American Recovery and Reinvestment Act of 2009

Floor Speech

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 -- (Senate - February 05, 2009)

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Mr. SCHUMER. Mr. President, I yield to the Senator from Illinois for a question.

Mr. DURBIN. I thank my colleague from New York. I would like to engage him. I listened carefully to Senator Coburn, my friend, a conservative Republican. I think that perhaps some elements of history have been forgotten. We don't want to dwell on the past, but those who don't learn the past are usually destined to repeat the mistakes of the past. When President Clinton left office, he left President Bush a surplus and he left him with a national debt, accumulated since the time of George Washington, of $5 trillion. Eight years later, when President Bush left office, he left President Obama--who has been President for 2 weeks and 2 days--with the biggest deficit in recent memory, $1 trillion, and a national debt that had doubled under the Bush administration.

I ask the Senator from New York if he is familiar with the fact that the debt incurred under the Bush administration comes down to $17,000 for every man, woman, and child in America, for the 8-year period of that administration? Is the Senator familiar with that fact?

Mr. SCHUMER. I thank my colleague for the question. I am indeed familiar with that. I have to tell my colleague it sort of astounds me how there is sort of a role reversal. In the past, the Republican Party has been known as the fiscal-and-austere party, and we have been labeled--or accused of being--the tax-and-spend party. When President Clinton left office, there was a significant surplus, I believe close to $300 billion a year. When George Bush took office, he ruined that rather quickly. We now have the deep deficit he left President Obama. President Obama has agreed to deal with that deficit once we get through the economic crisis.

Mr. DURBIN. The second question is this: There are complaints about this recovery reinvestment bill, which is currently at about $900 billion over a several-year period of time. Isn't the Senator aware, and haven't we recently been briefed that we expect in the next 2 calendar years $1 trillion less in spending by the American economy, and the amount we are talking about to try to put back into that accounts for less than half of what we know is lying ahead?

If we are going to invigorate the economy, create jobs, and give businesses a chance and give struggling families a chance, $900 billion, though it seems huge on its face, in comparison to the economic crisis we face, is at least proportional to the challenge.

Mr. SCHUMER. I think my colleague answers the question right. A $2 trillion shortfall in the economy is not just a number; it is millions of people out of work and tens of millions of families whose paychecks are squeezed, people not being able to go to college who deserve a college education by their grades, and it is small businesses going under. I say to my colleagues, there is a lot of talk about little items in the bill that are called ``pork.'' Take them out. Don't use it as an excuse not to vote for this bill. I daresay if we took every single one of those items out, we still would not get any more votes. It is nothing more than an excuse. We ought not to forget that.

I was going to speak for 15 or 20 minutes. My colleague from West Virginia has been waiting. Is it possible for me to yield 5 minutes to him by unanimous consent and then return to me?

The PRESIDING OFFICER. Is there objection?

Mr. WICKER. Objection.

The PRESIDING OFFICER. Objection is heard.

Mr. SCHUMER. Mr. President, then I will speak myself, even though I am not as articulate and intelligent as my friend from West Virginia.

I wish to address a few topics. First, yesterday, the President correctly put some limits on excessive compensation payments being paid out by financial firms that received taxpayer funds. To me, it is plainly unacceptable, at a time when the American public is being asked to spend hundreds of billions of dollars to bail out major institutions and trillions more to stabilize the financial system, that these institutions would turn around and reward the very same executives, many of whom created the current crisis.

Let me tell you how the average American feels and why this issue generates such fervor. Very simply, the average American goes to work, works on the factory line, or sits at his or her desk, does nothing wrong, and all of a sudden they might be laid off or have their paycheck squeezed or their health benefits cut. They are saying: We did nothing wrong and we are suffering.

Where is the shared sacrifice? Some of these top executives are continuing to be paid record amounts of money. Nothing bothers the American people more than when someone does something wrong and doesn't have to suffer for that, when they are doing nothing wrong and do have to suffer. So there is real anger out there. The people in the financial institutions ought to understand that. Some of the things they are doing, such as the junkets and the jet planes, show a tin ear. So President Obama did the right thing yesterday. Some people said that is Government interference. Hello. What about giving these institutions money? That is Government interference too.

