American Recovery And Reinvestment Act Of 2009

Floor Speech

American Recovery And Reinvestment Act Of 2009

BREAK IN TRANSCRIPT

Mr. GRASSLEY. Mr. President, the matter before this body is the majority's stimulus bill. It merges the products of last week's markup in the Finance Committee and the Appropriations Committee. Twenty-three Senators were involved in the Finance Committee markup. In that group, there were 13 Democrats, 10 Republicans. Thirty Senators were involved in the other committee's markup, the Appropriations Committee. In that group, there were 17 Democrats and 13 Republicans. So if we add that up, it means over half the Senate has been involved in either the Finance Committee part or the Appropriations Committee part of this legislation. For the first time, however, all Senators will have to consider this very large and complicated piece of legislation. That started yesterday and will go on for a week. So the public who want to follow Congress will have a long time to follow the issue.

We ought to take that sort of time with an $800, almost $900 billion piece of legislation. First, I will discuss process and then focus on substance. Because I am the senior Republican on the Finance Committee, I will focus on the Finance Committee's portion. I, like 69 other Senators, am still studying the Appropriations Committee part.

First, I thank my friend from Montana, Chairman Baucus, for courteously and professionally consulting Members on this side. We had one bipartisan Members' meeting where Chairman Baucus patiently heard all of us out. In addition, Chairman Baucus apprised me of the negotiations between Democratic leadership of both bodies and the Obama administration. Those Democrats-only negotiations were extensive. Folks on our side who read press reports could see how extensive they were. Further evidence of that deal making is the relatively small differences between the basic structure of the Committee on Ways and Means of the House of Representatives and the Finance Committee of the Senate. I congratulate Chairman Baucus on those negotiations. The fruit of that labor is the Finance Committee package.

One significant change followed a recommendation I made in early January. That change was made in committee. That was the addition of the alternative minimum tax patch for this year which means over 24 million families need not worry about an average tax increase of at least $2,000 per family for this year. But let no one be mistaken that this bill is the result of bipartisan negotiations. While Republicans were courteously consulted at the Member and staff level, we were never at the negotiating table. Speaker Pelosi best described the bottom line of the process from the Washington

Post, dated Friday January 23, when she said:

Yes, we wrote the bill. Yes, we won the election.

Indeed, there was a rumor floating around about an informal agreement among Democratic Members. The agreement appeared to be to vote against any Republican amendments, no matter what the merits of the amendments might be. As proof of that, if one would review the markup, they will find that nearly all Republican amendments were defeated on a virtually party-line vote. They will also find, for the first time in recent Finance Committee tax legislative history, small issues or modifications raised by dissenting Members, with a couple exceptions. I thank the leadership for those exceptions.

None of these smaller issues were even accommodated.

So let's be clear. We knew at the outset the markup would be ratifying a deal made between Democratic leaders of the House and Senate: No Republican ideas need apply. With the exception of that AMT patch amendment, this was the basic outcome.

Since the largely partisan markup process finished, we have been told by the President and members of the Democratic leadership that this bill is open to improvement by amendment, and I am hopeful we will see that follow through, and before the day is over, I am sure we are going to have some votes where we can do that.

If I could define ``bipartisanship'' just for a minute, I would define it kind of the way I have seen it work over the past decade in the Finance Committee but probably other committees do the same thing. Days before you want to bring up a bill, you sit down and you negotiate between the two leaders, and maybe other people, but you consider every member's position to some extent, and you come out with what is called a bipartisan mark.

In our committee, for some times that was Grassley-Baucus, for other times it was Baucus-Grassley. It is a little bit like buying a new car. If it is going to be a family operation, Chuck Grassley does not go up to Barbara Grassley and say: I have made a determination that we are going to buy a Ford Taurus, and it is going to be blue, and it is going to have these accessories, et cetera, et cetera. No. You sit down. Chuck and Barbara Grassley sit down, and we decide what color car do we want, what brand do we want, what do we want for accessories, et cetera, et cetera. And you go to the dealer, and you have a uniform family position of what kind of a car you buy.

That is the way bipartisanship ought to work here. That is the way I define it. That is the way it has worked over a long period of time. But it is not the way it worked in the product we have before us.

Now we have the President of the United States saying to leaders of his party, when they meet at the White House: Republicans have good ideas, and we want to work toward bipartisanship. Now we have a process in place. Will the President's leadership make a difference to the majority party here on Capitol Hill?

Before I get into substance, though, I wish to pull back and talk about the larger picture for a couple minutes. Majority Leader Reid opened debate on this bill yesterday. Yesterday we also had Groundhog Day. My first chart is a depiction of Punxsutawney Phil, that famous weather forecaster there in Pennsylvania. Yesterday, Phil saw his shadow. Groundhog Day is a recurring event. ``Groundhog Day'' is also the title of a famous film starring Bill Murray.

