[Congressional Record Volume 155, Number 3 (Thursday, January 8, 2009)]
[Senate]
[Pages S189-S190]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           ECONOMIC STIMULUS

  Mr. KYL. Mr. President, the president-elect spoke to the stimulus 
package today. The Finance Committee had an informal meeting today to 
discuss the proposition. Its outlines are still quite vague. There is 
no specificity to what precisely will go into the stimulus package, but 
there are some general concepts emerging.
  So what I wanted to do today, very briefly, is to outline what I 
think would be some sensible tests to evaluate what is being proposed, 
and what it may reveal is that some ideas would not meet these tests 
and should not be part of a stimulus package. Others would meet the 
tests and would help to resolve the economic crisis that faces America 
today.
  I think the context we put this in is one in which we have already 
had some bailouts, and Americans are a little suspicious that some of 
the money we have committed to these bailouts is going to help--the 
$200 billion bailout to Fannie Mae and Freddie Mac, the $150 billion 
bailout of AIG, the insurance company, the $700 billion Troubled Asset 
Relief Program, the recent $17.4 billion auto bailout, and, by the way, 
the announcement yesterday was that for the first time in the history 
of the world the budget deficit of a country--namely, the United States 
of America--will top $1 trillion. That is over 8 percent of our gross 
domestic product.
  A friend of mine reminded me today--I think it is an interesting bit 
of trivia--$1 trillion is more money than all the cash in circulation 
in the world today of the United States of America. All the dollar 
bills, the ten-dollar bills, the hundred-dollar bills, and all of the 
quarters, nickles, and all of the other cash of the United States does 
not equal $1 trillion, and that is how much the deficit is going to be 
for just this current year. That is a lot of money.
  In that context, we have to be very careful about how we spend 
another $1 trillion or thereabouts to stimulate the economy. The money 
comes from somewhere, and it either comes from taxpayers directly in 
the form of increased taxes or it is borrowed and the taxpayers 
eventually have to pay that back with interest. The interest cost, by 
the way, is expected to be well over $300 billion. So, as a result, we 
have to be very careful that we do more good than harm by taking this 
money away from American taxpayers. The first test obviously is, will 
it work? Will it stimulate economic growth? That is the test that Larry 
Summers, an adviser to the President-elect, has stated. In fact, he 
said, and I am paraphrasing, that investments will be chosen 
strategically on the basis of which will do the most to spur the 
economy. So if we have tried something before, and it has not worked, 
it is a good sign that probably we should not do that.
  The reason I say that is we had a stimulus already: the so-called tax 
rebate. We spent $150 billion on it. The facts are now in. It did not 
work; it did not stimulate the economy. In fact, only about 12 percent 
of the money turns out to have been spent. The lesson to be learned in 
a situation like this is, if you have tried something before and it has 
not worked, then do not repeat it because it is throwing good money 
after bad.
  The reason it did not work is because when people get a one-time 
windfall, they tend to save it or to pay bills with it. They spend it 
if they believe that it is a permanent part of their income forever, 
more so if it is going to relate to their taxes, we need to ensure that 
they know that they are going to have permanent tax relief. If it is 
simply something they believe they are going to have for a year or two, 
chances are they are not going to spend it. It is not going to do any 
good.
  Another test is, would Government action be better in the private 
sector or the Government sector? We know in America it is small 
business and some big business. It is our free enterprise system that 
creates jobs, that creates economic growth. The Government cannot 
create economic growth.
  In fact, when the Government gets involved, there is more potential 
to do harm than good. We can tax them, we can regulate them. Usually, 
it does not do them any good. Sometimes you can do things to help 
business. Usually, you do it in a way that helps with their tax burden. 
There are some good ideas that I have heard discussed that would, by 
making it more tax friendly to invest in certain kinds of equipment, 
for example, or to hire more people, if we knew that would stimulate an 
economic activity, that those kind of activities would be very useful.
  But frequently when we spend Government money, in this case, for 
example, potentially creating 600,000 new Government jobs, remember we 
are taking that money out of the private sector, and it is likely to do 
less good in the public sector than it would if we left it in the 
private sector.
  In fact, a couple of economists with whom we spoke yesterday noted 
that

