[Congressional Record (Bound Edition), Volume 150 (2004), Part 6]
[House]
[Pages 7607-7610]
[From the U.S. Government Publishing Office, www.gpo.gov]




   THE HARMFUL EFFECTS OF AMERICA'S GROWING TRADE AND BUDGET DEFICITS

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 7, 2003, the gentlewoman from Ohio (Ms. Kaptur) is recognized 
for 60 minutes as the designee of the minority leader.
  Ms. KAPTUR. Mr. Speaker, this evening I want to talk about the 
economy and America's way forward. How do we grow this economy in order 
that we create the wealth so that our families and our communities can 
become self-sustaining again, so our cities and our counties are not in 
debt and our States do not have to pass rising taxes on the citizenry 
of this Nation because the wealth production in their States is not 
sufficient to meet all the public needs that our citizenry is 
requesting?
  I want to begin with an image. I am fortunate to represent a Great 
Lakes community that spans the entire southern rim of Lake Erie from 
Toledo, Ohio through Lorain County on the eastern end. I like to call 
it the emerald and sapphire district of Ohio, the crown jewels of Ohio. 
In this region of Ohio because of our work on the environment, we have 
seen the restoration of our American eagle population. It is a majestic 
bird. When I first was elected to this Congress we had about two 
nesting pairs of eagles and now we are over 100. I had the opportunity 
this weekend to observe some of these magnificent animals and to watch 
them fly over the lake and to think about America's heritage as an 
independent Nation. I stood there on the shore and I thought a long 
while.
  I come here to the floor this evening because I have a deep concern 
that America indeed is losing her birthright

[[Page 7608]]

