Judd Gregg

Mr. GREGG

Mr. GREGG. Madam President, if the Senator is going to allow the bill to be open to LIHEAP, then I presume it should be open to all extraneous amendments. I suspect the amendment of the Senator from South Carolina relative to the city of Berkeley is an extraneous amendment but one that is worth debating and should be discussed.

Mr. GREGG

Mr. GREGG. Madam President, I send an amendment to the desk. Madam President, is the Sanders amendment pending?

Mr. GREGG. I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. GREGG. Madam President, this amendment is simply an attempt to recognize the need for expanding the LIHEAP program in the face of the dramatic increase in oil prices, but also recognizing that in extending the LIHEAP program for today, we shouldn't send the heating bill for that to our children to pay tomorrow, which is exactly how the Sanders amendment works. It is essentially borrowing money today. That is obviously not good policy. Clearly, if we have extra heating bills in this country today which should be paid for--and we do--the LIHEAP program does need to be increased because the cost of heating oil has gone up so significantly. We should pay for those costs today. So this amendment takes the Sanders language and pays for it. The Sanders language represents about an $800,000 increase in the LIHEAP program. This would be about a two- tenths-of-1-percent cut across the board in nondefense appropriations in order to pay for that amendment. It is very simple. It is obviously an attempt to bring some fiscal discipline but, more importantly, to reflect the fact that if these heating bills are going to be paid for--and they should be paid for--we shouldn't borrow the money to do it. We shouldn't ask our children 10 years, 15 years from now to pay those heating bills, with interest, when the bills are incurred today. So that is all it does. I appreciate the courtesy of the Senate in allowing me to proceed to offer this amendment. I especially appreciate the courtesy of the Senator from Wyoming. I ask for the yeas and nays on my amendment.

Mr. GREGG. Madam President, I withdraw my request.

