[Congressional Record Volume 153, Number 195 (Wednesday, December 19, 2007)]
[Senate]
[Pages S15959-S15961]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              THE ECONOMY

  Mr. REED. Mr. President, I rise today to discuss the state of our 
economy. Regrettably, the news is not good. Two weeks ago, the Mortgage 
Bankers Association reported that the rate of home foreclosures and the 
percentage of loans in foreclosure is at the highest level ever 
recorded by this organization. At the same time, surveys by the 
University of Michigan and the Conference Board showed consumer 
confidence at the lowest levels in many years. The financial troubles 
that began with the subprime mortgage crisis last summer have now 
spread to all credit markets and created a liquidity crunch that 
threatens our entire economy.
  Some say these troubles are merely temporary. In fact, some say there 
are two economies--the real economy, with people getting up and going 
to work, and the economy of Wall Street, which is financial engineering 
and all sorts of incredibly exotic financial products. The reality is 
these markets intersect. As a result, our whole economy is threatened 
now by forces that may be temporary, but they are working themselves 
out in a very difficult way for the people of this country, the men and 
women we represent, our constituents.
  Some contend that the market has undergone a correction since the end 
of cheap credit and speculation in the housing sector. They point to 
job figures and quarterly GDP growth as indications that the overall 
economy, the real economy, is strong.
  Frankly, I think we have to look critically at those assertions. What 
troubles me more than the numbers--the GDP and all the other financial 
statistics--is what I am hearing from Rhode Islanders and what I 
presume my colleagues are hearing from their constituents across the 
country. The mortgage crisis and credit crunch in many ways represents 
a culmination of their fears and sort of the tangible acknowledgement 
of what they have been fearful of for many months. Lately, I have been 
struck by how many people are finding it increasingly difficult to 
maintain a decent standard of living, despite having a steady job. 
People tell me they feel squeezed by the rising costs of energy, food, 
health care, and higher education, while at the same time the size of 
their paychecks does not seem to be expanding at all.
  For thousand of families in Rhode Island and millions of people 
across America, wage stagnation has created a general feeling of 
anxiety. Instead of trying to get ahead, most people are finding it 
hard to get by. The subprime meltdown and subsequent credit crunch are 
adding additional stress to that equation. For some people, it has 
pushed them to the brink of personal and financial crisis.
  Today, we are living in an era of divided prosperity, where a few do 
extremely well--extraordinarily well--and the rest of us are struggling 
to keep up. The Bush administration has aided and accelerated this 
trend of growing inequality, and its lax attitude toward regulation has 
allowed major economic liabilities to develop unchecked, allegedly for 
the sake of allowing the market to function ``efficiently.''
  The latest crises show markets are not always efficient, nor always 
equitable, and rampant speculation in the absence of oversight can 
create problems that cannot be quickly assessed or fixed. This 
President has perpetuated a system that encourages a fortunate few to 
collect as much of the benefits of our economy as possible, while 
sharing very little with the rest of society.
  At the same time, what we have seen developing are enormous blind 
spots that have begun to reveal themselves with disturbing frequency. 
The tragedies of Katrina and the collapse of the bridge in Minneapolis, 
as well as the subprime crisis, and even our policies in Iraq are all 
evidence of the administration's consistent failure to plan for long-
term liabilities. Moreover, this shortsighted focus is reflected in 
massive trade and budget deficits and the absence of any comprehensive 
plan to address our addiction to foreign oil or the skyrocketing cost 
of health care. These are creating real challenges for our country.
  This year, the new majority in Congress has tried to set a different 
course, but, unfortunately, we have not had the cooperation or support 
of the President in any real sense of the word. As a result, we have 
made some progress in addressing and correcting these issues but not 
nearly enough. In order to end the Bush era of divided prosperity, 
which some people speak of as two Americas, we have to, I think, 
reengage ourselves in a process of making sure America is competitive 
in the global economy and that it has sustainable policies that lead to 
true growth, which is shared by all Americans. We must reprioritize and 
take a more serious approach to the policy challenges at hand.
  Since World War II, every period of economic expansion has resulted 
in shared prosperity for most America. To be sure, growth varied by 
degrees over time and from place to place, but in general the tradition 
in America has been that a rising tide will lift up all boats. Yet for 
the past 6 years, under the Bush administration, this tradition of 
shared prosperity has not been sustained.
  In my State, the Poverty Institute of Rhode Island announced last 
month that our median wage actually declined since 2000, which makes 
Rhode Island the only State in New England to experience negative wage 
growth during this period. With stagnation in most places, we have 
actually seen negative growth. Since President Bush took office, the 
real national median household income has declined by $962, from 
$49,163 in 2000, to $48,201 in 2006. In fact, between the first quarter 
of 2001 and the third quarter of 2007, real median weekly earnings fell 
1.2 percent, compared to 7.1 percent growth between 1996 and 2000 under 
the Clinton administration. We have seen a startling change in the 
economy affecting the families of America, whose incomes grew from 1996 
to 2000 and have declined in real terms since then, and that reality is 
shaping the lives of millions of Americans.
  While the President's economic policy has yielded extraordinary gains 
at the very top of the income scale, his fiscal policy has multiplied 
differences and exacerbated the disparity between the very wealthy and, 
frankly, most everyone else.
  According to data recently published by the Congressional Budget 
Office, in 2005, real after-tax incomes jumped by an average of nearly 
$180,000 for the top 1 percent of households, while rising only $400 
for middle-income households, and $200 for lower income households, 
which signifies an extraordinary divergence in terms of the wealth of 
the very few versus everyone else. That average income gain for the top 
1 percent is more than three times the total income of the average 
middle-income household.

