-term costs, just 
exactly what the budget chairmen in both Houses and the ranking members 
argued we should not do, and as such they undermine the fiscal 
discipline and almost certainly will put pressure on long-term interest 
rates over some period of time.
  I have spent most of my life as a business person and as a bond 
trader, someone who worked in financial markets looking at these kinds 
of policies as they worked their way through the marketplace. I can 
assure my colleagues that fiscally irresponsible tax cuts, such as the 
ones that are on the table in the House of Representatives, will affect 
investors and will undermine the long-term health of our financial 
system, if not our economic system broadly. The end result will be 
higher mortgage rates, less business investment, and a weaker economy.
  Meanwhile, the House stimulus bill puts very little money into the 
economy directly.
  There is no investment in our infrastructure, no investment in our 
Nation's security, only tax cuts for those who are already doing well--
mostly for corporations and mostly for those that are doing well.
  To be blunt about it, I think this is wrong-headed economic policy. 
Perhaps because of my private sector background, I find it especially 
alarming.
  Our Nation faces an economic emergency. We need to be addressing it 
in an objective and legitimate way so we do not turn our backs on a 
need that is very obvious to everyone and get into political debates. 
We need to deal with it directly.
  I think we are fiddling while Rome is burning. We simply cannot 
afford to continue business as usual. We have to pull things together, 
minimize differences and focus on what is important to get the job 
done. Our economy is at stake. We are all in this together. We cannot 
let the events of September 11 get us off the track of this great 
Nation, this great economy-- doing those things which were done 
throughout the 1990s and continued as we started this century.
  We need to move with a bipartisan, objective package that will lead 
to real economic growth, and we need to do it now.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. REID. Madam President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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