Mr. GREGG

Mr. GREGG. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GREGG. I wanted to rise briefly to express my concerns at the process as it presently stands here in the Senate. I am tempted to say: Wherefore art thou the stimulus package, because there is no reason there should not be action on it now. I had some very serious reservations about this whole effort on the stimulus package. I believe very strongly that we need some sort of stimulus to this economy, that the economy is beginning to slow fairly dramatically, but that the present framework of the stimulus packages, as they were agreed to in the House and certainly the Senate Finance Committee, have very distinct flaws. But that does not mean we should not bring the packages up and vote on them. Last night we voted on the Finance package. It did not pass. It did not pass because it added $44 billion of additional money to an agreement which had already been reached between Speaker Pelosi, Republican Leader Boehner, and the administration, a bipartisan agreement which was reached with the tacit approval of the leadership of the Senate, as I understand it. Although I was not intimately involved in the negotiations, my understanding is the way this proceeded was that the Senate basically said to the House--the Senate leadership in the sense of Senator Reid and Senator McConnell said to the administration and the House: You see if you can reach an agreement on this stimulus initiative. And the administration, in good faith, under the leadership of the Secretary of Treasury, negotiated with Speaker of the House Pelosi and with Congressman Boehner, and they reached an agreement. It was an agreement that involved very distinct compromises, compromises which basically reflected a classic political process where you basically put on the table your ideas, the other side puts on the table their ideas, then you work to the middle and come up with a concept that both sides can at least be comfortable with, even if they do not accept all of the details. This package, as we all know, is a $150 billion package, the majority of which is a rebate, to people who pay taxes, of $600 to $1,200, and the balance of which is an incentive, especially to small businesses to go out and invest and as a result create hopefully more jobs and a more efficient economy. When it got to the Senate, for reasons which I still do not understand, the Senate decided it wanted to assert some prerogative here, even though the Senate leadership had said: Let the House leadership and the administration do the basic negotiations. We got a package out of the Finance Committee which took a $450 billion package and increased it by $44 billion. A lot of that package was basically baggage being thrown on a train leaving the station. It had clearly nothing to do with stimulating the economy over the short run. There were tax benefits for the coal industry, tax benefits for the wind industry; there were a whole variety of things that had nothing at all to do with stimulus. They simply were there due to the fact that certain groups around here had enough influence to be able to put their baggage on this train. What we have to remember is every dollar that is being spent on the stimulus package is being borrowed from our children and our children's children, because we do not have a surplus now. We do not have money to rebate. I mean ``rebate'' is the wrong term. This is basically money being borrowed from our children being paid to us, people who are working today or people who are paying taxes today under the House package. Then on the Senate package, it is another $44 billion of money being borrowed from our children and our children's children to be sent out the door today, for the purposes of different interest groups who have put their points forward. The majority leader said we would take the Senate package or we take no package, which makes no sense at all. The House package was a bipartisan, negotiated package, which had the Speaker of the House, who nobody can accuse of being a conservative--she comes from San Francisco. I do not think she is a conservative--the Speaker of the House, and the majority leader, the Republican leader of the House, Mr. Boehner, whom nobody can accuse of being a liberal, comes from someplace in Ohio, but he has quite a track record around here, Mr. Boehner, of being a conservative of note. They reached an agreement. It was not as though it was the Republicans saying, ``This is the package,'' or Democrats saying, ``This is the package.'' It was an agreement. So when it came over here, yes, there might have been adjustments that needed to be made, but to add $44 billion to it and say: Take that $44 billion addition or leave it, makes no sense at all in the context of reaching some agreement quickly and moving it out the door. In fact, Senator McConnell, I think, had the best idea. He said: Let's take the House package and add three things to it, three things that there seems to be consensus on around here: One was to make sure that seniors got a rebate so they could also participate in the stimulus initiative; two was to make sure that disabled veterans got a rebate so they could participate; and, three, to correct the technical error in the bill relative to illegal immigrants. So Senator McConnell said: Let's do those three things; add them to the House package, send it to back to the House, the House has agreed to approve that, we will send it to the President, and we will be done quickly, which is the whole purpose here. I am not arguing for the stimulus package. We know a stimulus of this nature, which is pure Keynesian economics, where you take money and you throw it at the economy without any sort of discretion on how the money is going to be used in order to produce long-term productive forces in the economy, which is simply saying to consumers: Here is the money, go out and spend it, hopefully that will raise the economy--we know under classic Keynesian approaches, which is what this stimulus package is, that the essence of that is to get it out the door, get those dollars into the consumers' hands quickly. So every day, every week of delay only aggravates the relative effectiveness of this stimulus exercise. We also know that because of the way our Internal Revenue Service is structured, the earliest they are going to be able to get these rebate checks out the door, if we were to act today, this week, would probably be May, middle of May; more likely that they are going to get out in June and, according to the economists who testify around here and give us our counsel--for example, Dr. Orszag, head of the CBO, said that the impact of those dollars going out the door, those $600 or $1,200 rebates under the House bill will not be felt probably until the late third quarter of this year. That is the fast track. Who knows what the late third quarter of this year will bring. I hope it will bring some turnaround in the economy. And certainly with monetary policy being changed in this country, where you are seeing significant reductions in the interest rates by the Fed, it is very likely we will see some uptick in our economy as we head into the third and fourth quarter of this year. I certainly hope that will occur; that the housing industry which has created this problem, as a result of having a housing bubble, will have begun to work its way through. But in any event, we know that to delay this further, so we push these stimulus events, such as giving people $600 to go out and spend, farther