[Congressional Record (Bound Edition), Volume 150 (2004), Part 3]
[Senate]
[Pages 3747-3749]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          VIEWING THE ECONOMY

  Mr. CONRAD. Mr. President, Senator Bennett provided a view of the 
economy and the status of the jobs recovery. Let me give an alternative 
view as to what he discussed.
  In looking at the jobs record of this President, what I see is that 
he is the first President who has lost private sector jobs in the last 
70 years. I know it disturbs our colleagues to refer to the last 
President who lost private sector jobs, who was Herbert Hoover.
  In making that statement, we are not saying the economy is in the 
same status as during the Great Depression. Obviously, that is not the 
case. Joblessness in the Hoover administration was approaching 25 
percent of the workforce. That is not the case today. But it is an 
accurate statement to say this is the first President in 70 years who 
has lost private sector jobs. It is also true that something is 
happening in this recovery unlike anything we have seen in recoveries 
since World War II.
  If we look at the average of the nine recessions since World War II, 
that is the dotted red line on this chart. This chart shows months 
after business-cycle peak on the bottom. What this shows is on average 
after 17 months, after the business-cycle peak, you start to see very 
strong job recovery. Here we are in this recession, 36 months past the 
business-cycle peak, and we are still not seeing meaningful job 
recovery. Something very different is happening. In fact, we are 5.4 
million jobs short of a typical recovery. Something is wrong. Something 
is not working.
  This shows the private sector job decline, and it shows 3 million 
jobs have been lost since January of 2001 when this President came into 
office. That is a fact.
  This chart shows that we are also facing the longest average duration 
of unemployment in over 20 years; that is, when someone loses their 
job, it is taking them longer to find a new job than at any time in the 
last 20 years. Again, I think it is telling us this recovery is 
fundamentally different, and there is something wrong in the economy.
  We also see we have the smallest share of the population at work 
since 1994. It is true we have millions of people at work. It is also 
true it is the smallest share of the population in a decade. Again, 
this is a recovery that is very unlike previous recoveries.
  When we look at real wages, we go back to 1996, the last 4 years of 
the Clinton administration. We saw real wages increasing substantially. 
Since President Bush has taken office, we have seen real wages 
basically flat.
  The President in his economic report in February of this year told us 
we could expect 2.6 million more jobs in 2004 than in 2003. For that 
prediction to come true, 520,000 jobs would have to be created per 
month. In the most recent month of February, only 21,000 were created. 
That is 500,000 jobs short of meeting the projection that was made on 
February 9 by the President's Council of Economic Advisers. Again, 
something is radically wrong.
  I might say every one of those 21,000 jobs was in Government. They 
were Government jobs, and not a single job was created in the private 
sector in the month of February.
  If we look historically--this is from the New York Times of today, 
``Promises, Promises,'' an article by Paul Krugman, a noted economist 
who went back and looked at what the administration has said would 
happen with jobs--these are administration forecasts. In 2002, the 
administration said we could expect 138.3 million jobs by 2005. In 
2003, they said, whoops, that 138 million jobs is not going to come 
true. Instead, we are predicting 135.2 million jobs by January of 2005. 
In this year, they said, whoops again. Forget about not only 138 
million jobs but forget about 135 million jobs as well. Instead, we are 
projecting 132.7 million jobs by January of 2005.
  You can see where we are. We are at 130.2 million jobs. That is 8 
million jobs below what the administration said would happen. They have 
been wrong. It is simple fact. They have been wrong, and they have been 
wrong by a big margin.
  Senator Bennett talked about the deficit. He acknowledged the deficit 
is now the largest it has been in dollar terms in our history. That is 
obviously the case. The deficit this year is expected to be $477 
billion. That is $100 billion more than last year and last year was a 
record. He is right, in dollar terms, this is the biggest deficit we 
have ever had.
  But then Senator Bennett said as a percentage of gross domestic 
production, this deficit is lower than others we have seen--at least 
some of the others we have seen. That is where he and I would have a 
disagreement.
