W. Akin

Mr. AKIN

Mr. AKIN. The person that runs their household responsibly, the State that runs its budget responsibly, now we are supposed to be bailing out the banks instead. It is sort of an odd concept, but I didn't mean to interrupt you.

Mr. AKIN. Well, it sounds to me a little bit like what the French philosopher Bastiat wrote. He was a legislator. He called it ``institutionalized theft.'' If a thug hits you on the head and takes your wallet, we call it ``stealing,'' but what happens when the government takes money that legitimately it should not be taking? We call that ``institutionalized theft'' or sometimes ``socialism.'' Thank you very much, gentlemen, for joining me. I really hope that this has been informative. Thank you, Mr. Speaker.

Mr. AKIN. Well, I appreciate your joining us, and I also appreciate the gentleman from Iowa. I think we've just got about a minute or so left. I think the thing that we have to walk away with is that the cost of going from a recession to a depression could be severe. In the days of Jimmy Carter, things were a whole lot worse than they are right now. They had double-digit inflation, and they had double-digit unemployment. We aren't quite that far yet. I would like to thank my friend from Iowa, Congressman King, Congressman Lamborn, also Dr. Gingrey from Georgia, Congressman Scalise from Louisiana, and also Congressman Jordan from Ohio, who have all joined us here this evening. Congressman King, the last word.

Mr. AKIN. Congressman King, we're kind of coming down the final stretch here. We've had a chance to talk in some very broad terms about, first of all, what created the problem. The problem was created by this silly legislation, largely, that came from this floor over a period of different generations of politicians who encouraged people to be irresponsible and to take out debt that they couldn't pay. Now, I don't know if that might have been sold as compassion, but I don't think it's compassionate to sell a man a loan that he can't pay back, that puts his whole family under stress as they labor under the economics of not being able to pay a loan. So what happens is you get more and more people taking these loans, and the people who are writing the loans don't care because it used to be that a bank had to live with the bad loans they made, but these loans are just passed on to Freddie and Fanny, and you know the government takes care of all of those loans. So we make all of these loans that don't work, and pretty soon these things start sliding down the wall. The tragedy is half of them are still due. So that then throws the whole world economy into a shock. So we're left here today at a crossroads. We are left at a fork. What are we going to do about this? The irony is that the people who largely created this mess, particularly the senior Democrat on the Financial Services Committee, say Freddie and Fanny don't have any problems. Now the whole world economy is on its knees, and they're in charge of fixing it. They've got a choice. They can continue to spend a whole lot of money, which we've already spent a lot of money. If that were going to work, we would be in a great situation. The other thing is that they're going to have to trust the American economy to pull us out. I see we have my distinguished friend from Colorado, Congressman Lamborn. Did you have a thought?

Mr. AKIN. They were politically popular, weren't they?

Mr. AKIN. Congressman Scalise, that is a great summary. We appreciate the wisdom that you've brought for us from Louisiana. I am going to yield to a gentleman who ran his own small business successfully for many years, the gentleman from Iowa and my very good friend. Do you have some sense from a small businessman's perspective, Congressman King?

Mr. AKIN. I will.

Mr. AKIN. So we're basically saying that there are two courses before us. We're standing at a crossroads. One of them is the old Keynesian theory that we're just going to spend a ton of money and slop it into everybody's pockets. The people who get the money may like us, but the whole economy is going to go down, not just into a recession but into a depression. The other alternative is to get the government out of the way and allow the small businessman to make the investment to drive the economy. Those are the two choices before us. We're not trying to criticize the Democrat Party for the past things--for creating the problem by making loans to people who shouldn't have gotten the loans, for refusing to regulate Freddie and Fanny--but now it is their responsibility because the voters have put them in charge, and they're going to have to take one of these two courses. We're standing here today, saying: You need to choose the responsible course, which is empowering small business to create those jobs.

Mr. AKIN. I mean, in politics, it's nice just to tell somebody, It's okay to be irresponsible. We'll just bail you out. The only trouble is that, when you allow that to grow to a certain level, the whole country crashes.

Mr. AKIN. The little trouble with what you're saying is that it requires people to be responsible, doesn't it?

Mr. AKIN. I will.

Mr. AKIN. Congressman Scalise, I don't know if you were aware of it, but did you ever hear the story of what the Irish did? Their economy was in trouble about 15, 20 years ago, and they decided they were going to cut their corporate taxes really to the bone. They really cut the corporate taxes. Now, in America we have the second highest corporate tax rate in the world. The Irish went the other way, cut their corporate taxes, and their economy took off like a skyrocket. And they've got more businesses starting and jobs, and their Gross Domestic Product has done fantastically. There's a perfect case study of somebody who used this odd principle that by cutting taxes you can actually are increase revenue. Here's a chart of it. You can see we cut the taxes. Everybody said oh, the Republicans have ruined the economy because we cut taxes. But take a look at what happens to revenue. Here is the way I was thinking about this. Tell me where it makes sense to you. Let's say you're king for a day and your job is to put a tax on a loaf of bread. So you start thinking. You say, ``I can put a penny on it. Well then, I'd have to sell a lot of bread to get a bunch of money or I could charge $100 for a loaf of bread, and then maybe nobody would buy any.'' Well, wouldn't commonsense say that there is something between a penny and $100 that's sort of the optimum at which you can tax it? When you increase the tax, you actually get less money. I think that is what's going on here, which is, if we cut the taxes, the economy takes off, and we end up with more government revenue. That's exactly your point, and that's the whole idea of supply side economics. You know, the Congressman from Louisiana is fortunate to have somebody who understands that basic idea, and that is the proposal that we're making. We're not trying to dump on somebody else. We're just saying, look, this massive spending bailout fever just is not going to solve the problem. Anybody who runs a household knows that if you're in trouble financially that you don't just start spending money. As Ronald Reagan said, it's not fair to say it's like a drunken sailor, because a drunken sailor is spending his own money.