and farther into the year, potentially into the Christmas season or into next year, is not going to address the underlying problem, which is the next two to three quarters, which look as if they are going to be extremely soft, potentially extraordinarily soft relative to economic activity. So action should be taken now. What has been suggested here to accomplish action--it is a very reasonable suggestion--is to take the House package, which was negotiated between the Speaker of the House, the Republican leader in the House, and Secretary Paulson, add to it the two or three things which there is consensus on over here, which is the payment to seniors, payment to veterans, and correcting the illegal immigration language, and passing it, and then move forward. If you accept this concept that we should do this sort of Keynesian stimulus event, that is what we should do. I must, as a matter of disclosure, say I have serious reservations about not only--I think the Senate package is terribly irresponsible, because it adds $44 billion to an agreed-to bipartisan agreement, but I also have problems with the underlying package. Because, for me, I believe we do need to stimulate the economy, but I think we need to focus the dollars on the problem, and the problem is the credit lockdown that is occurring generally in the economy but that is specifically being driven by the housing market problems. We know that for the last few years there has been an expansion in lending in the housing arena which was not supported by the underlying collateral or by the ability of people who were getting these loans to pay those loans under the terms of those loans. These were called subprime loans. What happened was people were attracted into buying a house, which had been built on speculation, and they were attracted in on an interest rate on the mortgage on that house which was very low, with the understanding that 2 or 3 years later that mortgage rate would jump fairly considerably. Well, unfortunately in many instances what happened here was, we built a lot of housing stock that could not be purchased, or if it was purchased, it was being purchased at costs which were below the real value of production, and on top of that, we were saying to people who did not have the incomes necessary to support the higher interest rate which was going to hit them in 2 or 3 years, the 2 or 3 years being now: You take the loan, we will worry about that later. Well, the ``later'' is today. The bubble is bursting. People are being put under extreme stress because many people who bought these homes cannot afford the increase on what is known as their ARM, their adjustable rate mortgage. It is severe. In parts of this country it is extremely severe--in Florida, Arizona, California. What is happening is you see a classic bubble where as the housing market starts to contract, lending generally starts to contract. Lenders who have these housing loans on their books, or who have sold these housing loans and cannot figure out how to get out of their contracts, are now trying to figure out how to get their books in order, to rebuild their capital and restructure themselves. As a result, good loans in other areas that are being repaid are starting to be chilled, as is new lending. Consequently, the entire economy starts to lock up because it is hard to get loans for anything, especially in distressed housing areas. The people who have these loans and live in these homes are finding themselves under the pressure of foreclosure. In many instances, these people are hard-working Americans who can pay a reasonable rate, but because the adjustment is not reasonable--it is very high under ARM agreements--they are not able to meet the obligations of the mortgage. So we should be focusing our efforts on that part of the economy. I congratulate the Secretary of the Treasury because he has tried to do that both through jawboning, the lending community, and by setting up the new HOPE proposal which has put a big chunk of money out there, over $100 billion, the purpose of which is to help people restructure those loans so that people who can make their payments under the original loan agreement or something near to the original loan agreement, because they have good jobs and they can make their interest payments, aren't forced out of their homes as a result of a jump in their mortgage rate. Progress is being made there. Over 370,000 people have been helped. But the problem is so large that that is not necessarily going to stabilize the market and free up the lending machines in America. So additional things should be done. For example, Senator Isakson of Georgia has suggested we have a one-time focused tax credit given to people who buy one of these homes in the inventory within the next year and that the home has been produced during this period of excess production and allow that to incentivize people to go back in the market and start to get this market going again. That is what we need to do. There are other ideas. The expansion of the FHA is an idea which--I don't quite understand why we haven't seen that bill come back to the Senate. It is in conference. It should be done soon. Increasing the lending limits on Freddie Mac and Fannie Mae is a dangerous step unless it is coupled with reforms necessary to make sure Freddie Mac and Fannie Mae have the underlying capital to support an expansion, but it is certainly something that should be considered. There are initiatives that could be focused much more in a targeted way and would actually do something to correct the problem and would, in the long and short run, from my viewpoint, have a much better effect on the economy. In addition, if we are going to try to stimulate the economy through classic Keynesian activity, I am not too excited about that, but we ought to put it on the productive side so we actually create a more efficient economy that is more productive and, therefore, capable of producing more jobs as we move into the future. Our problem may be that we don't have enough jobs as we move into the future. The way you get around that is to create an attitude in the marketplace so people are willing to go out and invest, take risks, be entrepreneurs, and create more jobs. There are ways to do that other than just giving people $600 to go out and spend arbitrarily, which they may spend on a product that is not even manufactured in the United States, in which case there has been no stimulus to the economy. If somebody buys a TV made in China with their $600, that has no stimulus effect on our economy because the dollars end up in China. It is important to understand that all this money comes from our children. We don't have a surplus to fund this stimulus package. Therefore, when we do stimulate, we need to do it in a much more focused way which is going to strengthen our economy and is going to address the underlying problem of the credit lockup which has been fed by the housing bubble. I hope we will take that up first. But, obviously, we will not take that approach. There is a significant majority that is going to support a stimulus package which is Keynesian based. So be it. But if we are going to do it, let's do it in the way which causes the least harm. The way to do that is to get it out the door quickly, have it be the package which essentially left the House, and not have the Senate throw in another $44 billion which we have to borrow from our children on top. Those are my concerns. I appreciate the courtesy of the Chair. I yield the floor.

