[Congressional Record Volume 154, Number 15 (Wednesday, January 30, 2008)]
[Senate]
[Pages S464-S470]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           ECONOMIC STIMULUS

  Mr. CARPER. Mr. President, it is almost 2 o'clock. This afternoon, as 
I understand it, the Senate Finance Committee is beginning to convene 
and to gather to debate the economic stimulus package which has come 
over to us from the House and to see what changes, if any, we might 
want to make in the Senate. I wish them good luck and Godspeed.
  If you look at the history of stimulus packages in this country--I 
came to the House in 1982, was here for a while, went off to be 
Governor of my State, and came back at the beginning of this decade. 
But the history of stimulus packages is, sometimes we seem to pass 
them, and we have passed them after some delay. We have passed them 
actually after we have not only gotten into a recession, but we were 
actually coming out of a recession. And rather than being helpful as 
you go into a recession, turning things around, the stimulus package 
can be inflationary, an after-the-fact thought, and not all that 
timely, not all that helpful.
  When we hear advice from economists and others on putting together a 
stimulus package, we hear the three Ts. The first of those is 
``timely.'' And the House has acted in a very timely way, working with 
the administration, to put together a package, not a bad package. I 
commend Speaker Pelosi and Secretary Paulson for the work they have 
done. It is not a perfect package, but I do not know that any of us 
could draw up a package that would be.
  It is timely. It has come to us expeditiously. It has come to us on a 
day on which I believe the Federal Reserve is meeting to discuss 
whether they might want to lower the Federal funds rate by another 
quarter or half a percent on top of the three-quarters of a point 
reduction they adopted actually a week and a half ago.
  A second piece of advice we have always gotten from economists and 
policy wonks on recession stimulus packages is, not only should it be 
timely, but it should be targeted; that is, the money should go to 
those places where the money will not simply be taken by whoever 
receives the benefit of a stimulus package and save more money, but 
would actually take the money and put it back into the economy to help 
get the economy moving.
  I heard earlier today some discussions going on in the Budget 
Committee. One of the witnesses was saying he was rather skeptical and 
dubious of a stimulus package and said it is like the Federal 
Government borrowing money and taking that money out of one pocket and 
putting it in the other.
  If we simply take the money from a stimulus package that the Federal 
Government might try to infuse into the economy, we give it to people 
who put it into their pockets who are just going to save the money, I 
do not know that we do a whole lot of good in stimulating the economy. 
That is not to say we do not need to save more money in this country of 
ours; we do. But I am not sure in the near term that is going to help 
move the economy. So the idea behind this stimulus package is, it ought 
to go to folks who need the money, who will spend the money. In some 
cases people are desperate for the money, people who might be desperate 
to feed their families, desperate to pay their heating bills in the 
winter. But they are going to take that money, whatever it might be, 
and infuse it, put it back into the economy quickly.
  The third T that we have heard a whole lot about is the T for 
``temporary,'' the notion here being that we face a significant budget 
deficit. We do not want to prolong that or make it worse long term. We 
do not want to dig an even deeper hole than we are in as a result. We 
want the stimulus package to be of a temporary nature, to help us avoid 
a dip, avoid a recession if we can. And if we are going to have one, to 
make it shorter than would otherwise be the case.
  The package that has come to us from the House has a good deal 
recommended. I have never been wild about tax rebates, but I think I 
supported one back in the earlier part of this decade about 3, 4, 5 
years ago. But the package that we have on tax rebates from the House 
actually is pretty well targeted.
  As I recall, there is maybe a $1,200 rebate that would go to folks, 
to a family, if you have two bread winners in the family. For an 
individual, it would be $600. There is a cap if your income is above a 
certain level, maybe $150,000 for a family, about half that or so for 
an individual. If your income is above those levels, you don't receive 
the rebate. We can quarrel whether $150,000 is too high or too low. It 
is what it is. It is better than having no cap at all. There are some 
who believe we should simply send out a rebate to everybody, $1,200 for 
a family and $600 for an individual. The problem with doing that is, it 
is little bit akin to taking money from the Federal Government out of 
one pocket and putting it into the pocket of another family who is not 
going to spend the money. They are not going to put the money back into 
the economy. They may save it. That is all well and good, but it is not 
going to do much to stimulate the economy.
  My hope is the Finance Committee will decide we will have a rebate 
and make sure it is targeted to those folks who are the most in need of 
some financial help and that any tax rebate we do reflects that. We had 
economists in recent weeks who have said to us, in testimony and other 
public forums, we can actually gauge what bang for the buck we get out 
of Federal stimulus dollars. We are told that if we actually put money 
into extending unemployment benefits, we get about a buck 75 for every 
dollar of stimulus we provide. If we put that money toward folks to 
increase slightly their food stamps, it is about the same. For every 
dollar we put into that, we get about a buck 75. We don't get quite 
that kind of return on a tax rebate, particularly if there is no cap. 
If there is a cap and the money is directed toward lower income folks, 
it is a better bang for the buck than would otherwise be the case.
  My hope is that as the Finance Committee considers what kind of 
package to put together, they will make sure there is some kind of 
reasonable cap on any tax rebate we send out.
  With respect to unemployment benefits, it makes a lot of sense to 
extend unemployment benefits, but I would target them. I would 
especially target them to States where levels of unemployment are high. 