The President is not saying there should be limits on compensation for those who don't take the Government funds. He is simply saying if you are going to take Government funds, use them to get the economy going again by pumping money into the economy, lending to small businesses, individuals, and others rather than for jets or excessive salaries. So I salute the President, and I support what he did.

I think, again, the people in the financial sector have to get with it. They have made big mistakes, the people at the top. Everybody is being hurt by those mistakes and the sacrifice ought to be, at the very least, shared.

Second, I want to talk about something in this bill, which is tuition tax credits for college for families up to $160,000. I thank Chairman Baucus, Senator Grassley, President Obama, and many on both sides of the aisle who supported this provision. I have worked long and hard to make college affordable, particularly for middle-class families. It is not because they deserve it more than others. If you are wealthy, you don't need the help. If you are poor, the Government gives help. I would be very much against cutting the Pell grants in this package. But the families in New York--remember, New York salaries, at least in some parts of our State, downstate, are high. The family making $60,000 or $70,000, when they get hit with a $20,000 tuition bill, they are like poor because they are paying the mortgage, the taxes, and the other expenses, and all of a sudden this bill hits.

During this recession, the most severe recession we have had since the Great Depression, there are literally hundreds of thousands of college students who deserve to stay in college, and hundreds of thousands more who deserve to get into college who will not go because their families don't have the money. When they don't go to college, or when they drop out of college, or they don't go to the college that best suits them because of financial reasons, not because of academic reasons, they lose, their family loses, and America loses as well. That is why I worked so hard to get this provision. It is a $2,500 tax credit, partially refundable, so it helps people making $40,000 and people making $80,000, as it should. It will help keep our human capital. This is very important. And I think President Obama showed wisdom in making sure there is a power grid that is more efficient that will help us in the future, and wisdom in making sure our health care has IT, which will help us.

When you read the polls, the American people, once again showing their wisdom, are saying we would like to have longer term projects in here because when, God willing, we get out of the recession, we would like to have something to show for it, whether it is traditional infrastructure or new infrastructure, including IT and power grid. There is human capital as well. If somebody drops out of college because they cannot afford it, the statistics show they often never go back and we lose as a country. So preserving human capital during these difficult times is important.

Again, this proposal has broad bipartisan support. It is not terribly expensive in the scheme of a $900 billion package. I hope we will move forward with it.

Finally, the last thing I will talk about to my colleagues on the other side of the aisle is this: I am utterly amazed at the lack of cooperation we are getting from so many, the lack of reaching out and trying to meet us part of the way. The bottom line is, we are in the most severe recession since the Great Depression.

The great worry is that we go into what the economists call a deflationary spiral. It means prices go downward. Businesses put off any expenditures because they think the price is going to get lower and lower. The Depression was a deflationary spiral, plain and simple. Japan's 10 years of stagnation was a deflationary spiral, less severe as a depression but spiral down nonetheless. Unfortunately, the sad fact is that economists don't know how to deal with a deflationary spiral. If we get into one--which is not likely but possible--we don't know how to get out.

So wise, sound economic policy would have us make sure this package is strong and gets money into the economy immediately. The kinds of tax cuts proposed by my colleagues on the other side of the aisle do not do that by the admission not of CHUCK SCHUMER but of a conservative economist such as Martin Feldstein. It takes longer for a tax cut to get into the economy, and particularly during difficult times people save a lot of the money. I am not saying we should have no tax cuts; 36 percent of this package is tax cuts. Yet we hear from our colleagues on the other side of the aisle that it is not enough. A, it works less well than the spending; B, you need a mix; and C, yes, we did win the election, and the American people are overwhelmingly for this.

Frankly, I had expected, given that Senator Reid says we are allowed to have amendments and given that he has agreed with Senator McConnell that we should have an old-fashioned conference where amendments are offered by people on both sides of the aisle, we would get real support and cooperation.

This bill has gotten more expensive. The two most expensive amendments were tax cuts proposed by Republicans, Senator Grassley along with Senator Menendez--Grassley was the lead here--proposed adding the AMT, $75 billion; Senator Isakson from Georgia, something I supported although I would like to see it narrowed and more focused, $19 billion. If you add those in, the tax cuts are rising, rising, and rising in terms of proportion, and still we do not see cooperation from the other side of the aisle.