Mr. GREGG

Mr. GREGG. Madam President, reserving the right to object, I note that I strongly supported LIHEAP and have supported it on numerous occasions and continue to support its expansion. I happen to believe it should be paid for. I don't think we should pass on to our children and our grandchildren the cost of the oil bills today. We should expand LIHEAP, but as part of expanding LIHEAP, we should offset that with an offsetting savings somewhere else. So at this time I have to object.

Mr. GREGG. Madam President, if the Senator will yield, I also am on my best behavior today, I can assure the majority leader. I have other unanimous consent requests I wish to make, but I am reserving my energy.

Mr. GREGG. Madam President, reserving the right to object, I simply note that when unemployment exceeds a certain level, there is reason to extend it, but this Nation's unemployment now is under 5 percent which is deemed to be full employment. There is no trigger attached to this proposal. In a State such as New Hampshire where unemployment is at 3.6 percent, an extension might have an opposite effect. Rather than stimulating the economy, it might undermine the ability to create more productivity. So I object.

Mr. GREGG. Madam President, reserving the right to object, I am very sympathetic to the work of the Senator from Washington. She does exceptional work. As a practical matter, I am always interested in areas where we can develop energy and alternative energy, but that is not part of a stimulus package. These tax credits would essentially not kick in for literally years, in many instances, and are not going to do a great deal of stimulating and should not be added to the package. So on behalf of the leadership, I object.

Mr. GREGG. Madam President, reserving the right to object, I think this proposal makes a great deal of sense, but in the name of the Speaker of the House, I would have to object. So I object.

Mr. GREGG. Again, this package was worked out between the House Republican leadership, the House Democratic leadership, and the administration, and basically the purpose here is to move the package quickly. That was not part of the package. Therefore, on behalf of the leadership, I would have to object.

Mr. GREGG

Mr. GREGG. I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GREGG. Mr. President, what is the regular order?