as an independent nation, as a self-sustaining nation here at home and 
that we are becoming too wed, as our Founding Fathers warned us, to 
entangling alliances and relationships abroad that affect our ability 
to see clearly here at home.
  I am not an isolationist by any means. I have worked more with 
foreign nations, almost more than I think any Member of this body. But 
I am concerned about the innards of this economy and it is as though 
those beautiful eagles that I watched this weekend had two lead weights 
on each claw, holding them down, not permitting them to fly and to 
reach their God-given potential.
  I want to talk a little bit about that tonight. I want to talk about 
the trade deficit that is a huge drag on economic growth in our Nation 
and also our budget deficit and talk a little bit about what this 
Congress, Republicans and Democrats working together, and the next 
President of the United States are going to have to do in order that 
that eagle can fly again and that America can restore the independence 
that she is losing every day.
  I have a chart here that shows the crisis we are in that started, oh, 
back in the mid-1970s, actually. It was not so bad back then because we 
still had large numbers of jobs in our country producing the kind of 
wealth that is necessary to lift family wealth and lift the national 
wealth. But with every succeeding year and every trade agreement that 
America signed, our trade deficit, the amount of imports coming in here 
versus what we export abroad, grew worse, until we are now at a level 
of half a trillion dollars more imports coming in here every year than 
our exports going out. With every billion dollars of trade deficit, we 
lose 20,000 more jobs. This hemorrhage has continued and has 
exponentially grown to a point where we almost wonder how do we get off 
this downward spiral.
  During this administration, we literally have had historic job losses 
totaling nearly 3 million more just in the manufacturing sector, and we 
see no clear plan on the part of this administration and the leaders of 
this Congress today to help reverse these trends so that America begins 
to export more than she imports. In fact, every year the situation has 
gotten worse. We look at where our trade deficits are growing. They are 
growing with China, they are growing with Japan, they are growing with 
Mexico, they are growing with India. In fact, with almost every country 
in the world, and that economic lifeblood that is being transferred 
from us elsewhere has not been replaced here at home.
  The crisis in manufacturing is particularly bad, because 
manufacturing has long been the key to our economy, whether it was 
steel and metals or composite materials or automotive or rail cars. In 
the airline industry, we still have some marginal lead but 
international competition there, closed markets and managed market 
strategies are fast pushing our producers to the sidelines. Important 
industries like electricity, electrical parts, even light bulbs and 
lighting fixtures. We look at polymers, the automotive industry. So 
much of the productive abilities of this country have been off-shored. 
And we see no plan in the President's economic report to try to begin 
to reverse these trends.
  Indeed, the jobs and so-called growth package that was passed here a 
couple of years ago had one major flaw, it did not require investment 
in this country. And so with the huge tax benefits going to certain 
investors on Wall Street, they have no obligation to invest those 
dollars here at home. In fact, there are many, many provisions in the 
Tax Code today that work against investment in this country. With no 
manufacturing jobs plan in place, this administration and the leaders 
of this Congress are working to provide more tax breaks for 
multinational corporations that ship our jobs abroad. That is hard to 
believe but it is going on. In fact, their plan includes a large 
loophole that allows foreign corporations to have foreign workers do 
most of the work to make a product and still reap a benefit from what 
is called domestic production in the Tax Code. It includes billions of 
dollars in new tax breaks for offshore operations of multinational 
corporations.
  What are we doing? We may be making certain investors on Wall Street 
happy because they do not have to invest in the United States. Why do 
we not reward those small businesses, family businesses, businesses 
committed to this country, businesses that help support not just jobs 
but baseball teams in our hometowns? They go to the Rotary, they really 
form the basis for what we created in the 20th century, the greatest 
industrial Nation in the world. Rather, what we see happening by this 
administration is the lack of appointment of a manufacturing job czar 
for the majority of this first term. Then when they finally came up 
with somebody that they were going to put over there, an Assistant 
Commerce Secretary For Manufacturing, they picked someone whose name 
had to be withdrawn because, in fact, he had announced through his firm 
not building a major plant in America but building one in Beijing, 
China.
  Why does someone not think about what should be done to move dollars 
toward investment here inside the United States of America? We take a 
look at the moves by the administration to reclassify jobs in fast food 
restaurants as manufacturing jobs. Since we cannot reverse these trends 
with the current economic program on the table, what they are doing is 
saying, well, if you have a service job and you work in a restaurant, 
we will classify that as a manufacturing job. It is not really going to 
change these numbers. America is not going to export more because of 
that decision. And so we have a real serious situation here where so 
much of our lifeblood, our national wealth is being drawn off and put 
in other places.
  The other big lead weight on the independent eagle that I talked 
about, the eagle that should be independent, is the growing budget 
deficit. The economy really cannot take off when you have this kind of 
overhang of trade deficit but also the other deficit of the budget 
deficit. During the decade of the 1990s, we had finally moved America 
to a surplus budget position in every fiscal year. It took a long time 
to get there but through the decade of the 1990s, this Congress and 
then the Clinton administration actually did it. But now what has 
happened? We see both in the unified budget and the on-budget numbers 
as of August 2002, we had moved to $111 billion in deficit; in the on-
budget deficit nearly $300 billion; and in 2003, the number got worse. 
This year, 2004, they anticipate over a half trillion dollars of 
deficit. You cannot have an economy grow and maintain this kind of lead 
weight inside. You say, well, Congresswoman, we could borrow. That is a 
good thing. My question is, but who are we borrowing from and to whom 
do we owe this interest? Folks, we do not owe it to ourselves anymore. 
Indeed, the largest exporter to us, China, is now the largest holder of 
the U.S. debt. Nearly half of the United States debt that is 
reaccumulating, we are now at a level of about $7 trillion, we have to 
borrow from others. Saudi Arabia is one of our biggest lenders.

                              {time}  2030

  But there is a price, and the price is the interest that we pay those 
who lend to us.
  What happened to the old system of postal savings stamps that we had 
during the Second World War? What happened to real U.S. savings bond 
drives? They have almost diminished to nothing as we have become more 
dependent on foreign borrowing.
  Our American eagle cannot fly without a balanced budget and without 
balanced trade accounts. Those two lead weights are holding her down.
  If you take a look what is happening, and this is an interesting 
chart, this just goes to show how quickly we moved from an annual 
surplus position, where our accounts were balanced, back in the late 
nineties. We came out of a huge deficit, and then we moved now into a 
huge deficit again. This is not what we should be giving to our 
children and grandchildren. We should be wiser than this.