       Taken together with prior research, this new data indicates 
     that income is now more concentrated at the top of the income 
     scale than at any time since 1929. I grew up in an era where 
     we looked to the history of the lives of our parents who 
     endured a depression

[[Page S15960]]

     in which the economy collapsed, and then through the policies 
     of this Federal Government and State government, we saw a 
     rising tide literally lift up every family in America. We saw 
     a more equal distribution of wealth. In fact, many people 
     prospered. Now we are seeing a reconcentration of wealth that 
     has great consequences not only for our economy, but for our 
     society.

  We pride ourselves as Americans on having a country where anyone can 
rise to the top, where opportunity will propel you forward, take the 
chances that are available to you. But what we are seeing in other 
economic studies is, frankly, today we can predict the success of a 
child based on the income of the parent more than we could 20, 30, and 
40 years ago. If your parents are wealthy, you are likely to stay 
wealthy. That was not the case 20, 30, and 40 years ago.
  In his new book ``The Squandering of America,'' the economist Robert 
Kuttner writes:

       Between 2000 and 2006, the productivity of American workers 
     increased by 19 percent. But the total increases in wages 
     paid to all 124 million non-supervisory workers--

  These are the blue-collar workers who come in every day, punch in, 
work hard, go home, and take care of their families.

       --was less than $200 million in 6 years--a raise of $1.60 
     per worker--not $1.60 per hour, but a grand total of one 
     dollar and sixty cents in higher wages per worker over nearly 
     six years . . . Compare this $200 million total for all 
     nonsupervisory workers to the nearly $38 billion paid in 
     bonuses alone by the top Wall Street firms during the same 
     period.