Mr. GREGG. Mr. President, I rise to speak about the discussion of how we will handle this economic slowdown. First, it is important to put this economic slowdown in some context. It is very difficult to know how significant it is. In fact, we had some economists testifying today before the Budget Committee, where I am ranking member, who said they weren't sure we were going into recession, are people who are highly respected, but they needed further numbers. We have economists who believe we are in a recession who are highly respected. Martin Feldstein from Harvard expressed that view today before the Budget Committee. Professor Blinder of Princeton, who was a Federal Reserve Board member at one time, expressed the view that he didn't know. Some things are fairly clear. The first is, there is tremendous stress on the economy because of the subprime meltdown in the housing market. In fact, the numbers are fairly staggering. The housing situation is probably as severe as it has been in recent history. That has led to a contraction of credit generally, which is what happens, regrettably, in such a situation where you have a very significant sector of the economy which has been subject to a bubble situation where there was an expansion which was not supported by the underlying value and which cannot, in this case, be supported by the repayment structure that is in place or the value of the collateral. The bubble bursts, and people find themselves unable to repay their loans, and the value of their collateral isn't high enough to offset the value of the underlying loan. As a result, that credit is contracted. That leads to other credit being contracted because, as those loans, unfortunately, dry up and go bad or can't be repaid, you find that the banking community generally has to continue to maintain its capital and its liquidity position. So it starts to contract its lending to people who can repay and who are good risks because the banking community doesn't have the resources to continue to expand because it is being contracted by the reduction in the value of the loan portfolio tied to housing. This feeds on itself. Regrettably, I have been through this three times in my professional career. The worst was when I was Governor of New Hampshire. At that point, in the late 1980s, early 1990s, we had a national crisis relating to housing which translated into a crisis in banking. In fact, of the seven major banks in New Hampshire, all were statistically insolvent. Five of them failed. Two of them survived because they were owned by outside banks that had the resources and capital to prop them up. But it was a regional event, and it was due to a lot of factors, primarily explosive lending in the 1980s which was not supported by, again, underlying collateral. It fed on itself so that people who had outstanding loans, who could actually repay, found they couldn't roll the loans over because the banks were not able to give them additional funds because they didn't have it. This time it appears to be a little different in that so much of this housing paper has been sold and resold and is spread liberally across the world. You could have gotten a mortgage in New Hampshire and have somebody in Germany own it now, or some part of it, as a result of this resale. So the risk has been spread outside the American banking system. That has two effects: One, it does spread the risk; second, the problem is that as these subprime loans come up, people who actually have good jobs and can pay a reasonable rate, as these ARMs are coming up at such high rates that they aren't reasonable, those folks are finding it difficult to renegotiate because there is nobody at the teller window, so to speak. They are dealing with servicing agencies which have no relationship either to the people who hold the debt. It is very hard to renegotiate these loans effectively. This is all compounding on itself and looks as if it is going to lead to a fairly significant slowdown or, as has been said by a number of people, potentially a recession. In response, the Federal Reserve has cut rates, once by 75 basis points and again today by 50 basis points. Those are significant cuts and should have a positive impact on the formation of liquidity in the market and also, obviously, on taking the pressure off the refinancing effort in the area of lending. But it takes 6 to 9 months before that works its way through the system. The question is, what do we do to stimulate the economy now, today, in the next 6 to 9 months when we have this window of slowdown which is very difficult to deal with because of the housing market crisis compounding into the general lending area crisis and the fact that some of our major banking institutions are under very significant stress. My view is--and I guess it is a minority view--that you focus the effort on that which is going to give you not only immediate stimulus but, hopefully, in the long term a stronger economy; in the long term an economy that is more efficient and more effective in creating jobs and making the American economy stronger. So you value every one of the options that are on the table by the basis of does it give you stimulus in the short run but, also, does it give you something in the long run which is going to produce a stronger economy. The proposals on the table are mostly divided into two categories: one to give people money to spend and, two, to give businesses incentives to go out and buy equipment and invest. The money-to-spend issue becomes fairly problematic in a world economy. You give somebody $500 or $600 to spend and if they actually spend it and they don't spend it on goods produced in the United States, it has virtually no impact on stimulating our economy. If you purchase a television from China or an iPod--I don't know where they are made, but let's say they are made in Vietnam--with the $500 that you receive as a tax stimulus through a stimulus package as a tax rebate, that has nothing to do with creating jobs in the United States. It may create jobs in China. It may create jobs in Vietnam. But it does not create jobs here, except at the margin, for the retail effort in the United States. Also, if you give money to high-income individuals as a tax rebate-- and basically, historically, those dollars do not get spent at all; they do not stimulate the economy in that sense at all--they get saved because high-income individuals have the discretionary income to spend anyway. So if they are going to get a windfall of $500, $600, $1,000, it is likely they are not going to spend that in addition to the other money they already have available to them, and they are probably going to save it. That does nothing to stimulate the economy. So as we look at this tax rebate effort, which I understand is being done for the purposes of stimulating the economy--the classic Keynesian effort of creating demand in the economy to grow the economy in a slowdown period--I think you have to look at what are the practical implications, what are the real implications of putting this money on the table for people. To begin with, it makes no sense at all to give it to high-income individuals. Even though I am a Republican--people may think that is counterintuitive--the simple fact is, it does not make any sense. So there should be a cap. I do not understand why the Finance Committee draft--what they are proposing--has no cap. But, secondly, unless this money can get out fairly quickly, and unless you can be fairly confident that it is going to go to purchases which are going to assist the American economy, then probably all you are doing by sending this money out the door in the form of a tax rebate is creating an income transfer which will obviously benefit lower-income people from a social standpoint but probably will not have much of an impact on the economic policies of stimulus. It does not look like we can get this money out the door very fast. The fastest track I have heard, which was testified to by the CBO Director, is the IRS could get these checks out maybe by the middle of June. But he also said the practical implications are that those dollars will not have an impact on the economy until the end of the third quarter or beginning of the fourth quarter, or, as he said, the Christmas season of this year. By that time, the Fed rate cuts will probably also have kicked in and started having an impact, so you may not be getting what you want, which is action in these first 6 months of this year as versus action at the end of this year to stimulate the economy. In fact, you may have two stimulative events coming in on top of each other, which might actually even be inflationary. It would seem to me that rather than taking this approach, it would make a lot more sense to put money where the problem is. Now, this has been resisted by the administration, and it is not being talked about a lot around here by the folks who are putting together the package. But it would seem to me that middle-income people who have these loans that are rolling over--these subprime loans--are the people who need the ability to refinance those loans so they do not get foreclosed on over the next 6 months. There are a number of ways we could do that. There are a number of ways we could actually put money into that area as a Federal Government which would benefit that group of people who appear to be at the essence of the problem--more than just sending the money out to everybody and hoping their demand will raise the economy in general. A tax credit to those folks, which is refundable, based off their interest payment on the refunded loan, is one option to get them through this period. A restructuring mechanism, which allows them to restructure and get assistance through restructuring, by significantly expanding FHA, by raising and putting that into the package, which is not in the package--it is being talked about in a separate vehicle, but it is not in the package--would help. Giving the State housing authorities more capacity to put money into the market would help. It would help. That is being talked about, which