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Mr. McCAIN. Mr. President, I would like to begin by thanking the managers for their patience and their leadership in this marathon that we are engaged.
I rise in support of the Coburn amendment, which strikes the $246 million Hollywood tax earmark. It is quite an interesting earmark in that the stimulus legislation provides a tax earmark for Hollywood in the amount of $246 million--a quarter of a billion dollars--over the next 11 years, and would allow large Hollywood studios the opportunity to choose between the existing tax break for movie studios or to write off 50 percent of the entire production cost for movies and TV shows made in 2009. In the years that follow the remainder of the production cost would be written off according to existing depreciation law. The 50-percent accelerated depreciation in the first year is a ``bonus depreciation.'' Obviously, this amendment would strike that special earmark.
I would point out to my colleagues that Hollywood is doing okay. They raked in over a billion dollars in January--the biggest January ever for the movie industry. That is testimony to the attractiveness of the product. Box office receipts were up nearly 20 percent in January 2009, with ticket sales up 16 percent over January 2008, when January is typically considered a weak month for the industry.
Movie director Rob Reiner was recently asked about Hollywood's relationship with Washington, DC, and claimed:
We are a special interest group that doesn't ask for anything like earmark legislation or tax breaks. We are the one industry that doesn't ask for a quid pro quo.
Well, rather than targeting tax breaks at big-time political donors, the stimulus should have targeted its tax break toward mainstream America.
I regret that I can't support the so-called stimulus bill that has been presented. We have an opportunity to craft a bill that would provide real relief for the American people at a time of great economic uncertainty. Unfortunately, that opportunity has so far been rejected. Once again, parochial partisan and special interests have taken precedence over the interests of the American people.
This bill has become nothing more than a massive spending bill, expected to cost taxpayers more than $1.2 trillion, according to the latest estimate by the Congressional Budget Office, and $1.2 trillion dwarfs any Government program in history, after adjusting for inflation. It is bigger than the New Deal and the Iraq war combined. The interest alone will be costlier than the Louisiana Purchase in current dollars or the amount the United States spent to land on the Moon.
During a press conference in November 2008 to introduce the new Director of the Office of Management and Budget, then President-elect Obama said:
The new way of doing business is, let's figure out what projects, what investments are going to give the American economy the most bang for their buck, how we protect taxpayer dollars so that this money is not wasted, restore a sense of confidence among taxpayers that, when we spend our money, it is on that which is actually going to improve their quality of life, create jobs that are so desperately needed, help to spur on economic growth and business creation in the private sector. That is all part of the new way of doing business.
1I was very pleased to hear the President speak those words. However, I do not believe the bill before us today is reflective of that sentiment. Let's acknowledge and continue to acknowledge that American families are hurting and they need our help. We have entered the second year of a recession. Record numbers of homeowners face foreclosure, our financial markets have nearly collapsed, the U.S. automobile manufacturers are in serious trouble, and the national unemployment rate stands at 7.2 percent--the highest in 16 years--with over 1.9 million people having lost their jobs in the last 4 months of 2008. Additionally, the number of Americans filing first-time unemployment claims this month matches the highest level in 26 years. Housing starts decreased 15.5 percent in December compared to the prior month. For 2008, housing starts were at a new low, shattering the previous record of 1.014 million set in 1991.
The list goes on and on, and I don't have to tell any American of the economic challenges we face and the real suffering that is going on throughout America. In the last year alone, due to the mortgage crisis, the Government has seized control of Fannie Mae and Freddie Mac, and we already passed a massive $700 billion rescue of the financial markets. We have debated giving the big three auto manufacturers tens of billions in taxpayer money as a ``short-term infusion of cash,'' knowing they would be back for more.
Last week, the House approved its $819 billion stimulus package on a party-line vote. The total cost of that legislation is almost as much as the annual discretionary budget for the entire Federal Government. We need to stimulate the economy, but we need to do it in a smart, fiscally responsible manner that will not bankrupt future generations of Americans. It is more important now than ever before that Congress restore fiscal discipline to Washington and get our financial house in order.
