[Congressional Record Volume 147, Number 178 (Thursday, December 20, 2001)]
[Senate]
[Pages S13884-S13888]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           ECONOMIC STIMULUS

  Mr. HOLLINGS. Mr. President, with respect to the stimulus bill, let's 
go right to the point. It really was not a stimulus at all. Over a 
month ago, Joseph Stiglitz wrote an article entitled ``A Boost That 
Goes Nowhere.'' I ask unanimous consent that this article be printed in 
the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

               [From the Washington Post, Nov. 11, 2001]

                       A Boost That Goes Nowhere

                          (By Joseph Stiglitz)

       The United States is in the midst of a recession that may 
     well turn out to be the worst in 20 years, and the 
     Republican-backed stimulus package will do little to improve 
     the economy-indeed it may make matters worse. In the short 
     term, unemployment will continue to rise and output will 
     fall. But the U.S. economy will eventually bounce back--
     perhaps in a year or two. More worrying is the threat a 
     prolonged U.S. recession poses to the rest of the world.
       Already we see inklings of the downward spiral that was 
     part of the Great Depression of 1929: Recession in Japan and 
     parts of East Asia and bare growth in Europe are contributing 
     to and aggravating the U.S. downturn.
       Emerging countries stand to lost the most. Globalization 
     has been sold to people in the developing world as a promise 
     of unbounded prosperity--or at least more prosperity than 
     they have ever seen. Now the developing world, especially 
     Latin America, will see the darker side of its links to the 
     U.S. economy. It used to be said that when America sneezed, 
     Mexico caught a cold. Now, when America sneezes, much of the 
     world catches cold. And according to recent data, America is 
     not just sneezing, it has a bad case of the flu.
       October unemployment figures show the largest monthly 
     increase in two decades. The gap between the United State's 
     potential gross domestic product--what it would be if we had 
     been able to maintain an unemployment rate of around 4 
     percent--and what is actually being produced is enormous. By 
     my calculations, it is upwards of $350 billion a year! This 
     is an enormous waste of resources, a waste we can ill afford.
       It is widely held that every expansion has within it the 
     seeds of its own destruction--and that the greater the 
     excesses, the worse the downturn. The Great Boom of the 1990s 
     had marked excesses. Irrational optimism has been followed by 
     an almost equally irrational pessimism. Consumer confidence 
     is at its lowest level in more than seven years. The low 
     personal savings rate that marked the Great Boom may put even 
     more pressure of consumers to cut back consumption now.
       It seemed to me that we were headed for a recession even 
     before Sept. 11. In the coming months we will have the 
     numbers that make clear that we are squarely in one now. The 
     economic cost of the attacks went well beyond the direct loss 
     of property, or even the disruption to the airlines. 
     Anxieties impede investment. The mood of the country 
     discourages the consumption binge that would have been 
     required to offset the reduction in investment.
       In any case, monetary policy--the Federal 
     Reserve's lowering of short-term interest rates to heat up 
     the economy--has been vastly oversold. Monetary policy is 
     far more effective in reining in the economy than in 
     stimulating it in a downturn, a fact that is slowly 
     becoming apparent as the economy continues to sink despite 
     a massive number of rate cuts; Tuesday's was the 10th this 
     year.
       The Bush administration's tax cut, which was also oversold 
     as a stimulus, is likely to haunt the economy for years. Now 
     the consensus is that a new stimulus package is needed; the 
     president has ordered Congress to have one on his desk by the 
     end of the month. Much of the stimulus debate has focused on 
     the size of the package, but that is largely beside the 
     point. A lot of money was spent on the Bush tax cut. But the 
     $300 and $600 checks sent to millions of Americans were put 
     largely into savings accounts.
       What worries me now is that the new proposals--particularly 
     the one passed by the Republican-controlled House--are also 
     likely to be ineffective. The House plan would rely heavily 
     on tax cuts for corporations and upper-income individuals. 
     The bill would put zero--yes, zero--into the hands of the 
     typical family of four with an annual income of $50,000. 
     Giving tax relief to corporations for past investments may 
     pad their balance sheets but will not lead to more investment 
     now when we need it. Bailouts for airlines didn't stop them 
     from laying off workers and adding to the country's 
     unemployment.
       The Senate Republican bill, which the administration backs, 
     in some ways would make things even worse by granting bigger 
     benefits to very high earners. For instance, the $50,000 
     family would still get zero, but this plan would give 
     $500,000 over four years to families making $5 million a 
     year--and much of that after (one hopes) the economy has 
     recovered. It directs very little money to those who would 
     spend it and offers few incentives for investment now.
       It would not be difficult to construct a program with a 
     much bigger bang for the buck:
       America's unemployment insurance system is among the worst 
     in the advanced industrial countries; give money to people 
     who have lost their jobs in this recession, and it would be 
     quickly spent.
       Temporary investment tax credits also would help the 
     economy. They are like a sale--they induce firms to invest 
     now, when the economy needs it.
       In every downturn, states and localities have to cut back 
     expenditures as their tax revenues fall, and these cutbacks 
     exacerbate the downturn. A revenue-sharing program with the 
     states could be put into place quickly and would prevent 
     these cutbacks, thus preserving vitally needed public 
     services. Many high-return public investments could be put 
     into place quickly--such as renovating our dilapidated inner-
     city schools.
       This may all sound like partisan (Democratic) economies, 
     but it's not. It's just elementary economics. If you really 
     don't think the economy needs a stimulus, either because you 
     think the economy is not going into a tailspin or because you 
     think monetary policy will do the trick, only then would you 
     risk a minimal-stimulus package of the kind the Republicans 
     have crafted in both the House and Senate.
       But what matters is not just how I or other economists see 
     this: It matters how markets, both here and abroad, see 
     things. The fact that medium- and long-term bond rates (that 
     is, bonds that reach maturity in five or 10 years or more) 
     have not come down in tandem with short-term rates is not a 
     good sign. Nor is the possibility that the interest rates 
     some firms pay for borrowing for plant and equipment may 
     actually have increased.
       In 1993, a plan of tax increases and expenditure cuts that 
     were phased in over time, providing, reassurances to the 
     market that future deficits would be lower, led to lower 
     long-term interest rates. It should come as no surprise, 
     then, that the Bush package, with its tax decreases and 
     expenditure increases, would do exactly the opposite. The 
     Federal Reserve controls the short-term interest rates--not 
     the medium- and long-term ones that firms pay when they 
     borrow money to invest, or that consumers pay when they 
     borrow to buy a house, which are still far