[[Page 7609]]

  The last chart I would like to show relates to prospects for the 
future as the per-barrel price of oil rises globally. One of the other 
drags that made it difficult for the eagle to fly is the increase in 
oil prices globally, because America is dependent. We are not 
independent in the use of energy inside this country. Two-thirds of 
what we use is imported, primarily oil, and those supplies are becoming 
more expensive, as every American knows when you go to the gas pump.
  If you look at the current price of $31.39, and it is hovering a 
little bit over that now, unemployment always follows a rise in fuel 
prices. If we look historically, going back, you can go back to the 
early nineties when the per-barrel price was about $37 a barrel and you 
saw U.S. unemployment rise about half a year later.
  The same thing happened every single time. Here is back in the late 
eighties. Oil prices then went up to $21.76 and unemployment ticked up 
to 7.5 percent. My point is, we now face rising prices at the pump. We 
know that means more unemployment down the road.
  So the indicators are that we need to be thinking about how do we as 
Americans become energy independent here at home? Why should we let 
these dollars flow offshore? If we put those dollars in our own pocket 
and created new energy industries here in the United States of America, 
which our Tax Code could also incentivize, we could begin to move to 
new biofuels. Rather than $60 billion of our wealth going abroad to 
other countries, where prices are rising, we could be investing in 
ethanol, we could be investing in biodiesel; not just a little 
pittance, but major national programs.
  We could be investing in photo-
voltaics, capturing the energy of the sun. NASA and the Department of 
Energy have wonderful technologies. All of the incentives we had in the 
Tax Code back in the eighties in order to further the development of 
those were removed as America became more and more beholden to foreign 
fuel. We need to think hard about how to help that eagle fly again.
  Energy independence is not a tangential issue, it is fundamental to 
this economy recovering. I was thus disappointed to read, and I will 
include this article for the Record, that the Chairman of the Federal 
Reserve, Alan Greenspan, said that because America has been 
experiencing this rise in prices, we have to begin importing more 
natural gas. He did not say we need to create more jobs here at home 
through the investment in energy technologies in the United States of 
America.
  Quoting the Washington Post, it said, ``Greenspan said a dramatic 
rise in the recent years in the price of both oil and gas for delivery 
six years into the future was almost certain to have an impact on the 
U.S. economy.'' So he is admitting that the job situation is not going 
to get better, that this will be a drag on economic growth.
  But then he said the impact was likely to be greater for users of 
natural gas, because they had no global supply to cushion price 
increases. He said, ``If North American gas markets are to function 
with the flexibility exhibited by oil,'' but what flexibility, Mr. 
Greenspan? We are totally dependent. Saudi Arabia tells us what to do, 
the OPEC nations tell us what to do. Our eagle cannot fly. She is not 
independent any more. But he says, ``more extensive access to the vast 
world reserves of gas is required.''
  I disagree. I think we need an administration in place that will make 
America energy independent in less than 10 years. We have the ability 
to do it. Right now, we have over $100 billion in oil subsidies largely 
going to multinational corporations operating far afield from North 
America. Why do we not turn some of those dollars back to investments 
here at home?
  Does any person not believe that if those dollars were brought back 
here and repatriated, we would not have a vast booming new industry 
across rural America, across Sun Valley, across Energy Valley, USA, our 
coal reserves that run from Pennsylvania all the way through Illinois?
  Do you mean to tell me we cannot figure this out, that we cannot 
figure out how to make clean fuels in the United States? No, we just 
became wed to a system that can no longer last. Let somebody else take 
those oil reserves. The eagle cannot fly, because we are totally 
dependent on somebody else.
  So my message this evening is that for America's economy to grow, we 
need a different set of leaders in this country. We need a set of 
leaders that will balance America's trade accounts; that will help us 
export products again, not American jobs; who will amend our trade 
agreements, whether it is NAFTA, whether it is our agreements with 
China, so that we begin to have balanced trade; so where markets are 
closed, we had best open them, or America will remain the dump market 
of the world. We need to have trade agreements that allow us to create 
jobs in this country again, not move our jobs offshore. We need 
balanced trade accounts.
  Number two, we need to balance the budget. We cannot continue to 
borrow from foreign interests to move this economy forward, because you 
have to pay the piper at the end of the road, and that piper is no 
longer U.S. savings bond holders in this country. That piper is now 
foreign interests. We are paying hundreds of billions of dollars every 
year to those very interests, and over half of our deficit is now 
financed by them. That eagle cannot fly. We have to become self-
financing here at home.
  Thirdly, in terms of energy, it is the major drag on this economy. We 
need here in Washington leaders who will commit to making America 
energy independent again, investing in photovoltaics, investing in 
hydrogen, investing in biofuels, biodiesel, ethanol and new fuels off 
our farms and fields that we have not even dreamed about yet. We need 
fuel cells. We need in the coal belt clean coal, far beyond what people 
have invented in the past. This is all within America's capability.
  I once read an expression that the greatest room in the world was 
room for improvement, and that the greatest force in the world is 
inertia. I hope that in this presidential year we will get to the point 
where, rather than cutting one another up, the candidates will stand up 
there in front of the American people and say this is what we intend to 
do in our first 100 days, this is what we intend to do in the first 6 
months and the first year to get this economy moving again.
  Every American should vote for the candidate, for this body, for the 
presidency, for the other body, who has the best ideas, because, Mr. 
Speaker, that eagle, she cannot make it alone. We have to help her. 
Right now, the burden is too heavy, and this economy cannot take leaps 
forward without greater vision and greater commitment by the top 
leaders of this country.
  Mr. Speaker, I include for the record the two articles I referenced 
this evening.