I think about Ohio. My heart is still with the Buckeyes. They are going 
through a tough time. As to the folks up in Michigan, I am a huge 
Detroit Tigers fan, but I also care about the people there and other 
places where unemployment rates are 8, 10 percent and where people are 
in some desperate straits. I hope we would target the unemployment 
benefits that we will extend, whether it is 13 weeks or 26 weeks, to 
particular places such as those States. For States that are enjoying 
economic good times, where the rate of unemployment might be 2 or 3 or 
4 percent, we ought to be careful about extending unemployment 
benefits. Certainly, 26 weeks doesn't make a lot of sense to me in 
those cases. Under current law, people are already eligible for 26 
weeks of benefits, and in places

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of low unemployment, I don't think it makes sense to add another 26 
weeks on top of that. If we had unlimited dollars, that would be well 
and good. But we have a deficit. It is getting bigger. The idea would 
be to target it accordingly.
  The same thing with food stamps. In a perfect world, I would actually 
not argue for having food stamps as part of a stimulus package, even 
though we know it is actually a pretty good stimulus, and there is a 
need out there. Last fall, we debated in the Senate, as they did in the 
House, a farm bill. A big part of the farm bill is not just aid to 
farmers or conservation funding for farmers to conserve open spaces. It 
is not just helping commodity crops or specialty crops. A big part is 
nutrition funding, which includes food stamps. I would not say we are 
close to reaching a compromise between the House and Senate on the farm 
bill, but my hope is we will get there within a couple months. If we 
are going to end up including in the stimulus package some provisions 
dealing with food stamps, I hope we would not make it a long time. I 
think you could argue for maybe a 3 months' provision. We could come 
back and extend that if we wanted to, maybe at most 6 months. But I 
would urge us not to go much beyond that. What we should do is finish 
our work on the farm bill, work out a compromise between the House and 
Senate, something the President will sign, and address nutritional 
needs as part of the stimulus package we are talking about. With 
respect to food stamps, do that in the farm bill, not in the stimulus 
package. If we are going to do it in the stimulus, do it for several 
months, not a year or more.
  The Federal Reserve has already done us a big favor in cutting the 
Fed funds rate, the rate of interest banks charge when they lend money 
to one another overnight. They dropped it down by three-quarters of a 
percentage point. That has an immediate effect, a significant effect. 
It sends a very hopeful signal not just to markets but to households 
and all kinds of folks who are in businesses needing credit. I commend 
the Federal Reserve. My hope is they take it a little further today and 
lop off another quarter percent. I don't know that they will do more 
than that, but that would be welcome.
  In a way, we overestimate the importance of a stimulus package that 
we adopt. We spend a lot of time wringing our hands and trying to get 
it right, working out a compromise between all the different sides. In 
the end, the impact of our package from the Congress and the White 
House is actually modest compared to the impact you get from a cut in 
the Fed funds rate by the Federal Reserve of a full percentage point.
  I close with maybe two or three points to keep in mind. One, in 
putting together a stimulus package, make it targeted, timely, 
temporary. Two, to do no harm, for us not to do something that is 
foolish. I would suggest that a tax rebate that goes to Warren Buffett 
and Bill Gates and the wealthiest people doesn't make a whole lot of 
sense in an age when the budget deficit is approaching $250 billion. 
Let's not do anything foolish, do no harm. And three, maybe one of the 
best things that can come out of a stimulus is to convey to the folks 
who are struggling or having a tough time making ends meet, maybe 
aren't very hopeful, that we can work together. Even in an election 
year, a lot of politics in the air, we can set differences aside and 
come together on a package which makes sense, which will be helpful to 
a lot of folks and to either help us avoid a recession or maybe make it 
more shallow and of shorter duration.
  Among the pieces of the House package that I thought were most 
meritorious was some stuff people don't think about very much. One of 
them deals with something called GSEs, government-sponsored 
enterprises. There are about three that I think a fair amount about. 
One is Fannie Mae. The other is Freddie Mac. The other is the Federal 
Home Loan Bank system which raises money for lending for home 
ownership. There is a proposal that would allow the government-
sponsored enterprises, the big financial behemoths of Fannie Mae and 
Freddie Mac, to have larger mortgages in their portfolio than they are 
currently allowed. I think they are currently allowed roughly $400,000, 
and there is a suggestion that they be able to take on loans to 
$700,000 or so. That is fine to do for a short period. I don't think we 
should make it permanent. I don't think we should do it even for a 
year. The reason is, we need to come back and provide a strong 
independent regulator for Fannie Mae and Freddie Mac. If we simply make 
this change to allow them to put larger mortgages in their portfolio, 
it is a little bit like saying you, eat your dessert, but you don't 
have to eat your vegetables.

  That is all well and good. They would like to be able to buy larger 
home mortgages and put them in their portfolios, high-cost places such 
as California and some places in the Northeast, but at the same time 
they need to eat their vegetables, and they need to have a strong, 
independent regulator who will be there to set the right kind of 
capital standards and to ride herd on these entities to make sure they 
don't get into trouble and, by doing so, get the rest of us in trouble.
  The other thing we need to do--and I don't think it is part of the 
bill the House has sent us, but it might be--deals with FHA, the 
Federal Housing Administration. FHA is 75 years old this year. 
