The Debt Ceiling

Floor Speech

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Mr. GRASSLEY. Mr. President, while we are waiting for people to decide what the rest of us can vote on in regard to cutting down on the national debt and what we can do about being able to continue our government to function tomorrow, all of this is about uncertainty, and we read about the uncertainty every day in the newspaper because people don't know what we are going to do. That then causes businesses, small and large, not to hire, and it seems as though they have a lot of cash they would like to spend and invest wisely. Some of that would surely create a lot of jobs and get our economy moving. Of course, the situation today where the revision of the quarterly economic growth has come out even less for the second quarter than we anticipated, it brings a lot of things to mind as to what we can do to create jobs. With 9.2 percent unemployment, that has to be our concentration.

I would like to advise my colleagues that a lot can be learned from history. We must change course if we want to change jobs. The 2007 to 2009 recession was officially over during the year 2009, and here we are still with 9.2 percent unemployment.

So this month happens to be the second-year anniversary of the official start of the recovery. But what kind of a recovery, with 9.2 percent unemployment? It seems to be an unofficial recovery; in other words, a recovery in name only. We have had about 2.8 percent annual growth average per year of that 2 years; and, of course, I just said the growth of the last quarter was revised downward. When we compare what we have during this recovery from what was a very bad recession with the recovery of the last deep recession, which was in 1981 and 1982, we compare this 2.8-percent growth now with a 7.1-percent growth for the recovery after the 1981 to 1982 deep recession--of course, we can go even further because, as I said, compare 7.1-percent growth after the deep recession of 1981 and 1982 with the 2.8-percent average growth so far during this 2 years of recovery, which has now slowed down to probably 1.5-percent growth. So statistically and actually, and for the people who are unemployed, recovery has, in fact, been very stalled since its very beginning 2 years ago, as we celebrate the 2-year anniversary of a so-called recovery, and still with 9.2-percent unemployment.

I say we must change course. If we want to go back to comparing now with the 1983 and 1984 period of time when we had a much more vibrant recovery, people tend to blame the weak economy today, during this recovery, on high personal savings rates. But, in fact, people are spending more now than they did in the 1983 to 1984 recovery because, today, the savings rate is about 5.6 percent, and in 1983 to 1984, the other recovery, it was 9.4 percent. So we can't say people aren't spending enough is why we don't have a recovery.

Then they tend to blame it on weak housing, but if we look at the difference between now and 1983 and 1984, that doesn't seem to be a very good reason.

Net exports are less now than they were in the 1983 and 1984 recovery. The growth of consumption and the growth of investment is 60 to 70 percent less now than it was in the 1983 and 1984 recovery.

So what can we learn from this history that made the recovery of 1983 and 1984, the last great recession we had compared to this recession, better than the recovery now? Why have we stalled today when we didn't stall in a comparable period of recovery after the last great recession? If the above doesn't explain it, then what does explain it? Why, then, was the recovery of the 1980s so much more vigorous than the recovery now if we are, in fact, in a recovery--and people would doubt that.

That is the question where I think we can learn from history. Political leaders ought to learn from the lessons of the past. There are a lot of lessons that can be learned going back over a long period of time: mistakes made in the Great Depression of the 1930s, or let's say the gigantic inflation of the 1970s. The 1930s and the 1970s were tough decades, but during those tough times and remembering them--and maybe other tough times as well; I am just picking out the Great Depression of the 1930s and the gigantic inflation of the 1970s--but these lessons learned by political leaders in the 1980s and 1990s led us to very unprecedented growth during those two decades when 44 million jobs were created. If 44 million jobs were created during those decades, why do we have such small job growth now? I think the answer is that we went back to basic principles that this country was founded upon: political and economic freedom. The principles that dominated the decades of the 1980s and 1990s when 44 million new jobs were created aligned with the principles that are the foundation of our country: political and economic freedoms. Those were limited government, incentives to produce, incentives for entrepreneurship, emphasis upon private markets, and rule of law. These tended to be in ascendancy during the decades of the 1980s and 1990s and it led to monetary policy that brought about price stability. It brought about lower marginal tax rates. Regulations encouraged competition and innovation. We had welfare decisions that were devolved down to the States where they could be handled more efficiently, and we had spending restraints that led to balanced budgets during the late 1990s, paying down $568 billion on the national debt.

So there was great hope that what was done during the 1980s and 1990s that brought about 44 million new jobs would extend into the 21st century and that we would continue to bring market-based principles into Social Security and other entitlement programs, bring market-based principles into education, bring market-based principles into health care. Because if these market-based principles worked during the 1980s and 1990s of the last century and created 44 million jobs, the success of that ought to carry over into other government policies so we could continue down the road of creating jobs instead of stagnating as we have now.