In a November 25, 2008, opinion piece in the Wall Street Journal, John Taylor, a senior fellow at the Hoover Institution and a professor of economics at Stanford University, wrote:
The major part of the first stimulus package last year was the $115 billion temporary rebate payment program targeted to individuals and families that phased out as incomes rose. Most of the rebate checks were mailed or directly deposited during May, June, and July of 2008. The argument in favor of these temporary rebate payments was that they would increase consumption, stimulate aggregate demand, and thereby get the economy growing again. What were the results? This chart reveals the answer. The upper line shows disposable personal income through September. Disposable personal income is what households have left after paying taxes and receiving transfers from the government. The big blip is due to the rebate payments in May through July. The lower line shows personal consumption expenditures by households. Observe that consumption shows no noticeable increase at the time of the rebate. Hence, by this simple measure, the rebate did little or nothing to stimulate consumption, overall aggregate demand or the economy. These results may seem surprising, but they are not. They correspond closely to what basic economic theory tells us. Temporary increases in income will not lead to significant increases in consumption. However, if increases are longer term, as in the case of a permanent tax cut, then consumption is increased and by a significant amount.
Mr. President, I ask unanimous consent to have printed in the Record the full text of Mr. Taylor's op-ed.
There being no objection, the material was ordered to be printed in the RECORD
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Mr. McCAIN. Now, one of the unfortunate things, and this is beginning to be appreciated by the American people, is that Members of Congress couldn't resist the temptation to load this bill with hundreds of millions of dollars in unnecessary spending, that will not do anything to stimulate the economy. We all know some of these, but they bear repeating, that have been included under the guise of stimulus: $400 million for STD prevention; $600 million for new cars for the Federal Government; $34 million to remodel the Commerce Department headquarters here in our Nation's Capital; $25 million to rehabilitate ATV trails; $150 million for honeybee insurance; $75 million for smoking cessation; and $50 million for the National Endowment for the Arts.
There is no doubt all of those are worthy causes which probably deserve our attention, our care and, sometimes, our dollars. But to portray them and others as a stimulus to create jobs and to have our economy recover, I think flies in the face of reality.
In the Senate bill, we have $100 billion to assist States with agricultural losses; $300 million for diesel emission reduction grants; $150 million for facility improvements at the Smithsonian Museum; $198 million for school food service equipment; and $2.9 billion for the weatherization assistance program.
There is also $6 billion of wiring for broadband and wireless in rural areas. I have always been an advocate of that. But the fact is, anyone who is knowledgeable of the difficulties and challenges will tell you that it takes years to achieve that goal even if the funds are available.
In order to comply with the Congressional Budget Resolution, the committee report contains a statement of how the emergency provisions contained in the bill meet the criteria for emergency spending. The report states, and I quote:
The bill contains emergency funding for fiscal year 2009 for responses to the deteriorating economy, natural disasters and for other needs. The funding recommended herein is related to unanticipated needs and is for situations that are sudden, urgent, and unforeseen, specifically the devastating effects of the economic crisis, natural disasters and rising unemployment.
Perhaps the authors of the bill can explain to me how $150 million for honeybee insurance falls within the distinction as outlined in the legislation. Someone needs to explain to me how giving tens of millions of dollars to the National Endowment of the Arts or the Smithsonian Museum will reverse ``the devastating effects of the economic crisis.''
The problem is we are accumulating debt that we are laying upon future generations of Americans. We are going to have to pay this debt sometime. My great worry is that if we do not account for this debt in some way, if we continue trillions of dollars of unnecessary and wasteful spending, then obviously we will find ourselves back in the situation we were in the 1970s, when we had hyperinflation and had to debase the currency.
I want to say a word for a minute about ``Buy American.'' The next time I come to debate on the ``Buy American'' provisions, I intend to bring a picture of Mr. Smoot and Mr. Hawley, the two individuals who were responsible, in the view of historians, for taking a country that was in a serious recession into the depths of one of the great depressions in the history of the United States.
Because as we enact protectionist measures, I was interested to hear my friend from North Dakota, Senator Dorgan, say it was not in violation of any treaty. It is in violation of several treaties. It is in violation of what has been an important aspect of America's policy which has been free and open trade.