I have another picture for you of Phil and Bill driving along. In the movie ``Groundhog Day,'' Bill Murray finds himself continually repeating the same routine. Now, my friend, Chairman Baucus, last year rightly pointed out the message of the film. The message was that Bill, guided by Phil, eventually had to figure out what he was doing wrong. Once Bill figured it out, he escaped the infinite loop.

On this bill before us, we need to learn from Bill's and Phil's adventure. We cannot and we should not legislate in a hasty manner and place ourselves in an infinite loop of repeating the same exercise. Democrats and Republicans and the President need to get this right, particularly in the time of the terrible economic recession we are in. We cannot casually deficit spend and ask American taxpayers to clean up the fiscal mess with high taxes down the road.

To me, there is a particularly compelling irony to the fact that we are debating another stimulus bill at roughly the same Groundhog Day timeframe. One year ago, almost to this exact date, the Senate spent a week debating an economic stimulus package. The target time set for enacting legislation was similar to the one for this package. I am talking about the Presidents Day recess. Let's keep the Groundhog Day irony in mind as we move forward this week and next week. Let's not repeat the same exercise, except this time with even much bigger dollars. Let's get it right.

Now to substance. I want to make it clear that most on our side agree with President Obama that stimulus is necessary. The economy is flat on its back. Too many Americans who want to find work cannot find those jobs. A lot of Americans are worried their job will be the next to go. We get that on our side. Everyone here knows we need to do everything we can to get the economy moving again. Where we differ between parties is the degree to which the engine ought to be Government or the engine ought to be the private sector, especially America's biggest job creator, our small business sector, where you hear quite regularly from economists that 70, 80 percent of the new jobs are created. In fact, in the year 2007, big business created no new jobs. All the new jobs in 2007 were created by small business.

These are honest, well-intentioned, philosophical differences between our two parties: Government or the private sector. But those are differences that are there. On our side, we want the new jobs to come from the private sector. On the other side, the preference is to grow employment through an expansion of Government.

Many on the other side and opinion makers who agree with them are invoking the example of Iowa-born President Hoover. Iowa is my home State. They seem to be doing it to portray anyone who questions the trillion-dollar package as a reincarnation of what we call Hoover economics. It is an unfair characterization. Again, let's be clear. Folks on our side recognize the need for action. So do not accuse us of Hooverism.

Also, though Iowans are rightly respectful of the only Iowan to be President, President Hoover, you have to recognize history. I would instruct the other side on a couple lessons from the Hoover era, too, where President Hoover was wrong. One lesson: Do not obstruct free trade. The highest tariff levels in the history of this country--the Smoot-Hawley tariffs--were enacted in the middle of his Presidency, and it shut down world trade. We have to think about that right now because the latest reports have the first reversal of the growth of trade worldwide since 1982. There is little doubt those protectionist barriers that were put up in 1930 or 1931 made the Great Depression worse. So let's not repeat that mistake. There is some evidence on the other side of the aisle that they do want to repeat that mistake and build up protectionist walls.

Now, there is another lesson from the Hoover era I want the other side to be aware of. President Hoover signed into law significant tax increases that made that Depression worse. Like high tariffs, economic history tells us that
these burdensome taxes retarded the economy's ability to recover--a recovery that did not happen until World War II came along. We do not want war to get us out of a recession.

On this side, we agree the lessons from the Hoover era need to be learned. We cannot be passive. President Hoover was passive. Errors of omission on fiscal stimulus should be avoided by all of us. Likewise, errors of commission on fiscal stimulus, such as impeding free trade and raising taxes, also should be avoided.

By the conclusion of this debate, those differences will be plain to people at the grassroots of America. I will tell you, all you have to do is go to Iowa, go to church on Sunday, go eat at the Village Inn after church with your family, go to a University of Northern Iowa basketball game, and talk to your neighbors. The public knows what is going on here. They see this as a big spending bill and not a stimulus bill.

We will see differences fleshed out in the debate and on the amendments. That is the way it should be. As I indicated above, most on our side want to improve this bill. Our amendments, large and small, will be offered as improvements. We hope the other side is sincere and will follow our President's admonition yesterday in their desire to change the bill in a way that can garner a bipartisan majority. Whether Republicans or Democrats have been in control, the test of proper stimulus boils down to three words.

That famous Harvard economist, former Secretary of the Treasury, a good person, Larry Summers, had this to say that ought to be a lesson for both political parties:

As with any potent medicine, stimulus, if misadministered, could do more harm than good by increasing instability and creating long run problems. A stimulus program should be timely, targeted, and temporary.

