[Congressional Record Volume 152, Number 84 (Monday, June 26, 2006)]
[House]
[Pages H4534-H4537]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
JOBS AND THE ECONOMY
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 4, 2005, the gentleman from New Jersey (Mr. Saxton) is
recognized for 60 minutes as the designee of the majority leader.
Mr. SAXTON. Mr. Speaker, I rise at this time to say a few words about
the U.S. economy, which has been actually quite good. It is quite
amazing for us here in the House with all of the responsibilities that
we have and with all of the responsibilities outside of the beltway
that the American people have to just take a minute or a few minutes, I
guess, to review the current economic situation.
Mr. Speaker, as the chairman of the Joint Economic Committee, some of
the observations are quite apparent to me, and I just wanted to share
these observations with my colleagues and with others who may be
present.
According, Mr. Speaker, to most neutral observers, including the
Federal Reserve and a consensus of private economists, the economy is
doing quite well and is quite healthy. Indeed, if anything, there seems
to be a little concern in some quarters that the economy may have been
growing too fast, a concern with which I do not agree.
The economy actually grew 4 percent in 2004 and advanced at a rate of
about 3.5 percent in 2005. The growth rate for the first quarter of
2006 is expected to be very robust, consistent with the trend of strong
growth since 2003.
In the first quarter of 2006, the economy expanded at a blistering
rate of 5.3 percent. Now, these are all figures and statistics that we
can vividly see because, in effect, we have already been through them.
Looking ahead is a somewhat more difficult exercise, and an exercise
that I often refer to others with whom I communicate from time to time.
[[Page H4535]]
I have here in my hand a copy of the ``Blue Chip Economic Indicators
Top Analysts Forecast of U.S. Economic Outlook for the Year Ahead.''
This blue chip economic indicator document was actually issued just a
few days ago on June 10. And for those who may not be familiar with
this report, it is essentially a compilation of the beliefs based on
what they see, of a variety of organizations and individuals from
organizations which will be quite familiar if you hear who they are.
There are actually 50-plus organizations that take part in this
process, organizations like Bear Stearns, Lehman Brothers, Goldman
Sachs, the National Association of Home Builders, Merrill-Lynch
Economics, General Motors Corporation, Standard and Poor's. And those,
of course, are just a few of the more than 50 organizations that take
part in this economic forecast.
You might suspect that since I have got it here with me it is good
news, and it is good news for the economy going forward. It projects
that in the second quarter of this year, the quarter that will end just
a few days from now on June 30, the economic growth rate, the GDP, will
continue to grow at almost 3 percent; and in the third quarter of this
year at 2.9 percent; in the fourth quarter of this year at 2.8 percent;
jumping back up in two quarters of next year to 3.1 and 3 percent
respectively.
And so these are good numbers; and so going forward, based on the
economic basis that we have been able to set in our country, we expect
things to continue to do quite well. The improvement in economic growth
in recent years is reflected by some very good economic figures. For
example, since August 2003, business payrolls have increased by over
5.3 million jobs. The unemployment rate stands at a low 4.6 percent.
Consumer spending continues to grow, and the number of American
families who own their own homes is at an all-time high.
The household net worth for families in the United States is also at
a record high. Productivity growth continues at a healthy pace. Long-
term inflation pressures appear to be contained at about 2.7 percent or
so. Long-term interest rates, including mortgage rates are still
relatively low. I can relate to this very well. I was in the real
estate business for 20 years before I came here. I can remember in the
1960s selling houses with 6 percent, with mortgages that carried an
interest rate of 6 percent. It was pretty much a standard rate.
Then as the years went by and inflationary pressures took hold,
inflation drove interest rates to 6 percent, 6\1/2\ percent, 8 percent,
10 percent. Mr. Speaker, I can even remember interest rates on home
mortgages being 19 percent, and of course that shut the market down.
Recently, interest rates for home mortgages have been at about 5
percent. But today, even today, when we think about interest rates
being higher than they were a year or a year and a half ago, they are
still at about the 1960s level of 6 percent or a little bit higher.
So low interest rates are still an incentive to economic growth. In
addition, the resilience and flexibility of the economy have overcome a
number of serious shocks: the war, the attacks on 9/11, and of course
most recently the hurricanes of last year, all disruptive influences
which have not been as disruptive as one may have thought.
{time} 1915
Equipment and software investment has been strong. It is clear that
the Federal Reserve remains poised to keep inflation under control. All
good news. The only soft spot that we see in the economy is in the
housing sector. It seems to be slowing somewhat, although it appears
that a soft landing is most likely. So in the recent policy report to
Congress, like the Blue Chip Indicators, the Federal Reserve noted that
the U.S. economy delivered a solid performance in 2005.
Furthermore, the Fed observed that the U.S. economy should continue
to perform well in 2006 and 2007. In summary, overall economic
conditions appear to remain positive. The U.S. economy has displayed
remarkable flexibility and resilience in dealing with many shocks. The
administration forecast for economic growth in 2006 is comparable with
those of the blue chip consensus and the Federal Reserve. With growth
expected to be about 3.5 percent in 2006, the current economic
situation is solid and the outlook remains favorable.