                U.S. Deficit, Rates Could Hurt Globally

       Uncontrolled U.S. budget deficits would pose a serious 
     threat to global prosperity in the coming years as rising 
     interest rates depress economic growth in the United States 
     and around the world, the International Monetary Fund warned 
     yesterday.
       The IMF released an analysis that predicted if nothing is 
     done to get control of the soaring U.S. deficits, it would 
     shave global economic output by 4.2 percent by 2020 and 
     reduce U.S. economic growth by 3.7 percent during the same 
     period.
       IMF economists said much of the adverse impact would occur 
     because of increased borrowing demands in the United States 
     to finance the budget deficit. This would drive up U.S. 
     interest rates and interest rates in other countries as the 
     global supply of available capital is reduced, they said.
       ``The rest of the world is affected seriously by the U.S. 
     fiscal deficit,'' IMF chief economist Raghuram Rajan told 
     reporters.
       The IMF's forecast that the U.S. budget deficit will be a 
     significant drag on growth reflected what will occur if there 
     is no improvement in the deficit, which the Bush 
     administration projects will hit $521 billion this year, a 
     record in dollar terms, and show little improvement in coming 
     years.
       President Bush submitted a budget to Congress this year 
     that projects that he will be able to cut the deficit in half 
     over the next five years, reducing it to a shortfall of $237 
     billion in 2009.
       The IMF said if Mr. Bush is able to accomplish such a 
     reduction in the budget deficit,

[[Page 7610]]

     it would significantly lower, but not eliminate the adverse 
     effects from the deficit on U.S. and global economies.
       It saw a long-run impact from such a budget reduction as 
     reducing global economic output by 2.55 percent, compared 
     with a reduction of 4.2 percent under the worst-case scenario 
     in which the deficit remains at the current record levels.
       Under the Bush program to reduce the deficit, U.S. economic 
     growth will be depressed by 1.88 percent in the long term, 
     compared with 3.68 percent under the more adverse deficit 
     path.
       However, the IMF said if the United States decided to 
     pursue more rapid deficit reduction, the adverse drag on 
     growth would be greatly reduced to 1.03 percent in the long 
     term in the United States and 1.47 percent worldwide.
       ``It would be good if there were stronger measures put in 
     place to contain the deficit and that is what we are looking 
     for,'' Mr. Rajan said.
       The IMF analysis of the economic impact of the U.S. budget 
     deficits represented the latest in a series of reports in 
     which the 184-nation international lending agency has urged 
     stronger measures to get control of the deficit.
       The IMF report conceded that the U.S. deficit, which 
     reflected in part the impact of Mr. Bush's tax cuts, was 
     useful in helping the United States and the global economy 
     recover from the adverse effects of a number of shocks such 
     as the 2001 recession, the terrorist attacks and the bursting 
     of the stock market bubble.
       Interest rates have yet to show significant increases in 
     spite of the large budget deficits.
       But the IMF said it was only a matter of time before rates 
     did start to rise, reflecting an improving economy, increased 
     demand for credit by businesses and actions by the Federal 
     Reserve to start raising interest rates to keep inflation 
     under control.
                                  ____


