Hearing of the Senate Budget Committee Suject: The President's Budget Proposals for Fiscal Year 2004

HEARING OF THE SENATE BUDGET COMMITTEE
 
SUBJECT: THE PRESIDENT'S BUDGET PROPOSALS FOR FISCAL YEAR 2004
 
SEN. PATTY MURRAY (R-WA): Thanks very much, Mr. Chairman.

Mr. Daniels, I really don't envy you your job of trying to sell to the American people the fact that long term debt and deficit spending is a good idea. I came to the Senate in 1992 and I clearly remember Ross Perot running around the country with charts and graphs and making a very clear case of why deficit spending wasn't good and as a result of that, my coming to the Senate with a number of people and we put together some really tough package back in 1993 that got us out of that cycle and I think the American public is pretty cynical about deficit spending.

I come from a state and a region, as Senator Wyden knows, we have been struggling for the last two years and I sat on this committee two years ago when the administration was projecting a $5.6 trillion surplus in 10 years and I cautioned everyone to be careful. Oregon, Washington, other states on the West Coast were hit with a huge energy crisis. We saw a real impact on our employment. The dot.com bubble had burst and I told this committee that surplus is going to be gone soon.

Of course, I wasn't able to predict 9/11. That had a serious impact on it too but I was very concerned about a tax cut at that time because we saw on the West Coast the unemployment rising. That has not left us. Oregon and Washington are still at the top of the country in terms of unemployment. We've had 76,000 people in my state lose their jobs in the last couple of years. One out of nine people don't have health care today because our health care is based on employment. They've lost their health care as well. We are very concerned about the budget proposal that has come forward to us, the tax cut proposal that could put us into a worse deficit spending. But even more so, people are saying, "What does this do to help me get back to work?"

Now, I have two quick questions for you. How will this tax proposal put people back to work in my state today? I don't see how a dividend tax is going to help the unemployment rate on the West Coast. And secondly, I would say, in response to my colleague from Idaho who I share a lot of concerns with as well, sometimes spending is important to get us back on track. When you put money into transportation and you build highways, you put those people back to work immediately at construction jobs and engineer jobs and design jobs and that helps our unemployment. And it helps economic development in the long run. So is it correct to say that spending is always not helpful to our economy? I don't think so and I would love to hear a response to both of those.

MR. DANIELS: Well, thank you, Senator. Your cautions a couple of years ago were well placed. We now see how they were well founded. The president shared them but events overtook us all in a way that maybe not even you had foreseen. In terms of the growth package, I think I stand on the answer I gave a few minutes ago. I think in terms of immediate help to put people back to work, I would sort of rank the—I would rank the proposals roughly this way. I think the acceleration of the rates probably first both for the benefit to consumers but also because so many small businesses would see a vast improvement in their situation and might be able to hire more people. You know that that's where the jobs come from—net jobs in this economy.

I think behind that the child credit, which many of your constituents would receive an immediate several hundred dollars depending on their family circumstance, from bringing that reform that Congress has already voted for forward.

And I think the small business expensing up there at the top too.

One other thing I would mention and that I think has gotten too little attention is the president's proposal on top of the unemployment insurance and compensation that we have now for three plus billion dollars for new reemployment accounts which 1.2 million Americans, including many of your constituents could access money that they control to suit their own personal family circumstance and provide an incentive because they could keep the balance if they got back to work more quickly.

SEN. MURRAY: I would agree with you. You're talking about putting cash in people's pockets today. That's important if you want them to be purchasing things but I think that the other side of that is that if this puts us into debt, it's going to cost people more, as Ross Perot told as so many times, in terms of their interest rates on their mortgage or their house or they're sending their kid to college.

MR. DANIELS: This is what governing is about, Senator. The president believes it's a good idea. It's a good chance to take an additional step for growth at this time. Again, there was a lot of counsel. There's still some out there that says don't take that step, leave well enough alone. That wasn't where he came out. In regard to interest and mortgage rates—the lowest rates in 40 years thank goodness. It's been very beneficial to individuals and to the economy. We want to keep an eye on that but for the moment that's a big plus.

SEN. MURRAY: Well, on the spending side don't you agree that when you spend money, for example on transportation projects that I alluded to, that also helps get our economy going again. Gets the revenue streams going again and move us in the right direction?

MR. DANIELS: Well, the president's proposing for example greater highway spending in a new reauthorized highway bill and that, certainly, I think done well. A better infrastructure is very good for the economy. When I think of highways I think first of all of the way they enable businesses and individuals to practice more commerce. We need a good infrastructure to do that. I think we have to be a little cautious and always remember that the dollar we spend on a given project had to be taken from somebody first.

SEN. MURRAY: Let me ask a really fast, quick question. Our state legislatures are in extreme—they have to balance their budgets. We have a two and a-half billion dollar deficit in the state of Washington alone and I'm concerned about the Medicaid reform package. If you could just comment quickly. It looks a block grant proposal that's failed several times in the past and I am just curious on whether or not how this is going to help our states when it seems to me that combining these programs is not going to help our state legislatures when they're dealing with the Medicaid crisis?

MR. DANIELS: The first thing to note is that it's purely optional. So any state that believes it would not be of net benefit to them can continue on without any effect. It involves, if you get a chance to look at it more closely, it involves what states—almost all states, I think, have been telling Secretary Thompson and telling the president they want much more flexibility and more money to go with it. Several billion dollar in the first few years. So there'd be more money per beneficiary along with more flexibility. But again, it's strictly up to the states to choose.

SEN. MURRAY: I know my time is up but let me just say, if you base it on the formulas from the past that have rewarded states who are not as efficient, it is simply going to put more of our state legislatures in a bind but I will talk more about that --

SEN. NICKLES: Senator Murray, thank you very much.