I guess the fundamental difference I have between the authors of the ``Buy American'' provisions and myself is that I believe the most productive, the most innovative, and the strongest and best workers in the world reside in the United States of America, that the innovations and technology that have led the world have come from the United States of America, and that our products can compete anywhere in the world under free and open trade conditions.
Now, there have been violations on the part of other countries. That is why we are members of the WTO. That is why there are provisions in the North American Free Trade Agreement that should be vigorously pursued when there are violations and protectionist activities on the part of any nation of which we are participants in trade agreements.
If there are specific violations, then those violations should be addressed. But I wanted to emphasize, if we pass these ``Buy American'' provisions, you will find other nations retaliating and you will find us on a sure but unfortunate path to the exacerbation of our economic difficulties. That is a matter of history. Consult any historian. I hope we will not keep these ``Buy American'' provisions in whatever legislation we arrive at.
This bill contains protectionist ``Buy America'' provisions that will prove harmful to both the American worker and the world economy. The Senate version of the stimulus bill goes beyond the stark protectionism of its House counterpart in a way that risks serious damage to our economy. The Senate bill requires that major projects funded in the bill favor American-made steel, iron, and manufacturing over goods produced abroad. These anti-trade measures may sound welcome to Americans who are hurting in this economy and faced with the specter of layoffs. The United States, after all, produces the world's finest products. Yet shortsighted protectionist measures risk greatly exacerbating our current economic woes. Already, one economist at the Peterson Institute for International Economics has calculated that the ``Buy American'' provisions in this bill will cost more jobs than it will generate. Some of our largest trading partners, including Canada and the European Union, have warned that such a move could invite protectionist retaliation, further harming our ability to generate jobs and economic growth.
We have seen this tendency before. In the 1930s, as depression swept the globe, countries around the world enacted protectionist legislation in a counterproductive effort to preserve jobs at home, at the expense of those abroad. It was a fool's errand, and the result was the largest and most prolonged economic downturn of the 20th century. We know better now, and we must have the foresight and the courage to do what is right.
I am very concerned about the potential impact these ``Buy America'' policies will have on bilateral trade relations with our allies. From a philosophical point of view, I oppose this type of protectionist trade policy, not only because I believe free trade to be an important means of improving relations among all nations, but it is essential to U.S. economic growth. Moreover, from a practical standpoint, the added ``Buy America'' restrictions in this stimulus bill could seriously impair our ability to compete freely in the international markets and could also result in loss of existing business from long-standing trading partners.
Let me be clear. I am not against U.S. procurement of American products. The United States, without a doubt produces the very best products in the world, this certainly is the case with American-made defense products. In fact, a Department of State study reported that U.S. defense companies sold more weapons and defense products and claimed a larger share of the world market than was previously realized. This study shows U.S. exports of defense products increased to nearly $49 billion in 2006, comprising nearly 70 percent of global exports. This number continues to rise steadily. Furthermore, I believe that competition and open markets among our allies on a reciprocal basis would provide the best equipment at the best prices for the taxpayers and U.S. and allied militaries alike.
Congress can continue to protect U.S. industries from foreign competition for selfish, special interest reasons, or we can loosen these restrictions to provide necessary funds to ensure our economy can return to the strength it once had. ``Buy America'' policy in defense spending is particularly harmful and costly. Every dollar we spend on archaic procurement policies, like ``Buy America,'' is a dollar we cannot spend on training our troops, keeping personnel quality of life at an appropriate level, maintaining force structure, replacing old and worn-out weapon systems, and advancing our military technologies. It is my sincere hope that legislative provisions like ``Buy America'' in the stimulus bill are dropped and that Congress will end once and for all the anticompetitive, antifree trade practices that encumber our Government, the military, and U.S. industry.
In addition to the ``Buy America'' language contained in both the House and Senate stimulus bills, other policy provisions have been included in this legislation. Many of these items are nothing more than typical policy riders that will do nothing to stimulate the economy and create jobs. Most are partisan provisions that were added to this bill because it is considered to be ``must-pass'' legislation. They should not be included in any type of stimulus legislation and should instead go through the regular legislative process and subjected to necessary debate. Some examples of these policy riders include requiring the Transportation Security Administration to buy 100,000 employee uniforms from U.S. textile plants, legislation to give Federal workers new whistleblower protections, and legislative language favoring open access, or net-neutrality, that telecoms have long opposed.
