Hearing of the Senate Finance Committee- Strengthening America's Economy Part I

Interview

Hearing of the Senate Finance Committee- Strengthening America's Economy Part I

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SEN. RON WYDEN (D-OR): Thank you, Mr. Chairman.

Thank you, Dr. Orszag, for a very useful presentation.

I just came from home and discussed these issues with people. And I found that with this kind of economic situation, people in effect were saying that, you know, handing them $800 was something like putting a band-aid on arterial bleeding. And I'd like to explore with you a little bit of a different way to approach it.

My sense is working people save income that is temporary. And then working people spend income that is permanent. So what I've been interested in is a policy that will raise incomes permanently. So as I looked around at the options and read the good work you all did, I came first to infrastructure and transportation, because that is a huge economic multiplier and the need is so great with bridges falling down and Katrina and all of these problems. Senator Sununu and I have introduced a bipartisan proposal to let $50 billion worth of Build America bonds. And I wondered about the applicability of that to this situation.

So I went to your very good report, and you all seem to feel that transportation funding and infrastructure takes awhile to get out; it takes awhile to kick in. That seems to be the conclusion of your people. So we did some research at that point -- having looked at your report -- and we found some areas of infrastructure spending could be utilized very quickly, such as road resurfacing. And there is an enormous need for those kinds of projects.

So what would be wrong with the idea of doing something like that very quickly -- very quickly, especially since you've just given the chairman the information about the third quarter for the tax rebates and start with that?

MR. ORSZAG: Well, it's funny. Actually, in our internal discussions, road resurfacing was also held up as perhaps the one example of infrastructure spending that actually would spend out relatively rapidly. I think the challenge is in a broad-based infrastructure package, targeting those things that would spend out quickly because in general, these projects do spend out very slowly and that substantially attenuates their stimulative impact in the short-term.

SEN. WYDEN: Because it seems to me you're spot on in terms of the longer term, so what Senator Thune and I are interest (sic) in will take a bit longer to kick in. But I noticed you also did an analysis, forecasting a 36 percent cut in highway funding next year because of a short-term drop in highway trust fund income. So the combination of that crunch that we already have -- rebates taking longer to get out based on your current analysis -- if the Congress can -- and there's an association that these officials find projects that would kick in quickly, say, in the next three months, wouldn't that be something worth looking at?

MR. ORSZAG: Again, I think the challenge is that that kick in within the next three months -- limiting an infrastructure package to that kind of thing and also deciding quickly on exactly what those things are is the challenge. So if it were possible to do that and get money out the door fast, yes. As I said, any dollar that's actually spent is relatively effective. The question is limiting the package to those things, and I think that is complicated.

SEN. WYDEN: I thank you for your analysis and I'm going to follow up with you. And if you could ask the CBO staff to see if there are additional areas besides road resurfacing, which I think your folks have already seen has some potential -- I've had some independent analysts look at that -- we did an assessment of this and found that each billion dollar of transportation funding creates an estimated 47,500 jobs. And of course, the multiplier is everywhere. It's all over these local communities and it's something that can kick in quickly. So if we could follow that up with you further, Dr. Orszag, I appreciate it and the good work that you've done.

Thank you, Mr. Chairman.

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SEN. BAUCUS: Senator Grassley's not here.

Senator Wyden, you're next.

SEN. WYDEN: Thank you --

SEN. BAUCUS: Thank you very much.

SEN. WYDEN: Thank you, Mr. Chairman.

I want to come back to this question of infrastructure and the short term versus the long term. It seems as if this stimulus debate really comes down to whether you ought to focus on immediate help -- and, of course, that is critical, because there is a world of hurt in the country -- or, as I'd like us to look at it, immediate help plus some long-term benefits.

Now, we're going to work with you on these studies from the transportation officials indicating that they think they could hire workers within weeks. And shortly after that, individuals could be getting paychecks. But I think I want to ask this from an economic standpoint.

If Dr. Orszag has one dollar for stimulus, just one dollar, shouldn't the search initially be for the double benefit that I'm talking about here, the immediate help plus the prospect that that can lead to longer-term sustainable benefits such as employment in infrastructure?

I'm talking just from an economic standpoint. We're going to have to work with you on trying to find these categories like road resurfacing that I think can be done quickly. But just from an economic standpoint, if Dr. Orszag had one dollar for stimulus, shouldn't the search be for what I think is the two-shot benefit?

MR. ORSZAG: I would think that any long-term benefit should be just an auxiliary kind of complement or benefit, and the focus should really be on what works best during this unusual period of weakness. And there are options that work very well in the short term but don't work well in the long term, and I'm not sure that we should rule them off the table if the immediate concern is boosting the economy in the short run.

SEN. WYDEN: I share that view. If the choice is between getting the immediate benefit, as we all know exists when you help people, for example, with unemployment compensation, or frittering away money in terms of these longer-term projects that people aren't going to see, then I think that's a no-brainer. You ought to go with the immediate help.

What I want to do is to find a way we can get the two-fer, that we can get the immediate help to people so that folks who are suffering see that there is some effort on the part of the Congress to put a tourniquet on this. I mean, I've compared the $800 to sort of like a band-aid on arterial bleeding. I mean, people want the immediate help.

But I also think when you look at the crisis in infrastructure, which you all have correctly pointed out is going to get worse because of the short-term decline in funds, here's a chance, if we get good counsel from folks like you, to get both the short-term help and the long-term help. And I just look forward to working with you on that.

MR. ORSZAG: Well, I would just say you've given me an opportunity to use a really big word, lexicographic. I think the best way of proceeding at this point is to rank short-term stimulus by their bang for the buck, and then there are other considerations that you, as policymakers, can take into account once that's been accomplished.

SEN. WYDEN: Fair enough.

Thank you, Mr. Chairman. Chairman Grassley for the day.

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