[[Page S13885]]

     higher than the short-term rate, which now stands at its 
     lowest level in 40 years. Whatever monetary policy does in 
     lowering short-term rates can be largely undone by an 
     administration's misguided fiscal policy, which can increase 
     that gap between short and long rates; that gap has widened 
     considerably.
       Worse still, America has become dependent on borrowing from 
     abroad to finance our huge trade deficits; and the reduction 
     in the surplus is likely to exacerbate this (on average, the 
     two move together). If foreigners become even less confident 
     in America, they will shift their portfolio balance, putting 
     more of the money elsewhere. That adjustment process itself 
     could put strain on the U.S. economy. Before the terrorist 
     attacks, confidence abroad in America and the American 
     economy had eroded, with the bursting of the stock and dot-
     com bubbles. The two remaining pillars of strength were the 
     quality of our economic management and our seeming safety. 
     Both of these have now been questioned--and the stimulus 
     package likely to become law has nothing to allay foreigners' 
     fears.
       As a former White House and then World Bank official, I 
     have had the good (or bad) fortune to watch downturns and 
     recessions around the world. Two features are worth noting.
       First, standard economic models perform particularly badly 
     at such times, they almost always underestimate the magnitude 
     of the downturn. One relies on these models only at one's 
     peril. The International Monetary Fund and the U.S. Treasury 
     badly underestimated the magnitude of the Asian downturns of 
     1997--and this mistake was at least partly responsible for 
     the disastrous IMF policies prescribed in Indonesia, Thailand 
     and elsewhere.
       Second, there are long lags and irreversibilities: Once it 
     is clear that the downturn is deep, and a stronger dose of 
     medicine is administered, it takes six months to a year for 
     the effects to be fully felt. Meanwhile, the consequences can 
     be severe. The bankrupt firms do not become unbankrupt and 
     start functioning again.
       Downturns are likely to be particularly severe when the 
     economy is hit by a series of adverse shocks. Market 
     economies such as ours are remarkably robust. They can 
     withstand a shock or two. But even before terrorism came 
     ashore, America had been hit badly. The attacks added 
     political uncertainty to the already great economic 
     uncertainty.
       So here we are, facing a major downward spiral. This is 
     where eroding confidence in economic management comes into 
     play. John Maynard Keynes, the founder of modern 
     macroeconomics, (including the notion of the stimulus) 
     emphasized the importance and vagaries of investers' ``animal 
     spirits''--that is, the unpredictability of their optimism 
     and pessimism. But expectations, rational or irrational, 
     about the future are of no less importance to consumers. 
     Those who are worried about losing their jobs are more likely 
     to cut back on their spending and to save the proceeds from 
     any tax cuts.
       It was great fun being part of the Great Expansion. Every 
     week brought new records--the lowest unemployment rate in a 
     quarter-century, the lowest inflation rate in two decades, 
     the lowest misery index in three. The good news fed on 
     itself, and the confidence helped fuel the expansion. We took 
     credit where we could, but I knew that much of this was good 
     luck--and the Clinton administration and Fed not messing 
     things up.
       Now, every week brings new records in the other direction--
     the largest increase in unemployment and decline in 
     manufacturing in two decades, the first quarterly fall in 
     consumer prices in nearly a half-century, the slowest growth 
     in nominal GDP in any two consecutive years since the 1930's. 
     Americans love records, but unfortunately, these new ones are 
     contributing to the already pervasive sense of anxiety. The 
     Bush administration will not try to claim credit for these 
     new records; rather, it will blame Sept. 11. Osama bin Laden 
     is a convenient excuse, but the data will show his murderous 
     henchmen were aiding and abetting at best: The economy was 
     already sliding toward recession.
       I wish I could be more optimistic about our economy's 
     prospect. I worry that all of this naysaying will simply 
     contribute to the downturn. Perhaps I am wrong, and the 
     economy will, on its own, recover quickly.
       But perhaps I am right. Then, without an effective 
     stimulus, the U.S. economy will sink deeper into recession, 
     and the rest of the world with it. An ineffective stimulus 
     could be even worse: It would harm budgetary prospects, 
     raising medium- and long-term interest rates. And when we see 
     the false claims for what they are, confidence in our economy 
     and in our economic management will deteriorate further. We 
     have had a first dose of this particular medicine. We hardly 
     need another.