Sometimes people wonder, where did we ever get this 30-year fixed rate 
mortgage that people could prepay. Where did it come from? It came from 
the FHA. It has been around a long time. FHA was the birthplace of what 
we think of as the traditional mortgage. The FHA, as recently as a 
dozen or so years ago, was involved in mortgages that went to maybe 20 
percent of the homes being bought and sold. Twenty percent used FHA. 
Today it is about 5 percent. The difference between that 20 percent and 
that 5 percent for the most part is people have gone into the subprime 
market, and they have gotten these adjustable ARM mortgages.
  People have been lured by teaser rates. Now these adjustable ARMs are 
resetting. It might have been a teaser rate of 2, 3, 4 percent. They 
are now going at 7, 8, 9 percent. The folks who got into these exotic 
mortgages are finding they can't refinance, and they are stuck with 
some kind of significant penalty or maybe being stuck altogether. What 
we need to do is bring the FHA of the 20th century into the 21st 
century and make it relevant for folks looking to buy a house today. We 
passed legislation in the Senate. They are actually not that far apart. 
We reduced the amount of downpayment from 3 percent to 1.5 percent for 
an FHA loan on a home mortgage. And we do some things. We require folks 
to get the kind of counseling they need. We do a better job on reverse 
mortgages. When people are old and their houses are basically paid for, 
they can actually live on the equity of their home for the rest of 
their lives. The idea would be to make those more readily available to 
people who could use that kind of help later in their lives.
  There are a variety of other changes in the FHA that need to be made 
to make it relevant for today. Those are examples of some.
  As much as anything that we would do in the stimulus package that is 
being debated right now in the Finance Committee, we need to come to 
closure on reauthorizing the FHA and bringing it into the 21st century. 
While we are doing that, we need to go ahead and raise the cap on the 
amount of loans, the size of the loans and mortgages that can be bought 
and put into the portfolios of Fannie Mae and Freddie Mac, but only for 
6 months, with the idea that between now and 6 months from now, the 
House and Senate will hammer out a compromise, signed by the President, 
that will provide for a strong, independent regulator for Fannie Mae 
and Freddie Mac, for Federal Home Loan Banks. If we do all that, we 
will convey not just a sense of hope, but we will do something that 
goes beyond a mere stimulus for a couple months. We will address the 
underlying problem that got us into this mess, the subprime lending 
mess in the first place because what we will do is say to the folks who 
have marginal credit, who otherwise would maybe have to rely on these 
exotic mortgages, these adjustable ARMs, instead of having to rely on 
something such as that, they can rely on the FHA, as people have done 
for a generation, because we have made it relevant for your lives and 
for your needs.
  That is the view from Delaware today. My hope is some of that will be

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prevailing later today in the Senate Finance Committee, and we will 
have an opportunity to take it up and debate it tonight and tomorrow.
  I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. SANDERS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. SANDERS. Mr. President, I ask to speak as in morning business.
  The ACTING PRESIDENT pro tempore. We are in morning business. The 
Senator from Vermont is recognized.
  Mr. SANDERS. Mr. President, I think it is clear to the vast majority 
of the American people, if not to the President of the United States, 
that the middle class in our country is shrinking; tens of millions of 
people are working longer hours for low wages; workers today are 
getting into their cars and are paying outrageously high prices for a 
gallon of gas; that senior citizens in the State of Vermont can't 
afford the skyrocketing costs of home heating fuel; and that at this 
particular moment in our history, with poverty increasing and the 
middle class shrinking and our economy in serious trouble, it is 
absolutely imperative that we pass an economic stimulus package. The 
bottom line is not just passing a package but passing a good package.
  I think there are some positive aspects of the bill that came from 
the House. I think from what we are hearing, the Senate Finance 
Committee is going to make that bill even stronger. But the main point 
I want to make this afternoon is that when we pass an economic stimulus 
bill, we have to get it right. It has to be fair. It has to have the 
impact of rejuvenating our economy and helping those people in need.
  Later this afternoon, as the Presiding Officer knows, the Senate 
Finance Committee will be voting on what I believe is, for the most 
part, an improved version of the economic stimulus bill that came from 
the House. I think it is right that the Finance Committee bill includes 
an extension in unemployment insurance for 13 weeks in all States and 
an additional 26 weeks in States with high unemployment. That is 
obviously the right thing to do, because people who lose their jobs, 
people whose unemployment compensation expires, are people in desperate 
need. Those are the people we need to help. From an economic stimulus 
point of view, those people will take that money, spend it, and help 
stimulate our economy.
  I am also pleased that the Finance Committee extended the rebates to 
20 million senior citizens who don't earn income, and that was 
certainly a major lack in the bill that passed the House. There are 
millions and millions and millions of senior citizens in this country 
hanging on, on low fixed incomes, getting their Social Security check 
every month, but having a very difficult time making ends meet, 
especially with health care costs rising, heating fuel costs rising, 
prescription drug costs rising. Those people need help. It is 
absolutely imperative that if we pass an economic stimulus package, it 
must include our senior citizens as well. I applaud the chairman of the 
Finance Committee for including that provision in the bill.