  He showed the unified deficit as a share of GDP. That is very 
misleading. We have to look at the deficit and exclude Social Security 
from the calculation. When we do that, what we see is this deficit as a 
share of GDP is nearly equal to what we had in 1983 and it is the 
biggest deficit we have had going back all the way to World War II as a 
percentage of GDP.
  Why the difference between my interpretation, my analysis of deficit 
as a share of the economy, and his? Very simply, he includes Social 
Security; I exclude it. Why? Go back to 1983. There was virtually no 
Social Security surplus. It was several hundred million dollars. It was 
between $200 and $300 million--million with an ``M.'' This year, the 
Social Security surplus is $160 billion. If we are analyzing our fiscal 
condition, if we are analyzing where we are on an operating basis the 
way any company would, we do not throw the retirement funds of the 
employees into the pot. Those are excluded. That gives the real 
operating deficit. As I say, as a percentage of GDP that is the second 
biggest since World War II, only exceeded by the very substantial 
deficits we had in 1983.
  Going forward, the President says, yes, these deficits have been very 
large. But, he said, do not worry; they will get better. He said, we 
will cut the deficits in half in the next 5 years.
  No, we are not. The only way he gets to that conclusion is he leaves 
out things. He leaves out the cost of the war. He has no cost for the 
war past September 30 of this year. No cost for the war in Iraq, no 
cost for the war in Afghanistan, no cost for the war against terror. 
Does any person believe the right answer to those costs past September 
30 of this year, which is the end of the Federal fiscal year, is zero? 
The Congressional Budget Office says that is not the right answer. They 
say the right answer is $280 billion, the cost of the war, residual 
cost over the next 10 years.
  When we add ongoing war costs and take out Social Security, we are 
looking at an operating basis for the Federal Government, and we 
include the need to fix the alternative minimum tax, the old 
millionaires' tax that is swiftly becoming a middle-class tax trap, we 
see virtually no progress, virtually none is being made at reducing the 
operating deficit of the United States, not only for the next 5 years 
under the President's plan but over the next 10 years. This is what to 
me is by far the biggest concern.
  Yes, we ought to be worried about the biggest deficit in our history 
this year. Frankly, deficits after a period of our being attacked, 
after a period of economic downturn, should not be too surprising. What 
is alarming, what should worry us, are the massive sustained deficits 
on an operating basis for as far as the eye can see with no improvement 
even when the President is forecasting strong economic recovery. All of 
this is happening at the worst possible time, right before the baby 
boomers retire.
  If we look at the debt of the United States, not just focus on the 
deficits--

[[Page 3748]]

that is the annual difference between what is spent and what is taken 
in, that is the deficit, the debt is the accumulation of those 
deficits--what we see with the gross debt of the United States under 
the President's plans with his tax cuts, with the additional war cost 
the CBO tells us we will face, and the need to take on this alternative 
minimum tax crisis because it is becoming a middle-class tax trap, we 
see what is happening. It is taking off like a scalded cat. This is 
reality talking. This is facts. This is where this is all headed. It 
does not add up.
  What about the disappearance of that surplus, what is responsible for 
it? The Senator from Utah put up a chart that said 24 percent or 25 
percent of the disappearance of the surplus is tax cuts. That is not 
what we find. When we look at the period of 2002 to 2011, which is the 
period when we had the first of the President's tax cuts, for that 10-
year-period, 33 percent of the disappearance of the surplus--remember, 
they were projecting a $5.6 trillion surplus for that period and that 
has now turned into a $3.5 trillion deficit--there is a turnaround, in 
a negative sense, of $9.1 trillion. Our fiscal condition deteriorated 
by $9.1 trillion in the flash of an eye, in 3 years. Thirty-three 
percent of that disappearance is due to tax cuts.
  The difference may be between the chart he showed and the chart I 
show that I have included the debt service, the effect of the 
additional interest we will have to pay because of the tax cuts and, 
appropriately, that cost ought to be assigned to the tax cuts. 