  Mr. HOLLINGS. Mr. President, earlier this week USA Today had an 
editorial entitled ``Shopping for 2002 Votes, Dems, GOP Raid Surplus.''
  I will read the last sentence:

       In Washington, putting on a great show of activity to 
     demonstrate concern for anyone's economic hurt may seem to be 
     smart politics. But sometimes the best thing the government 
     can do is nothing. This is one such time.

  I ask unanimous consent that the editorial be printed in the Record.
  There being no objection, the editorial was ordered to be printed in 
the Record, as follows:

                  [From the USA-Today, Dec. 17, 2001]

            Shopping for 2002 Votes, Dems, GOP Raid Surplus


  despite signs of economic recovery, congress insists on `stimulus'.

       What's wrong with this picture?
       Just two weeks ago, the White House announced that not only 
     have last winter's predictions of massive budget surpluses 
     evaporated, but major deficits are predicted for at least the 
     next three years, as well.
       State governors from both parties are warning that 
     homeland-security needs are going unaddressed for lack of 
     funding.
       Yet, instead of recognizing these new realities, Congress 
     and the White House are spending the last days before their 
     holiday recess trying to enact a hugely expensive ``economic 
     stimulus'' package that is packed with tax cuts and social 
     spending. And they're doing so even as the economy is showing 
     signs of recovering on its own.
       Stimulus clearly is not more dangerous than the lack of 
     one. yet, instead of spiking the idea, congressional 
     Democrats and Republicans are seeking a compromise. Not 
     because the economy needs a jolt, but because each party sees 
     it as an opportunity to score some points in the 2002 
     congressional campaigns:
       House Republicans, on a largely party-line vote, passed a 
     $100-billion package of tax cuts targeted overwhelmingly at 
     corporations and individuals with incomes in the top 5% of 
     the nation, coincidentally among the biggest sources of 
     political contributions. The biggest tax breaks for business 
     weren't targeted at job creation but at refunding taxes 
     already paid as long ago as 1986. Many of the cuts for 
     individuals--questionable during a budget squeeze in any 
     case--wouldn't take effect until 2003, when the recession is 
     likely to be long over.
       Senate Democrats are headlining a $600 tax rebate for 
     working-poor families that didn't earn enough to benefit from 
     last summer's income-tax rebates, as well as a one-month 
     holiday from payroll taxes. It's a nice appeal to their blue-
     collar political base, but normally fractious economists 
     almost all agree it's no stimulus: Repeated studies show one-
     shot cash windfalls are likely to go to reduce debt or 
     bolster savings, not to spending that would stimulate the 
     economy. Similarly, extending unemployment benefits and 
     helping to pay for health insurance sound like noble 
     objectives--but backdoor welfare, even if needed, is no kick-
     start for a troubled marketplace.
       The Bush administration murmurs piously about compromise, 
     but what the president and his aides are hinting at looks a 
     lot like the old Washington game: doling out the political 
     bonbons for both sides to claim victory, with little concern 
     for economic justification.
       Meanwhile, the money just isn't there. The return to red 
     ink is so abrupt that the Treasury asked Tuesday for a hike 
     in the government's borrowoing limit, to a whopping $6.7 
     trillion. The current ceiling, $5.95 trillion and just three 
     months ago headed rapidly downward, may be reached as soon as 
     February.
       In Washington, putting on a great show of activity to 
     demonstrate concern for anyone's economic hurt may seem to be 
     smart politics. But sometimes the best thing the government 
     can do is nothing. This is one such time.

