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. REED. Mr. President, I rise in support of the bill that is before us, the American Recovery and Reinvestment Act. It is designed to save jobs, create jobs, and restore a sense of confidence and hope to the people of this country.

We have seen extraordinary deterioration of the economy in this country. This morning, job figures released revealed an additional--over 600,000 jobless claims. In the last two months, we have lost 500,000 jobs in each of the two preceding months. We have to act decisively, dramatically, and with a scale that will have an effect on the overall economy. That is I think inherent in the proposal President Obama has sent us.

I salute Senator Inouye, the Appropriations Committee chair, and the subcommittee chairmen and Chairman Baucus for their work in bringing this bill to the floor. We have to not only revitalize our economy but restore hope to the American people.

President Obama has set out a very ambitious goal. He wants to weatherize 2 million homes. It is not only to put people to work in America with the skills of craftsmen and craftswomen, but in the future it is going to save us money. So this is not only an immediate response to a problem, but it is a long-term increase in our productivity and our ability to be competitive in a very difficult world economy.

I have also introduced an amendment which I will not call up, but it would increase the weatherization funds and the LIHEAP funds and other funds, but I hope in conference we can raise those totals.

We need these investments. This is the most perilous economic situation a President has ever faced since the 1930s. This is the inheritance of 8 years of poor policy. This is the inheritance of a huge increase in our national debt in the last 8 years. Under President Bush we have seen our national debt explode. That is the legacy that is facing the next generation of Americans today, and unless we revive this economy, this situation will deteriorate, it will not stabilize, and it will not grow. That is our challenge. It is a more difficult challenge today than it has been at any time in the last several decades.

This is not a cyclical downturn. This is not an imbalance of supply and demand. This is not a situation where it will work itself out. We have to take decisive action, and that is a big part of President Obama's plan. Our crisis today has its roots in the last 8 years of mismanagement: an economic doctrine of tax cuts funded by deficit spending, skewed toward the rich, not toward working Americans; inadequate supervision of our financial markets; a lack of adequate risk assessment by financial institutions throughout not only the United States but the world; and the very difficult and costly and unfunded war in Iraq and operations in Afghanistan.

We have to focus our attention on the present, but it is important to understand how we got here. President Bush inherited a $236 billion Federal budget surplus. His first order of business was to cut taxes which benefitted proportionately the wealthiest Americans, enacting three major tax cuts between 2001 and 2003. These tax cuts added to the national deficit, reduced our capacity to make much needed investments in infrastructure, education, and health care, and exacerbated income inequality. The median family income actually fell $2,000 between the year 2000 and the year 2007. Families lost $2,000 of their income, despite strong productivity and growth. Americans were working harder, being more innovative, more creative, and yet average families were losing income.

In terms of jobs creation, the 2003 tax cut actually reduced job growth below the estimates the President was using to justify his tax proposals. As the wealthy thrived and corporate earnings skyrocketed, capital investments did not keep pace. Instead, many corporations decided to dole out handsome salaries and use their profits to buy back stock in pursuit of short-term boosts to share prices. This made the options these executives enjoyed that much more valuable.

Corporate profits grew by 66 percent between 2000 to 2006, despite the fact that annual national investment in nonresidential structures--largely commercial structures such as factories and office buildings--fell by $130 billion or more than 30 percent. Overall investment in buildings, equipment, and software grew by less than 6 percent.

Not only is there a fiscal deficit, there has been an investment deficit in the United States in the last 8 years.

Over the past year, we have witnessed the long-term consequences of these failed economic policies. Since the start of the recession, in December 2007, the number of unemployed individuals has grown by 3.6 million, and the national unemployment rate has risen to 7.2 percent.

In Rhode Island, it is particularly difficult. We have an unemployment rate of 10 percent, second only to Michigan. We have lost a huge number of jobs. In fact, we have also seen a complementary increase in foreclosures; as people lose their jobs, their ability to pay their mortgages declines.

The lack of oversight in the financial markets in many ways fueled the subprime mortgage crisis and led to the failings of Wall Street. We saw rating agencies deficient and negligent in judgment and lacking independence, which in turn led to a poor assessment of bond rating risk. Investment banks took advantage of this system reaping windfall profits through the creation of complex financial instruments, such as collateralized debt obligations, which hid underlying risk. All of this financial engineering did not provide opportunities and hope for working Americans.

Throughout this process, where were the principal regulatory agencies, such as the Securities and Exchange Commission? Simply put, they were asleep at the wheel.

The environment of lax oversight and poor lending practices created a bubble in housing prices. The collapse of that bubble resulted in home loan defaults and falling housing values. The companies that owned these assets saw their value plummet. All of this is contributing to the dilemma and the crisis we see today. We are in a very dangerous situation, with weak housing markets, stagnant wages, impaired consumer spending, which leads to further erosion of housing prices and further erosion of the economy. It is a vicious cycle and we have to break that cycle. We have to do it with this legislation.