I would like to say to President Obama: Sir, you have bent over backward to listen to suggestions. We have tried as well. But it takes two to tango. Bipartisanship means two people tangoing. It does not mean you should get your way on everything or even half. A third, 40 percent is pretty generous.

I believe this package will pass because I don't believe the other side will want it on its doorstep that it failed. My Republican colleagues in the Senate do not have the luxury of their House colleagues of voting no and the bill would still pass.

I am rueful and regretful that we have not seen more real bipartisan cooperation at a time when the American people want it, at a time when we need to act quickly, at a time when spending programs--anathema as they may be to some on the other side of the aisle--are the best way to get this economy going.

I will say--and I am speaking for myself--that the real test here is not how many votes we get, as long as we pass it. That will long be forgotten. The real test is whether this proposal puts Americans to work and gets us out of the economic morass we are in--at least begins to get us out of the economic morass we are in. I, for one, would say do not decimate this package and make it ineffective to win over enough people so we have 80 votes. That is a distant memory, 80 votes. I know it was a hope of the President. Clearly, it is a distant memory. To get no votes in the House and to have as little support thus far as we are getting from the Republican side of the aisle shows how out of touch, frankly, my colleagues are with the economy and with the new world in which we live.

I know what it is like. I came to Congress in 1980 when Ronald Reagan was elected to be President. Crime was ripping apart my working-class and middle-class district. I got on the Judiciary Committee and the Crime Committee. Do you know what I found when I got there? That the ACLU, an organization I generally support, was writing the crime legislation. They had a view. I respected that. I disagreed with it. I thought it was so wrong for the time, that you should lean so far over on one side that you might let hundreds of guilty people go free lest you convict one innocent person. When I saw that happen, I knew why Democrats had lost. I said the Reagan era was going to be dominant because we were out of touch.

Mr. President, I say to my colleagues on the other side of the aisle, they are just as out of touch today as we were then. The American people want action. They don't want an ideological adherence to no Government programs, no Government spending, tax cuts, particularly for the wealthy only. They want help with health care, they want help with education, they want help with energy independence. And while they certainly don't want a government to waste money and they certainly don't want the little porky things in this bill, the few--less than half of 1 percent--that should come out, they want the basis of this bill.

I make a final plea to my colleagues on the other side of the aisle: Get with it and help us. Don't stick to your narrow ideological philosophy that served you well in 1981 but doesn't work for the greatest recession we have had since the Great Depression. Maybe in the course of today, as we work through the amendment process, for the good of America and, frankly, for the good of your own party, others on the other side of the aisle will come over and truly work with us to get a stronger package that will create jobs and get us out of the recession.

Mr. President, I yield the floor.

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Mr. SCHUMER. Mr. President, I rise to discuss the stimulus proposal advanced by my friend and Republican colleague from Nevada, Senator Ensign. His plan is to have the Government provide fixed mortgages at 4 percent to all creditworthy Americans.

Senator Ensign has stated publicly he believes the Government should seek to help stabilize the housing market during these tumultuous times and, as my colleagues all know because I have been speaking about it for months and months, I completely agree 100 percent that we have to stabilize the housing market.

I have been told the Treasury, under the leadership of Secretary Geithner, is working on a plan to get mortgage rates down. It is a good idea. But the plan of Secretary Geithner is completely different from the plan offered by Senator Ensign and others. Geithner's plan is a plan--I haven't seen the details. I look forward to supporting it. But it is different from this plan which I must oppose in a very serious way.

Let's start from the beginning. We in Washington sometimes seem to forget that the root cause of the financial and economic turmoil we are now experiencing, and that is the worst most of us have ever seen, except those who lived during the Great Depression, is the inability of homeowners to make their mortgage payments on time. Whether it is because they lost their jobs or suffered unexpected medical costs or, as was too often the case in recent years, because they were targeted by predatory mortgage lenders and given a loan they couldn't afford or because they reached too far on their own, there are a large number of homeowners who are staring into the abyss of foreclosure. Of course, all Americans know we are now facing potentially the worst economic crisis since Herbert Hoover was in office.