  Mr. HOLLINGS. Mr. President, the Wall Street Journal printed an 
article earlier this week on Monday entitled, ``The Stimulus Fiasco.'' 
I ask unanimous consent this article be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             [From the Wall Street Journal, Dec. 17, 2001]

                          The Stimulus Fiasco

       In the not-so-epic battle over fiscal ``stimulus,'' the 
     shouting has all come down to this: The White House is 
     demanding that the 27% income-tax rate, be cut to 25%, while 
     Senate Majority Leader Tom Daschle is insisting on a mere 
     26%. Only in Washington would anyone believe that either one 
     is going to make much economic difference.
       If this is all that the politicians can come up with, we 
     have a modest proposal: Pack it in. The economy will be 
     better off if President Bush calls the whole thing off and 
     instead focuses on abosrbing the lessons of this political 
     fiasco.
       Not that we expect this to happen. The point of this 
     exercise long ago stopped being economic growth and became 
     political advantage. Mr. Bush wants to be able to sign 
     something--anything--he can call ``stimulus'' to show voters 
     he isn't like his father and cares about more than foreign 
     policy. Mr. Daschle knows this, so he wants to deny Mr. Bush 
     any tax cuts that might actually stimulate in favor of 
     loading up on tax rebates, jobless benefits, health-care 
     subsidies and other things that will redistribute income to 
     his political constituencies. And it looks as if he's going 
     to prevail.
       This is clear from Mr. Bush's latest counter-offer last 
     week to Mr. Daschle dictating the terms of his own surrender. 
     Gone was the across-the-board acceleration of individual 
     income-tax rates that he originally wanted and that his own 
     economists believe would be the best economic medicine. Mr. 
     Bush is still requesting some corporate tax

[[Page S13886]]

     relief, such as a temporary speedup in depreciation and 
     scaling back the corporate alternative minimum tax. But these 
     will only pad business balance sheets for a while and do 
     little to alter long-term incentives. Meanwhile, the 
     President gave in to Mr. Daschle on tax rebates for low-in-
     come Americans who didn't get them last summer--that is, for 
     people who pay little or no income tax anyway.
       What really matters now is not whether a deal is struck 
     this week but what lessons Mr. Bush learns from his looming 
     defeat. We'd suggest at least two. The first is that only 
     thing bipartisan abut Mr. Daschle is his smile. Like his 
     mentor, George Mitchell, who destroyed Mr. Bush's father, Mr. 
     Daschle wants to make Mr. Bush a one-term President. Rumors 
     abound that the South Dakotan plans to run himself, but even 
     if he doesn't he represents a Senate Caucus loaded with other 
     potential candidates (John Kerry, Joe Lieberman, John 
     Edwards, Hillary Clinton, Joe Biden).
       All of them are pursuing the Daschle strategy of wrapping 
     their arms around a popular President on the war. But on 
     domestic policy they are competing against one another for 
     advantage among the Democratic Party's liberal interest 
     groups. This critical mass of Presidential ambition is 
     inevitably pulling the entire Democratic Senate to the left. 
     In the stimulus debate, it explains why Mr. Daschle 
     established the absurd condition that any ``bipartisan'' 
     compromise had to be supported by two-thirds of all Senate 
     Democrats. That means any 17 Democrats can kill anything, and 
     there are more than enough Caucus liberals to do that.
       If Mr. Bush wants to know where Democrats will go next, all 
     he had to do was watch Mrs. Clinton a week ago Sunday on 
     NBC's ``Meet the Press.'' While praising Mr. Bush to the 
     skies on the war, she also came out for repealing the tax 
     cuts that the Congress already passed this summer. By not 
     fighting harder to accelerate all of his rate cuts now, the 
     President has left himself open to a three-year defensive 
     battle to keep what he's already won.
       Mr. Bush might as well recognize this now and plan 
     accordingly. The only way he will get anything done in the 
     Senate between now and 2004 is to move public opinion on the 
     issues or beat Democrats at the polls in 2002. The worst 
     habit in this environment is to negotiate with yourself, 
     which is what has happened to Mr. Bush on ``stimulus.'' The 
     President first gave Democrats $40 billion in new spending, 
     but got no tax promises in return. Then he conceded on 
     jobless benefits, but also got nothing, then on tax rebates, 
     for which Mr. Daschle seems to have handed him only the token 
     one-percentage point cut in the 27% rate.
       The second lesson is that Mr. Bush's economic team failed 
     him. Counselor Larry Lindsey gave him outdated Keynesian 
     advice, assuring him against all evidence that tax rebates 
     would spur growth. Treasury Secretary Paul O'Neill has 
     provided no direction that we've noticed, offering only 
     tentative counsel on policy and tripping over his own tongue 
     on the politics. If this team were running the war in 
     Afghanistan, the Marines would be the ones surrounded at Tora 
     Bora.
       The silver lining is that the economy may recover on its 
     own without any fiscal stimulus. Ed Hymen of the ISI Group 
     says he sees more signs of recovery by the week, oil prices 
     are down and the Fed has provided ample liquidity (maybe too 
     much if you look at the 10-year Treasury bond rate that 
     hasn't fallen with Fed easing). This means Mr. Bush can 
     afford to reject the phony stimulus that is now emerging from 
     Congress. But in the long run he owes Americans coping with 
     hard times a better domestic political strategy and a 
     stronger economic team.