We have seen a situation where Americans have to put off essential and important purchases, such as medicine, and they may have to defer education for their children. They have to make these very difficult choices. We have to make difficult choices. Spending on durable items, such as cars, appliances, and furniture has plunged at a rate of 22.4 percent last quarter.

We have to get the economy moving again. We are in a situation where this is not only our problem, it is an international problem. The global economy is in uncharted waters. According to the IMF, in 2009, economic growth across the world will fall to 0.5 percent from 3.4 percent in 2008--the lowest rate since World War II. It is a worldwide phenomenon.

In response, we have to act quickly and decisively to pass this legislation. It is estimated that with the plan President Obama has suggested, we can provide 13,000 additional jobs in Rhode Island. That will be good news.

With banks failing, automakers on the verge of bankruptcy, and pervasive unemployment, the American people are rightfully asking us to respond, and do so quickly and decisively. We have to also recognize that this action is integrally related to the financial markets, the banking system, the financial system, and without increased consumer demand and increased consumer confidence they will fall further and require additional help. In order to provide support to financial institutions, in addition to the TARP funds, we have to pass this legislation to get people back into the marketplace. We also have to recognize that as we get the economy moving, we have to modernize our regulatory system. Our regulators need to have the tools and resources to get the job done. We have seen the problems with the unregulated hedge funds, private equity concerns, and the lack of enforcement by the Securities and Exchange Commission. That has to be changed. The American people will not tolerate business as usual. The first act is to get our economy moving forward. This legislation proposed by the President will begin to do that.

The Congressional Budget Office estimates that 78 percent of the funding in this bill could be spent in the next 18 months. This is timely; it is responsive.

According to JPMorgan Chase economist Michael Feroli, the Recovery Act would add about 4 percentage points to the second and third quarter GDP growth. He recognizes that a lot of infrastructure projects we are proposing will take some months to get off the ground. The first major input will be the tax breaks, transfer payments, and State and local government aid. We will see a growth in terms of the GDP. We will also see the effect of this program taking hold in our economy. It is necessary to pursue this approach.

This bill gets the most ``bang for the buck,'' with funding to modernize unemployment insurance, increase unemployment insurance benefits, and extend the existing Federal unemployment insurance extensions on the books to cover those recently laid off. It will provide immediate help to unemployed Americans and provide an immediate boost to consumer spending.

Tax cuts comprise about one-third of this legislation. But unlike the Bush tax cuts, this legislation provides targeted relief to 95 percent of working Americans. An estimated 470,000 Rhode Islanders alone would receive tax relief. This is all extremely important.

We also are going to make improvements to a whole range of infrastructure--roads, bridges, highways, public housing. All of these programs will receive additional attention. We are going to bolster State and local governments, because if we don't provide them additional resources, they will begin to cut back vital programs and it will be contradicting what we are trying to do at the Federal level. If they cut back, that won't help us move the economy forward. This assistance to State and local governments is important.

Rhode Island is prepared to receive, under this legislation, $220 million to help local school systems and communities pay for critical services, $46 million to improve local drinking water and sewer systems, and $132 million for road and bridge repairs. Right now, regarding the major interstate highways through Rhode Island all tractor-trailers are required to detour, get off the road, and drive miles out of the way through local streets and then get back on the highway; and at the same time it is required that the State provide State police officers in both directions 24 hours a day to ensure that they do that. That is inefficient. That is a waste of resources. If we can fix those roads and bridges, we can provide for a more efficient use of our highways and put the money more appropriately to generate jobs and productivity. That is one example.

Also, there is going to be strict accountability and transparency in this proposal. Part of this legislation will provide for hiring additional auditors to track where the funds are going. There will be public acknowledgment of what projects are funded and the process of the projects.

This legislation is absolutely essential. We have to do it. We have to move decisively, quickly, and I hope we can do that.

I yield the floor.

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FMAP INCREASE

Mr. REED. Mr. President, I thank the chairman of the Finance Committee, Senator Baucus, for his inclusion of an important provision regarding State eligibility for the FMAP increase in this bill. If it were not for this provision, my State of Rhode Island may not have been eligible for the relief because a State law effective on July 1, 2008 changed eligibility, but the change was not implemented until the Centers for Medicare and Medicaid Services, CMS, approved a waiver on October 1, 2008. The timing of the State's decision, not the approval date by CMS, should be the controlling factor.

I ask the chairman, does section 5001(f)(1)(C)(ii) of the bill specifically address this situation?

Mr. BAUCUS. Yes. That provision specifically addresses the unique circumstances of Rhode Island. It should not matter when CMS is able to make a change in a waiver. What matters here is that Rhode Island had clearly determined that it would make the eligibility change on July 1, 2008. The decision to do so was made well in advance of congressional consideration of an FMAP increase, so Rhode Island has not been trying to game the system. Under this provision, Rhode Island will certainly be eligible for the FMAP increase.

Mr. REED. I agree and again thank the chairman.

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