  Furthermore, I am strongly in agreement with the proposed package 
coming out of the Senate Finance Committee that low-income Americans 
who pay Social Security and Medicare taxes should also receive the same 
rebate as somebody who is earning $50,000, $60,000, or $80,000 a year. 
In point of fact, those people are most in need, and I disagree with 
the House provision that would provide them with a $300 rebate as 
opposed to middle-income or upper middle income people who get a $600 
rebate. We should not provide a two-tier rebate approach. Everybody 
should get the same amount. Certainly lower income people have more 
need of the money than upper income people. So I think that provision 
in the Finance Committee proposal makes a lot of sense.
  Having said those positive things about the Finance Committee 
package, there is one area where I strongly disagree. Under the House 
package, the rebates were capped at incomes of $75,000 per year for 
individuals and $150,000 a year for couples. As I understand it, the 
Finance Committee would eliminate those caps and they would say to the 
wealthiest people in our society, to the millionaires and to the 
billionaires, to Bill Gates, to Warren Buffett, that you will be 
eligible for a tax rebate. At a time when this country has a record-
breaking national debt, at a time when the people on top have never 
done so well, and the richest 1 percent are doing very well based on 
anyone's analysis; at a time when the richest 1 percent have already 
received collectively hundreds of billions of dollars in tax breaks 
from President Bush, the idea that under a so-called economic stimulus 
package we would be providing $500 to Bill Gates is not only absurd, it 
is laughable. I hesitate to think what the American people will 
conclude if we go forward in that approach, and if we do away with the 
cap at $150,000, which the House appropriately placed in there.
  It has been estimated that eliminating the income caps for the rebate 
checks, giving that money to Bill Gates and other billionaires would 
cost about $5 billion. Five billion dollars would, in fact, be enough 
money to significantly increase food stamps for tens of millions of the 
neediest Americans in our country. I don't think it is rocket science 
to suggest that it is more important to make sure that kids in this 
country get adequate nutrition, that older people be able to get some 
help in food stamps, than giving a $500 check to millionaires and 
billionaires, not to mention that all of the economists agree that if 
you are talking about an economic stimulus, the fastest way you get 
that money out into our society is by giving it to people who are most 
in need who will then spend it, not to the wealthiest people in this 
country. I hope very much that every Member of the Senate will conclude 
that giving a tax rebate of $500 a person in a so-called economic 
stimulus package to the wealthiest people in this society makes zero 
sense.
  In my view, despite the improvements or most of the improvements we 
are seeing in the Senate Finance Committee, I think that, frankly, 
there is a lot more that must be done in the economic stimulus package, 
and it should be done for two reasons. No. 1, for 7 years, we have had 
a President who has turned a blind eye to the middle class and working 
families and lower income people in this country; at a time, in fact, 
when poverty is increasing, his contribution to the process was to 
propose major cutbacks in one program after another. I think it is time 
now that Congress pay attention to the needs of the middle class, lower 
income people, and start addressing their needs rather than just upper 
income people who have received so much over the last 7 years. 
Specifically, we must provide help to those most in need, particularly 
senior citizens on fixed incomes, low-income families with children, 
and persons with disabilities.
  We must strengthen the middle class in this economic stimulus 
package, and we must put Americans back to work at good-paying jobs by 
paying attention to our infrastructure, which has so long been 
neglected with the results being that we have bridges and roads and 
culverts and school buildings that are in desperate need of repair.
  If we fail to pass an economic stimulus package that does not 
accomplish all three of these goals, we will have missed out on an 
important opportunity to strengthen our economy and to help those 
people most in need.
  Here are just a few steps that I believe we should be taking. First, 
I believe we should increase the stimulus package by at least $25 
billion. I also believe we should reduce the business tax breaks by at 
least $25 billion. Mark Zandi from Moody's has estimated that the 
business tax breaks contemplated by Congress would yield very little 
stimulus to the economy, much less than increasing food stamps or 
unemployment benefits. In other words, if the goal is to stimulate the 
economy, the tax breaks being proposed for the business community in 
many ways would have much less of an impact than many other proposals, 
such as increasing food stamps or unemployment benefits.
  If we did those two things--increase the stimulus package by $25 
billion and reduce the business tax breaks by $25

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billion--that would leave us with an additional $50 billion. What can 
we do, what should we do with this $50 billion? We could complete the 
picture. We can put Americans back to work at decent-paying jobs, we 
can help those who are most in need, and we could strengthen the middle 
class.
  How do we do that? Specifically, I believe we should provide $5 
billion for an expansion of the Food Stamp Program. In America today, 
poverty is increasing. We are seeing levels of desperation in the State 
of Vermont and all over this country that we have not seen in many 
years. Food shelves in the State of Vermont and throughout this country 
are running out of food. I understand that in the agriculture bill, 
there are proposals to increase food stamps, but we do not know when 
that farm bill is going to be passed. We have to act now. Let's support 
our neighbors who are having a hard time feeding their families. Let's 
substantially increase food stamps and do it in this economic stimulus 
package.
  What else should we be doing? I can tell my colleagues, coming from 
one of the coldest States in America, at a time when home heating fuel 
prices are soaring, it is absolutely imperative that we significantly 
increase funding for the LIHEAP program. Many of the people on LIHEAP 
are senior citizens, and the rest are low-income people. With fuel 
prices soaring, with poverty increasing, more and more people are 
having a difficult time keeping their homes warm. We must significantly 
increase LIHEAP funding. The economists tell us that is also an 
important mechanism if we are going to stimulate the economy.
