W. Akin

Mr. AKIN

Mr. AKIN. Reclaiming my time, though, gentleman, you talked about a culture of smoke and mirrors here. This was supposed to be a jobs package. It was supposed to be a stimulus. I'm calling it a ``porkulus.'' But that was the theory. And yet what you're saying that it has in here, it really isn't; it's more about big government spending. I yield.

Mr. AKIN. Just reclaiming my time, you're saying that when we go out, because we've got to raise this 800-some billion dollars. We've got to raise that money in the market. That means somebody's got to loan the government that money, right?

Mr. AKIN. And we're counting on what, foreign countries like China to loan us the money? And we're hoping that they're going to buy, what, our Treasury bills?

Mr. AKIN. How far can we push this?

Mr. AKIN. Reclaiming my time, what you're saying once again, in other words, is we're going into uncharted waters. We're talking about something in the neighborhood of $7,000 per family, just in the first six weeks of this administration.

Mr. AKIN. Reclaiming my time. Essentially what happened, we had a recession during the time of the New Deal. They tried this Keynesian economics, which, at that time, you could at least give them credit; while it didn't make any common sense, at least it hadn't been tried. And here you have the author, the guy that was really behind it, even almost before Little Lord Keynes came along, this guy, Henry Morganthau was supporting this thing. And then 8 years later he comes before our committee and says, it does not work. And then it says, also at an enormous debt, to boot. Now, why would we want to turn around and do the same thing over again, when there is a bold initiative that can be taken, just as has been done, that history has proved works. I had just shown the chart of what happened when we did the dividend and capital gains tax cut to allow small businesses to keep more of their money to make the investments in their businesses. And we saw the fact that right after that tax cut right here, we see all these jobs being created. What else happened? Well, let's take a look at the Gross Domestic Product of the country. These lines to the right are after that tax cut. You can see that the average has gone up to 3 percent, whereas before that tax cut it was at 1.1. And here's the best thing of all. If you care about all these different other ways that the Federal Government could spend money, one of the things you'd want would be the economy to be strong because then you have more revenue. Take a look at--let's see. I've got to try and find the chart that shows what happened. Somewhere along the line we lost one of the charts here. But the bottom line was when you did that tax cut, second quarter of 2003, what you find is immediately the Federal revenues start going up. Well, it doesn't surprise you when you think about it because look at all the more people that have jobs. They're all paying taxes. And you see the Gross Domestic Product going up. So when the economy gets better, we have more money to spend. And that is what has always made America great. It's because there are certain basic true principles that are not smoke and mirrors. It's not a whole lot of government redistribution of wealth, and not everybody is a socialist, in spite of what the cover of Newsweek wants to tell us. And I'd yield.

Mr. AKIN. I do yield.