But sometime after 2000--and that doesn't mean just after President Obama was elected, because there was a Republican President before that--but sometime after 2000 both political parties compromised--and I want to emphasize both political parties--on the principles of limited government. They did it for a multitude of reasons. Some of these reasons were that they thought government ought to control business cycles to a greater extent, that we ought to increase home ownership, and we know how that worked out: We ought to have a policy that people ought to be able to buy a house they can't afford. Now we know that is a stupid policy, but at the time we didn't know it; also the prescription drug issue, as an example, although there were some market-based principles put into that.

But, anyway, there were a multitude of reasons why we ought to compromise the principle of limited government, but it ended up more interventionist and it made the Federal Government more powerful, and we ended up with unintended consequences: the financial crisis we still remember and we are still trying to get out of; the recession, which I have already talked about, of 2007 and 2009, of which we are celebrating 2 years of supposed recovery that isn't real recovery; we have had a great amount of expanded government debt; and now we have this nonexistent recovery with 9.2-percent unemployment.

I think, looking back, how did this happen? I was here when it happened. It reminds me of the story about--well, I guess I ought to say it and then give the story. It happened so slowly, and all of these things added up to be bad to bring about the great recession, and now not a very good recovery, because each one of them happened independent of the other and without one relating to the other. So it reminds me of the story of the frog and the water. If you throw a frog in boiling water, he will jump out and live. If you put a frog in cold water and gradually heat it up to a boil, it is going to accommodate the changes and die. So these policies slowly developed and we got into the situation we are in right now. I will say it again: Change came so slowly, it crept up on us.

Then, of course, what happened? The crash came. We had this Federal intervention in housing. I stated it before: Buy a house even if you can't afford it. We eliminated a lot of Federal Reserve accountability, particularly when they didn't have to report on monetary growth on a regular basis as they did before. Then we had these countercyclical fiscal policies that failed. We had, during periods of growth in our economy, unrealistically low interest rates by the Federal Reserve action. Then, of course, we had government bailouts. This has led to things all getting worse since 2009. We had more intervention. We had loose monetary policies, QE1 and QE2, of the Federal Reserve. We had a stimulus plan that was supposed to keep unemployment under 8 percent, and since it was passed in February of 2009, unemployment has never been below that. It has always been above 8 percent. It is 9.2 percent now, but it was even over 10 percent. We had the Cash For Clunkers Program. We had the first-time homeowners tax credit. All of these together have not brought recovery, even though the economists tell us we are in the second-year anniversary of a recovery.

What did they bring that has stalled the recovery? What they have brought is more uncertainty, and more uncertainty is bad for the economy because, as I said when I started out, there is plenty of money out there in corporations.

There are plenty of small businesses that want to hire, but they do not know what we in this Congress are going to do to them so they are not moving forward. Consequently, the unemployment rate is not going down. And right this very hour, as people are trying to find something that can pass this body and the other body so we do not have default, it even brings more uncertainty, and you read it in the morning paper, this morning's paper. So you have to come to the conclusion, with all of this intervention bringing about all this uncertainty, that big government is not a very good manager.

Then, as I said, this did not happen just since President Obama became President. This happened over the period of time of this decade and maybe even going back a little bit into the other decade. But just since President Obama was elected, we have added yet more complex intervention: the health care reform bill, Dodd-Frank, the Consumer Protection Bureau.

The President this very week has been talking about increasing taxes, only he does not use the word ``taxes.'' We have to have more ``revenue'' or we have to have ``balance.'' But it still adds up, all of these things out there, that government does not know what all these rules and regulations--do you realize that in health care reform, there are 1,690 delegations of authority to the Secretaries to write regulations? And they are not going to be written for years. But that brings so much uncertainty.

So we have more uncertainty, plus unintended consequences that come out of these, like right now, rising health care costs because of the bill, deterring new investments because of Dodd-Frank and deterring risk-taking. Risk-taking is what entrepreneurship is all about, and entrepreneurship is mostly related to small businesses, where 70 percent of the new jobs are created.

Government intervention is the problem because government intervention or government not making decisions all adds up to more uncertainty. So I think the solution is to unwind government intervention in all these regulations of EPA and all the other government agencies. Every day in the newspaper, you see some new regulation coming out. If you want to get people to hire, you ought to just shut down the printing presses for a while.

One sure thing though: We can thank God we have run out of monetary and fiscal ammunition because it has not worked anyway. We are going to probably have a great deal of inflation because of what the Fed did. We have no more spending we can do because all the spending we have done has not done the good it was supposed to do. We need no more greater debt, and we do not have any more zero interest rates to put out there because that is practically where it is right now.

Instead, what we need is spending controls, and what we need is free market principles. Historical evidence shows what works and what does not. I said what works and what does not is shown from the lessons learned from the depression of the 1980s and the gigantic inflation decade of the 1970s. So people in the 1980s and 1990s changed to policies that were market-oriented, and we created 44 million new jobs. So we ought to be learning from history. Historical evidence shows what works and what does not. And right this day, in this town, interventionists in the market control today. We need to restore less intervention, the policies of the 1980s and the 1990s to restore jobs. Remember, it created 44 million new jobs.

I yield the floor.

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