[[Page S190]]

even in a recession business gets a 4 to 5 percent return on its 
investment. The real test should be, if the money is spent in the 
Government sector, will we get at least that return on the investment 
that we are making? If we do not, we should leave that money in the 
private sector so the private sector can get that return on that 
investment and therefore generate more economic activity in our private 
enterprise system.
  Another question is whether the new Government spending replaces 
State and local spending. My understanding is there is a big chunk of 
money to go to State and local governments. Now they have gotten 
themselves into a pickle because a lot of them have big budget deficits 
this year. They are going to constrict what they spend money on as well 
or they are going to have to raise taxes or fees or find some other way 
to balance their budgets.
  But they obviously would like for the Federal Government to bail them 
out. Well, obviously before the Federal Government considers doing 
that, the first question is, Are you going to correct what has created 
the deficiency in the first place or are we simply going to save your 
bacon then you do not have to do anything to change your ways. Are you 
going to reduce your spending? For example, are you going to spend the 
money anyway?
  People are talking about shovel-ready projects. There are a lot of 
shovel-ready projects at the State level for roads or highways or 
whatever, and they are called shovel-ready because the State is 
prepared to do them. Well, if the State is going to do them anyway, 
then clearly the Federal Government paying for it is not going to 
create any new jobs. It is not going to stimulate economic growth in 
any way, even though it might produce a new bridge or a new highway 
that is useful to the people in that State. So since our goal is to 
stimulate new economic activity, we must ask whether the spending will 
really create new economic activity or merely replace something at the 
State level that would occur anyway.

  The penultimate question is, Is it worth doing? We have to ask the 
taxpayers from whom we are getting money whether an investment is worth 
undertaking at all. For example, one of the things that would be on an 
infrastructure to-do list was a mob museum in Las Vegas; there was a 
snowmaking venture in Minnesota. Are these the kind of investments that 
American taxpayers believe are warranted under any circumstances?
  There are a lot of investments the Federal Government can make that 
are worthwhile. For example, clearly we have used a lot of military 
equipment that needs to be replaced. There are good jobs throughout 
this country producing military equipment. We need to add personnel to 
our military. I think there is a general consensus to do that. That 
will cost money. That will obviously create jobs.
  So those are activities that are needed, are worthwhile, are job 
creating, and clearly would help our country, potentially being much 
more worthwhile than, like I say, a mob museum or some kind of 
snowmaking equipment.
  Then, finally, I think there is one final test that we might talk 
about. In view of the huge deficit we have, should we make the deficit 
worse? This is a cost-benefit analysis. This is clearly going to be 
added to the deficit. So the question is, How much more deficit can we 
pile on without having adverse consequences in the immediate and long-
term? We might stimulate the economy over the next 3 or 4 months, but 
if we are creating a huge hole to dig out of 3 or 4 years from now, we 
have to ask, Is it really going to be worth it.
  So when we evaluate the different proposals, we have to ask whether 
it is going to be worth it to have this large a deficit, twice the $1.2 
trillion of this coming year. One thought in this regard is this: When 
we lower tax rates, we know it helps people. It helps small business 
create jobs. That is what you do in a recession. You try to help people 
by letting them keep more of their money so they can spend it and help 
get us out of the recession.
  Permanent tax cuts are the way to do that. The permanent tax cut 
obviously may or may not reduce revenue to the Treasury. The right kind 
of tax cuts can actually produce more revenue to the Treasury, but 
increased spending, there is no way around it, loses money to the 
Treasury. It puts you in a deeper hole. So as between the potential 
relief from taxes, leaving more money in the private sector, which is 
eventually going to create the jobs to get us out of the recession, or 
having the Government spend more money and creating a larger deficit 
that way, it is a test that I think we need to be very clear about, 
from my mind.
  While I am willing to help do things to stimulate economic activity 
in the short term, I am not willing to ignore long-term consequences of 
a deficit the size that would be created by the kind of spending we are 
talking about.
  If we apply the right kind of tests--and they are sensible. They are 
not Republican or Democratic tests; they are obviously tests that any 
prudent person would ask before spending this kind of money--I think 
that will help us better evaluate the kind of economic stimulus package 
we can actually support in the Senate. It will be the kind of analysis 
our taxpaying constituents expect of us when, in view of all of the 
other things that have been done to bail out various aspects of our 
economy, with the kind of trillion-dollar-plus deficit we are looking 
at, they want us to engage in, they want us to be prudent.
  They have had their fill of wasteful Washington spending. They want 
us to be very careful about what we do with their money in the future. 
I hope as we engage this debate in the future--we will have plenty of 
time to talk about it, debate it, think about it, to analyze it and I 
am not suggesting we try to slow-walk it, but in trying to move quickly 
we nevertheless take the time to perform the kind of analysis I have 
talked about.
  I yield the floor, and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. CHAMBLISS. I ask unanimous consent that the order for the quorum 
call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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