Obviously, if we have less revenue, we have more debt, and that means 
we have more interest payments. Mr. President, 30 percent of the 
disappearance is technical changes. Eight percent is economic downturn. 
Senator Bennett put these two categories together and called it 
weakness in the economy and technical changes and then attributed--in 
his chart it was 40 percent--it to weakness in the economy.
  No, no, no, no. No, no, that is not right. Eight percent of the 
disappearance of the surplus is weakness in the economy. Thirty percent 
is technical changes, mostly lower revenue, not as a result of tax cuts 
but as a result of the mechanical devices that are used to project 
deficits, that are used to project revenue being wrong.
  The various models, the econometric models that are used to predict 
revenue, have been wrong. They have overestimated revenue, not because 
of tax cuts but because the models were wrong. That has accounted for 
30 percent of the disappearance of the surplus.
  Again, Senator Bennett put up a chart that put these two together--
weakness in the economy and technical changes--and then attributed the 
40 percent to weakness in the economy. That is five times the result of 
weakness in the economy. Weakness in the economy only accounted for 8 
percent of the downturn.
  Other legislation is 29 percent; that is, increased spending. His 
analysis and ours is pretty close on increased spending.
  But where did the increases occur? Ninety-one percent of the increase 
in spending occurred in three areas: national defense, homeland 
security, and the response to the attacks of September 11--rebuilding 
New York, the airline bailout. Those three categories--defense, 
homeland security, and the response to the attacks of September 11--
account for 91 percent of the increase in spending, and the increase in 
spending accounts for 29 percent of the disappearance of the surplus.
  So the fact is, the tax cuts are the biggest single reason, for the 
10-year period, for the disappearance of the surplus.
  Again, what is most alarming is where this is all headed. This is not 
my chart. This is from the President's own budget analysis. What it 
shows is that the next 10 years is really the budget ``sweet spot.'' It 
is the budget ``sweet spot'' even though we are running record budget 
deficits, the biggest in our history. But the President says if you 
adopt his spending plan and his tax plan, these are the good times, 
that it is going to get much more serious when the baby boomers start 
to retire and the full effects of the President's tax cuts are phased 
in. Then you can see the President's policies are going to take us 
right over the cliff into massive deficits and debt, unlike anything we 
have seen before. That is his projection of where his policies are 
leading.
  Well, we do not just have to rely on his projections because they 
have been wrong repeatedly. The Congressional Budget Office is telling 
us exactly the same thing. This is their long-term forecast of what 
happens under the President's policies--his tax cuts, fixing the 
alternative minimum tax, his spending policies. This is what they say 
is going to happen.
  This is where we are now. These are records: the biggest deficits, in 
dollar terms, we have ever had. This is where we are headed, according 
to the Congressional Budget Office, if we adopt his policies--a sea of 
red ink. That is what we face as a nation under the President's 
policies.
  Now we look at Federal spending and Federal revenue because it is 
that relationship that determines what happens to deficits.
  This chart shows what has happened to Federal spending as a 
percentage of gross domestic product. Senator Bennett referred to using 
a percentage of gross domestic product as an appropriate measure of 
looking at debt and deficits. I agree because it takes out the effect 
of inflation so you can see real comparisons over time for Federal 
spending and Federal revenue.
  What this shows us is, by 2001, we had gotten down to 18 percent of 
gross domestic product going for Federal spending, down sharply from 
where we were in the 1980s and the 1990s. In fact, you can see, in the 
Clinton administration, President Clinton came in right here, and every 
year thereafter spending, as a percentage of GDP, went down. I think 
this is counterintuitive to many people, but under a Democratic 
President, Federal spending went down each and every year of his 
administration measured against the national income.
  President Bush came in, and we have had a spike up in spending. 
Again, 91 percent of that increase has gone for defense, homeland 
security, and a response to the attacks of September 11. Still, if you 
project out this level of spending, what you see is we are still well 
below the spending of the 1980s and 1990s.