  That is $38 billion to those people who are extremely successful on 
Wall Street versus $200 million for every nonsupervisory worker in the 
country.
  Since 1997, the pay of CEOs of large corporations has increased to an 
average of $10.5 billion per year, or about 369 times the average wages 
of a worker and 821 times the average wage of a minimum wage worker. 
Such facts make it clear that most Americans are working harder and 
more productively.
  Yet these facts go against what many of us were taught in school 
about the tenets of economics. I am referring to the basic idea that as 
the economy becomes more productive, those productivity gains are 
shared, and as a result workers get more in their paychecks. That is 
not happening. It is not happening as it should.
  Let me give another example. According to ``Alpha'' magazine and the 
New York Times, in 2006, the top 25 hedge fund managers combined earned 
$14 billion. That is enough to pay New York City's 80,000 public 
schoolteachers for nearly 3 years. Ask yourself: As a matter of social 
worth and value, should 80,000 public schoolteachers be paid for 3 
years with what 25 individuals have earned?
  I understand there is a risk premium for the pay that these financial 
managers earn. They are not only talented, dedicated people, but they 
are also going in there and taking chances and rolling the dice and 
creating innovation, entrepreneurship, and opportunities for others. 
But still I must ask: Is this distribution of wealth and reward 
commensurate with all the efforts of those teachers, men and women in 
urban school districts who are laboring to give kids a chance so they 
can seize opportunities? As Americans, we have to stop and ask 
ourselves why is this happening. Is there something we can and must do 
to make this country a little bit fairer?
  Even some billionaires are concerned about this. Warren Buffett has 
criticized the U.S. tax system for allowing him to pay a lower rate 
than his secretary. Mr. Buffett paid 17.7 percent on the $46 million he 
made last year. He did not try to avoid paying higher taxes, he simply 
took the advantages that were in the tax code to which he--indeed, to 
which each of us--is entitled. Meanwhile his secretary, who earns 
$60,000, was taxed at 30 percent.
  If you consider these inequities, these differences, it is hard to 
understand why the President is so adamant about protecting the tax 
rates for the top 1 percent of earners. The consequence of this is that 
we also have fiscal complications. We have the most rapid deterioration 
of our Nation's fiscal health in the history of this country. In this 
administration, we have swung from a projected surplus to a projected 
deficit dramatically.
  When the President took office, we had a surplus. Yet he has run a 
budget deficit every year for the past 6 years. Over that period of 
time, Bush's deficit spending has increased our national debt to nearly 
$9 trillion, which is virtually $30,000 for every man, woman, and child 
in America. He has pushed this country into record levels of debt to 
finance tax cuts for individuals who, frankly, are earning at a level 
at which they do not need additional tax cuts.

  Not only does it give more to those who already have a great deal, it 
also starves the Government from funds to use for investing in the 
future productivity and prosperity of this country.
  The only areas where the President has consistently supported more 
money have been for his tax cuts and for unlimited spending on his 
policy in Iraq. With these items, there is no limit to what he will 
accept. A recent report released by the Joint Economic Committee 
estimates that the total economic cost of the war in Iraq has been 
approximately double the direct budgetary costs. We have been spending 
billions, but the costs are much more than that. As we look to a 
drawdown of our troops going forward, the JEC estimates that the total 
economic cost of the war will reach $2.8 trillion for the entire 2003-
to-2007 period, when you factor in veterans health care, the cost of 
equipping and replacing the materiel we have consumed in this war, and 
the reinvestments we will need to make in our military. It is a huge 
amount of money.
  We are spending $10 billion per month on Iraq. Just 2 months of the 
cost of that war is roughly the same amount that was at issue between 
the President and the Congress in our debate about the budget this 
year. The President refused to spend $22 billion more than his limit on 
domestic spending, but in 2 months, we will consume at least that much 
in Iraq without any revenue offsets, without any qualms, and without 
any additional considerations. Unconditional spending was the message 
he sent to us last evening when he demanded that this Congress send him 
money for Iraq.
  The President's policy seems to be not guns and butter but guns and 
caviar--money for Iraq, money for Afghanistan without limit, without 
end, it appears, and benefits through the tax system for the very 
wealthiest Americans, not the rich, but the super-rich.
  This year, the Government is effectively spending $49 billion to 
provide tax breaks averaging $130,000 for those with incomes greater 
than $1 million. And we are seeing the impact throughout this country. 
We particularly see it as we go back to what has to be, I believe, the 
reference point for what we all do, and that is, what is happening to 
families across this country.
  In Rhode Island, the cost of health care premiums is rising twice as 
fast as wages and inflation. Premiums in Rhode Island increased 67 
percent between 2001 and 2006. Wages did not increase that fast, I can 
tell you that. The number of people without insurance increased 50 
percent in that same period. They cannot afford to pay for the cost of 
insurance.
  Gas prices have more than doubled in Rhode Island. The price of 
regular gas has jumped 95 percent from $1.52 when President Bush took 
office to about $2.97 in June of 2007. People are spending more and 
more money on getting to work, getting the kids to the Little League 
games.
  College education costs are rising in Rhode Island and across the 
country. Average tuition fees in Rhode Island have increased 6 percent 
for our 4-year public colleges and 5 percent for our private colleges.
  At the same time, the value of a home has been decreasing, and people 
are beginning to sense that decrease. A home used to be the great 
source of economic security, economic wealth, economic flexibility, and 
a hedge against the uncertainty of the economy, but now we are seeing 
in Rhode Island, and indeed across America, an explosion in 
foreclosures.
  And we can also factor in the uncertainty of pensions. The fact is 
that more and more of my constituents are being pushed from a defined 
benefit to a defined contribution plan or in some cases to no pension 
at all. The erosion of traditional pensions is adding to this 
uncertainty.
  The net effect of all of this is that many Rhode Islanders are 
working longer hours but are barely able to maintain the same standard 
of living.
  What we have to do is respond to these issues. We have taken some