  Including food stamps, LIHEAP, and unemployment benefits in the 
economic stimulus package is not only the right thing to do in terms of 
stimulating the economy, it is the moral thing to do. We cannot, we 
must not turn a blind eye to those people who are most in need. That is 
what has gone on year after year under Republican rule. It is time we 
turned that around and told those Americans most in need that we hear 
them, we know what is going on, and this Congress, this Government will 
respond to those needs, and now is the time to do that.
  In my State and all over America, our infrastructure is crumbling. 
There are estimates that we need over $1 trillion to rebuild our 
bridges, our schools, our culverts, and in the process of doing that--
this is work which has to be done, and the longer we wait, the more it 
costs. I speak as a former mayor. When you delay your infrastructure 
repairs, all it means is it is going to cost you more next year. We can 
put many workers back to work doing this very important task of 
rebuilding our infrastructure, making sure the schools our kids are 
going to are updated, and making sure they are energy efficient. If we 
make our schools and public buildings energy efficient, in the long run 
we are going to save money. But as an immediate economic stimulus, 
putting money into the infrastructure can create many jobs, and these 
are good-paying jobs. I am talking about schools, bridges, roads, 
sewers, wastewater plants, rails, ports, airports, health delivery 
systems, and other infrastructural needs. Last year, about 200,000 
construction workers lost their jobs, and this is a good way of 
bringing at least some of them back into the workforce.
  I will also give two more examples of investments we should be making 
that can have a very significant impact upon the lives of the American 
people.
  When a worker loses his or her job, in all likelihood that worker is 
also losing his or her health care. We have seen, since Bush has been 
President, over 7 million Americans lose their health insurance, and as 
unemployment goes up, surely that number will only increase.
  If we just provided, for example, $148 million for the expansion of 
community health centers, that would be enough money to create 227 new 
CHCs all over this country. It would provide jobs for health care 
workers, but even more importantly, when somebody loses their health 
insurance, they would have the opportunity to access primary health 
care, dental care, low-cost prescription drugs, and mental health 
counseling. This is a good investment at any time. It is an especially 
good investment now. It puts people to work and will provide health 
care access for millions of Americans.
  For those who question the appropriateness of including community 
health centers in an economic stimulus package, I simply remind them 
that this is precisely what we did under President Ronald Reagan's 
stimulus package in the 1980s. It worked then, and I believe it will 
work now.
  Another important investment we should be making is to provide at 
least $500 million for the low-income Weatherization Assistance 
Program. Weatherization is a program that is going on all over the 
country. We do not need a new bureaucracy to funnel that money into the 
projects; it is there already. In Vermont and in many other parts of 
America, the needs for weatherization far outstrip the funds that are 
available. Many of the community action agencies have long waiting 
lists.
  Funding weatherization makes eminent sense for a number of reasons. 
No. 1, the programs are in place. We can put people to work right away. 
That is an economic stimulus. No. 2, it is absolutely absurd that 
millions of low-income people continue to live in homes which are very 
poorly weatherized, where insulation is lacking and they have 
inadequate roofs, windows, and doors. They are putting money into their 
heating system, and that money is simply leaking out of their homes, 
causing, by the way, an increased problem with greenhouse gas 
emissions. So weatherization makes sense in terms of creating jobs, it 
makes sense in saving people money on their fuel bills, and it makes a 
lot of sense for those of us who want to cut back on greenhouse gas 
emissions.
  Back in 2001, when both you and I, Mr. President, were Members of the 
House, I was an early backer of tax rebates. I strongly support tax 
rebates for middle-class and for low-income families with children and 
for persons with disabilities. I also believe senior citizens who do 
not pay income taxes should be receiving this assistance as well 
through a bonus in their Social Security checks. But giving someone 
$500 or $1,000 alone will not fix the economic problems the middle-
class and working families of our country are facing. Putting Americans 
to work at decent-paying jobs and helping those most in need is also 
extremely important.
  We must pass an economic stimulus package. We must do it as quickly 
as we can. But we must do it in a way that really has an impact on our 
economy and an impact on the lives of those people who are most in 
need. In the coming hours and days, I intend to be actively involved in 
that process.
  Mr. President, I yield the floor, and I suggest the absence of a 
quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. GREGG. I ask unanimous consent that the order for the quorum call 
be rescinded.
  The PRESIDING OFFICER (Mr. Sanders). Without objection, it is so 
ordered.
  Mr. GREGG. Mr. President, what is the regular order?
  The PRESIDING OFFICER. The Senate is in morning business. Senators 
are authorized to speak for up to 10 minutes.
  Mr. GREGG. Mr. President, I rise to speak about the discussion of how 
we will handle this economic slowdown. First, it is important to put 
this economic slowdown in some context.
  It is very difficult to know how significant it is. In fact, we had 
some economists testifying today before the Budget Committee, where I 
am ranking member, who said they weren't sure we were going into 
recession, are people who are highly respected, but they needed further 
numbers. We have economists who believe we are in a recession who are 
highly respected. Martin Feldstein from Harvard expressed that view 
today before the Budget Committee. Professor Blinder of Princeton, who 
was a Federal Reserve Board member at one time, expressed the view that 
he didn't know.