Mr. AKIN. Now, Congressman Scalise, you made a point that I think, and I think it is, it almost seemed counter-intuitive to me when I first heard this before I came to Congress, the idea that the government could actually cut taxes and raise more revenue. Doesn't that seem like making water go uphill?

Mr. AKIN. I think I'm the one supposed to do that. Congressman Scalise from Louisiana, we'd love to hear your thoughts too along the same lines. And thank you very much. I appreciate that, Congressman Lamborn.

Mr. AKIN. You know, we like to get into these numbers a little bit because we have to study it and live with it day by day. But let's try to make this practical for the average person on the street. What we're talking about is, instead of treating a recession, we're talking about, if we don't do this right, we're going to create another depression. We're talking about an extremely serious condition for our country; is that correct?

Mr. AKIN. Congressman King, I think you've just given us a rather eloquent description of just basically saying, free enterprise does work, doesn't it?

Mr. AKIN. I don't want to be any kind of socialist, gentleman.

Mr. AKIN. The second quarter. I stand corrected. The second quarter of 2003 is the black line that you see here. And this first chart is Gross Domestic Product of the United States. Now, if you take a look at the things on the left side of the chart that are in red, this includes a bunch of kind of nice tax cuts, which give better deductions for having kids and a lot of feel good kind of stuff. So it's not just any tax cut that makes a difference. Your point is you're investing in productivity. When you get to the second quarter of 2003, we did one major tax cut, and that was dividend and capital gains, which immediately put money back into the pockets. It's not really put money back in. We just never took it out of the pockets of the small businessmen who made investments and took risk. And take a look at what happens on the average. This is going all the way out to 2007. The average Gross Domestic Product, 1.1 percent before that tax cut, after it you see that the averages jumped a couple of percent on Gross Domestic Product. Now, that's an interesting chart. Let's take a look at the next one. What happens to go along with Gross Domestic Product? Let's take a look at jobs. This is job creation. Everything below the line means we're losing jobs, as we are right now in the economy. The second quarter of 2000--oh, you were right, May 2003. You take a look and you see all of this job growth. An average loss of 99,000 jobs in the first couple of years, as we inherited the recession in 2001, and a gain of 147,000 jobs following. That is the effect of letting small business, turn them loose and let them be productive. Now, here's the thing that I find most amazing, and that is the fact that when you do this, the government cuts taxes; and guess what happens to the money we have, the revenue? Well, take a look at the third chart. There again, May of 2003, a low point in Federal revenue. As the economy gets going, Federal revenue takes off like a skyrocket. So what do you solve? Everybody is more wealthy. There are more jobs, and not only Federal, but State governments have more money to spend. To your point, gentlemen, I thought some specifics though. This isn't theory. This is what JFK did, this is what Ronald Reagan did, and this is what happened under the Bush administration with that key tax cut, not just any tax cut, but the one that empowers Americans and gets the government's big fist out of their pocketbooks. I yield to the gentleman. Continue.

Mr. AKIN. That is a very interesting proposal that you have and one that a lot of economists are taking a very serious look at and one that is really rising in popularity I think with a lot of scholarly people, Congressmen, and I appreciate your doing it. I would like to dig into one little detail of what you said. What we're not talking about is a lot of fancy theory here. This is stuff that's been tried. And we know that excessive government spending, way beyond our budget, has created a Great Depression and all kind of other trouble. But what we're talking about, instead, is allowing small businesses to invest. And so, when we did that, we actually did that in the first quarter of 2003. And I have a series of graphs here that show the result of doing that. Let's just take a look at this: The black vertical line on this graph is the first quarter, or part way into 2003.

Mr. AKIN. You put that in context, that is a lot more than the Marshall Plan adjusted for inflation. That is more than the War in Vietnam adjusted for inflation. It is more than the Louisiana Purchase. I mean, it is more than anything we have bought before.

Mr. AKIN. Well, I really appreciate the Congressman. I know that you are disciplined in the wrestling sport. You understood that there are some rules that life works by, you work out hard, you wrestle a good match, and there are rules of economics as well. We have a gentleman joining us tonight also, I think he is from Iowa, as I recall, just a bit to the west of Missouri, and Mr. King, Congressman King, I would recognize you if you want to talk a little bit along the same lines. We have been talking about what you shouldn't do. The gentleman from Ohio is talking about the inherent unfairness, the injustice of basically taxing somebody to fix a problem they didn't create, of bailing out a big company when the little one doesn't get bailed out, this whole bailout fever, everybody with their hands out. Now, is there a better kind of solution? What would a supply side kind of model be? What would you recommend? We don't want to sit here and criticize people that are proposing things without giving them an alternative that is better, and I think that is what you would like to talk about.

Mr. AKIN. It was about $800 billion. It is not even $1 trillion. So we got about $800 billion or $900 billion for the war in Iraq, and we are talking about just in a period less than a year, $1 trillion? This is an uncharted kind of area we are getting into.

Mr. AKIN. If you allow me to interrupt you just a minute, let's put that in perspective. How much did the war in Iraq cost, that everybody was complaining about for the last 6 or 7 years?

Mr. AKIN. As we have done in the last 2 years. And you are talking $2 trillion.

Mr. AKIN. So the gentleman, what you are saying is from the time this country was founded to the 1980s, we had not accumulated as much debt-- --