  Mr. HOLLINGS. I will read the last sentence:

       But in the long run [Mr. Bush] owes Americans coping with 
     hard times a better domestic political strategy and a 
     stronger economic team.

  That is the first time I heard the Wall Street Journal ask for a 
stronger economic team. The reason is because we are in deep trouble.
  We ended up last fiscal year, which ended just 3 months ago, on 
September 30 with a deficit of $141 billion. That was not as a result 
of September 11.
  I ask unanimous consent to print in the Record a Wall Street Journal 
editorial dated August 16.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             [From the Wall Street Journal, Aug. 16, 2001]

            Nasdaq Companies' Losses Erase 5 Years of Profit

                           (By Steve Liesman)

       Mounting losses have wiped out all the corporate profits 
     from the technology-stock boom of the late 1990s, which could 
     make the road back to the previous level of profitability 
     longer and harder than previously estimated.
       The massive losses reported over the most recent four 
     quarters by companies listed on the Nasdaq Stock Market have 
     erased five years' worth of profits, according to figures 
     from investment-research company Multex.com that were 
     analyzed by The Wall Street Journal.
       Put another way, the companies currently listed on the 
     market that symbolized the New Economy haven't made a 
     collective dime since the fall of 1995, when Intel introduced 
     the 200-megahertz computer chip, Bill Clinton was in his 
     first term in office and the O.J. Simpson trial obsessed the 
     nation. ``What it means is that with the benefit of 
     hindsight, the late '90s never happened,'' says Robert 
     Barbera, chief economist at Hoenig & Co.
       The Wall Street Journal analysis looked at earnings 
     excluding extraordinary items going back to September 1995 
     for about 4,200 companies listed on Nasdaq, which is heavily 
     weighted toward technology stocks but also includes hundreds 
     of financial and other growth companies. For the most 
     recently reported four quarters, those companies tallied 
     $148.3 billion in losses. That roughly equaled the $145.3 
     billion in profit before extraordinary items these companies 
     have reported since September 1995. Because companies have 
     different quarter-ending dates, the analysis doesn't entirely 
     correspond to calendar quarters.
       Large charges that aren't considered extraordinary items 
     were responsible for much of the red ink, including 
     restructuring expenses and huge write-downs of inventories 
     and assets acquired at high prices during the technology 
     bubble.
       Analysts, economists and accountants say these losses raise 
     significant doubts about both the quality of past reported 
     earnings and the potential future profit growth for these 
     companies. Ed Yardeni, chief investment strategist at 
     Deutsche Banc Alex. Brown, said the losses raise the question 
     of ``whether the Nasdaq is still too expensive. These 
     companies aren't going to give us the kind of awesome 
     performance they did in the '90s, because a lot of it wasn't 
     really sustainable.''
       The Nasdaq Composite Index stood at around 1043 in 
     September 1995, soared to 5048.62 in March 2000 and now 
     stands at 1918.89. Because companies in the Nasdaq Composite 
     Index now have a cumuluative loss, for the first time in 
     memory the Nasdaq's value can't be gauged using the popular 
     price-earnings ratio, which divides the price of stocks by 
     their earnings. That means it is impossible to say whether 
     the market is cheap or expensive in historical terms.
       The extent of the losses surprised a senior Nasdaq 
     official, who asked not to be named. ``I wouldn't have 
     thought they were that high,'' he said.
       Nasdaq spokesman Andrew MacMillan, while not disputing the 
     losses, pointed to the $1.5 trillion in revenue Nasdaq 
     companies generated over the past year, saying that 
     represented ``a huge contribution to the economy, to 
     productivity, and to people's lives . . . regardless of 
     what's happening to the bottom line during a rough business 
     cycle.''
       Satya Pradhuman, director of small-capitalization research 
