[Congressional Record (Bound Edition), Volume 149 (2003), Part 15]
[Senate]
[Pages 20833-20835]
[From the U.S. Government Publishing Office, www.gpo.gov]




                              THE ECONOMY

  Mr. REED. Mr. President, I would like to take a moment to speak about 
the economy, an issue that is of increasing concern to so many families 
across the country. Measured in terms of employment alone, this has 
been a very difficult and demanding time for Americans across the 
Nation. At the President's urging, Congress has passed three major tax 
cuts in what is becoming an annual ritual. I call it a ritual, because 
it is based on an ideological belief that tax cuts are a one-size-fits-
all fix to all of our Nation's economic woes.
  Regardless of the specifics of our economic situation, regardless of 
the growing number of unemployed Americans, and regardless of our 
record budget deficits, the Administration has pushed on with its 
misguided, one-track approach.
  Mr. President, I do not think anyone would invest a dollar in a 
project if they only expected to receive 10 cents back. But that is 
essentially what has happened under the trickle-down economic approach 
of the Administration. A March 2003 report by the Democratic staff of 
the Joint Economic Committee estimated that in the best case scenario, 
the first year return of the 2003 tax cuts would be less than 10 cents 
on the dollar.
  What this means is the American people massively overpaid, committing 
ourselves to transferring hundreds of billions of dollars to the 
Nation's wealthiest individuals for a pittance of economic stimulus.
  We have all become extremely anxious and hopeful to hear anything 
positive about the economy. At first blush,

[[Page 20834]]

the recent data coming from the Department of Commerce offers a 
suggestion of hope. But after considering the reports at longer length, 
and in the context of all the participants in our economy, I am 
convinced the reports about our gross domestic product are something of 
a letdown.
  As Senator Conrad has stated, 70 percent of the growth in this 
quarter's GDP estimate is caused by increased defense spending, without 
which the economy would have grown at less than 1 percent. This 1 
percent growth would be the slowest economic growth of any 
administration in half a century. So what we are seeing is one of those 
issues in which one sector, for obvious reasons--because of our buildup 
in Iraq and our subsequent operations there--is generating a 
disproportionate share. One can ask the question fairly, how long can 
that continue?
  The National Bureau of Economic Research announced last month that 
the recession ended 20 months ago. But this announcement simply 
confirms what many have long suspected--that we are in the midst of a 
``jobless recovery.'' The economy is in as much trouble as it was in 
the early 1990s, if not worse. More than 3.2 million private sector 
jobs have been lost during this Administration, with 1.2 million jobs 
lost even after the so-called end of the recession 20 months ago. And 
6.2 percent of the civilian labor force was unemployed, which is down 
slightly from the previous numbers of 6.4 percent. But the July decline 
is instructive because it doesn't represent a growth in jobs, it 
represents the fact that there is a drop in the number of people 
looking for jobs. The way we measure unemployment is by looking up the 
number of people actively pursuing employment, that is the basis of the 
calculation. What we are seeing is people giving up hope, becoming 
disheartened, understanding that it is hard to find jobs and therefore 
dropping out of the search for jobs.
  Indeed, if you look at the ratio of employment to population, total 
number of people working versus the population of the U.S., we have 
seen that ratio decline. Nine million workers were unemployed in July 
across the country.
  But for the current President Bush, this is not his father's jobless 
recovery. By this period in the 1991 economic recovery, private nonfarm 
payrolls were rising again. Not only are private sector jobs failing to 
rise again, they are continuing to fall at an even faster rate. 
Corporate layoffs are continuing. For Americans who have suffered the 
most from the recession, this is not an economic recovery because there 
are simply no jobs.
  In my State, we received notice that a major department store is 
closing, a flagship store in one of our prominent malls, Lord & Taylor, 
which will lay off workers. We are seeing other retail operations 
close. For the families of Rhode Island and the Nation, the news they 
are getting is of more job losses.
  Persistent unemployment is only one piece of evidence that passing 
tax cuts does not fix the Nation's economy. The next place to look is 
the budget.
  This week, for the first time, President Bush acknowledged the role 
the tax cuts played in mortgaging our Nation's economic future by 
turning budget surpluses into record budget deficits. In the Rose 
Garden, the President said: ``And so part of the deficit, no question, 
was caused by taxes; about 25 percent of the deficit.'' That is 
according to the President. But according to economists, these figures 
are conservative at best.
  The administration's Midsession Review reveals that the budget 
deficit for fiscal year 2003 is expected to be an astonishing $455 
billion. This is the largest budget deficit in our history. This 
deficit is placed into stark relief by the Bush administration's 
forecast upon coming into office of a $334 billion surplus for 2003. So 
in just 2 years, we have seen a swing of more than three-quarters of a 
trillion dollars and that is just for this fiscal year.
  The causes of the deficit are plain to see if you look at what is 
happening to revenues as a share of GDP--they have gone into a 
freefall. According to the Midsession Review, revenues in 2003 will 
equal 16.3 percent of gross domestic product, the lowest level relative 
to the size of the economy since 1959. The administration would like 
the public to believe this is some sort of natural decline due to 
recession and war. But we have been in recession before and we have 
seen war before, without getting into such a low level of revenue.
  In fact, we can look at where revenues relative to GDP were in 1990 
and 1991 and see that for President Bush, this is not his father's tax 
policy either. The truth is the administration's tax cuts actually 
account for 36 percent of the $7.6 trillion reversal in what was the 
10-year budget outlook for fiscal years 2002-2011.
  This is not even taking into account the administration's soaking up 
of Social Security surpluses, thereby reneging on a campaign promise 
not to raid Social Security. Moreover, the tax cuts take away resources 
necessary to ensure both Social Security and Medicare long-term 
solvency.
  We need to save for the retirement of the baby boomers, and we are 
now less than a decade away from that wave of retirement. We don't have 
time to ``grow out'' of the deficits as we might once have back in the 
1980s. That makes these efforts even more pernicious to the economy.
  The administration has leveled the claim that the deficits would only 
be temporary. The first chart appearing in the Administration's 
Midsession Review shows that deficits as a share of GDP will be cut by 
more than half by 2006. As Senator Conrad has pointed out, cutting a 
deficit in half after you have quadrupled or tripled it isn't exactly 
impressive management. Yet, I don't believe this Administration will 
even accomplish that reduction of the deficit. The deficits in the 
latter half of their 6-year window are not going to be as small as they 
claim they will be.
  There are many reasons why we should be skeptical of the 
administration's predictions of much smaller deficits in the future 
years. First, the budget projections don't include lots of things that 
will surely increase the deficit; for example, the continuing costs of 
the Iraqi occupation--estimated today at $4 billion a month--and the 
continuing cost of military operations in Afghanistan, estimated today 
at $1 billion a month.
  Secondly, the administration's tax cuts are unlikely to boost GDP--
and tax revenue relative to GDP--as much as the administration thinks. 
Their forecast for the years 2005 through 2008 is simply too 
optimistic. The Midsession Review shows an increase in revenue relative 
to GDP of more than 2 percentage points in just 3 years, 2004 through 
2007. But this sharp increase is unprecedented. It didn't even happen 
during the ``revenue surprises'' of the 1990s when revenues seemed to 
explode.
  Such dramatic growth in revenues is much less likely now, because the 
administration's tax cuts have reduced the mechanisms that were the 
main drivers of the 1990s revenue surprises--capital gains taxes and 
the progressivity of the individual income tax system.
  Then there is the other administration response to the deficit 
issue--that it simply doesn't matter.
  Federal Chairman Allan Greenspan repeatedly has emphasized that 
higher deficits do, in fact, lead to higher interest rates. As the 
Fed's monetary report to Congress stated, deficits have already led to 
a downswing in national saving, and ``if not reversed over the longer 
haul, such low levels of national saving could eventually impinge on 
the formation of private capital that contributed to the improved 
productivity performance of the past half-decade.'' At last month's 
Banking Committee hearing, Chairman Greenspan clearly stated that he 
would oppose the continuation of large deficits in the face of full 
employment. Yet the administration's own overly-optimistic forecast 
shows deficits persisting after the economy is back to full employment 
and robust economic growth.
  By choosing tax cuts over less costly and more immediate stimulus for 
the past several years, the President has allowed the manufacturing 
sector, a hallmark of our country's economy, to fall into a spiraling 
decline. This neglect for a vital sector of the economy