  Some things are fairly clear. The first is, there is tremendous 
stress on the economy because of the subprime meltdown in the housing 
market. In fact, the numbers are fairly staggering. The housing 
situation is probably as severe as it has been in recent history. That 
has led to a contraction of credit generally, which is what happens, 
regrettably, in such a situation where

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you have a very significant sector of the economy which has been 
subject to a bubble situation where there was an expansion which was 
not supported by the underlying value and which cannot, in this case, 
be supported by the repayment structure that is in place or the value 
of the collateral. The bubble bursts, and people find themselves unable 
to repay their loans, and the value of their collateral isn't high 
enough to offset the value of the underlying loan. As a result, that 
credit is contracted.
  That leads to other credit being contracted because, as those loans, 
unfortunately, dry up and go bad or can't be repaid, you find that the 
banking community generally has to continue to maintain its capital and 
its liquidity position. So it starts to contract its lending to people 
who can repay and who are good risks because the banking community 
doesn't have the resources to continue to expand because it is being 
contracted by the reduction in the value of the loan portfolio tied to 
housing. This feeds on itself.
  Regrettably, I have been through this three times in my professional 
career. The worst was when I was Governor of New Hampshire. At that 
point, in the late 1980s, early 1990s, we had a national crisis 
relating to housing which translated into a crisis in banking. In fact, 
of the seven major banks in New Hampshire, all were statistically 
insolvent. Five of them failed. Two of them survived because they were 
owned by outside banks that had the resources and capital to prop them 
up. But it was a regional event, and it was due to a lot of factors, 
primarily explosive lending in the 1980s which was not supported by, 
again, underlying collateral. It fed on itself so that people who had 
outstanding loans, who could actually repay, found they couldn't roll 
the loans over because the banks were not able to give them additional 
funds because they didn't have it.
  This time it appears to be a little different in that so much of this 
housing paper has been sold and resold and is spread liberally across 
the world. You could have gotten a mortgage in New Hampshire and have 
somebody in Germany own it now, or some part of it, as a result of this 
resale. So the risk has been spread outside the American banking 
system. That has two effects: One, it does spread the risk; second, the 
problem is that as these subprime loans come up, people who actually 
have good jobs and can pay a reasonable rate, as these ARMs are coming 
up at such high rates that they aren't reasonable, those folks are 
finding it difficult to renegotiate because there is nobody at the 
teller window, so to speak. They are dealing with servicing agencies 
which have no relationship either to the people who hold the debt. It 
is very hard to renegotiate these loans effectively.
  This is all compounding on itself and looks as if it is going to lead 
to a fairly significant slowdown or, as has been said by a number of 
people, potentially a recession. In response, the Federal Reserve has 
cut rates, once by 75 basis points and again today by 50 basis points. 
Those are significant cuts and should have a positive impact on the 
formation of liquidity in the market and also, obviously, on taking the 
pressure off the refinancing effort in the area of lending. But it 
takes 6 to 9 months before that works its way through the system.
  The question is, what do we do to stimulate the economy now, today, 
in the next 6 to 9 months when we have this window of slowdown which is 
very difficult to deal with because of the housing market crisis 
compounding into the general lending area crisis and the fact that some 
of our major banking institutions are under very significant stress.
  My view is--and I guess it is a minority view--that you focus the 
effort on that which is going to give you not only immediate stimulus 
but, hopefully, in the long term a stronger economy; in the long term 
an economy that is more efficient and more effective in creating jobs 
and making the American economy stronger. So you value every one of the 
options that are on the table by the basis of does it give you stimulus 
in the short run but, also, does it give you something in the long run 
which is going to produce a stronger economy.
  The proposals on the table are mostly divided into two categories: 
one to give people money to spend and, two, to give businesses 
incentives to go out and buy equipment and invest.
  The money-to-spend issue becomes fairly problematic in a world 
economy. You give somebody $500 or $600 to spend and if they actually 
spend it and they don't spend it on goods produced in the United 
States, it has virtually no impact on stimulating our economy. If you 
purchase a television from China or an iPod--I don't know where they 
are made, but let's say they are made in Vietnam--with the $500 that 
you receive as a tax stimulus through a stimulus package as a tax 
rebate, that has nothing to do with creating jobs in the United 
States. It may create jobs in China. It may create jobs in Vietnam. But 
it does not create jobs here, except at the margin, for the retail 
effort in the United States.

  Also, if you give money to high-income individuals as a tax rebate--
and basically, historically, those dollars do not get spent at all; 
they do not stimulate the economy in that sense at all--they get saved 
because high-income individuals have the discretionary income to spend 
anyway. So if they are going to get a windfall of $500, $600, $1,000, 
it is likely they are not going to spend that in addition to the other 
money they already have available to them, and they are probably going 
to save it. That does nothing to stimulate the economy.
  So as we look at this tax rebate effort, which I understand is being 
done for the purposes of stimulating the economy--the classic Keynesian 
effort of creating demand in the economy to grow the economy in a 
slowdown period--I think you have to look at what are the practical 
implications, what are the real implications of putting this money on 
the table for people.