is good. Allowing Freddie Mac and Fannie Mae to raise their cap--but to do it in the context of also underlying reforms so we do not end up, a year or two from now, where Freddie Mac and Fannie Mae are going under-- would help. The first part is being talked about, raising the cap, but not the second part, the reform mechanism. So there are some things we can do that I think would get to the problem more appropriately--and the issue of the economic slowdown would mute that, hopefully--and would also in the long run create a much stronger economy. I have introduced today--I did not introduce it--but Senator Isakson introduced it today; and I am his primary cosponsor--a bill to do this in the area of tax credits. But it is not going to be included in the package, which is unfortunate. The second part of the package which is being talked about is investment incentives for businesses, small businesses. They should be directed at small businesses, by the way, because small businesses create the jobs in this country. These involve expensing and bonus depreciation, as it is referred to, and net loss operating carryback. So if you have a net loss this year because we have a slowdown, you can pick it up in years you have had a profit--apply it to years you have had a profit--reducing your tax burden. These are all good ideas, in my opinion, very good ideas, and will strengthen the economy. In the long run, it will make us more efficient and create more jobs. And jobs are the bottom line. So I have no problem with that part of the package. But a third part of the package being talked about is extending unemployment insurance. If you talk to most of your economists around here who present before the Congress--and many of them do, obviously. In the Budget Committee we have an almost unending stream of economists before us, and they are always very informative. If they come out of what I call the Galbraith school of economics, which is sort of the Harvard school of economics, which is a stepchild of the Keynesian school of economics of the 1930s, they will basically say if you want to get dollars into the economy quickly, you put it into unemployment insurance and food stamps, because that gives you an immediate boost in the economy to people who will spend it because they need it. That is probably a legitimate argument, especially on food stamps. But on unemployment insurance, it is not a legitimate argument if you have full employment. In fact, it is the absolute opposite of what happens when you have full employment. To extend the unemployment insurance benefits by a year, which is what is being proposed, in the areas that have essentially full employment means you give a disincentive to people to go out and find a job in an atmosphere where jobs exist. By definition, if you have a full-employment economy, you have jobs going unfilled. So, for example, in my State of New Hampshire, where we have an unemployment rate which is essentially 3.7, 3.8 percent for the State--and the highest level of unemployment we have for any county in the State is 4.4 percent--we have what is known as full employment. Now, there are pockets of problems. We have one specific town in the State which was a single-factory town and the factory, regretably, has recently closed, so that specific group of individuals has a very serious issue, and there is a way to address that in a targeted way. But to extend unemployment insurance for our entire State, when we are at actually less than full employment--we are actually below full employment--in other words, we have a lot of jobs going unfilled when you are at 3.7 percent employment--full employment being 5 percent in our economy, in the 5-percent range--you essentially create an incentive for people to stay on unemployment much longer than is necessary for them to find a job. We know statistically if you have an economy where jobs are available, an economy where unemployment is under 5.5 percent, that means you have jobs available and that most people find a job in the last 2 weeks of their unemployment. That is human nature: They stay on unemployment until almost the end and then find a job. If you extend it another year, those folks who could be productive, procuring a job, creating economic activity by having a job, will stay on unemployment, even though there may be a job out there they could take because you have jobs available. So it makes no logic to extend unemployment insurance in areas where you have full employment. And full employment in our economy is defined as basically under 5.5 percent. The Nation is at 5 percent right now. We have never extended unemployment insurance in this country when we have had an employment rate under 5.7 percent--never. So to do this at this time is counterintuitive to how you make the economy more efficient and, as a result, stimulate the economy. One of the economists who testified before the Budget Committee today said if this would work, you should always extend unemployment insurance and keep everybody on unemployment forever because, basically, if you have a full-employment economy, and you are going to get your economy more stimulated by having more people stay on unemployment, then leave everybody on unemployment. Obviously, that does not make any sense. He was saying that tongue in cheek. It is fairly clear, if you have an economy where you have jobs that are not being filled, you do not arbitrarily extend unemployment insurance for a uniquely long period because those jobs will never be filled because nobody will ever leave unemployment insurance. So you undermine the efficiency of the economy. It is sort of the old French approach to do it that way--not the new French approach but the old French approach. Yes, there may be regions of our country that have an unemployment rate where clearly there are no jobs available, and those regions need relief. I would be more than happy to see an unemployment insurance extension which was tied to a trigger which said: All right, historically, we have viewed under 5.5 percent as full employment; over 5.5 percent we are getting into a serious issue; so let's take the 5.7 percent rate--which is where we have historically never gone below to extend unemployment insurance--but let's take the 5.7 percent rate and put a trigger into the system, so if a State or even a region within a State--that is a definable region that is significant--has an unemployment rate of over 5.7 percent, they get the extended unemployment benefits. That makes sense. But a general national extension of unemployment insurance for the sake of stimulating the economy is going to be counterproductive if you have a full-employment economy in the regions. States such as Michigan may need the extension. States such as New Hampshire, I am sure, on an individual, anecdotal relations basis, may need it, but as a practical matter it would be counterproductive to our economy to do it because we are at 3.7 percent unemployment. So that proposal, which, by the way, the House looked at and said it did not make sense in the context of this economic situation, should not be inserted by the Senate. I think the best approach we can take--because I, obviously, have reservations about the stimulus package that came out of the House on the demand side. And I have reservations about some of the initiatives within that package. I would like to see that package, obviously, include more of a target on the problem which is to address the issue of home ownership and the housing stocks, which are so overpriced now, and, unfortunately, empty--making sure we figure out some way to move people toward absorbing that housing side. I would like to see more of that, but that is not going to happen. It is not going to happen in the context of the period we have to act. There is an agreement that exists between the President of the United States and the Speaker of the House of Representatives and the Republican leader of the House of Representatives. It is agreement that involves tradeoffs. But the basic underlying purpose of the agreement was and is to stimulate the economy. It may or may not do that, but the one positive effect I will stipulate it will have is it creates at least a sense that the Congress and the Government and the President and the Speaker of the House and the Democrats and the Republicans can cooperate to try to address what is clearly a slowing of our economy through some fiscal policy action. Even though it is $150 billion, which is a lot of money--and all that money is going to have to be borrowed from our children, unfortunately, and over 10 years it totals up to being about a $200 billion event because of interest compounding on it--even though that is a high price tag to pay for what you might call a confidence builder, it is still something you can argue should be done if you have that type of an agreement. For the Senate to sort of step in and say: Well, we want to tinker with it, and we want to change it there, well, it is nothing more than an execution of Senate prerogative, but it is not going to help the policy because none of the proposals coming out of the Senate committee are all that good on the side of policy--especially the unemployment insurance proposal and the lifting of the caps on the benefits proposal--what it is going to do is undermine the confidence of the American people that we as a government can act. So the high water mark appears to me to have been reached on this issue when the President and the Speaker of the House reached agreement, working with the Republican leader in the House. I think we as a Senate ought to take sort of a mature attitude and say: Well, progress was made. We are confronting a fairly serious situation. Let's not throw out our proposal simply for the sake of putting a proposal on the table. Let's recognize that something needs to be done quickly, and that this is the best we are going to get. Hopefully, that will be the resolution of this process as we move toward concluding, and one hopes this can be done within the next week. Mr. President, I yield the floor.

