Grassley: Stimulus Package Needs to be More Targeted

Floor Statement of Senator Chuck Grassley:
Opening Floor Debate on Stimulus Bill
Delivered Tuesday, February 3, 2009

The matter before this body is the Majority’s stimulus bill. It merges the products of last
week’s markups in the Finance Committee and the Appropriations Committee.

Twenty three Senators were involved in the Finance Committee markup. In that group,
there were 13 Democrats and 10 Republicans. Thirty Senators were involved in the
Appropriations markup. In that group, were 17 Democrats and 13 Republicans. That
means over half of the Senate has been involved in either the Finance part or the
Appropriations part. For the first time, however, all Senators will have to consider this
very large and complicated piece of legislation.

I’m first going to discuss process and then focus on the substance. Because I’m the
senior Republican on the Finance Committee, I’m going to focus on the Finance
Committee’s portion. I, like 69 other Senators, am still studying the Appropriations part.
First off, I want to thank my friend from Montana, Chairman Baucus, for courteously and
professionally consulting members on this side.

We had one bipartisan members meeting where Chairman Baucus patiently heard us out.
In addition, Chairman Baucus apprised me of the negotiations between the Democratic
Leadership of both bodies and the Obama Administration. Those Democrats-only
negotiations were extensive. Folks on our side who read press reports could see that.

Further evidence of that deal-making is the relatively small differences between the basic
structure of the Ways and Means and Finance Committee packages. I want to
congratulate Chairman Baucus on those negotiations. The fruit of that labor is the
Finance Committee package.

One significant change followed a recommendation I made in early January. That was
the addition of the alternative minimum tax (“AMT”) patch for this year. Its addition
means over 24 million families need not worry about an average tax increase of at least
$2,000 per family for this year.

But let no one be mistaken that this bill is the result of bipartisan negotiations. While
Republicans were courteously consulted at the member and staff level, we were never at
the negotiating table. Speaker Pelosi best described the bottom line on the process. She
said: “Yes, we wrote the bill. Yes, we won the election.” That quote comes right out of
the front page of the Washington Post, dated Friday, January 23, 2009.

Indeed, there was a rumor floating around about an informal agreement among
Democratic members. The agreement appeared to be to vote against any Republican
amendment, no matter the merits. If you review the markup, you’ll find that nearly all
Republican amendments were defeated on a virtual party line vote. You’ll also find, for
the first time in recent Finance Committee tax legislative history, small issues or
modifications raised by dissenting members, with a couple of exceptions, were not
accommodated. So, let’s be clear. We knew, at the outset, the markup would ratify a deal
made between the Democratic Leadership of the House and the Senate. No Republican
ideas need apply. With the exception of the AMT patch amendment, that was the basic
outcome.

Since the largely partisan markup process finished up, we’ve been told by the President
and members of the Democratic Leadership that this bill is open to improvement by
amendment. I’m hopeful we’ll see follow-through on that.

That’s a few comments on the process. Now, I’ll turn to the substance.

But before I get into to the substance, I’d like to pull back and talk about the larger
picture for a couple minutes. Majority Leader Reid opened debate on this bill yesterday.
Yesterday was also Groundhog Day. My first chart is a depiction of Punxsutawney Phil,
that famous weather forecaster. Yesterday Phil saw his shadow. Groundhog Day is a
recurring event. Groundhog Day is also the title of a famous film starring Bill Murray.
Here’s a picture of Phil and Bill driving along.

In the movie Groundhog Day, Bill Murray finds himself continually repeating the same
routine.

Now, my friend, Chairman Baucus, last year, rightly pointed out the message from the
film. The message was that Bill, guided by Phil, eventually had to figure out what he was
doing wrong. Once Bill figured it out, he escaped the infinite loop. On this bill, we need
to learn from Bill and Phil’s adventure. We cannot and should not legislate in a hasty
manner and place ourselves in an infinite loop of repeating the same exercise. Democrats
and Republicans and the President need to get this right. We cannot casually deficitspend
and ask America’s taxpayers to clean up the fiscal mess with high taxes down the
road.

To me, there is a particularly compelling irony to the fact that we are debating another
stimulus bill at roughly the same Groundhog Day timeframe. One year ago, almost to the
exact day, the Senate spent a week debating the economic stimulus package. The target
time set for enacting legislation was similar to the one for this package. I’m talking about
the President’s Day recess. Let’s keep the Groundhog Day irony in mind as we move
forward. Let’s not repeat the same exercise, except this time, with much bigger dollars.