Additionally, both bills contain wasteful Davis-Bacon provisions that mandate artificially high wage rates, based on faulty data, for its Federal construction spending. These rates are determined by the Secretary of Labor to be the prevailing wages in the geographic locality of the project for similar crafts and skills on comparable construction work. A report by the Department of Labor found that the wage surveys on which the prevailing wages are based are inaccurate. DOL's inspector general submitted a report to Congress that noted that a contractor hired by DOL found ``one or more errors in nearly 100 percent of the wage reports we reviewed.'' The error rates were high even after a more than $20 million effort to fix the surveys. In addition to outright errors, the inspector general noted that DOL used faulty methodology from unscientific surveys that led to bias, and even the data it did collect was untimely and, therefore, suspect.
The Davis-Bacon Act is an outmoded, depression-era, inflationary policy that, according to recent estimates, will inflate the construction costs of this bill by $17 billion. If we are trying to create new jobs then we should repeal Davis-Bacon, not encourage its expansion in this bill. Davis-Bacon imposes heavy regulatory burdens and unnecessary costs on Government contractors--not to mention the taxpayers who have to foot the bill for the inflated costs. Furthermore, Davis-Bacon makes it more difficult for entry level job seekers, the unemployed, and the unskilled to obtain work.
A recent study noted that ``contrary to its purpose, the Davis-Bacon Act distorts construction labor markets. Davis-Bacon wages bear little relation to market wages, because the Government's prevailing wage estimates are wildly inaccurate. In some cities, Davis-Bacon rates are much higher than market wages. In Long Island, New York, for example, market rates for plumbers are $29.68 an hour. Davis-Bacon rates, however, are $44.75 an hour, 51 percent more than what the markets demand. In other cities, Davis-Bacon wages are significantly below market rates. For instance, Davis-Bacon rates for carpenters and plumbers in Sarasota, FL, are $6.55 an hour, a figure below Florida's minimum wage of $7.21. Nationwide, Davis-Bacon rates average 22 percent above market wages and inflate the cost of Federal construction by 10 percent.'' Mr. President, decent, livable wages are important for every American--but imposing harmful, outdated Davis-Bacon requirements on Federal construction projects will do nothing more than bloat the cost of this bill, suppress new construction hires, and depress the economy.
I want to say a few words about the proposal that I and a group of other Senators have presented today and will be proposing as we go through this debate. Basically in the category of taxes, it would eliminate the 3.1-percent payroll tax for all American employees, lower the tax bracket from 10 percent to 5 percent, lower the 15-percent tax bracket to 10 percent, lower corporate tax brackets from 35 to 25, lower tax brackets to 25 from 35 to small businesses, and help provide for accelerated depreciation for capital investment. The total cost of that provision would be $275 billion.
It would also extend the unemployment insurance benefits, extend food stamps, unemployment insurance benefits would be made tax free, and training and employment services for dislocated workers would be provided at the cost of $50 billion.
There would be housing provisions. Let me emphasize to my colleagues what we all know: It was the housing crisis that began this conflagration and it will be the stabilization of home values that ends it.
My friend from Nevada here and others have been working hard to try to address the housing crisis. In our respective States, obviously, the housing crisis is of the utmost severity, as it is throughout the country. But in high-growth areas of the country such as ours, it is even more severe. We have seen even more dramatic reductions in home values.
So our primary goal, my friends, is that we must stabilize home values if we are going to reverse this deep and precipitous slide we are seeing and the difficulties we are experiencing in our economy.
Among other proposals, $11 billion would require the Federal Government to allocate funding to increase the fee that servicers receive from continuing a mortgage and avoiding foreclosure from a one-time fee of $1,000 up to $60 per month for the life of the loan.