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steps. We have passed, in terms of education, the College Cost 
Reduction Act. This $20 billion increase in student aid is the result 
of this Democratic Congress and our priorities, but we have to do much 
more.
  We have moved forward with respect to some issues on housing, but 
progress has come much too late and is still too little. We finally 
cleared the Federal Housing Administration Modernization Act, the FHA 
Act, which is going to increase the amount of loans the FHA can 
guarantee. That is going to get them back into the lending business. 
But this action has come months after we should have moved more 
promptly, more efficiently, more effectively to do that.
  We have to respond to this growing crisis now in terms of 
foreclosures. Secretary Paulson announced his plans recently and I 
think the plans are important because at least they signal some action. 
However, I suspect they are probably inadequate for the scope of the 
problem that is developing. We have legislation that is pending that 
has to be moved that I think will be much more effective going forward.
  On energy, this week, the President is signing an energy bill which 
is long overdue. It increases gas mileage, or CAFE, standards. But we 
have to do more there, too. The tax provisions which are so essential, 
I think, to ensuring that there are incentives for alternate fuels, 
incentives in the marketplace so investors will put in money with the 
confidence that they will be repaid, those tax incentives are still 
languishing. They have to be passed. Again, we have made progress, but 
it has not been adequate progress to date.
  We have to deal with the broader sense of our dependency on oil. 
Again, this energy bill is a very good step forward. It has to be 
supported. It has to be advanced. It has to be extended.
  When we look at the economy from the standpoint not of the 
macroeconomic statistics of gross domestic product, when we look at the 
economy not simply in the context of financial markets, when we look at 
the economy from the standpoint of people who live in Harrisville, RI, 
or Harrisburg, PA, it is a tough economy. People at home are asking us 
to stand up and do something, to give them again the sense that when 
they work and their productivity goes up, their wages will go up as 
well; to give them the sense that they can actually provide for their 
family, maybe even put a little bit aside. Very few middle-income 
people are putting anything aside these days. That is our challenge.
  This Congress has taken some steps to meet that challenge in terms of 
education policy, in terms of energy policy, in terms of at least 
beginning to deal with the housing issue. We have a lot more to do, and 
we need the cooperation of the administration.

  I think this is a historic moment. Are we going to abandon our sense 
that this country is based on opportunity for all of our citizens? Are 
we going to abandon the sense that our economy works for all of its 
citizens; that those who are creative and clever and take risks will 
get great rewards but that no one is going to be left behind, no one is 
going to be left without anything to show for working hard, working 
smarter, and working better? I hope not.
  I think that will be one of the ultimate judgments not just on this 
Congress and this administration but on our tenure as Members of the 
Senate as we go forth.
  Mr. President, I thank the Chair for his consideration in allowing me 
to speak beyond the recess time, and I yield the floor.
  The ACTING PRESIDENT pro tempore. Under the previous order, the 
Senate stands in recess until 2:15 p.m.
  Thereupon, the Senate, at 12:46 p.m., recessed until 2:15 p.m. and 
reassembled when called to order by the presiding officer (Mr. Cardin).
  The PRESIDING OFFICER. The Senator from North Carolina is recognized.

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