Statement on Economic Stimulus

Floor Speech

Statement on Economic Stimulus

BREAK IN TRANSCRIPT

Ms. SNOWE. Madam President, first of all, I thank the chairman of the Finance Committee, Senator Baucus, and our ranking member, Senator Grassley, for their combined tireless leadership in advancing a very critical piece of legislation, the stimulus bill that has been passed by the Finance Committee and will be considered by the Senate shortly. I thank them for spearheading such an important initiative in a very timely fashion. It is an issue of critical consequence to the Nation.

We know there is a decline in our economy. We are seeing the economic indicators, which I will speak to shortly. There is no doubt that across the board it is absolutely vital that we enact as quickly as possible a stimulus package to begin to address the erosion we have identified and that we have seen in our economy.

Again, I thank the chairman of the Finance Committee and the ranking member for working so quickly to address many of the issues raised on this very comprehensive piece of legislation, understanding that some of the issues that have been raised--even since the time in which the House of Representatives had voted upon their package, they also incorporated many provisions that I think are more targeted and will strengthen the bill that passed in the House of Representatives and the bill that had been negotiated between the House and the President.

I do think it is important for the Senate to have the opportunity to have its input on this bill that is going to be so vital to America and to our constituents and to make sure it is as precise and calibrated as possible in order to rejuvenate the economy and, hopefully, to galvanize some of the economic dimensions of our economy that have taken a turn for the worse.

It is imperative that we act in a timely fashion. I think changing the package and incorporating those issues that are also essential to build upon the strengths of the legislation that passed in the House of Representatives are not mutually exclusive. We cannot afford to stand idly by as the economy continues to erode. That is why I think there is a collective conclusion that we have to develop a package that can be supported in both the House and Senate and will be signed by the President.

The Finance Committee held a number of hearings recently on the question as to whether to even have a stimulus package. I know there is debate on both sides of the political aisle and among economists as to whether it is essential. But the fact is, more than half of the economists surveyed in this country believe there is a recession that is imminent. So, obviously, we have a responsibility to take every possible step and every possible measure that can avert or at least mitigate the impact and the brunt of any recession.

Dr. Martin Feldstein, former chair of the Council of Economic Advisors for President Reagan, expressed his support for a stimulus plan. Last week, before the Senate Finance Committee, he said:

Because of current credit market conditions, there is a risk that interest rate cuts will not be as effective in stimulating the economy as they were in the past. That is why a stimulus measure deserves our attention.

It certainly deserves our attention and our informed decisions, in terms of what exactly should be considered in a stimulus package. No doubt, time is of the essence--we all agree on that--in passing a viable and effective piece of legislation. But our obligation, as well, is to be deliberative on one of the issues that is of great consequence to this country.

We have to develop the best possible package, building upon the strength of the House measure, and it must be targeted to those who need the support; and we need to rebuild the economy and, hopefully, avert any potential recession. We have to strike the right balance because, obviously, that will be central to averting a recession, avoiding it, as we face a confluence of historic and unprecedented economic indicators that are profoundly troubling.

We can anticipate more than $600 billion in resets in the adjustable rate market in the spring, which is, of course, on top of all the resets that have occurred recently. We are experiencing a housing crisis. Recently, the Commerce Department indicated that the drop in home prices is at the lowest since they began keeping records in 1963. Likewise, the price of oil per barrel has now skyrocketed and spiked recently to $100 per barrel. Gasoline is approximately $3 at the pump, and we can anticipate, according to a report even of today, that it may go as high as $3.50 per gallon. The number of long-term unemployed today is nearly twice the rate of the unemployed immediately prior to the recession of 2001 and 2002, when we extended unemployment benefits. So we have seen the long-term unemployment rate jump significantly.

We have had an unemployment rate that surged most recently, in the short term, from 4.7 percent to 5 percent in 1 month alone. Obviously, we don't know what to anticipate in future months. That is why it is so critical to have the stimulus package in place.

Most troubling is what the Commerce Department indicated yesterday: that a growth in the gross domestic product has slowed to .6 percent in the fourth quarter of last year, for an annualized rate of more than 2.2 percent for 2007. That happens to be the slowest annual rate of growth in 5 years. So there is no question that we must use the fiscal tools at our disposal to mitigate the impact of a slowing economy and, hopefully, avoid any potential recession.

One of the economists who appeared before the committee--Dr. Jason Furman of the Brookings Institution--echoed as much when he said that ``a well-designed fiscal stimulus in the form of increased government spending or tax reductions, has the potential to help cushion the economic blow.''

So the package agreed to yesterday in the Finance Committee, in my view, meets this challenge and achieves those goals. It is well-balanced, effective, and it will stimulate the economy through some key provisions that I think are essential, in terms of addressing the problems we are facing. One is the refundable tax rebate, of course; that is, to spur the buying power of all Americans across the board, but most especially low-income and senior consumers, which is important.

The House-passed package doesn't include a benefit for senior citizens. It doesn't include the more than 20 million seniors on fixed incomes. They would not benefit from the stimulus package enacted in the House of Representatives. It doesn't include an extension of unemployment benefits which, again, I might add, economists have identified as one of the surest ways to impact the economy. You will have the most affect on spending almost immediately--in fact, some economists have said within 2 months, as opposed to the rebate, by the time it passes the Congress and is signed by the President, but also because of the length of time it takes to distribute it. Even under the most efficient means possible, we will not feel the effect of it until the spring or later midyear.