[[Page 20835]]

has especially hurt the Northeast and the Midwest.
  Just this week, the Wall Street Journal stated:

       While hundreds of factories close in any given year, 
     something historic and fundamentally different is occurring 
     now . . . Most of these basic and low skilled factory jobs 
     aren't liable to come back when the economy recovers or when 
     excess capacity around the world dissolves.

  The manufacturing industry cut 56,000 more jobs in June alone, the 
35th consecutive monthly decline. From manufacturing to information 
technology, midcareer workers have been especially hard hit, and with 
many of these jobs lost forever to other countries, there is even more 
reason to act fairly and pass additional assistance for the long-term 
unemployed and to provide them with new skills through job retraining 
programs when you consider the record of job loss.
  We should not limit unemployment and job retraining assistance to 
those laid off from manufacturing jobs, however. With so many Americans 
out of work for far too long and the persistence of job losses, there 
is an incredibly pressing need to extend benefits to those workers who 
have exhausted all of their unemployment benefits and yet still found 
no work. It is not their fault that jobs are not being created for them 
to fill.
  Finally, there is no question that state fiscal crises are also 
restraining the economic recovery. These crises are predicated in no 
small part on insufficient Federal grant-in-aid to the States, along 
with decreased state tax revenues that are tied to reduced Federal tax 
rates.
  Indeed, what we have here is a push-and-pull phenomenon. As the 
administration claims they are cutting taxes to stimulate the economy, 
State and localities are forced to raise taxes and cut expenses under 
their rules and their budgets, thus creating a situation in which our 
effect is counteracted by their necessary actions.
  The official labeling of an ``economic recovery'' by the National 
Bureau of Economic Research sadly does not mean an end to the economic 
suffering that too many Americans feel. I think we should all be deeply 
concerned about the state of our economy--the persistent unemployment, 
and the huge budget deficits that are only likely to grow worse as the 
administration continues to push its tax-cutting agenda. Contrary to 
the administration's claims that its tax-cutting agenda is necessary to 
get the economic growth to bring surpluses back, those tax cuts will 
reduce our economic capacity for many, many years to come. We have 
already seen clear evidence of that, even in the administration's own 
estimates.
  Just this week, a trio of Cabinet Secretaries has been traveling 
across the country on a so-called Jobs and Growth Tour Bus. But there 
have been no jobs, very limited growth.
  And this tour is less of a victory lap than a further underscoring of 
the serious economic issues that face American families.
  It appears that for some, the problem of working families struggling 
to get by merely serves as an excuse to pass massive, ineffective, 
irresponsible, and untargeted tax cuts. We must stay focused and pass 
measures that make sense and will put our economy on the right course 
both now and into the future.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Virginia.

                          ____________________