Mr. Speaker, in December of 2005, this is another way to look at the
economy, the Joint Economic Committee issued a report, under my
direction, entitled ``U.S. Economy Outperformed the Canadian, European
and Japanese Economies Since 2001.'' When we look at our U.S. economy
and have comparisons within the economy, that is one way to look at
economic growth. But another way is to compare it with what is going on
in the rest of the world. The economic data showed that since 2001, the
United States has outperformed every other large developed economy in
the world. This report examines the performance of a peer group of
large developed economies from 2001 to the present time. The peer group
included Canada, Japan, the United States, and 25 member states of the
European Union.
Recently, we updated this report to bring it current. The United
States and Canada in the most recent version of this report tied for
first place in economic growth among the major developed economies with
an average gross domestic product growth of 2.6 percent a year from
2005 to the current period. That compares with just 1.6 percent
economic growth in the European Union and 1.5 percent in Japan. The
period includes the economic slowdown after the collapse of the stock
market bubble in 2000 and the terrorist attack of 2001.
However, after Congress cut taxes on capital gains and dividends and
provided business with incentives in May of 2003, the United States
enjoyed the highest rate of economic growth among the major developed
countries.
This is a point that I would just like to stop and pause for a moment
to talk a little bit more about. We knew that economic growth while we
were growing beginning in the fourth quarter of 2001, when we began to
grow, job growth was very slow. The President said, and the Congress
agreed, that if we gave business some incentives to invest, that
investment in fact would take place and that we would grow. That
actually happened.
As we see on this chart, we had this valley of very slow growth and
very little invested in the economy during 2001 and 2002. But after the
tax cuts that took place in the first quarter of 2003, business
investment occurred rapidly and it helped to spur economic growth
throughout the economy. For example, the United States created more
jobs than any other major economy from 2001 to 2006: 6 million jobs as
of today created in the United States, 5.7 million jobs in the European
Union, 1.5 million jobs in Canada, and a loss of almost 1 million jobs
in Japan.
The unemployment rate. In March of 2006, the United States had an
unemployment rate of 4.6 percent. That is the second lowest among the
major developed economies. Only Japan was better with 4.1. Canada was
actually 6.4. Here is the unemployment rate in the United States; 4.6
percent in the yellow bar, actually 6.3 percent in Canada, and 8.4
percent unemployment rate in the European Union.
In industrial production, another example, from January 2001 to
February 2005, the United States ranks first in the growth of
industrial production among major developed economies. Industrial
production grew by 7.4 percent in the United States, 4.1 percent in
Canada, 2.8 percent in the European Union, and 1.4 percent in Japan.
The rate of inflation is more good news. It has remained contained
throughout the countries that were studied. As I noted a little while
ago in the United States, interest rates are comparatively low with
other countries.
And so as we look at the economy generally, we believe that we have
done some things right. I mentioned tax policy a minute ago. Let me
mention one other item which I think is extremely important. While we
give credit to our friends at the Federal Reserve, interest rates are a
direct reflection, or follow along as a reflection, I guess is a better
way of putting it, of the rate of inflation. And so we have to give
credit to our friends at the Federal Reserve who have done a great job
in controlling inflation.
Another prominent feature of the recent U.S. economy is in fact a
lower
[[Page H4536]]
and more stable rate of inflation than we have experienced in quite
some time. The persistently low rate of inflation depicted on this
chart there has helped to calm financial markets and reduce risk. This
persistently lower rate of inflation has in turn fostered lower
expectations of future inflation and consequently helped to lower the
lid and keep interest rates low.
As we look here, we see that back in the eighties we had relatively
high inflation, and as we went through the nineties, we can see that
inflation actually dropped below 2 percent and has persistently stayed
below 2 percent. The Fed has in essence adopted an implicit inflation
targeting approach which has been very good for economic growth.
I would like to just conclude my portion of these remarks by saying
that the blue chip indicators look good going forward and we have done
some things right both here in the House and at the Federal Reserve.
One of the things that I like to say about economic growth is that no
matter what we do here, economic growth can't take place without the
continued enthusiastic participation of the American worker. We try to
provide those opportunities as best we can through our tax and spending
policies, through the Federal Reserve's policy, through business
incentives that we time and again put in place to encourage things to
happen. But in the final analysis, it is the American working man and
woman out there in the private sector that make economic growth
possible.
I would like to yield at this point to my friend from Georgia (Mr.
Gingrey) who would like to add some thoughts perhaps to what I have
said.
Mr. GINGREY. I appreciate the gentleman from New Jersey yielding, and
I thank him, Mr. Speaker, for bringing these statistics to the floor of
the House this evening. Clearly, these numbers show that this economy
is doing well under this Republican leadership and this Republican
President. The blue chip report that the gentleman talked about on
fiscal year 2007, and he mentioned those 50-something prestigious
financial organizations, says that the economy will continue to do well
the rest of this fiscal year and into 2007. Mr. Speaker, it is because
of the policies of this administration and this Republican-led
Congress. Those policies I am speaking of, of course, are that you grow
the revenue when you cut taxes.
This is not a novel idea that we just invented over the last 2 or 3
years. This happened under a Democratic President in 1960, John F.