So then it would take a while to really be absorbed into the economy so that an extension of unemployment benefits would become essential and pivotal. In fact, the Congressional Budget Office said it has the greatest amount of cost-effectiveness and the least amount of lag time before it is felt in the economy, it has the maximum amount of impact on the overall economy in terms of its effectiveness, and it has the most certainty about the impact it will have on the economy to spur economic spending.

Finally, we have an extension of the energy tax incentives. People say we should not have the energy tax incentives in this legislation. Yet it is interesting to note that it would create more than 100,000 jobs, by industry estimates, by the end of the year--100,000 jobs. The whole goal and focus of this legislation is to create more jobs, and if we know definitively there are provisions that will create more jobs immediately because of pending projects, then doesn't it make sense to include them in this legislation? It will spur economic activity or spur consumption, and it will reduce our dependency on imported oil.

Investment incentives for small businesses will also be included in this legislation to work in conjunction with other initiatives through job creation by providing for expensing for small businesses so they can write off more of their capital investments or be able to use the extended carryback of operating losses and extending that period from 2 to 5 years so they can reach back further. They have their choice of incentives, whatever works for a company. They may be in a struggling situation, and they can write off their losses of current years against their profits of past years. It makes sense to put these provisions and incentives in one single package that will help to spur the economy.

In addition, of course, is the bonus depreciation as well--another dimension of economic investment that can make a difference in serving as a catalyst in our economy.

Finally, in this legislation, we include a provision that was omitted in the House of Representatives package, and that is one that would make sure our disabled veterans benefit from the stimulus package, benefit from the rebates.

I thank my colleague, Senator Lincoln, for initiating this amendment. I joined her in that effort in the Finance Committee because we thought that was a major omission, to exclude more than 250,000 of our Nation's service disabled veterans because their compensation is not taxable. We wanted to make sure they should be able to participate in the stimulus plan. Our disabled veterans deserve to be part of the rebate plan, and this package makes sure that happens. I appreciate my colleagues on the committee who supported this pivotal provision.

This legislation casts a wide economic net, and that makes it more equitable, especially to the most vulnerable among us in America. It doesn't merely represent sound economics to propel this stimulus, but it is also in greater alignment with Federal Reserve Chairman Bernanke, who said that a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible in the next 12 months or so. The measure we will be considering and debating does affect the aggregate. It does ensure that its impact is felt as much as possible, and it does so on a more accelerated timetable.

The tax rebate incorporated in this legislation is obviously central, and the refundability makes it all the more effective. That is why I was a strong advocate in ensuring that refundability was part of the stimulus package, that it certainly had to be included to make sure the low-income and middle-income Americans and households would have the ability to have the benefits of any rebate because it would also make a difference in stimulating our economy because two-thirds of consumer spending is really what drives our economy. It is the economic engine. We depend on consumer spending to drive our economy. So the refundability portion is very important because it will make sure those people who benefit from this rebate are ones who also need this rebate. They need it to pay for the necessities of daily life, given spiraling costs in terms of oil, food, and gasoline. We want to make sure we can mitigate the impact of this declining economy and the rising costs in their households.

When we had various witnesses before the committee, we talked about the effectiveness of the refundable tax rebate. In fact, the Hamilton Project, which was conducted by economists at Brookings Institution, noted that a one-time tax rebate equal to 1 percent of the GDP, which is about $140 billion in today's economy, and directed at households likely to spend money would boost the level of GDP by 1 percent or more for two consecutive quarters, increasing the annualized GDP growth rate by about 4 percent in the first quarter of the effect.

So if the aim of this bill is to arm American consumers with additional money to stimulate consumer spending, it is integral that this benefit is extended to the 20 million working families and the 20 million seniors who were omitted from the House bill who are more likely to spend the money that will be included in the stimulus package.

The package which is before the Senate which was enacted by the Finance Committee will be absolutely vital to low-income Americans and to seniors who otherwise would not have benefited from the package which was enacted in the House. So, again, the Senate Finance Committee package builds upon the provisions that were incorporated in the House legislation and are strengthened in the package that was marked up in the Senate yesterday.

I think it is absolutely critical that we make sure no one is left behind when it comes to benefiting from this rebate that is directed at low-income and middle-income households because they are the ones who are most likely to spend this rebate because of the driving costs of, as I said, oil and food and the daily necessities of life.

I also think it is important to extend the unemployment benefits, as I said earlier. The fact remains that the unemployment rate for the long term is twice as high as it was in the recession in 2002. We included extension of unemployment benefits. After all, if the purpose of this package is to put in place the fiscal tools to make sure we can do everything within our power to avert a potential recession, then we have to make sure these tools are absolutely in place to make sure we can avoid a potential decline in our economy that leads to a recession.

In my home State alone, the case for an extension is undeniable. As the State department of labor reported, the announced layoffs for February and March are up an unconscionable 75 percent over the layoffs that occurred in December and January. Unemployment is increasing, certainly in my State. We have seen it reflected in the recent numbers. We have no way of knowing the extent to which it will get worse, but we do know by all accounts and certainly by the economic indicators, by the general consensus of economists, that a recession is a potential, that it could potentially be imminent in the short term. So all the more important to put in place a provision to extend unemployment benefits because it will have the maximum effect in our economy to impact direct spending. Also, I think it is important that it will stimulate the economy. In fact, Mark Zandi of Moody's Economy said that every dollar spent now on unemployment will result in an infusion in the economy of more than $1.64 cents.

BREAK IN TRANSCRIPT

Source