[Congressional Record (Bound Edition), Volume 154 (2008), Part 1]
[Senate]
[Pages 923-924]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           ECONOMIC STIMULUS

  Mr. DORGAN. Mr. President, tonight we will hear from the President in 
his annual State of the Union Address. I know the President is expected 
to talk a great deal about the economy and the need for an economic 
stimulus package. I wanted to talk for a moment about this because I 
think it is important for us to understand what is happening to our 
economy.
  I know there are some who think the field of economics is some field 
with precision and elegance and that we are dealing with the ship of 
state. If we can find our way to the engine room and find all the knobs 
and gauges and valves and levers and turn them the right way, such as 
providing an investment credit and bonus depreciation, that somehow we 
will get this ship of state moving again. Of course, that is not what 
is at stake at all. There isn't an engine room with knobs and valves 
and gauges. This is the field of economics, which I have said 
previously is a lot like psychology pumped up with helium.
  So we talk a lot about knowing what is going on. The fact is we are 
going to now do a stimulus package because there is a notion that there 
is a problem with the economy. Well, there is more than a problem, 
there is a very serious problem with this economy. Take a look at the 
stock market, which is a barometer of confidence--up and down similar 
to a yo-yo--mostly down. The housing market has cratered, with 
construction of new homes and apartments in 2007 down 25 percent from 
the prior year. That is one of the giant job engines in our economy--
the housing market. The unemployment rate has jumped, with some 1.4 
million workers without a job for 27 months or longer. The trade 
deficit recently hit a 14-month high. Oil prices are still way up. 
Retail sales are their worst in years. So we have a very serious 
problem.
  Now, the Federal Reserve Board took bold action last week and that is 
unusual for the Federal Reserve Board. They all wear gray suits and 
wire-rimmed glasses and seldom do anything that is very bold, but last 
week they did. They cut interest rates by three-quarters of 1 percent. 
So the expectation is that because the Fed is taking that action and 
seems to be very concerned about the economy, that we should take a 
look at our fiscal policy, so there is talk about a stimulus.
  Frankly, I think a stimulus package is fine. I don't think it does 
all that much. But the absence of doing something on the Senate side of 
Congress would send the wrong signal. Psychologically, it is important 
we work on a stimulus. We are talking about a stimulus that is probably 
1 percent of our economy, so it is not exactly going to jump start the 
American economy. In addition, if all we do is a stimulus package and 
we continue to ignore the fundamentals, the things that are 
structurally wrong in this economy, the things that have not just 
caused the economy to be in some trouble but caused the American people 
and people all around the world to look at us and say: You know 
something, you are off track. You are not addressing the things that 
matter, and this is unsustainable. If we don't do something to address 
those things, we will not be addressing the basic problem of our 
economy.
  So let me talk about that. No. 1, a fiscal policy. A reckless fiscal 
policy. I mean, in recent years, think of it. This administration 
inherited a large budget surplus. Then we got hit with a recession, a 
war in Afghanistan, a war in Iraq, a war on terrorism--and a whole 
series of events--including Hurricane Katrina. Many of us said to the 
President: Don't propose we spend surpluses that don't yet exist. Let 
us be conservative. He said: Katy bar the door, let us have big tax 
cuts and most of it for the wealthy, and he pushed it through Congress.
  Now, I didn't push for it, he did, and we ran up a huge deficit 
because of all these unexpected circumstances we were confronted with. 
So now, in recent years, we have sent soldiers off to war, and the 
President says to Congress: We are sending soldiers to go fight, but we 
don't intend to pay for it. I want the Congress to provide emergency 
spending in order to pay for that, and we will add it to the debt. Last 
year, he asked Congress for $196 billion for the current fiscal year. 
That is $16 billion a month, $4 billion a week, none of it paid for, 
and all of it added to the debt. As if to say to the soldiers: You go 
fight, and when you come home, we will have you and your kids pay the 
bills. That is a fiscal policy that is completely off balance.
  We are going to borrow about $600 billion this year. That is how much 
will be added to the debt. I know that is not what they say the deficit 
is. They say the deficit is lower because, among other things, they are 
taking all the Social Security surplus from the trust funds and using 
it to show a lower deficit. We are going to borrow about $600 billion a 
year to sustain the budget policies of this administration. Add to that 
a $700 billion to $800 billion a year trade deficit, $2 billion a day 
every single day, and you are talking about a combined red ink in our 
budget and trade policies of some $1.3 trillion. That is almost 10 
percent of the American economy. Think of that. That is unsustainable.
  Now, add to a reckless fiscal policy and a trade policy in which we 
are hemorrhaging red ink and exporting American jobs, regulators who 
were asleep on the job--people who came to Government but didn't want 
to regulate--and the subprime loan scandal occurred right under their 
noses. We all heard the advertisements. When you turned on the 
television, you heard the ads. It couldn't have escaped the notice of 
the regulators, surely. The ads said: Have you been bankrupt? Do you 
have trouble getting credit? Have you been missing your house payments? 
Come to us. We have a loan for you. We will give you a new home 
mortgage. And so they did, with a teaser rate at 2 percent and 
unbelievable circumstances.
  Everybody was making lots of money. The brokers were making millions, 
the mortgage banks were making a lot of money, and then they were 
packing these mortgage loans, the good ones, with the bad ones, just 
like they used to pack sausage with meat and