     at Merrill Lynch, says the recent massive losses tell a story 
     of a market where investors became focused on revenue instead 
     of earnings. With billions of dollars in financing chasing 
     every glimmer of an Internet idea, Mr. Pradhuman says, a lot 
     of companies came to market long before they were ready.
       ``The underwriting was very aggressive, so earlier-stage 
     companies came to market than the kind of companies that came 
     to market five or 10 years ago,'' he adds. He believes there 
     is plenty of potential profitability out there in this crop 
     of young companies, But, he notes, ``only among those that 
     survive.''
       The data show that the very companies whose technology 
     products were supposed to boost productivity and help smooth 
     out the business cycle by providing better information have 
     been among the hardest-hit in this economic slowdown. 
     ``Management got caught up with how smart they were and 
     completely forgot about the business cycle and competition,'' 
     says Mr. Yardeni. ``They were managed for only ongoing 
     success.''
       To be sure, some of Nasdaq's largest star-powered companies 
     earned substantial sums over the period. Intel led the pack 
     with $37.6 billion in profit before extraordinary items since 
     September 1995, followed closely by Microsoft's $34.6 billion 
     in earnings. Together, the 20 most profitable companies 
     earned $153.3 billion, compared with losses of $140.9 billion 
     for the 20 least profitable. Included in the losses was a 
     $44.8 billion write-down of acquisitions by JDS Uniphase and 
     an $11.2 billion charge by VeriSign, also to reduce the value 
     on its book of companies it had bought with its high-price 
     stock.
       These charges lead some analysts and economies to believe 
     that including these losses overstates the magnitude of the 
     decline. According to generally accepted accounting 
     principles, these write-offs are treated as regular expenses. 
     But corporate executives say they should be treated as one-
     time items. ``It's an accounting entry rather than a true 
     loss,'' maintains Bill Dudley, chief U.S. economist at 
     Goldman Sachs Group.
       Removing these unusual charges, the losses over the most 
     recently reported four quarters shrink to $6.5 billion on a 
     before-tax basis. By writing down the value of assets, 
     companies have used the slowdown to clean up their balance 
     sheets, a move that should allow them to move forward with a 
     smaller expense base and could pump up future earnings.
       ``It sets the table for future dramatic growth,'' says 
     independent accounting analyst Jack Ciesielski. Because of 
     the write-downs, ``when the natural cycle begins again,

[[Page S13887]]

     the returns on assets and returns on equity will look 
     fantastic.'' But Mr. Ciesielski adds that this benefit will 
     be short-lived.
       Cicso Systems in the first quarter took a $2.25 billion 
     pretax inventory charge. This quarter, it partly reversed 
     that write-down taking a gain of $187 million from the 
     revaluation of the previously written-down inventory. The 
     reversal pushed Cisco into the black.
       But Mr. Barbera warns that investors shouldn't be so quick 
     to ignore the unusual charges. For example, during good times 
     it wasn't unusual for companies to book large gains from 
     investments in other companies. Now that the value of those 
     investments are under water, companies are calling the losses 
     unusual. ``If they are going to exclude the unusual losses, 
     then they should exclude the unusual gains,'' says Mr. 
     Barbera.

  Mr. HOLLINGS. I read from the article:

       The Wall Street Journal analysis looked at earnings 
     excluding extraordinary items going back to September 1995 
     for about 4,200 companies listed on Nasdaq, which is heavily 
     weighted toward technology stocks, but also includes hundreds 
     of financial and other growth companies. For the most 
     recently reported four quarters those companies tallied 
     $148.3 billion in losses. That roughly equaled the $145.3 
     billion in profit before extraordinary items these companies 
     have reported since September 1995.