Let’s get it right.

Now, I’ll discuss the substance. First off, I want to make it clear that most on our side
agree with President Obama that a stimulus is necessary. The economy is flat on its
back. Too many Americans who want to find work can’t find jobs. A lot of Americans
are worried that their job will be the next to go. We get that on our side. Everyone here
knows we need to do everything we can to get the economy moving again. Where we
differ is the degree to which the engine ought to be government or the private sector,
especially America’s biggest job creator, our small business sector. These are honest,
well-intentioned philosophical differences, but they are there. On our side, we want the
new jobs to come from the private sector. On the other side, the preference is to grow
employment through an expansion of government.

Many on the other side and opinion makers who agree with them are invoking the
example of President Hoover. They seem to be doing it to portray anyone who questions
the trillion-dollar package as a reincarnation of Hoover economics. It’s an unfair
characterization. Again, let’s be clear, folks on our side recognize the need for action.

Also, though Iowans are rightly respectful of the only Iowan to be President, President
Hoover, we recognize history. And I’d instruct the other side on a couple lessons from
the Hoover era. One lesson: don’t obstruct free trade. The highest tariff levels in the
history of this country, the Smoot-Hawley tariffs, were enacted in the Hoover era. There
is little doubt those protectionist barriers made the Great Depression worse.

Another lesson from the Hoover era: don’t raise taxes. President Hoover signed into law
significant tax increases. Like the high tariffs, economic history tells us, these
burdensome taxes retarded the economy’s ability to recover.

On this side, we agree that the lessons from the Hoover era need to be learned. We
cannot be passive. Errors of omission on fiscal stimulus should be avoided. Likewise,
errors of commission on fiscal stimulus, like impeding free trade and raising taxes, also
should be avoided.

By the conclusion of this debate, those differences will be plain to the American People.

We will see the differences fleshed out in debate and amendments. That’s the way it
should be. As I indicated above, most on our side want to improve the bill. Our
amendments, large and small, will be offered as improvements to the bill. We hope the
other side is sincere in the desire to change the bill in a way that can garner a large
bipartisan majority.

Whether Republicans or Democrats have been in control, the test of proper stimulus boils
down to three words. All of them begin with the letter “t.” Stimulus proposals should be
timely, targeted, and temporary. I have a chart that depicts the test. If you apply the
three t’s test to much of the spending in this proposal you will find it fails the test. We’ll
get into that when we examine and debate the bill.

Some folks might ask what’s the problem if we overshoot and flunk the test.
The first problem is we’re running out of budget room.

The bill before us will, when interest costs are included, add almost $1.3 trillion to the
deficit.

All of this extra deficit increase would be proposed when the baseline deficit for this
fiscal year will hit $1.2 trillion. That amount exceeds all historical records.

As a percentage of our economy, that will mean 8.3 percent. That amount easily exceeds
the previous peak of 5.7% in 1983. It’s almost 50% percent above any comparable post
World War II levels.

The figures on federal debt held by the public are likewise staggering.

In the period of 2001-2007, debt held by the public increased by comparatively smaller
amounts, roughly less than 1% per year. This year’s change easily exceeds all of that.
So, we need to acknowledge the deficit situation we’re in. It is very serious. So,
whatever we do, we ought to not make the long-term fiscal situation worse than it is. The
other problem is that, if we prime the pump too much and the pumped out stimulus
doesn’t materialize until after the hoped-for recovery is upon us, then we might risk too
much stimulus. The result could be inflation.

Let’s bring a sharper focus on this point. The Congressional Budget Office (“CBO”) tells
us that less than half of the appropriations amounts will be spent out by the end of fiscal
2010. The Finance package does a bit better. Ironically, the tax policy stimulus, much
maligned by the hard-core of both Democratic Caucuses, helps the spend-out ratio greatly
in the Finance package.

The theory for erring on the side of overloading on the spending side is that we need to
direct dollars to the folks most likely to spend them. This is the reason we are told that
we need extra FMAP money, expanded entitlements, and other state aid.

It misses the point that the U.S. fiscal policy system already has an arsenal of antirecessionary
automatic stabilizers directed at the same population. These stabilizers
provide immediate assistance to those most vulnerable to an economic downturn. CBO
says these benefits, including food stamps, unemployment insurance, and Medicaid will
grow to $250 billion this year. That built-in lower-income population stimulus will be
equal to 1.8% of our economy.