Mr. AKIN

Mr. AKIN. Mr. Chairman, it is a pleasure to be able to join with some of my colleagues here tonight. And we're going to be talking about a subject that is, I believe, near and dear to many people's hearts, or at least of concern to many people. And I suppose one way to introduce this subject would be to take a look at something that has been in the news now for 6 and 7 years, and that would be the subject of how much money we have spent in the war in Iraq. Many people were observing that we were spending way too much money, that the budget was out of balance and we are just wasting money over in Iraq and in Afghanistan. And yet ironically, in the very first month of this new administration and this new Congress, we spent more money in that first month than what we spent in 2 years in the two different wars for 6 and 7 years added together. If you add all of the money spent in Iraq, all of the money spent in Afghanistan and add it all together, it is less than what we spent in the first couple of months of Congress this year. Now, how do we get to that point? What brought this about? If you want to try to take a look at how much money does that mean, that says that we spent in the first month more money than the entire tax revenue that we're planning to collect for the year 2008. It would be as if you had your own family budget, and in January you spent all of your income for the year. You have got 11 very lean months to take a look at. So how is it that we got to this point? That is what we are going to be talking about. We're going to have a nice kind of roundtable discussion with many people from different States. And so I want to back up just a little bit and take a look at how did we get to this point that we have the economy in the condition that it's in? Well, the story goes back quite a ways. It goes back to the Carter years. People found that as people were trying to get mortgages, particularly in certain areas of economically disadvantaged areas in various cities, that it was hard for them to get home loans. And so they put together the Community Reinvestment Act. And in a sense, what it was saying to banks is, you have got to take a few of your loans and loan them to people who it's not clear that they will be able to pay it back, because somehow or another people everywhere need to have a chance to buy a home and to own a home. Well, that idea was then followed up with the creation of a couple of quasi-governmental but also quasi-private organizations that were little known at the time called Freddie Mac and Fannie Mae. And those organizations were in the same business of trying to help people that were sort of middle-income buyers or lower-income buyers to be able to buy a house. And so they helped to write loans and underwrite loans. The theory was, at least implicit, that the government IOU was behind the things that Freddie and Fannie took care of. Then as we moved along further, we moved up to the Clinton era. Toward the end of Clinton's days, what he did was increased the percentage of the loans that Freddie and Fannie had to make and increased the percentage of them that were very risky loans. In other words, essentially what he was saying was that the government is forcing Freddie and Fannie to make loans and that we know an awful lot of them are not going to be paid. And of course when you start to mandate that quasi-governmental groups are going to make bad loans, then pretty soon you're going to have trouble. Well, this coincided then, as we move along a couple further years, to the era when Alan Greenspan drops the interest rates extremely low because the economy is tanking. In 2000, Greenspan started dropping the interest rates. And then you create this idea of, well, hey, if we have got all of this money at tremendously low interest rates, where are you going to park it? Well, let's park it in real estate because real estate always goes up. You can't make a mistake in real estate. In my first early days here at Congress, boy, did I feel stupid that I hadn't bought a great big multimillion-dollar house, because if I could have just afforded the interest payments on it for 4 years, it would have doubled in value between 2000 and 2004 or 2005. Of course, I would have to have been smart enough to buy it in 2000 and smart enough to sell it by 2005. Well, as everybody knows, that old bubble popped. And increasingly all of these loans that were being made started in the process of defaulting. And it was not just people in economically disadvantaged areas that were making these loans. No. Wall Street got into the deal. And so did the speculators. And so what started to happen was you had people going out there and selling all of these loans. The local banks went through the Community Reinvestment Act and would make the loans. But as soon as they made the loan, they turned it right on over to Fannie and Freddie, assuming that if anything goes wrong, the Federal Government is going to bail them out. Then you get to the point where people are running around who are mortgage brokers. And they don't care what kind of job you have. If you want to borrow a half a million bucks, fine, because they simply write the loan, make the commission on the loan, and the loan is passed on largely to Freddie and Fannie. In the meantime, Wall Street was taking all of these loans, packaging them together and slicing and dicing them and selling them all over the world and making a great deal of money in the process as the housing bubble was going up and up. Everything looked pretty good. And then you had the rating agencies, such as Standard & Poor's or the other one would be Moody's. They were all giving these things Triple A ratings. This is good stuff. Everybody around the world, buy all of these loans that are made to people who we know really don't have the ability to pay these loans. And so now you get this situation where you're spiraling upward and upward. The bubble is about to pop. Did anybody see it coming? Well, the answer is, yes, as a matter of fact they did. President Bush saw it coming. He saw it coming in 2003. And he approached the legislature. He said, I have got to have the legislative authority to rein Freddie and Fannie in because these guys are going crazy making these loans, and it's going to mess the whole economy up. And so Congress, while we were in the majority in 2004, we passed a bill that allowed the President to have the authority to regulate Freddie and Fannie to stop this runaway train. It went to the Senate, and it was killed by the Democrats. Now let's take a look at what appeared in the New York Times, not exactly a right-wing oracle, about that very time, September 11, 2003. And this is part of the quote, September 11, 2003, New York Times, ``These two entities, Fannie Mae and Freddie Mac, are not facing any kind of financial crisis.'' Who would say that? Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ``The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.''