He may not be an MD, but there is a lesson from that Ph.D. we can learn. It is a lesson of medicine: First, do no harm. Well, we want to measure this bill according to what Dr. Summers says. If you apply the three ``T's'' test to much of the spending in this proposal, you will find it fails the test. We will get into that when we examine and debate the bill.

Some folks might ask: What is the problem if we overshoot and flunk the test? The first problem is running out of budget room. The bill before us will, when interest costs are included, add up beyond that $900 billion to $1.3 trillion added to the deficit. All of this extra deficit increase would be proposed when the baseline deficit for this fiscal year will hit $1.2 trillion. That amount exceeds all historical records. As a percentage of our economy, that will mean 8.3 percent of gross domestic product.

I have read some economists saying that is more stimulus than we have ever had in the history of this country. Maybe 8.3 percent is enough. I think in a bipartisan way, and with the President, we concluded it is not enough. But above that, it seems to me, we ought to be cautious and make sure it is timely, temporary, and targeted because this amount of 8.3 percent easily exceeds the 5.7 percent in 1983. It is almost 50 percent above any comparable post-World War II levels.

The figures on Federal debt held by the public are likewise staggering. In the period of 2001 to 2007, debt held by the public increased by comparatively smaller amounts, roughly 1 percent per year. This year's change easily exceeds all of that, as you can see from this chart of how the deficit continues to go up. You also see it there, as a percent of gross national product, higher than it has been for a 40-year average.

So we need to acknowledge the deficit situation we are in. It is very serious. So whatever we do, we ought to not make the long-term fiscal situation worse than it is. You can see from this chart in the outyears how bad that situation is going to be.

The other problem is if we prime the pump too much and the pumped-out stimulus does not materialize until after the hoped-for recovery is upon us, then we might risk too much stimulus. The result could be inflation.

Let's look at the timely part of Dr. Summers' statement. That needs to be brought into sharper focus. The Congressional Budget Office tells us that less than half of the appropriations amounts will be spent out by the end of fiscal year 2010. So only half of the spending in the bill is timely. The Finance package does a little better. Ironically, the tax policy stimulus, much maligned by the hardcore of both Democratic caucuses, helps the spend-out ratio greatly in the Finance package.

The theory for erring on the side of overloading the spending side is that we need to direct dollars to the folks most likely to spend them. This is the reason we are told we need extra FMAP money, expanded entitlements, and other State aid.

It misses the point that the U.S. fiscal policy system already has an arsenal of antirecessionary automatic stabilizers directed to the very same populations. These stabilizers provide immediate assistance to those most vulnerable who have been hit by an economic downturn. The Congressional Budget Office says that these benefits, including food stamps, unemployment insurance, and Medicaid, will grow to $250 billion this year. That built-in, lower income-population stimulus will be equal to 1.8 percent of gross national product.

It also misses the point, when you argue that you ought to err on the side of overspending, about ensuring that the lessons of moral hazards apply to the States. The fiscal problems faced by many of our States and localities are largely the result of their inability to keep spending in line with revenue. Between the third quarter of 2006 and the third quarter of 2008, State revenues increased 7 percent and State spending increased twice that amount--15 percent. In other words, the States and localities spent $2.22 for each additional dollar of revenue. The States have been on a spending spree, and they have dug themselves into a hole.

Now, we will hear that the Medicaid money we are adding--which I refer to as a slush fund for States--is necessary to avoid tax increases at the State and local level. We will also hear that vital services will be cut unless we cut a big blank check to States. Just as we did during the Finance Committee markup, some on our side will test these assumptions with amendments on these points. An open-ended slush fund is not targeted. It is not going to bring about sound, responsible fiscal policy in the States that need it, and this is true no matter how you dress up this issue.

Perhaps the most disturbing stimulus test failure is on the third ``t''--that it should be temporary. This is what bothers me most about this bill. I am referring, of course, to the temporary test. In this package, there are many new popular spending programs labeled ``temporary.'' Those programs total $140 billion. If these programs are extended or made permanent, we can expect another $1.3 trillion added to future deficits. I will challenge anyone on the other side to tell me these programs will be turned off once enacted. With large Democratic majorities and a Democratic President, I would say any such promise is dubious in this Congress. It is about as deliverable as a promise to sell the Brooklyn Bridge.