On the positive side, I wish to applaud my Republican colleagues, both for embracing the idea of a big stimulus proposal--this is certainly big--and for recognizing the critical importance of helping at-risk homeowners. Those are good. But when you look at the specifics of this plan, you know it is one you cannot support. I don't care whether your ideology is Republican or Democratic, liberal or conservative. Unfortunately, the proposal offered fails miserably at either stabilizing the housing market or at providing an effective stimulus. It does so at an unthinkably large cost and risk to the American economy.

The cost of this program is, to put it succinctly, through the roof. For fiscal conservatives to advocate it, I am quite surprised.

The Republican proposal is light on details, but it appears to offer all Americans who qualify for Fannie Mae and Freddie Mac conforming loans, an interest rate of 4 percent. This is very important. This is not just for new home purchases but also for refinancings as well. So anyone who owns a home can refinance at 4 percent, Freddie or Fannie-supported loans.

The bottom line is, this idea will be prohibitively expensive and may jeopardize the credit rating of the United States of America. It is that serious. The Republicans themselves say they will cap the program's cost at $300 billion--$300 billion for this one program. What does this even mean? Do they mean the total size is $300 billion? If that is so, it works out to about 2.5 percent of mortgages in America, giving only a tiny handful of Americans an enormous windfall. Mr. President, 2.5 percent get this break, 97.5 percent do not.

More likely the Republicans mean that the program's total losses will be $300 billion, a figure which can only be gotten by using the same Enron-style accounting that got us into this mess. This is not a realistic or even possible figure, when you consider how much risk the Government will end up shouldering. Currently, Fannie and Freddie have more than $5 trillion in outstanding conforming loans, all of which would qualify for refinancing under the Senator Ensign-Senator McConnell plan. You can bet that most Americans who qualify will take this offer. Who wouldn't? After all, what homeowner out there would not refinance into a 4-percent mortgage?

So the Government would be the owner of over $5 trillion in mortgages. You are telling me anyone can guarantee that the Government would lose only $300 billion on this plan? If you believe that, I have a hedge fund I would like you to invest in called Madoff Securities, LLC.

Even if the Republican plan costs $300 billion, it recklessly exposes the country to enormous financial risk. No matter how rosy the estimates may be of how much this program will cost in the long run, the fact remains, in the short run, we have to come up with the money to finance these new mortgages, potentially more than $5 trillion. Where will the new money come from? From issuing new debt. Does anyone believe the United States, for this one program, can issue $5 trillion of new debt and not jeopardize the dollar, in the midst of the worst crisis in our lifetimes?

I believe as much as anyone in the strong creditworthiness of our country. We can and will repay all of our debts, and investors around the world know this. That is why U.S. debt is sold at a low rate. But add $5 trillion to the debt in a short period of time and see what happens. After 8 years of tax cuts, wars, adding another $5 trillion could break the back of the U.S. dollar. The odds are all too high that could happen. Do you know what then will happen? We will all be in a world depression immediately. This program cannot work.

If the Republican plan were able to reverse our housing slide, then it might make sense. But even at its goal, it fails. Why? It does not correctly identify the problem, which is that there is an oversupply of housing right now that is made worse each month by the glut of foreclosures occurring driving down home prices.

Now, you tell me, you are in your home, you pay your mortgage, you now have an absolute right to refinance at 4 percent, and you are staying in the same home. How does that reduce the glut of housing on the market? How?

Furthermore, it does not address the vast majority of homes at risk for foreclosure, the 70 percent that are underwater, where the amount owed on the mortgage exceeds the value. Underwater mortgages are high foreclosure risks no matter what the mortgage rate is. You can have a 4-percent rate, a 1-percent rate, an 8-percent rate, and if you do not have enough income to pay your mortgage, you are not going to pay it.

So the second problem or the third problem with this is it does not make it any better. If you owe $400,000 on a $300,000 home, as millions of American homeowners across the country do, you will not even qualify for this plan, you are not even eligible for refinancing. So it does not get at the problem. Not only does it cost a fortune, but it does not get at the problem because the proposal is vastly skewed toward refinancing rather than toward the purchase of new homes. It will not stimulate housing demand much at all. If you are a new homeowner, you may take advantage of the 4-percent rate or you may continue to wait and see if home prices bottom out. But if you are a current homeowner, you are going to refinance no matter what. Now, what about it has a stimulus?