[[Page 924]]

 sawdust. They would use the sawdust as filler back in the old days.
  Well, during unregulated times, just like packing sawdust into 
sausages, what these folks did is, they took good loans and bad loans, 
packaged them up. They sliced them up, then they securitized them, and 
sent them out, sold them, and everybody was happy and everybody was fat 
and everybody was making a lot of money, until it all came home to 
roost. A whole lot of folks could not make housing payments.
  So what we found with the subprime loan scandal is 2.2 million 
families with subprime loans will lose their homes to foreclosure; 7.2 
million with subprime mortgages have an outstanding mortgage value of 
$1.3 trillion. And when those interest rates reset, a whole lot of them 
will not be able to pay the bills to keep their homes.
  All of this happened under the nose of regulators who came to 
Government not wanting to regulate. And it caused severe damage to our 
country. Now, add to that a reckless fiscal policy, a trade deficit in 
which we are hemorrhaging in red ink and shipping jobs overseas and a 
scandal in the home mortgage industry that caused enormous damage to 
our country, made a lot of folks rich in the short term, and victimized 
a lot of others. Add to that the unbelievable speculation that is going 
on in hedge funds, most all of it outside of the view of regulators.
  Hedge funds are about $1.2 to $1.5 trillion in value; but that does 
not describe their importance to the economy. They are heavily 
leveraged. That $1.2 to $1.5 trillion of hedge funds is engaged in one-
half of all of the trades every day on the New York Stock Exchange. 
They are engaged in, among other things, credit default swaps.
  There is something called credit default swaps, derivatives, with 
notional values of $43 trillion. There is so much unbelievable 
speculation with dramatic amounts of leverage in hedge funds and 
derivatives that it is scary. Nobody knows what is going on because it 
is outside the view of regulators. That is the way they want to keep 
it.
  We will talk about stimulus; we will talk about short-term measures. 
But if we do not deal with this issue of a fiscal policy that is way 
off track, a trade policy that is an abject failure, regulators who 
have no interest in regulating, scandals will develop and mature right 
under their noses, this country is not going to recover. Our economy is 
not going to thrive and grow. It is fine to do a stimulus package of 1 
percent of GDP, I do not object to that. We will borrow the money from 
China, likely, to do it; perhaps put some money in the hands of people 
who will go to Wal-Mart and buy goods from China, for all I know.
  But, psychologically, I think it is fine to create a fiscal policy 
initiative that compliments what they are doing at the Fed with 
monetary policy. But that will not solve the underlying problems in our 
economy. We have deep abiding problems in fiscal policy, trade policy, 
and regulatory failures.
  This Congress and this President have a responsibility to address 
them. Talking about stimulus, and just talking about stimulus, means we 
have not addressed that which moves this ship of state forward in the 
future, creating expansion opportunities and jobs and economic health. 
The only way we do that is to stare truth in the eye and understand 
what is causing the problems in the country and how to fix it.
  There is an old saying on Wall Street I was told by a friend: You 
cannot tell who is swimming naked until the tide goes out. Well, the 
tide has gone out, and now we are going to see some sights that are not 
very pretty. It has to do with speculation and a whole series of things 
that we have to correct. And my hope is, starting this evening at the 
State of the Union Address and following that, at last long last, we 
might see a President and a Congress work together to face the truth 
about fiscal policy, trade policy, and inept regulation that has put 
this country in significant difficulty and trouble.
  We need not have a future that manifests that trouble forever. If we 
take bold action and courageous action to understand what is wrong and 
what the menu of items are that we need to go to fix it, I think we can 
have a much better and brighter economic future in this country. I want 
to be a part of that work, and I know many of my colleagues do as well. 
So let's hope the first step to do that begins this evening at the 
joint session of the Congress at the State of the Union Address.

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