               [From the Washington Post, Apr. 27, 2004]

             Greenspan: Energy Prices Threaten U.S. Economy

                         (By Martin Crutsinger)

       Washington.--The United States needs to expand the global 
     trade in natural gas as a way to prevent future sharp price 
     increases from harming its economy, Federal Reserve Chairman 
     Alan Greenspan said Tuesday.
       Greenspan said a dramatic rise in recent years in the price 
     of both oil and gas for delivery six years into the future 
     was almost certain to have an impact on the U.S. economy.
       But he said the impact was likely to be greater for users 
     of natural gas because they had no global supply to cushion 
     price increases.
       ``If North American gas markets are to function with the 
     flexibility exhibited by oil, more extensive access to the 
     vast world reserves of gas is required,'' Greenspan said in 
     remarks to an energy conference sponsored by the Center for 
     Strategic and International Studies.
       Greenspan said imports of liquefied natural gas accounted 
     for only 2 percent of the U.S. market last year in part 
     because environmental and safety concerns have limited the 
     number of U.S. ports with facilities to handle liquefied 
     natural gas, or LNG, shipments.
       But he said that situation could be changing.
       ``Given notable cost reductions for both liquefaction and 
     transportation of LNG, significant global trade is 
     developing,'' he said. ``And high natural gas prices 
     projected by distant futures prices have made imported gas a 
     more attractive option for us.''
       Greenspan said the fact that worldwide imports account for 
     57 percent of global oil consumption but only 23 percent of 
     natural gas consumption showed the growth potential for trade 
     in natural gas.
       Greenspan said the price of energy contracts for delivery 
     six years into the future and taken a sharp jump upward over 
     the past four years after a decade of ``tranquility.''
       He noted that the price of oil for delivery in six years 
     fell from $20 per barrel just before the first Gulf War to 
     $16 to $19 per barrel in 1999.
       Distant futures contracts for natural gas were less than $2 
     per 1,000 cubic feet of natural gas at the time of the first 
     Gulf War and had risen only slightly to $2.50 per 1,000 cubic 
     feet by 1999.
       But currently, distant futures contracts for oil have risen 
     to more than $27 per barrel while the price increase for 
     natural gas has been even more noticeable, rising from $3.20 
     per 1,000 cubic feet in 2001 to almost $5 currently.
       While Greenspan said the rise in oil prices apparently 
     reflected increased fears about supply disruptions in a more 
     unstable Middle East, he attributed the increase in natural 
     gas prices to the fact that there is more limited global 
     trade in natural gas.
       ``Natural gas pricing . . . is inherently far more volatile 
     than oil, doubtless reflecting, in part, less-developed, 
     price-damping global trade,'' he said.
       To deal with these price pressures, Greenspan called for 
     more access to global supplies through a major expansion of 
     liquefied natural gas terminal facilities and the development 
     of newer technology that allows the liquefied natural gas to 
     be turned back into a gas at offshore facilities.
       ``As the technology of LNG liquefaction and shipping has 
     improved and as safety considerations have lessened, a major 
     expansion of U.S. import capability appears to be under 
     way,'' Greenspan said.
       He said these developments offered great promise of 
     boosting the availability of natural gas in the long term. 
     But he cautioned that since it will take years to put the new 
     facilities into operation, the near-term outlook for natural 
     gas prices would likely remain ``challenging.''

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