Safe harbor provisions remove the legal constraints inhibiting modifications; tax incentives for home purchases; the tax credit in the amount of $15,000 or 10 percent of the purchase price, whichever is less, with the option to utilize all in 1 year, or spread out over 2 years, and GSE and FHA conforming loan limits. This cost would be around $32 billion.
We should invest in our national infrastructure and defense. We should spend $9 billion to improve, repair, and modernize Department of Defense facilitates, restore and modernize barracks, improve facilities and infrastructure directly supporting the readiness and training of the Armed Forces, and invest in the energy efficiency of Department of Defense facilities. This activity would generate construction and craftsmen jobs in the short term by addressing deteriorating conditions of existing facilities for projects that are ready to be carried out in the next 9 months.
As to the resetting our combat forces, the Department of Defense will be requesting emergency supplemental appropriations in the spring of 2009 to support the operations in Iraq and Afghanistan. Inclusion of this in the stimulus accelerates those requirements and will be used to place new orders or to repair vehicles, equipment, material, ammunition required to fully equip our combat units, while generating jobs on assembly and manufacturing lines around the country.
I urge my colleagues to think about, if we are going to provide funds, that our defense needs are great, of the equipment that has been worn out in Iraq and will again be required to be used in Afghanistan. Obviously all of us who have visited our military installations know there are facilities that need to be modernized, restored, and new construction. We propose $70 billion for road and bridge infrastructure, road and bridges on Federal land, public transit and airport infrastructure and improvements, and $1 billion for a small business loan program. The total estimated cost for investing in our infrastructure: $88 billion.
Finally, we need to require these spending programs in the stimulus bill be sunset 3 years from enactment. If this spending is intended to restore our economy and jump-start it, once the economy is jump-started and restored, then we should not have to continue this spending and increase the size of our debt and lay it on future generations of Americans.
This proposal states that after two consecutive quarters of economic growth greater than 2 percent of inflation-adjusted GDP, the following control mechanisms will trigger to reduce the deficit and promote long-term economic growth: All spending provisions in the economic stimulus legislation where funds have not been spent or obligated will be cancelled and permanently rescinded. The budget baselines shall be adjusted downward to ensure that all spending in the stimulus, whether spent or cancelled, is treated as a one-time expenditure and not assumed to be repeated.
What a lot of Americans do not know is every time we add a spending provision, that becomes part of the baseline, which assumes that that money will be spent over time. We cannot continue that indefinitely. We propose a 2-percent across-the-board reduction in spending, with the goal of balancing the budget by 2015.
We should establish two separate entitlement commissions, one to make recommendations on systems and the other Medicare-Medicaid. We all know the elephant in the room is Social Security and Medicare, and the unfunded liabilities associated with it. We should also require recipients to disclose costs for awarded projects, prohibit stimulus funds from being used for lobbying activities, political contributions, holiday parties, unnecessary renovations, and questionable travel.
We should spend some more money on accountability, transparency, oversight, and results. We should create a recovery and accountability and transparency board with a Web site, create a Congressional oversight panel, establish a recovery and reinvestment oversight board composed of Federal agency heads, require review and audits by the Comptroller General on the bill's effectiveness in achieving economic and workforce recovery goals, and establish a special inspector general modeled after the oversight required for TARP. The total is $445 billion. I think this is a balanced proposal and one that I hope deserves the serious consideration of this body.
I want to say a word about TARP. The American people have been dissatisfied with the results, and Members of this body have been as well. In the first round of $350 billion, it seemed that the priorities seemed to change literally on a daily or weekly basis.
It became unclear as to exactly what that $350 billion was going to do, and, apparently, if you look at all of the statistics, it has not resulted in significant improvement.
Now, what would have happened without it will be a matter of conjecture and analysis by economists and historians. Now we are in the second round. Now we are told there may need to be more, another TARP, after we pass this stimulus legislation and an omnibus appropriations bill.
When we start totaling that, we are talking about several trillion dollars, and we can't continue that without the American people experiencing some tangible results. Most Members of this body are in agreement. We need to stimulate and jump-start the economy. Let's not do it in such a way that our children and grandchildren pay for it in the most painful and difficult manner. We owe that to them.
I yield the floor.
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