Just so appropriators don't get too far out on a limb, I wish to quote from what Chairman Miller of one of the House committees had to say. He was talking about these built-in expenditures that are going to go beyond the 2 years; things that ought to be handled by the Appropriations Committee on an annual basis, considering all of the priorities that come to us from all segments of the economy and from all government programs. If you think you are building this into the base, this is Chairman Miller--I am going to quote here from Congress Daily:

Chairman Miller in the House was asked about the fact that funding for education programs disappears in two years, and he said the word he got from the Obama administration is that these funding levels will NOT become the baseline and that in two years, we can expect that the President's Budget Request will be lower than these new levels. That means schools will see a short-term jump for these programs, but any teacher or programs they put in place may be cut in two years.

Now, let me just ask my colleagues about that. Is it smart to use something that is absolutely needed--a stimulus bill--for an excuse to jack up spending well into the future? That is going to be done in 1 week. Isn't that something appropriations committees generally take several months to do before they make decisions to go down that road? That is something for my colleagues to consider.

To sum it up, this package meets a different three t's test. We start with trillion-dollar deficits. We have a bill that, with interest added, adds more than another trillion dollars to future deficits. We have a bill that has new spending ostensibly labeled as ``temporary'' but likely to be extended, that bakes into the cake another $1 trillion of future deficits. Passing this three t's--as in trillions--test ought to be a Senator's pause, and we hope during this debate that pause happens. From our side's view, these are major shortcomings on the substance.

Although we saw execution of a deal to vote down our amendments in committee no matter whether our ideas were meritorious or not, we would like to be and will be constructive, and we will build on parts of the package that we support. But make no mistake about it, we are going to try to use Dr. Summers' guideline of, first, do no harm--he didn't say that--but the
three t's test he put on the chart from his quotation. In other words, we hope our amendments will be more openly received on the Senate floor than they were in committee.

In this respect, we will go back to major differences between the parties on how to get the economy moving. On our side, we would like to push more incentives for long-term growth of private sector jobs. There is a good start on a broad-based middle-income tax cut in the package. We would like to expand the tax cut to cover all middle-income taxpayers.

During this fall's campaign, the President described as middle class families making less than $250,000. Many of the tax cuts don't apply to millions of families making less than $250,000. It doesn't make sense to me to call a proposal a middle-class tax cut if it doesn't apply to millions of middle-class families. We would like to direct that at labor and capital income earned by middle-income taxpayers.

Since we weren't at the negotiating table to offer these progrowth ideas, you will see them arise as constructive offers to improve the package.

I wish to speak for just a minute to some health provisions in the bill.

Spending in this bill should be judged based on two criteria: Will it stimulate the economy, and is the money being well spent? In committee, we aired our honest disagreements over whether several of these provisions were actually stimulative. Improving health information technology is critical for health care infrastructure. I support many of those provisions, but I have to ask: Will it stimulate our economy, and is this money we should add to the deficit rather than offsetting it?

It wasn't so long ago that $16 billion was a lot of money around here. Providing assistance to States makes sense if we are concerned about States raising taxes or cutting spending. But is $87 billion the right number, and is increasing Medicaid spending the right way to do it beyond what is necessary to take care of the millions of people who are going to lose their health insurance? That is a much smaller figure; somewhere around $10 billion to $12 billion rather than $87 billion. Could we better stimulate economic recovery using all or part of that money elsewhere?

The Finance Committee package also includes a 2-year extension of our current Trade Adjustment Assistance Programs. I am working with the chairman to see if we can agree with our counterparts on the House Ways and Means Committee on a broader reauthorization of these programs, but that is still a work in progress.

Apart from trade adjustment assistance, I am disappointed that this administration isn't focusing on trade as a component of an economic stimulus package. As I said, we should heed an important lesson from the Hoover era. Economic growth comes from expanding free trade, not contracting it, because protectionism in the 1930s brought us to World War II. Opening new markets for U.S. exporters should be a part of the mindset to stimulate our economy.

Right now, 20,000 people are being laid off from Caterpillar. I don't think John Deere has laid off very many yet, but 22 percent of John Deere workers have their jobs because of international trade--tractors made in Waterloo, IA, getting on boats in Baltimore to go overseas. We don't want to shut down those kinds of jobs, and without emphasis upon trade being a very important part of a stimulus package, we are sending a message that trade does not matter. Trade does matter. For instance, we have these pending agreements with Colombia, Panama, and South Korea which would provide significant opportunity to do just that, and they should be implemented as soon as possible.

As we go through the bill, our side will offer several amendments that I hope will be accepted to try to make the bill better and answer the questions I and other Members have raised. The people back home see Congress spending vast amounts of taxpayers' money. They are counting on us to ensure their money is spent wisely and not wastefully, and that means to make sure this is a stimulus bill and not a ``porkulus'' bill.

I thank the Chair, and I yield the floor.

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