Mr. AKIN. I will yield.

Mr. AKIN. I yield.

Mr. AKIN. I would yield.

Mr. AKIN. Reclaiming my time, yes. Gentlemen, thank you for coming to that point, because I don't like people to come in here and be critical and say that it's no good, that it will not work, and then don't offer a better alternative. The good news is that there is a better alternative. We don't have to be doing what we are doing. I noticed that my colleague from Georgia, again Dr. Gingrey, Congressman Gingrey, has got a chart here. Would you like me to yield, and do you want to explain what you have?

Mr. AKIN. That's correct. That was 2003 in the New York Times, September 11, the President sees this coming, he says that we've got to regulate them more. I'm reclaiming my time. People are saying that this is a failure of free enterprise. This has nothing to do with the failure of free enterprise. This is a failure of socialism.

Mr. AKIN. That's correct. We passed a bill. Reclaiming my time, we did pass a bill. And this is something that we saw as a problem. But as you will recall, the way that the Senate body works, while we sent legislation over to them, this article goes on to say the Democrats opposed it. And we did have the 60 votes to get it passed. So nothing was done. And perhaps if there is any blame that needs to be made on the economy being in the condition it's in, it really rests with the U.S. Congress, with the House and the Senate. Now these other rating agencies that said that you're going to give a Triple A rating to this trash, certainly they ought to have to be accountable as well. And certainly Wall Street was knowing that they were selling trash and rating it Triple A and selling it all over the world. It wasn't that they hadn't done some things wrong, but to allow that to happen, first of all, the Congress was out to lunch.

Mr. AKIN. Reclaiming my time, my understanding was what Clinton did was not so much in the Community Reinvestment Act, although that was done with ACORN and all, but more particularly he specifically required that Fannie and Freddie make loans that essentially we knew weren't going to be any good. I yield.

Mr. AKIN. Reclaiming my time, you know, gentlemen, somehow or other people want to try and package this as compassionate. I'm trying to think of people such as myself or other people in my district and what happens if you put someone into a house, and maybe they can afford a $250,000 house, and you put them in a $400,000 house, and all of a sudden, every month they've got that mortgage payment coming due; and the financial pressure, it starts to drive the husband and wife apart and make the children's lives hell as eventually they end up on a street side with their sofa on the sidewalk because they can't afford it. How is that compassionate? I don't understand. But gentleman, I note that we have some other distinguished guests here. Could we come back to you in just a minute?

Mr. AKIN. Reclaiming my time, gentleman, we are going to get to that very point that you're making, and I thank you so much, Congressman Broun from Georgia. And I sometimes think of it as doctor, but now you're congressman. You've got a couple of different hats. I appreciate your just straightforward approach. This is what we're talking about that's hurting a whole lot of very small, very average people. And the thing that really makes me sick about it is we saw the thing coming, and not only has the American economy got a cold, we've given pneumonia to the rest of the world, and there are people starving because of these very policies. And somehow, putting somebody in a house that they can't afford, I don't see how there's anything compassionate about that. But we are joined by another doctor from the great State of Georgia as well, Dr. Gingrey, but maybe we should call him Congressman Gingrey. I would be happy to yield to you sir.

Mr. AKIN. Reclaiming my time just a minute. What you're doing is you're fast forwarding a little bit. We started by talking about how did we get in this mess. I was going to make just a comment. Sometimes people say this is as bad as the Great Depression. Certainly it's not. It's not as bad as what things were under Jimmy Carter when we had double digit unemployment and double digit inflation. But we can make it that bad if we work at it and do the wrong things. So that's scaling it. Now, what you're talking about is we've got a solution that's being proposed. It's a solution that's proposed by the Pelosi Democrat Congress. We saw the vote on that last week. Not a single Republican voted for it. But they had a proposal, and I think it's great that we do have a problem. We acknowledge there's a problem, and they made a proposal. And that's what you're talking about, Doctor, and you're talking about the mechanics of what they're proposing, and I think we need to take a look at that. And what you're saying, from what I'm hearing you say is, you don't think it's going to work. And I yield.