Kennedy. It happened again in the early eighties under President
Reagan. You cut taxes; you grow the revenue. All of these statistics
that the gentleman from New Jersey (Mr. Saxton) has pointed out in
regard to low inflation, low unemployment, robust gross domestic
product over something like 12 straight quarters now. Five million jobs
since 2001.
I know when I first got to the Congress in the 108th in 2003, all I
heard, Mr. Speaker, from the other side was how many jobs had been lost
since George W. Bush was first elected. They pounded on that. I have
not heard too much from the other side recently, because clearly this
economy is robust, these jobs are growing, and they will continue to
grow.
We have this arcane scoring system, Mr. Speaker and my colleagues,
and I know everybody agrees, and this is really not in dispute, that
when you cut taxes, they calculate a number of how much it is going to
cost. I think with the Bush tax cuts, it was estimated that it was
going to cost $1.3 trillion in reduced revenue; $1.3 trillion less
coming into the Treasury because of a reduction of every marginal rate
so that everybody in this country, every American taxpayer, would get a
reduction in their Federal taxes and get a check in their pocket. To
double the child tax credit, to eliminate the marriage penalty, to
lower the capital gains and dividend rates to 15 percent for almost
everybody and, indeed, for some as low as 5 percent, and to give our
small business men and women, Mr. Speaker, we are talking about the
mom-and-pops of this great country who probably create 65, 70 percent
of all these jobs that we are talking about, to let them more rapidly
depreciate their capital improvements so they can, with bricks and
mortar, new machines, new equipment, whether it is in my profession,
the health care industry, or any other, to put people back to work, so
that more people, albeit at a lower rate, are paying taxes.
What happens is instead of costing $1.3 trillion over 10 years, in
about 2\1/2\ years our revenue increased, and I know the gentleman from
New Jersey will confirm this and agree with me, by something like $250
billion, increased revenue, because of the boldness, the courage, and
the good common sense to look at historical perspective and understand
that when you cut taxes, you pull a country out of recession and you
don't cause decreased revenue coming to the Treasury, you end up with
more.
This is a great opportunity that the gentleman brings to us tonight
to make sure the American people and all our colleagues on both sides
of the aisle understand. Every Member is entitled to their own opinion,
but they are not entitled to their own facts. I commend the gentleman
from New Jersey for bringing us the true facts this afternoon and this
evening on this floor of the House.
Mr. SAXTON. I thank the gentleman for emphasizing the importance of
tax policy relative to economic growth.
One of the things that I would like to point out, and I know the
gentleman knows this as well, the President today has been criticized
by some for his tax policy, I think, unfairly. One of the charges that
is often made is that these are, quote, tax cuts for the rich. I have
some other statistics here that I would just like to share with my
colleagues and that is simply this: if you believe that tax policy can
be used to promote economic growth, as the gentleman and I do and as
many others in this House do, then we are going to have to cut taxes
relative to the people who pay taxes, because people who don't pay
taxes can't get a tax cut because they don't pay taxes, unless we give
them money back.
And so the facts are that the top 1 percent of the wage earners in
this country pay 34 percent of the taxes. That is the individual income
taxes. The top 5 percent of the people, wage earners, pay 54 percent of
the taxes to the Federal Government. The top 10 percent pay 65 percent
of the taxes. The top 25 percent pay 84 percent of the taxes. And the
top 50 percent of the wage earners in this country pay 96.5 percent. So
the bottom 50 percent of the wage earners in America, in the United
States, pay about 3.5 percent of the taxes.
{time} 1930
So if we are going to have tax cuts and if the people who pay taxes
are the ones whose taxes you cut, which you kind of have to do by
definition, then it will fall that the top 50 percent of the wage
earners get most of the tax breaks because they are paying 96.5 percent
of all the taxes that are paid on the personal side in this country.
So because of what has gone on in Republican and Democrat
administrations, and the gentleman mentioned John Kennedy's inaugural
address in 1962. I can remember his words, almost, not quite, but he
said something like this. He said, we cannot for long expect to remain
the leaders of the world if we fail to set the economic pace at home;
and he stood right up there on that lectern and outlined a set of tax
cuts to make the economy grow. And John Kennedy's tax cuts went into
effect, and the economy did grow.
So this is not new to many here, but it is a revelation sometimes to
people who haven't heard this before.
So our economy is growing. It has been growing since 2001. Since
2003, when we put in place our tax cuts, we began to see investment
take hold and the economy grow and jobs being created, almost 6 million
new jobs created since this economic recovery began; a low rate of
unemployment, 4.6 percent, and things looking pretty good for the
future, according to the blue chip indicators, which we referred to
earlier.
So, Mr. Speaker, I went on to share with my fellow Members these
observations based on the facts that the gentleman from Georgia and I
have cited here; and I want to thank the gentleman from Georgia for
coming here and taking part in this Special Order.
I think we can look forward, Mr. Speaker, to some good economic
growth going forward, hopefully during 2006 as well as 2007 and beyond,
as we continue to do what we can here to make that happen.
[[Page H4537]]
Again, I thank the gentleman for taking part.
____________________