  To begin with, it makes no sense at all to give it to high-income 
individuals. Even though I am a Republican--people may think that is 
counterintuitive--the simple fact is, it does not make any sense. So 
there should be a cap. I do not understand why the Finance Committee 
draft--what they are proposing--has no cap.
  But, secondly, unless this money can get out fairly quickly, and 
unless you can be fairly confident that it is going to go to purchases 
which are going to assist the American economy, then probably all you 
are doing by sending this money out the door in the form of a tax 
rebate is creating an income transfer which will obviously benefit 
lower-income people from a social standpoint but probably will not have 
much of an impact on the economic policies of stimulus.
  It does not look like we can get this money out the door very fast. 
The fastest track I have heard, which was testified to by the CBO 
Director, is the IRS could get these checks out maybe by the middle of 
June. But he also said the practical implications are that those 
dollars will not have an impact on the economy until the end of the 
third quarter or beginning of the fourth quarter, or, as he said, the 
Christmas season of this year.
  By that time, the Fed rate cuts will probably also have kicked in and 
started having an impact, so you may not be getting what you want, 
which is action in these first 6 months of this year as versus action 
at the end of this year to stimulate the economy. In fact, you may have 
two stimulative events coming in on top of each other, which might 
actually even be inflationary.
  It would seem to me that rather than taking this approach, it would 
make a lot more sense to put money where the problem is. Now, this has 
been resisted by the administration, and it is not being talked about a 
lot around here by the folks who are putting together the package. But 
it would seem to me that middle-income people who have these loans that 
are rolling over--these subprime loans--are the people who need the 
ability to refinance those loans so they do not get foreclosed on over 
the next 6 months. There are a number of ways we could do that. There 
are a number of ways we could actually put money into that area as a 
Federal Government which would benefit that group of people who appear 
to be at the essence of the problem--more than just sending the money 
out to everybody and hoping their demand will raise the economy in 
general.
  A tax credit to those folks, which is refundable, based off their 
interest payment on the refunded loan, is one option to get them 
through this period. A

[[Page S469]]

restructuring mechanism, which allows them to restructure and get 
assistance through restructuring, by significantly expanding FHA, by 
raising and putting that into the package, which is not in the 
package--it is being talked about in a separate vehicle, but it is not 
in the package--would help. Giving the State housing authorities more 
capacity to put money into the market would help. It would help. That 
is being talked about, which is good.
  Allowing Freddie Mac and Fannie Mae to raise their cap--but to do it 
in the context of also underlying reforms so we do not end up, a year 
or two from now, where Freddie Mac and Fannie Mae are going under--
would help. The first part is being talked about, raising the cap, but 
not the second part, the reform mechanism. So there are some things we 
can do that I think would get to the problem more appropriately--and 
the issue of the economic slowdown would mute that, hopefully--and 
would also in the long run create a much stronger economy.
  I have introduced today--I did not introduce it--but Senator Isakson 
introduced it today; and I am his primary cosponsor--a bill to do this 
in the area of tax credits. But it is not going to be included in the 
package, which is unfortunate.
  The second part of the package which is being talked about is 
investment incentives for businesses, small businesses. They should be 
directed at small businesses, by the way, because small businesses 
create the jobs in this country. These involve expensing and bonus 
depreciation, as it is referred to, and net loss operating carryback. 
So if you have a net loss this year because we have a slowdown, you can 
pick it up in years you have had a profit--apply it to years you have 
had a profit--reducing your tax burden.
  These are all good ideas, in my opinion, very good ideas, and will 
strengthen the economy. In the long run, it will make us more efficient 
and create more jobs. And jobs are the bottom line. So I have no 
problem with that part of the package.
  But a third part of the package being talked about is extending 
unemployment insurance. If you talk to most of your economists around 
here who present before the Congress--and many of them do, obviously. 
In the Budget Committee we have an almost unending stream of economists 
before us, and they are always very informative. If they come out of 
what I call the Galbraith school of economics, which is sort of the 
Harvard school of economics, which is a stepchild of the Keynesian 
school of economics of the 1930s, they will basically say if you want 
to get dollars into the economy quickly, you put it into unemployment 
insurance and food stamps, because that gives you an immediate boost in 
the economy to people who will spend it because they need it. That is 
probably a legitimate argument, especially on food stamps.
  But on unemployment insurance, it is not a legitimate argument if you 
have full employment. In fact, it is the absolute opposite of what 
happens when you have full employment. To extend the unemployment 
insurance benefits by a year, which is what is being proposed, in the 
areas that have essentially full employment means you give a 
disincentive to people to go out and find a job in an atmosphere where 
jobs exist.

  By definition, if you have a full-employment economy, you have jobs 
going unfilled. So, for example, in my State of New Hampshire, where we 
have an unemployment rate which is essentially 3.7, 3.8 percent for the 
State--and the highest level of unemployment we have for any county in 
the State is 4.4 percent--we have what is known as full employment. 
Now, there are pockets of problems. We have one specific town in the 
State which was a single-factory town and the factory, regretably, has 
recently closed, so that specific group of individuals has a very 
serious issue, and there is a way to address that in a targeted way.
