The State of the Economy

THE STATE OF THE ECONOMY -- (House of Representatives - January 16, 2008)

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Mr. ELLISON. Well, Doctor, let me just add my voice and say I love to be on the House floor with my colleagues. You guys are servants of the people of the United States, whether we're from the upper Midwest or Iowa, Kentucky, or all the way out in Colorado, it's a joy to be in the company of people who care about the American working class and are willing to get out there strong to speak up for what working class people need.

You know, this stimulus package is to signal change in a broader sense to make our economy fair and more productive. It's signaling change. One hundred billion dollars is a whole lot of money, but when you think about this trillion-plus-dollar economy we live in, it's not a whole lot by comparison. But it's not designed to solve every problem, it's supposed to spark economic change, signal an overall change in the way our economy is structured so that we can have working class people prosper and grow.

My colleague from Colorado pointed out that it's not a matter of trickle down, it's bubble up. You put the money in the hands of middle-class people, they go out and buy washing machines, they go out and buy food, they go out and buy groceries, they put

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their kids in school, and the next thing you know more deals are being done and you see an overall increase in the economy, a rising tide lifting all boats. You take care of the middle class and the rest will take care of itself.

If you give tax cuts to the wealthiest of the wealthy, the very definition of being rich is that you don't need the money. So, what do you do? You don't spend the money. You merge. You go buy some company overseas and then they take advantage of comparative wage differentials and the next thing you know we're exporting jobs. The fact is is that an economic stimulus targeted to people who really will spend that money and really do need that money and can spend that discretionary income will spark our economy. But it will only be a signal of an overall shift of economic fairness that has to do with our innovation agenda, that has to do with increasing the minimum wage, that has to do with decreasing the cost of college loans, an overall economic package that is big and that is structural that has to do with making changes to predatory lending laws, that has to do with our housing markets, an overall package that will take a little more time to implement, but an economic stimulus package that will happen soon and will spark economic growth directly affecting the unemployment numbers that jumped in December, and as Mr. Perlmutter correctly points out, directly affecting the increase in the Consumer Price Index as well.

Now, you know, the underlying source of this economy's weakness is the collapse in the housing market. In 1995, what happened to the housing market? Bam, straight to the moon. People thought it would never end. As a matter of fact, people bought houses, some of them subprime. Some of them found themselves thinking, well, if I buy this house right now, get into this subprime mortgage, the increasing housing values gives me wealth; I can refinance when this house is even worth more. But, you know, everything that goes up must come down. And as a matter of fact, when we saw people refinance these homes, they consumed that increased wealth in their house. That helped drive the consumer sector, but eventually these things come down and we are hitting the wall.

People are not making it, folks. We have a negative savings rate in America. Negative savings rate. That means if you get paid on Friday, you're out of money Wednesday night. That means you're hanging on and you're hoping that you can stretch that penny out to get to the end of the week. That means that instead of steak you're eating hamburger and instead of salmon you're eating tuna fish. And it's not funny. It's serious business. People are really, really struggling.

And so the fact is, folks, that we have a negative savings rate and that is why people are turning to the credit cards. That's why, when they get a big purchase, they've got to refinance their homes, although that's tough to do today, and that's why they go to title loans, payday loans and pawnshops. This is what is driving that move. We are drying up the consumer sector.

And I just want to say that we have seen record foreclosures in America, record foreclosures. We haven't seen this many foreclosures since the Great Depression.

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Mr. ELLISON. I want to respond directly to your point, Congressman, because I think this is one of the things that in a very palpable feeling way really struck home to me, and that was when I was campaigning back in 2006. I met a gentleman who kind of came to the front door when I knocked on his door. And he came in a very gingerly way; it was clear that he had suffered some kind of injury and wasn't feeling very good. And he said to me, you know, Keith, about a year ago I was up on my roof because me and my partner make a little more than minimum wage, not that much more than minimum wage, but we were able to get into the house because we got into the subprime mortgage. We got some credit cards that they sent to us that we didn't ask for. But because I didn't have a whole lot of money, I climbed up on that roof to fix it because it was leaking. I didn't want to see more damage happen to the house, we had to patch it. And I, as you might guess, fell off that roof. The guy fell off the roof and sustained some serious injuries. The injuries were too bad, his partner was going to try to put him in the car but he couldn't move him because he was hurting, and it was dangerous, and so he called the EMS truck, Emergency Medical Services. They came to get him. That was about 1,800 bucks right there. He didn't have health care insurance. He put the medical bills on the credit card as long as he could, couldn't pay that; as a matter of fact, paid one credit card, but on the other one he was late. Guess what happened to the interest rate on the credit card that he was on time for? It went up. That's called universal default. So, now he's paying 32 percent interest. He's getting further and further behind. He's not working. His partner is struggling to keep the mortgage paid. They see a reset in the mortgage. Now they are totally up. They are just really in bad shape now, and they are facing foreclosure.

When the man told me this story, he was dry in the eye but I was misty. I couldn't believe, I said, you know, not in America. People who work hard, 40 hours a week every week, cannot be in this situation. It's wrong. And I felt it was my responsibility to do something about it.

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So when I stand on the floor to talk about working class prosperity with you here tonight, six Members of Congress, and when I heard our Speaker talk about this stimulus package, I was reminded of what happened when the great President Franklin Delano Roosevelt died. Back in those days, Representative Yarmuth, they used to have the coffin of the President loaded up on the trains. You know what I am talking about, Representative Walz? And that train was carrying that casket across the country. And there was a man who appeared at one of those train stops where that casket was being carried across the country, and there was a journalist there too, and the man was crying about the President. He was in tears over President Roosevelt. And as you know, he was the President during the Great Depression.

And the journalist walked up to the man and said to the man, ``Sir, I see that you're crying and very emotional over what happened to the President. Did you know President Roosevelt?''

And the man gathered himself, cleared his threat, and he said, ``No, I didn't know President Roosevelt. But he knew me.''

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