Mr. GREGG

Mr. GREGG. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GREGG

Mr. GREGG. Mr. President, I wished to rise to talk a little bit about the proposed stimulus package which is working its way through the Congress and has been agreed to between the President and the Speaker of the House. First, I congratulate the Speaker, the Republican leader of the House, and the President, especially Secretary Paulson, for sitting down and trying to reach a bipartisan understanding as to how we move forward in what is obviously a very tentative economic time. We know in this Nation we are confronting some very serious issues, most of them brought on by a bubble in the credit markets relative to lending for housing construction. As happens with a classic bubble--and this is a classic bubble--when it bursts, when, in other words, the underlying security and the people responsible for paying back the debt cannot do that because money has been lent to people who are not in a position to repay their loans and the security under that debt has not been able to be maintained to reinstate the value of that debt, when that happens, that not only affects the loans, the immediate loans that are impacted, but it leads to a further contraction in the marketplace. I have been through this a number of times in my experience, and it always seems to happen the same way with loans which turned out to be not well made being called, and they are then followed by the people who lent the money and the capital markets having to contract in order to basically build back up their capital positions. So people who actually have good loans find that they cannot get credit extended further and it feeds on itself and you start to see a slowdown. That appears to be the type of issue which we may be confronting as a Nation, where we know we have a huge subprime problem. It is very big. We know that may lead to a further contraction. In fact, we are already seeing that. We know also, ironically, in this market, what happened was a lot of those loans were syndicated out and then they were put in synthetic instruments and actually multiplied their impact and we ended up with an inverted pyramid. We have one little loan with inadequate capital which can't be paid back, and then you have a pyramid with the way that loan is chopped up and can't be sold. So it is exaggerated in size. So this is a big issue for us as a nation. The question is how to address it. Well, first off, I congratulate the Fed because the Fed has stepped up. I wish they had stepped up earlier, but they have stepped up and reduced rates and, as a result, that should create more liquidity in the market. The second is fiscal policy, and that is where the President's proposal, working with the Speaker of the House and the Republican leader, has come forward. It is called a stimulus package, the purpose of which, in an economic slowdown, is to pursue classic economic policy, which is to stimulate demand during a time of economic slowdown in order to stimulate the economy, generally. That is a ``black letter'' rule of how you try to abate the economic slowdown. The question is: Will it work? Will what has been put on the table make sense and will it work? Remember the last time we did this--with what is known as the tax rebate, which are not tax rebates because most of the people getting these don't pay taxes, it is an income transfer--we were coming off a period of surplus, the only time of surplus in the last 30 years we have had as a Federal government. We had 3 years of surplus, and we felt we had cash in the till to rebate or to pay out. Now we don't have the surplus. In fact, we have a deficit. It is not a huge deficit but still a deficit. It has been coming down over the last few years, which is the good news. But it does mean any stimulus package we pursue is going to have a debt effect. In other words, we are going to have to borrow the money in order to pay it out to people through this tax rebate or basic payment process. So who ends up paying it? Well, our children are going to pay the cost of this stimulus package, and it is going to be because it is a debt- compounding event. In other words, if the package represented today is to be $150 billion in cost over its lifetime, which is supposedly confined to this year, that debt that you have to borrow to pay the $150 billion will have interest earned on it. So after 10 years, that becomes $200 billion in debt because it won't be paid back over 10 years and our children and our children's children will have to pay the burden of that. So basically we are saying to our children, some of whom haven't even started earning money yet, we are going to give you a $200 billion bill for this stimulus package we are going to put in place over the next 6 months. So if we are going to do something such as that, which is fairly significant, we better make sure the stimulus package works; that it actually stimulates the economy; that it actually does retard the slowing of forces slowing down the economy and, hopefully, reenergize it. The proposals which we have on the table and came from the House break into two basic approaches: First is a pure consumption approach, where you basically give people of middle and low incomes in this country--I think it is $80,000 of individual or $175,000 of joint income--a tax rebate of $600 to $1,200. That is a payment. It is structured in a way that some people who don't pay taxes will actually get the payment. The theory is they will take that money and they will go and spend the money and, as a result, the economy will see a boost. There are two problems with this theory we need to address, however. First, under the present structure of our Internal Revenue Service, the CBO, which is a fair arbiter--they do not have prejudice in this debate--the CBO has testified--the Congressional Budget Office--that the IRS--and they have consulted with the IRS on this--the Internal Revenue Service cannot get these checks out before midsummer, probably, or late June at the earliest. CBO has further testified that the actual economic impact of people spending this money, these rebates, these payments, will probably not occur until the late third quarter, early fourth quarter of this year. Interestingly enough, Dr. Orsak, the head of CBO, has also testified-- and again this is a fair arbiter--that the slow period, the period when you need stimulus, is the next two quarters or the next two-and-a-half quarters. And he has said, quite simply, that because of the limitations within the IRS, this rebate probably would not help those quarters. So that should be a concern to us. The money may not end up coming into people's hands--taxpayers or nontaxpayers--to be able to be used in the timeframe when it is going to be most needed. In fact, toward the third quarter of this year and into the fourth quarter of this year, it is again the testimony of the CBO Director that the cuts the Fed has put in place, the \3/4\-percent prime cut, is going to cause the economy to react to that cut in a positive way, hopefully, and that will occur in the third and fourth quarter mostly. So you could actually end up with two events on top of each other acting as a stimulus at the same time when we no longer need a stimulus. So we need to be concerned about that. That is of concern. The second problem which this proposal has--of taking a large amount of cash and putting it on the table for people--is that, again, it may not stimulate our economy. In other words, if somebody goes out with their $600 rebate and they buy a television made in China or they buy an iPod made in Vietnam--I don't know if that is where iPods are made-- or if they buy a washing machine made somewhere else--if the product isn't actually physically produced here--then, basically, you are not stimulating our economy, you are stimulating the economy where the product is produced. Since the assumption is most of these dollars will be spent on consumable items or will be used to pay down credit cards, which has no stimulus effect at all--theoretically, if it is spent on consumable items and, for example, is apparel or consumable goods which are manufactured overseas, then the stimulative effect for the United States is extremely limited, only at the margin. Again, this was testified to by the Director of CBO. So these are two concerns with this idea of infusing money into the package. The second part of the package says: Well, we are going to do an inventory of basically a business incentive event. We are going to allow people to expense capital purchases, versus depreciate, over a number of years. We are going to allow people bonus depreciation. Both of those are probably good tax policies from the standpoint of strengthening our economy over the long run because they make the economy more efficient. It means some small businessperson will be able to go out and buy a machine which makes their business more efficient, and as a result of being more efficient, it makes the American economy stronger. So yes, that is good policy, but it will have very little stimulus effect on the underlying economy. So the concern is the House package may not have the stimulus it claims to have and may end up being a debt event which our children will have to repay. What concerns me even more, though, is what is being talked about in the Senate. We are talking about taking the House package and significantly bidding it up. The House package bothers me to begin with, but to bid it up in the Senate is a mistake. We are talking about expanding the rebate to everybody. Now, that will have absolutely no stimulus effect, in my opinion. To say that high-income individuals or people with joint incomes over $100,000 should get a stimulus, should get a $500 payment--first off, they probably don't need it; and, secondly, they do not need it if we are going to borrow from their children; and, thirdly, they are probably going to save it, which is great in the long run but has no immediate stimulus effect. Secondly, there is a proposal to include an extension of unemployment compensation benefits--unemployment insurance. Well, that would make sense if we were in a recessionary event, but right now the national unemployment rate is about 5.1, 5.2 percent, which is deemed full employment. Anything between 5 and 5.5 percent is historically a full- employment situation. There are pockets of communities around this country which have higher unemployment, no question about it. But to put out a nationwide extension of unemployment insurance for an additional year, which is what is being talked about, or for an additional 6 months, which is also being talked about, that creates an incentive, in a full- employment economy, to not cooperate, to not go out and find jobs. It has the opposite effect. It is intuitively obvious that has a perverse impact on what you want in the area of human reaction, which is to go and find a job, if the jobs are available. Jobs in a 5-percent economy are available. So any unemployment extension should be tied to a trigger, and that trigger should be set at what has been the historical levels of what is deemed to be recessionary, or a significant slowdown, which is around 6 or 7 percent, so you don't extend unemployment insurance unless you hit that level of unemployment. You can also make it regional. If one region has 6 percent unemployment, then you give them the extended unemployment insurance. If one region doesn't have 6 percent unemployment, you don't give them the extended insurance. We are also talking about, on our side of the aisle, adding food stamps, adding FMAP, adding LIHEAP, adding infrastructure, and adding State and local tax deductibility. All this has been thrown out by other Members on our side of the aisle. State and local aid. It is making it a grab bag of everybody's ideas of whom they want to take care of and whom they want to attract in terms of political support or what is important to say to supporters or a group of people they think are important as their constituencies. And that makes no sense at all. First, it is going to slow this package dramatically if you do that. Second, you are not going to improve stimulus activities around here by doing that. So I would hope we would not proceed that way. I have a lot of problems with the initial package. I do congratulate the White House. I do congratulate Speaker Pelosi and Congressman Boehner for putting together a package and for recognizing the need. I have big reservations as to whether it is the most useful package from the standpoint of stimulus, but it appears, in light of what the Senate is now talking about, to be the high watermark. Maybe we should take the House package and pass it and acknowledge the fact that we have done something. The biggest impact of this event is very obvious; it is psychological. It is a big price to pay for a psychological event, $150 billion, which adds up to $200 billion over 10 years to our children. That is the big impact, that the American people and the world can see the Congress and the President can work together to address what we see as an economic slowdown, even though what we are proposing probably will not have the effects we hope it will have in the short term. But we should not aggravate this problem by significantly increasing the lack of focus of the package by throwing in all these other ideas, by expanding the rebate to high-income individuals, by extending unemployment insurance in areas where there is basically full employment. Literally, the House package becomes the high watermark. I thought I would never say that, but that is the way it looks right now from the Senate activity. So I wished to make those points because I think we may have to have an open discussion of what goes on around here, but we also have to have expedited activity. I do not want to slow it down. I do want to make the points that if we start throwing all this baggage under the bill, we will probably set the train in the wrong direction. I appreciate the courtesy of the Chair and I yield the floor.

