American Recovery and Reinvestment Act of 2009

Floor Speech

AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 -- (Senate - February 06, 2009)

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Mr. KERRY. Mr. President, I thank the distinguished chairman for his efforts on this bill and on this issue as a whole.

I have been listening for the last few days to our colleagues on the other side of the aisle talk as if the last 8 years hasn't happened, as if they have no responsibility for it, and then come back to the floor of the Senate today, and in the last few days, with proposals that have already been tested and, frankly, proven hollow and empty and inadequate. It is kind of surprising to me to see the absence of common sense that has been at the center of the arguments over the course of the last couple of days.

Let me give an example. We keep hearing about how the spending, spending, spending is too big and it is a problem. In fact, spending itself, we have heard in the arguments, is not going to solve this problem. Well, over 40 States in this country now have budget shortfalls--40 States--and the Governors in those States are already cutting essential services. They face the choice of cutting police, fire, teachers, and other critical services. The fact is that as they cut, those people are not able to pay mortgages, not able to go to the store and buy whatever it was they planned to buy, because they are out of a job and therefore lacking cash. They may even become at risk for foreclosure on their homes. So if you want to contribute to toxic assets, the best way to do it is to continue to adopt the policy that you don't put cash into the hands of Americans.

Now, that alone is not going to solve the problem. The normal debt ratio of a household in our country is about--income to household debt--50 percent. Right now, the average household in America is carrying a debt-to-income ratio of about 150 percent. And if all you do is give a tax cut that puts cash into the hands of people--which I understand, incidentally, our proposal does give a tax cut--if that is all you do, a large percentage of that is going to simply go to paying for past acquisitions, for past services provided. It is going to be used by taxpayers to pay off their credit card bills, to pay their debt, but it isn't going to create the kind of spending and consumption that is at the heart of the American economy.

Mr. President, 72 percent of American GDP comes from consumption. Unless we recognize how you stop the tailspin and begin to turn things around, we are ignoring reality. I have heard a lot of talk about we ought to do a tax cut, we ought to do a tax cut. I have supported many tax cuts during my years here, and there are tax cuts in this proposal. But a tax cut is nontargeted. If you put a tax cut into the hands of either a business or an individual today, there is no guarantee they are going to invest their money. There is no guarantee they are going to invest their money in the United States. They are free to invest anywhere they want, if they choose to invest.

Let's look at that. When you have a tailspin in the economy, as we do today, and confidence is declining, as it is today, if you are a banker and if somebody comes in to borrow money from you, you have to look at the prudent lending practices and standards by which you are going to make that loan. In today's climate, the inclination of a prudent banker is not to make the loan. Why? Because they see consumerism contracting, because they see the tailspin in housing, because they see the lack of new building, new contracts, and you are locked into a vicious cycle--not a virtuous cycle, a vicious cycle, a downward cycle. This effort is to break that cycle.

Almost every major economist has suggested that it is going to take a very significant component of that ugly word ``spending'' in order to prime the pump and begin to shift the psychology and turn things around. Now, is that all we need to do? No. And President Obama has said that is not all we need to do.

To the Senator from Tennessee, who has been talking about housing and you have to stop the housing slide first, let me say to him respectfully that I sat in the White House a year ago with Secretary Paulson, President Bush, and Vice President Cheney, and I was the only person in the room who said: Mr. President, if you are going to do a stimulus now, you ought to put housing into this package. And I turned to the Secretary and I said: Mr. Secretary, you could be negotiating right now to keep people in their homes at a fixed mortgage rate and a new valuation, and you should do it. And their heads nodded, and they said: That sounds like a good idea.

GORDON SMITH and I came back to the Senate, and we put in a $15 billion provision in the Finance Committee, which passed the Finance Committee 20 to 1. It came to the floor of the Senate, and guess what. The very people who are here on the floor now saying we have to do housing stripped it

out of that provision. The President and the administration opposed it. And for 9 months they sat there while 10,000 homes a day were being foreclosed, and they allowed us to slide into where we are today. So when I hear my colleagues come and say we have to fix housing now, they are about 10 months to a year late on that effort. They have created, because of their indifference a year ago, a situation where it is out of control. Every major economist in the country is now telling us: You have to stop the fall.

If 40 States in our country are facing a predicament, it is incumbent on us to help those States not lay off those firefighters, not lay off those teachers, and help them go with a readymade project.

I have heard colleague after colleague say: Well, what job is going to be created through this spending? Well, let me tell you very directly. If you have a shovel-ready project, we can put that into place tomorrow. There are thousands of them across the country ready to go.

We have a $1.6 trillion infrastructure deficit. While other countries have
been investing in high-speed rail transportation, schools, and other parts of their economy, we haven't. We have been giving tax cuts to the wealthiest people in the country. And the price of that is that today we have the largest gap between the middle class and the wealthy that we have ever had in this country. The fact is, none of those people are guaranteed to invest that money in any of the new projects the way we are. So Government--yes, Government--has the ability to be able to make a decision that the private sector won't necessarily make today.

I have supported almost every private sector effort through here over the years. I have supported 100 percent a zero capital gains reduction so that we could excite investment and venture capital into new enterprises with respect to energy and alternative fuel and new materials and nanotechnology and communications and artificial intelligence--all the things that would provide the high value-added job base of the future for our country. And most economists will tell each of my colleagues, without a party label, that if we were to invest now in those future efforts, we would be creating a much stronger base for our jobs in the future.

That is what this seeks to do. This bill, this stimulus effort, seeks to break the downward cycle and encourage investment in those kinds of products that provide a high value-added job and strengthen America's economy for the long run.

The fact is that doing the stimulus and doing housing aren't going to fix this crisis either. The truth is that the majority of our banks in this country are fundamentally insolvent. Paul Krugman has referred to a number of large banks as zombie banks because their assets and liabilities are almost either even or negative. But if you look at those assets in many of them, they are in the toxic category. And if they legitimately mark their books today at the value of the marketplace, they would not be, according to most standards, solvent.

So we are going to visit on this floor within a short period of time how we are going to recapitalize the banks. This effort will not be satisfied with what we are doing here alone. But I guarantee you, every day that we dawdle, every day we keep this going, forgetting about reality and debating what are old and, frankly, discredited approaches to the economy, we are going to create more toxic assets, more people are going to lose their jobs, and more confidence will be lost as we continue to go down.

Frankly, the difference between $50 billion on this bill or $100 billion--let's get it moving--that is not going to make the difference to the economy. What will make the difference to the economy is whether we express on this floor a real understanding of what is happening and a real concentrated effort across party lines to address it. That is what the American people are waiting for.

Mr. President, how much time do I have remaining?

The PRESIDING OFFICER. The Senator has 6 seconds.

Mr. KERRY. I thank the Chair.

I hope we are going to get to the common sense that is at the center of this and do what we need to do for the American people quickly.

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