Mr. AKIN. Reclaiming my time, you're saying this is $10,000 for every family in America is what this thing is going to cost?

Mr. AKIN. Reclaiming my time, I appreciate, Doctor, and Congressman your joining us and your perspective. I think when you start talking about $800 billion or $1 trillion, those are such box car size numbers, it's a little bit tricky to put them in perspective. I think you've done a great job when you bring it down to the fact that the stimulus package that was just passed last week by the Democrats, that would be your medical care and your food and clothing for an average family. That's what that would be. That's how much it's going to cost an average family. Or you could say it's what it costs you to have your house. Those are significant numbers. I think it brings it home, and we really to ask ourselves what are we getting for this stimulus package? And with that, I note that we have a distinguished colleague of mine from all the way out on the West Coast, Congressman Dreier, who has been here a number of years and is really on top of these issues. It's an honor to have you joining us. I yield to the gentleman.

Mr. AKIN. Reclaiming my time for just a minute, I appreciate your perspective because we can stand here and talk about boxcar numbers and economic theory and policy, but you are bringing it down to what it has to do with the guy in the street, what it has to do with me. There is a picture that always sticks in my mind. I don't know. You know, sometimes you take in mental pictures, and there is a picture that sticks in my mind. When we get talking about these charts and everything, I always want to come back to this picture, and that is a picture of a house, and sitting right there on the sidewalk is somebody's sofa. I think about the young dads who have just gotten married and who may have a kid or two, and they are struggling, and they are trying to keep their heads above water, and they tell their wives not to buy any food, and they tell their kids not to buy any toys. They are still trying to pay this debt off, and they keep getting worse and worse behind. Finally, they go out there, and that is when they end up with that sofa that's sitting on a sidewalk. That is what we are talking about with these socialistic policies. Here it all started with this ``give somebody something,'' and somehow or other, Uncle Sam and socialism are going to make it work.

Mr. AKIN. Reclaiming my time, I am also joined here today with Congressman Latta from Ohio. I believe he has got some charts and can help cast a little bit more light on exactly what this bill is that was just passed last week and what it means. It has $500 million for the National Endowment for the Arts. I wonder if that's going to get the economy going. It has got $54 billion for 19 programs that the OMB--that is the Office of Management and Budget-- said were completely ineffective programs. Yet we are going to put $54 billion into programs that, by our own definition, do not work. Particularly if you want to take a look at another one, there is $355 million for STD funding. That may put a totally different meaning on the word ``stimulus.'' Anyway, we are joined here by Congressman Latta from Ohio. Thank you for joining us, gentlemen, and I am interested in your perspective. I yield.

Mr. AKIN. Reclaiming my time, let's get this number down. As to the number of unemployed when we started into the first big recession that was going to become the Great Depression, what was the percentage?

Mr. AKIN. Reclaiming my time, your point is just what was observed by the guy who was doing all of this Keynesian economics, this guy Morgenthau. After spending us into tremendous debt, he just basically said, after 8 years, we weren't able to create any jobs, and you're saying it was basically World War II that generated the jobs; am I correct? I yield.

Mr. AKIN. I hate to interrupt you. Could I reclaim my time for just a minute? We are joined here on the floor by another expert we have got, and I want to get right back to you, but Congressman Scalise is trying to catch an airplane pretty soon. I wanted to try to fit him in because I think he has an interesting perspective that just ties in beautifully with where you were going, Congressman Latta. So I yield to you, Congressman Scalise.