Mr. GREGG

Mr. GREGG. Mr. President, I ask unanimous consent that Senator Stevens be recognized for up to 10 minutes following my remarks.

Mr. GREGG. Mr. President, I have no knowledge of what the request is other than a request for 10 minutes of remarks.

Mr. GREGG. Mr. President, I wish to speak on a subject which is not related to this bill. I congratulate the managers for bringing this bill forward. Stimulus Package Mr. President, the subject I rise to speak about is one that is fairly topical to today's events, obviously, with what is happening in the international markets and in the stock market and with the Federal Reserve System, and that is the issue of how we as a Congress should proceed relative to what has been called a stimulus or growth proposal. I want to put down what I would call a red flag of reason, let's call it, as we move forward on this stimulus package. Let's first understand what the problem is we are confronting. The economy has a serious overextension of credit. This overextension of credit occurred because, as often occurs, there was a period of exuberance in the credit markets. Now, I have had the good fortune to be involved in Government and in the private sector for a number of years, and I have seen this type of situation arise at least two major times during my career, once when I was Governor of New Hampshire. What happens is people who make loans suddenly find they have a lot of cash available to them to make loans, and they go out and start making loans based on speculation that it can be repaid rather than on the capacity of the individual they are lending the money to to repay it or based on speculation that the collateral for that loan will always maintain its value as originally assessed when, in fact, that collateral may be overstated. This usually comes at the end of what is known as a business cycle, when basically you have a lot of people out there who probably have not been through a downturn before in their lives who basically put out credit at a rate that is irrationally exuberant--to use the terms of Mr. Greenspan on another subject of the late 1990s bubble--and as a result, credit is put out that, in this instance, was put out at a rate and to individuals who basically did not have the capacity to repay it under the terms of the credit, and with collateral that did not support it. This exuberant expenditure of credit or promotion of credit was compounded by the fact that we had an inverted pyramid created. That item of credit, that loan that was made, which was made on collateral which didn't support it and which was made to an individual who probably didn't have the ability to repay it under the terms that it was made on, that item was then sold and it was sold again, and then it was turned into some sort of synthetic instrument which was multiplied and created more sales of the item. So you have basically an inverted pyramid, where that initial loan, which had problems in and of itself on the repayment side and on the collateral side, was compounded by a reselling of the loan over and over again in a variety of different markets and through a number of different instruments, which essentially exaggerated the implications that that loan should not be repaid. So that is what has happened. The loans can't be repaid, in many instances, or the collateral isn't there, in many instances, so these loans start to get called and they start to be foreclosed on. Because they can't be repaid, the lenders find themselves in a situation where they have to obtain liquidity from somewhere else. So they start to contract their lending to basically people who can repay because they must maintain a strong balance sheet, they must maintain their capital reserve, and as a result it feeds on itself and you have a liquidity crisis. That is a classic business cycle. It is a classic end to a business cycle, and that is what we are in today. It is unfortunate and it causes great personal harm and trauma and it obviously disrupts the economy and people and it affects people's lives. People are damaged by this. Its roots basically go to the fact that there were people lending money to people who should not have been lent money under the terms they were lent it without the collateral they needed for support. So how do we react to that? How do we keep that from snowballing into a massive slowdown in the economy or a possible potential recession? Well, the discussion is to stimulate the economy through some sort of fiscal policy and the Federal Government taking action--what is known as fiscal policy. There is also, of course, the monetary side. Today the Federal Reserve cut the rates by 75 basis points, and as a result, the market reacted, although it was hugely down when they started. I haven't looked at it recently. I don't know that it reacted in a positive way to that cut in rates. On the fiscal side, there is a lot of discussion about stimulating the economy. I guess my red flag of reason I am putting out here is, if we are going to stimulate the economy through fiscal policy, let's at least do it correctly. Let's not do it in a way that damages the economy or the future or that basically gets you a short-term political headline but doesn't get you the impact you need, which is to help people through a difficult economic period. The proposals which are out there, most of which I have seen, have fallen into two categories. One is stimulate the economy by giving people money to spend and the other is to stimulate the economy through energizing small business and large business to invest in economic activity. The problem we have with a stimulative event, which is basically giving people $100, $200, $300, $400, whether you give it to them directly or whether you give it to them through the tax laws, is that money will be spent, but does it stimulate our economy? I am not so sure. So much of the product we buy in America today, that we consume in America today is produced outside the United States: Maybe it stimulates the Chinese economy, but I am not so sure it stimulates our economy. What may be raising the Chinese economy may raise the national economy and that helps us out, but as a practical matter, I am not sure it gets a big bang for the bucks expended, and, most importantly, what happens when you take that sort of action is you borrow this money. This money doesn't appear from nowhere that you are going to put out into the marketplace and say: Here, American citizen, we are going to return you X dollars through a direct payment--probably an inverted tax payment of some sort, for people of low income who aren't basically paying taxes are going to get some sort of payment; middle-income people will get a lesser payment or some marginal payment. That money has to be borrowed. That money gets borrowed from our children. The practical effect of borrowing that money, if it is a $150 billion one-time event, is it compounds because there is interest on top of that and it grows into a lot more money. Then our children and our children's children end up having to pay it back. So do you get the value? Is there a value there that is large enough to justify putting this debt on our children's backs for this type of stimulus event? I think we have to look at that very seriously. There are proposals out there that we should essentially waive the Social Security payment, for example; that we should say we are not going to require people to make their Social Security withholding payment for 1 month or 2 months or whatever the number would be that we would settle on. That, as a policy matter, has very serious implications for our children and our children's children. Essentially, the Social Security system is supposed to be an insurance system, where you as a working American pay into the system so when you retire, you have paid into the system money which is then returned to you through Social Security payments for your retirement. It is and historically has been viewed as an insurance policy approach, with the Federal Government managing the insurance. Yes, nobody is going to argue the fact that the Social Security system in the outyears does not have the resources to repay the liabilities that are on the books. That is a big issue for us and it is a function of the retirement of the baby boom generation. But you only radically, quite honestly, aggravate that problem by borrowing from the Social Security Administration to essentially fund the short-term fix of a stimulus package. First, you have created a brandnew event, which has never happened in my knowledge, of taking Social Security dollars and moving them over for the purposes of an expenditure which is a day-to-day operation of Government expenditure. You are basically formally saying the Social Security dollars which are paid in, in taxes, can be used for something other than the purposes of creating obligations which will be paid back in the form of retirement payments. You are saying Social Security dollars will go directly--without any obligation being shown on the Social Security balance sheet--will be taken off the Social Security balance sheet and put directly into the day-to-day operation of Government for the purposes of paying people a stimulus event of $500 or $600. The implications of that are huge, from a public policy standpoint. We are basically totally readjusting our approach as a nation toward Social Security. You are basically saying Social Security is a dollar in, dollar out purpose, with absolutely no fund and that there is no offsetting balance being set up for Social Security payments, which is used later to pay down the Social Security responsibility. That is a terrible precedent. It may be a theoretical debate, but it is one heck of a big precedent to create that sort of new paradigm relative to Social Security. Again, what do you get for it? You get a momentary stimulus which may or may not help our economy, because as we all know, most of that consumer event is going to occur with the purchase of products produced outside the country, to a large degree, and you don't get any long-term action which is essentially going to improve the financial viability of the Social Security system. In fact, you significantly aggravate it because, again, you compound that event, and compounding interest has an amazing effect in the area of what will end up as the total cost of that one-time event. Ask the notch babies about that. So this is a policy choice which I think would be truly destructive to the historical role of Social Security in our Government and would be equally probably nonproductive as a stimulus to our economy and probably do more damage than good. There is also the proposal that we extend unemployment insurance for another 2 weeks, 3 weeks, 4 weeks. Well, that has some arguably positive benefits if you are into a recession, but we are not in a recession. We have essentially what has historically been deemed full employment in this country, which is we are at about 5 percent of unemployment. When you extend unemployment and you have full employment, you are basically creating an atmosphere where people who are on unemployment have no incentive to go out and find a job, even though there may be a job available because you are at pretty much a full economy. So are you being destructive to the system or are you actually reducing productivity to the system when you make that choice? I would say that is a very debatable issue and one which needs to be looked at before we take this action. I understand that politically it is a great press release: We are going to extend unemployment for 2 weeks for people who are out of work. Yes, that is a great press release, but if you have earned literally at full employment, which is where we appear to be right now, or pretty close to it, then to extend unemployment at this time could be counterproductive, significantly counterproductive to keeping the economy going, because it would not allow people to go out and find jobs for whom jobs may be available. Now, if we do move into recession, which is----

Mr. GREGG. I ask unanimous consent for an additional 5 minutes.

Mr. GREGG. I appreciate that, and I will try to make this brief and wrap up in less than 5 minutes.

Mr. GREGG. Mr. President, I ask unanimous consent to speak briefly at this point. I ask unanimous consent that at the completion of the remarks of the Senator from Alaska I be recognized for up to 10 minutes.

Mr. GREGG. So we have that issue, which is fairly significant. The real goal of a stimulus package should be to create an atmosphere where we actually improve the underlying pillars of the economy, and that means we improve productivity, we improve the incentive of people to be productive and go out and create jobs, and that can be done if we need to do this, and that is very much an issue--that can be done through initiatives which are productive, or which are on the productive side of the ledger rather than just on the spending side of the ledger. I know, historically, people have said: Well, inject money into the economy and that will make it move. That was before we got to an international economy, where essentially injecting money into the economy so consumers can spend money basically moves the Chinese economy, not necessarily ours. What makes much more sense is if we are going to inject money into this economy through some sort of Federal initiative, we should do it in a way where we create economic benefit to our economy, by making it more productive and thus creating more jobs and creating more incentive for entrepreneurs. There are a lot of ways to do that. As we proceed down this road to discuss this issue of stimulus, I will continue to discuss that point and get specific on ways we could do that. So I wished to raise this sort of red flag of reason before we step on to this slippery slope of a stimulus package which could easily end up being primarily a spending package, for the purposes of addressing whatever anybody happens to deem to be a good political spending issue, that before we step on that slope, we take a hard look at what we will end up with in the way of producing benefit for people today versus producing debt that our children will have to repay and maybe undermining our economy generally for the long term. I yield the floor at this time.