Clearly, this is not a housing plan. It is a way to put money into people's pockets--something I am not against--through the refinancing of mortgages. But will this provide the economic shot in the arm we need to get our economy back on track? Unfortunately, there again, the answer is no. We know that most people, when given tax cuts during a downturn such as this, do not respond by spending money but by saving it and paying down their debt. The poor and the working class spend more of the tax cuts they receive; they are less likely to be able to use this program. The program targets its largesse at homeowners who hold mortgages of up to a value of $625,000, and the more expensive your home, up to that limit, the more money you get back. So, ironically, the people getting the most money back are the people less likely to spend and stimulate the economy. It is highly inefficient.

Furthermore, guess who is going to take a big slice of this money--the bank that would do the refinancing. Everyone knows points. We all, when we have gone for a mortgage, hate points. Points mean you have to pay $5,000, $10,000, whatever. So the final point is, while we are putting money in people's pockets, which is an admirable goal, we are letting every bank doing the refinancing take a big cut on points. If you have a $150,000 mortgage you are going to refinance, about $1,000, $2,000, $3,000, depending on the bank, will go to them. So even if this is not a housing stimulus, which we know it is not, even if it is a way to get money into people's pockets at a cost of at least $300 trillion and an immediate outlay of $5 trillion, why are we giving every bank in America that does the refinancing a cut? That makes no sense. It is done willy-nilly.

With all due respect, I wonder at the depth of the thinking that went into putting this proposal together. Perhaps if it were limited to first-time home buyers, perhaps if the bank's points were limited, perhaps if we would say there would be an income limitation because another problem with this is multimillionaires--this is another point: If you make $5 million a year, you get the reduced rate and the Federal Government pays for it. Do we want to give multimillionaires the ability to refinance? So perhaps if there were income limitations. So the nub of this idea might be supportable. The way it is put together here on paper, because it costs so much, because it is not going to stimulate housing, because it is a very inefficient way to get money into the economy and get the economy going, because the banks take a cut, and because very wealthy people can apply for this, who do not need any help, it makes no sense to enact it now.

What I would suggest to my good friend from Nevada is this: Take the nub of this proposal and go back to the drawing board and refine it. The administration is coming up with a housing proposal next week. We will work on housing. We have to. And then you can have your proposal, we will see what their proposal is--which I believe is significantly different, although the intention, at least for home buyers, is to bring mortgage rates down--and maybe we can come up with an agreement or a compromise. But to vote for this plan now with its high cost, lack of an income limitation, money that goes to the banks right off the top, and lack of ability to move the housing market--this amendment should not and cannot pass.

So I would urge my Republican colleagues to come up with a new, better plan that gets to the root of the housing crisis, and then we can begin to work on solutions. We certainly need to tackle the problem. We need to tackle it on the demand and the supply side. But the demand side needs to be targeted at ways to boost new home purchases only, not extend refinancing to all of them. On the supply side, we need to adopt measures that will efficiently prevent foreclosures and reduce the excess supply of homes, enhance FHA-insured lending, bankruptcy reform, and the extension of FDIC loss mitigation.

I am confident we can come up with a good plan that is more targeted, less costly, and that will begin to get us out of the housing morass. I would hope that my colleagues again scrap this proposal, go back to the drawing board, and, after we finish the stimulus, work with us in a bipartisan way to produce that result.

I yield my remaining time back to my colleague from Montana, the chairman of the committee.

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Mr. SCHUMER. My colleagues, it is a great idea to help with housing. Listen to what the amendment of my friend from Nevada does. It costs between $300 billion and $1 trillion. Second, it applies to people of any income. Do you want to have the Federal Government spend its money to give a multimillionaire a break on their mortgage? Third, the banks take a cut. Every time there is a refinancing, there are points. If we want to give people money, don't let the banks take a cut. Fourth, it does nothing about the housing market because, A, most of it will go to refinancing--people who are in a home stay in the home--B, the people who really need help do not qualify because they do not get Fannie, Freddie, or FHA.

It doesn't help housing, it costs a fortune, it helps the banks, and it is one of the most expensive things before us. If you are a fiscal conservative, there is no way you can vote for this.

I yield the floor.

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