Senator Schumer Believes It's Time to Tap Into the Petroleum Reserve

SEN. CHARLES SCHUMER (D), NEW YORK: Well, we don't really even have to tap it, Jan. All we have to do is put it on the table and say we might use it as a weapon should things get out of hand.

Right now, we have a crisis where not only is there indecision about Middle Eastern oil, but of course Venezuelan oil has been cut off. And OPEC really controls the situation here. They can determine how much oil to let out. If they know that if prices go too high that we'll start using our strategic petroleum reserve, if the past is any indication, they actually increase output. Because once they know the price will come down, they'd rather make the money themselves than have our SPR, our government, make the money.

HOPKINS: Well, and in fact, a few years ago you proposed tapping the strategic oiling reserves, it was done, and prices came down, right?

SCHUMER: Prices went down anywhere between 10 percent and 25 percent, and they stayed down. And it was a lesson to OPEC that we would mix in during certain situations.

And what I've found troublesome, vexing, I guess, is that the president has said we will not use the strategic petroleum reserve. That's like giving OPEC a green light to raise prices.

HOPKINS: But, on the president's side, he's saying that this is for emergency and if we're at war with Iraq maybe we need those reserves at that point and we don't now.

SCHUMER: Well, two things.

First, the law was -- may have been ambiguous when it was first passed if it could be used for non-war situations, for economic situations. But the law has been changed, and it's clear now it can be used for the kind of situation we have now where Venezuela has just shut off the spigot.

Second, in 19 -- 2000, when I urged the president to do that, they used 30,000 barrels of oil, it was so successful that they got back more oil, they did a swap and got back more oil than they had. So out of our reserves, which are now close to 600 million barrels, all we'd need is about 30 million barrels. So it's not in one way or another jeopardizing need for oil should we come to war.

HOPKINS: Now, you and Senator Snowe are proposing that states be given quite a lot of money in order to help balance their budgets. Why is it such a crisis in the states' budgets, and where is this money going to come from?

SCHUMER: OK.

The crisis in the states occurs because of the general economic downturn and because many, many, many of the states, not just New York and California, but many are dependent on, you know, the financial returns, capital gains taxes, and things like that, all of which are weighed down with the stock market bubble being burst.

Why is this a good idea? To put -- where the money would come from, is we think it should be part of the stimulus package. The president's proposed a $670 billion package. We're proposing only $40 billion of that go to the states.

And why is that the right thing to do? Three reasons.

First of all, it's immediate money into the system. If you want to get the economy going, a one-year influx into the states, who by the way now have a $90 billion deficit and then the localities have even more, so they have a huge deficit, they'll spend it right away. So it pumps the money out in established programs.

Two, it doesn't increase the structural deficit, because if you do this for one year, unlike a permanent tax cut, it doesn't change the budget, hopefully, when the economy turns around and becomes prosperous in 2005, 6, 7, 8, et cetera. And third...

HOPKINS: This is not in the president's stimulus package?

SCHUMER: It is not. He originally had put some money in, and they took it out at the last minute. And so Senator Snowe and I and many people, this is a bipartisan issue, think it should be, and it's one of the best tools we have to get the economy going.

The third grounds I was going to mention is the fact that it seems to be, you know, that the states do have a crisis and if they're all to raise taxes, it would undo a lot of the tax cuts that would occur in this fiscal year now and you wouldn't want to rob Peter to pay Paul.

So it makes sense from just about every grounds. And we're gaining a lot of support from the governors, from the mayors, and a lot of bipartisan support on Capitol Hill.

HOPKINS: Thank you very much. Senator Charles Schumer, a Democrat of New York.

SCHUMER: Thank you, Jan.