  It is as if the last 5 years never occurred. What did I have to 
listen to as a long-time member of the Budget Committee? Surpluses as 
far as the eye can see, they said in June when the President signed the 
$2.3 trillion tax cut. I want to say it right as a Senator saying we 
ought to be increasing revenues, paying our way.
  I see the distinguished former Governor of Florida in the Chamber. We 
could not get by as Governors in our States unless we had a triple-A 
credit rating. None of these industries are going to expand and come to 
us at all.
  What really hearkened this particular Senator because we never seem 
to learn. The same act, same scene 20 years ago: David Stockman, the 
head of President Reagan's economic team, the Director of his Office of 
Management and Budget, in his book, ``The Triumph of Politics,'' talks 
about the Trojan horse, growth-growth, Kemp-Roth, and what we had 
entitled ``voodoo No. 1.'' Now we have voodoo No. 2. Referring to 
voodoo No. 1 on page 342, at the end of the year in November after they 
passed the tax cuts, we immediately went into recession, which is 
exactly what has happened in the year 2001.
  I quote:

       [President Reagan] had no choice but to repeal, or 
     substantially dilute, the tax cut.

  Can you imagine that?

       He had no choice but to repeal, or substantially dilute, 
     the tax cut. That would have gone far toward restoring the 
     stability of the strongest capitalist economy in the world. 
     It would have been a great act of statesmanship to have 
     admitted the error back then, but in the end it proved too 
     mean a test. In November 1981, Ronald Reagan chose not to be 
     a leader but a politician, and in so doing he showed why 
     passion and imperfection, not reason and doctrine, rule the 
     world. His obstinacy was destined to keep America's economy 
     hostage to the errors of his advisers for a long time.

  That is exactly our dilemma now. For those who regret the non-passage 
of the stimulus bill, go to Sunday school and thank the Good Lord 
because--as Stiglitz said and as the USA Today said and as the Wall 
Street Journal said and now as Dave Stockman said 20 years ago--we 
ought to be removing those tax cuts, repealing that $2.3 trillion.
  It is not the confidence of consumers, it is the confidence of the 
market. The money boys who really govern the economic affairs of this 
country--the $2 trillion is still going to be lost.
  How much are we up? I ask unanimous consent to print in the Record, 
the deficit to the penny as included by none other than the Secretary 
of Treasury.
  It is entitled the Public Debt to the Penny. That is the Secretary of 
the Treasury. I ask unanimous consent that this document be printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                          THE DEBT TO THE PENNY
------------------------------------------------------------------------
                                                         Amount
------------------------------------------------------------------------
Current:
  12/19/2001.................................      $5,883,339,152,814.48
Current Month:
  12/18/2001.................................       5,881,570,635,636.22
  12/17/2001.................................       5,875,160,714,473.71
  12/14/2001.................................       5,875,869,812,211.80
  12/13/2001.................................       5,875,559,240,572.48
  12/12/2001.................................       5,877,463,679,105.98
  12/11/2001.................................       5,879,691,857,799.79
  12/10/2001.................................       5,877,125,427,843.37
  12/07/2001.................................       5,874,922,950,915.27
  12/06/2001.................................       5,877,883,213,016.24
  12/05/2001.................................       5,868,016,815,751.26
  12/04/2001.................................       5,867,886,281,057.86
  12/03/2001.................................       5,862,832,382,763.04
Prior months:
  11/30/2001.................................       5,888,896,887,571.34
  10/31/2001.................................       5,815,983,290,402.24
Prior fiscal years:
  09/28/2001.................................       5,807,463,412,200.06
  09/29/2000.................................       5,674,178,209,886.86
  09/30/1999.................................       5,656,270,901,615.43
  09/30/1998.................................       5,526,193,008,897.62
  09/30/1997.................................       5,413,146,011,397.34
  09/30/1996.................................       5,224,810,939,135.73
  09/29/1995.................................       4,973,982,900,709.39
  09/30/1994.................................       4,692,749,910,013.32
  09/30/1993.................................       4,411,488,883,139.38
  09/30/1992.................................       4,064,620,655,521.66
  09/30/1991.................................       3,665,303,351,697.03
  09/28/1990.................................       3,233,313,451,777.25
  09/29/1989.................................       2,857,430,960,187.32
  09/30/1988.................................       2,602,337,712,041.16
  09/30/1987.................................       2,350,276,890,953.00
------------------------------------------------------------------------
Source: Bureau of the Public Debt.