It also misses the point about ensuring that the lesson of moral hazards applies to the
states. The fiscal problems faced by many of our states and localities are largely the
result of their inability to keep spending in line with revenue.

Between the third quarter of 2006 and the third quarter of 2008, state revenue increased 7
percent and state spending increased 15 percent. In other words, the states and localities
spent $2.22 for each additional dollar of revenue. The states have been on a spending
spree. And they’ve dug themselves a hole.

Now, we will hear that an FMAP slush fund for states is necessary to avoid tax increases
at the state and local level. We’ll also hear that vital services will be cut unless we cut a
big blank check to the states. Just as we did during the Finance Committee markup, some
on our side will test those assumptions with amendments on those points. An open-ended
slush fund is not targeted. It’s true no matter how you dress it up.

Perhaps the most disturbing stimulus test failure is on the third “t.” I’m referring to the
temporary test. In this package, there are many new popular spending programs labeled
temporary. Those programs total $140 billion. If these programs are extended or made
permanent, we can expect another $1.3 trillion added to future deficits.

And I will challenge anyone on the other side to tell me these programs will be turned off
once enacted. With large Democratic majorities and a Democratic President, I’d say any
such promise is dubious for this Congress. It’s about as deliverable as a promise to sell
the Brooklyn Bridge.

To sum it up, this package meets a different three t’s test. We start with trillion dollar
deficit. We have a bill that, with interest included, adds more than another trillion to
future deficits. We have a bill that has new spending, ostensibly labeled as temporary,
but likely to be extended, that bakes into the cake another trillion into future deficits.

Passing this three “t’s,” as in trillions, test ought to give any Senator pause.

From our side’s view, those are the major shortcomings on the substance. Although we
saw execution of a deal to vote down our amendments in committee, no matter whether
our ideas were meritorious or not, we’d like to be constructive and build on the parts of
the package we support. In other words, we hope our amendments will be more openly
received on the Senate floor.

In this respect, we’ll go back to the major difference between the parties on how to get
the economy moving again. On our side, we’d like to push more incentives for long-term
growth of private sector jobs.

There is a good start on a broad-based middle-income tax cut in the package. We’d like
to expand the tax cut to cover all middle income taxpayers. During last Fall’s campaign,
the President described as middle class families making less than $250,000. Many of the
tax cuts don’t apply to millions of families making less than $250,000. Doesn’t make
sense to me to call a proposal a middle class tax cut if it doesn’t apply to millions of
middle-class families.

And we’d like to direct that at labor and capital income earned by middle income
taxpayers. Since we weren’t at the negotiating table to offer these pro-growth ideas,
you’ll see them arise as constructive offers to improve the package before us.

Now I’ll turn to some of the specific health-related provisions in the Finance Committee
package.

Spending in this bill should be judged based on two criteria: will it stimulate the economy
and is the money being well spent?

In committee, we aired out honest disagreements over whether several of these provisions
are actually stimulative.

Improving health information technology is critical for our health care infrastructure.
I support many of the provisions that are in the Finance Committee bill.

But I have to ask: will it stimulate our economy and is it money that we should add to the
deficit rather than offsetting it?

It wasn’t so long ago that 16 BILLION dollars was a lot of money around here.

Providing assistance to states makes sense if we are concerned about states raising taxes
or cutting spending.
But is 87 BILLION dollars the right number and is increased Medicaid spending the right
way to do it?

Could we better stimulate economic recovery using all or part of that money elsewhere?
The Finance Committee package also includes a 2-year extension of our current Trade
Adjustment Assistance programs.

I’m working with the Chairman to see if we can agree with our counterparts on the House
Ways and Means Committee on a broader reauthorization of these programs, but that’s
still a work in progress.

Apart from Trade Adjustment Assistance, I’m disappointed that this Administration isn’t
focusing on trade as a component of the economic stimulus package. As I said above, we
should heed an important lesson from the Hoover era. Economic growth comes from
expanding free trade, not contracting it.

Opening up new markets for U.S. exporters should be part of the mindset to stimulate our
economy.

Our pending trade agreements with Colombia, Panama, and South Korea provide
significant opportunities to do just that and should be implemented as soon as possible.

As we go through the bill, our side will offer several amendments that I hope will be
accepted to try to make the bill better answer the questions I have raised.

The people back home see Congress spending vast amounts of taxpayer dollars and they
are counting on us to ensure their money is spent wisely not wastefully.

-30-

• Print
• Email
• Tweet