  But let's look at the revenue side for the other side of this coin. 
That is where we see a fairly stark picture. You can see that the 
revenue side is where the whole Federal fiscal condition has collapsed. 
Revenues, as a percent of GDP for this year, are projected to be at the 
lowest level since 1950. Now look at that.
  When President Bush came into office, we were at a high level of 
revenue as a share of GDP. In fact, he used that as a reason to cut 
taxes. He said, revenue is at a record level as a share of GDP, and 
that told him we ought to cut taxes. But look at where we are now. We 
are now at a record low, the lowest revenue has been since 1950. And 
his answer: Cut taxes some more.
  It does not matter what the question is, his answer is the same. And 
I think any rational person, looking at this objectively, would say: 
What do we have to do to dig out of this? We have to restrain spending. 
We have to get more revenue to balance this budget. Balancing this 
budget is critically important before the baby boomers start to retire 
and increase the spending even more, and, unfortunately, under the 
President's plan, before the revenue dips even more because he is 
proposing deep tax cuts that explode in cost at the same time the baby 
boomers' cost to the Government increases.
  Finally, Senator Bennett talked about the tax cuts as being the 
reason the economy is in recovery. I don't agree that that is the 
correct analysis. There are two things Government can do to affect the 
economy. One is monetary policy. That is money supply, interest rates; 
that is under the purview of the Federal Reserve. The other element of 
economic policy that can be affected by the Federal Government is 
fiscal policy, the taxing and spending decisions by the Congress and 
the President.

[[Page 3749]]

  First of all, I would say the biggest reason for the economic 
comeback is monetary policy. The Federal Reserve Board has adopted a 
very accommodative monetary policy, the lowest interest rates in 40 
years. That gives enormous lift to the economy. That is, I believe, 
reason No. 1 for the economic comeback.
  No. 2 would be the business cycle. We have seen for a very extended 
period the economic history of the country. When you have a slowdown, 
you have an automatic recovery as the business cycle proceeds. We have 
seen typically 17 months after a business cycle peak, when you have a 
recession, you start to see very strong job growth and recovery. In 
this particular recovery, we have seen very weak job growth, even 
though we are 36 months past the business cycle peak. Nonetheless, 
business cycle is clearly the key reason for the rebound and stimulus.
  Certainly, stimulus through tax cuts and Government spending has also 
given lift to this economy. After all, we have run nearly a trillion 
dollars in deficits in just the last 2 years. So we are spending more. 
In fact, spending from 2000 to 2003 was up 20 percent. That is 
stimulative, that is more money moving in the economy. That is more 
goods and purchases by the Government. That stimulates the economy. In 
addition, the tax cuts, without question, also provided stimulus. I 
would say the rebate checks and the lower rates helped stimulate 
consumer spending in the short run, but the tax cuts for the affluent 
were largely saved. So the part of the tax cuts that were especially 
stimulative were those tax cuts that led people to spend money.
  The problem with the President's tax cuts is he weighted them too 
heavily to the upper income who are the very least likely to spend the 
money and stimulate the economy.
  Finally, there is the sinking dollar. The dollar has gone down now 
nearly 30 percent against the euro since 2002, making U.S. exports 
cheaper abroad, making it easier for others to buy our goods.
  Those are the factors I believe have contributed to economic 
recovery, not just the tax cuts. Certainly the tax cuts have played a 
role, but they are just one factor in the five factors I have 
mentioned.
  With that, I take this opportunity to thank my colleagues for the 
good day we had today, the productive debate and discussion we had. I 
welcome this opportunity to respond to Senator Bennett and his 
alternative view of what is happening with deficits and debt, what is 
happening to the job circumstance in our country, and to give my view 
of what is occurring. I find people across the country are increasingly 
troubled by a sense that something is wrong, something is amiss, 
something is not happening as it has happened in the past.
  All of us have a responsibility to try to diagnose why that is 
happening and come up with solutions that will make things better for 
the future.
  I yield the floor.

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