                                     THE DEBT TO THE PENNY AND WHO HOLDS IT
                                              [Beginning 1/31/2001]
----------------------------------------------------------------------------------------------------------------
                                                                   Intragovernmental
                                       Debt held by the public          holdings                  Total
----------------------------------------------------------------------------------------------------------------
Current:
  12/19/2001.........................     3,410,253,888,547.10     2,473,085,264,267.38        5,883,339,152,814
Current month:
  12/18/2001.........................     3,409,529,106,007.83     2,472,041,529,628.39        5,881,570,635,636
  12/17/2001.........................     3,409,404,133,952.59     2,465,756,580,521.12        5,875,160,714,473
  12/14/2001.........................     3,411,315,816,347.79     2,464,553,995,864.01        5,875,869,812,211
  12/13/2001.........................     3,411,300,511,893.02     2,464,258,728,679.46        5,875,559,240,572
  12/12/2001.........................     3,410,599,497,172.45     2,466,864,181,933.53        5,877,463,679,105
  12/11/2001.........................     3,410,412,991,136.99     2,469,278,866,662.80        5,879,691,857,799
  12/10/2001.........................     3,410,374,030,620.89     2,466,751,397,222.48        5,877,125,427,843
  12/07/2001.........................     3,410,332,012,889.24     2,464,590,938,026.03        5,874,922,950,915
  12/06/2001.........................     3,409,948,417,231.43     2,467,934,795,784.81        5,877,883,213,016
  12/05/52001........................     3,399,263,255,412.91     2,468,753,560,338.35        5,868,016,815,751
  12/04/2001.........................     3,399,212,246,226.65     2,468,674,034,831.21        5,867,886,281,057
  12/03/2001.........................     3,399,094,184,616.49     2,463,738,198,146.55        5,862,832,382,763
Prior months:
  11/30/2001.........................     3,404,026,838,038.17     2,484,870,049,533.17        5,888,896,887,571
  10/31/2001.........................     3,333,039,379,996.92     2,482,943,910,405.32        5,815,983,290,402
Prior fiscal years:
  09/28/2001.........................     3,339,310,176,094.74     2,468,153,236,105.32        5,807,463,412,200
----------------------------------------------------------------------------------------------------------------


                                     THE DEBT TO THE PENNY AND WHO HOLDS IT
                                                [Thru 1/30/2001]
----------------------------------------------------------------------------------------------------------------
                                                                   Intragovernmental
                                       Debt held by the public          holdings                  Total
----------------------------------------------------------------------------------------------------------------
Prior months:
  01/30/2001.........................     3,369,903,111,703.32     2,370,388,014,843.13        5,740,291,126,546
  12/29/2000.........................     3,380,398,279,538.38     2,281,817,734,158.99        5,662,216,013,697
  11/30/2000.........................     3,417,401,544,006.82     2,292,297,737,420.18        5,709,699,281,427
  10/31/2000.........................     3,374,976,727,197.79     2,282,350,804,469.35        5,657,327,531,667
Prior fiscal years:
  09/29/2000.........................     3,405,303,490,221.20     2,268,874,719,665.66        5,674,178,209,886
  09/30/1999.........................     3,636,104,594,501.81     2,020,166,307,131.62        5,656,270,901,633
  09/30/1998.........................     3,733,864,472,163.53     1,792,328,536,734.09        5,526,193,008,897
  09/30/1997.........................     3,789,667,546,849.60     1,623,478,464,547.74        5,413,146,011,397
----------------------------------------------------------------------------------------------------------------


[[Page S13888]]

  Mr. HOLLINGS. We are already $76 billion in the red in addition to 
the $141 billion we ended up in the red this last fiscal year. We had 
to listen to Alan Greenspan say, ``Oh, wait a minute; we might pay off 
the debt too quick.''
  We had $5.6 trillion and surpluses as far as the eye could see, and 
now what do they need to do? They need to increase the debt limit. They 
asked us the other day, let us increase the debt limit.
  The debt limit, according to the budget and economic outlook for 
fiscal years at the beginning of the year, they said, and I quote: 
``Under those projections, the debt ceiling would be reached in 2009.'' 
That is what they told us 11 months ago, that in 2009 the debt limit 
was going to be reached. The first order of business when we come back 
in January and February is to increase the debt limit, all on account 
of a rosy scenario, all on account of--what do they call it?--voodoo 
number two.
  We better sober up and start paying the bill in Washington.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.

                          ____________________