  But to extend unemployment insurance for our entire State, when we 
are at actually less than full employment--we are actually below full 
employment--in other words, we have a lot of jobs going unfilled when 
you are at 3.7 percent employment--full employment being 5 percent in 
our economy, in the 5-percent range--you essentially create an 
incentive for people to stay on unemployment much longer than is 
necessary for them to find a job.
  We know statistically if you have an economy where jobs are 
available, an economy where unemployment is under 5.5 percent, that 
means you have jobs available and that most people find a job in the 
last 2 weeks of their unemployment. That is human nature: They stay on 
unemployment until almost the end and then find a job. If you extend it 
another year, those folks who could be productive, procuring a job, 
creating economic activity by having a job, will stay on unemployment, 
even though there may be a job out there they could take because you 
have jobs available. So it makes no logic to extend unemployment 
insurance in areas where you have full employment. And full employment 
in our economy is defined as basically under 5.5 percent. The Nation is 
at 5 percent right now.
  We have never extended unemployment insurance in this country when we 
have had an employment rate under 5.7 percent--never. So to do this at 
this time is counterintuitive to how you make the economy more 
efficient and, as a result, stimulate the economy.
  One of the economists who testified before the Budget Committee today 
said if this would work, you should always extend unemployment 
insurance and keep everybody on unemployment forever because, 
basically, if you have a full-employment economy, and you are going to 
get your economy more stimulated by having more people stay on 
unemployment, then leave everybody on unemployment. Obviously, that 
does not make any sense. He was saying that tongue in cheek.
  It is fairly clear, if you have an economy where you have jobs that 
are not being filled, you do not arbitrarily extend unemployment 
insurance for a uniquely long period because those jobs will never be 
filled because nobody will ever leave unemployment insurance. So you 
undermine the efficiency of the economy. It is sort of the old French 
approach to do it that way--not the new French approach but the old 
French approach.
  Yes, there may be regions of our country that have an unemployment 
rate where clearly there are no jobs available, and those regions need 
relief. I would be more than happy to see an unemployment insurance 
extension which was tied to a trigger which said: All right, 
historically, we have viewed under 5.5 percent as full employment; over 
5.5 percent we are getting into a serious issue; so let's take the 5.7 
percent rate--which is where we have historically never gone below to 
extend unemployment insurance--but let's take the 5.7 percent rate and 
put a trigger into the system, so if a State or even a region within a 
State--that is a definable region that is significant--has an 
unemployment rate of over 5.7 percent, they get the extended 
unemployment benefits.
  That makes sense. But a general national extension of unemployment 
insurance for the sake of stimulating the economy is going to be 
counterproductive if you have a full-employment economy in the regions. 
States such as Michigan may need the extension. States such as New 
Hampshire, I am sure, on an individual, anecdotal relations basis, may 
need it, but as a practical matter it would be counterproductive to our 
economy to do it because we are at 3.7 percent unemployment. So that 
proposal, which, by the way, the House looked at and said it did not 
make sense in the context of this economic situation, should not be 
inserted by the Senate.
  I think the best approach we can take--because I, obviously, have 
reservations about the stimulus package that came out of the House on 
the demand side. And I have reservations about some of the initiatives 
within that package. I would like to see that package, obviously, 
include more of a target on the problem which is to address the issue 
of home ownership and the housing stocks, which are so overpriced now, 
and, unfortunately, empty--making sure we figure out some way to move 
people toward absorbing that housing side. I would like to see more of 
that, but that is not going to happen. It is not going to happen in the 
context of the period we have to act.
  There is an agreement that exists between the President of the United 
States and the Speaker of the House of

[[Page S470]]

Representatives and the Republican leader of the House of 
Representatives. It is agreement that involves tradeoffs. But the basic 
underlying purpose of the agreement was and is to stimulate the 
economy. It may or may not do that, but the one positive effect I will 
stipulate it will have is it creates at least a sense that the Congress 
and the Government and the President and the Speaker of the House and 
the Democrats and the Republicans can cooperate to try to address what 
is clearly a slowing of our economy through some fiscal policy action.
  Even though it is $150 billion, which is a lot of money--and all that 
money is going to have to be borrowed from our children, unfortunately, 
and over 10 years it totals up to being about a $200 billion event 
because of interest compounding on it--even though that is a high price 
tag to pay for what you might call a confidence builder, it is still 
something you can argue should be done if you have that type of an 
agreement.
  For the Senate to sort of step in and say: Well, we want to tinker 
with it, and we want to change it there, well, it is nothing more than 
an execution of Senate prerogative, but it is not going to help the 
policy because none of the proposals coming out of the Senate committee 
are all that good on the side of policy--especially the unemployment 
insurance proposal and the lifting of the caps on the benefits 
proposal--what it is going to do is undermine the confidence of the 
American people that we as a government can act.
  So the high water mark appears to me to have been reached on this 
issue when the President and the Speaker of the House reached 
agreement, working with the Republican leader in the House. I think we 
as a Senate ought to take sort of a mature attitude and say: Well, 
progress was made. We are confronting a fairly serious situation. Let's 
not throw out our proposal simply for the sake of putting a proposal on 
the table. Let's recognize that something needs to be done quickly, and 
that this is the best we are going to get. Hopefully, that will be the 
resolution of this process as we move toward concluding, and one hopes 
this can be done within the next week.

  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Missouri is recognized.

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