America Recovers: How to Boost a Sagging Economy
Aired November 1, 2001 - 19:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: So my call to Congress is, get to work and get something done!
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ROBERT NOVAK, CO-HOST: Tonight, Congress gets to work. But will lawmakers ever agree on best way to stimulate the declining economy? Is the answer more tax cuts or more government spending? This is CROSSFIRE.
Good evening. Welcome to CROSSFIRE. The American economy was staggering before September 11th, but since then it looks like a freefall, and more bad news came out today.
Consumer spending last month fell 1.8 percent, the steepest drop in 14 years. Manufacturing activity dropped for its 15 month in row. So where is that economic stimulus Congress started talking about seven weeks ago? It's stuck in partisan and ideological disputes.
President Bush just declared he want a stimulus bill on his desk ready for signing by the end of November, 21 -- 29 days from now. And the Democratic-controlled Senate Finance Committee will take up the issue next Tuesday. But the Republicans want more tax cuts and the Democrats want more spending. Who is right? Who will prevail?
We are asking Senator Chuck Grassley of Iowa, the senior Republican on the Finance Committee, and Senator Dick Durbin of Illinois, the assistant Democratic floor leader. Bill Press.
BILL PRESS, CO-HOST: Senator Grassley, good evening.
SEN. CHUCK GRASSLEY (R), IOWA: Good evening, Bill.
PRESS: Senator, let's start -- you are picking up where the House left off with this economic stimulus package. That bill came out the House costing $100 billion and it was of full of tax cuts for -- more tax cuts for the wealthiest people in this country and for the country's big corporations. Wouldn't you have to agree, to start off tonight, that the House bill is way too big and way too loaded with corporate tax cuts?
GRASSLEY: I think what I would say about the House bill is that it's not realistic in a proposal that is going to get to the president. I think the Senate has a capability of such a realistic proposal, because we have the capability of getting together a bipartisan proposal.
And I have been working with Senator Baucus now for a long, long time -- several weeks now -- to put together a bipartisan package as we put together a bipartisan package last April and May with the first tax cut of this year. But the Democrat caucus will not let him negotiate with me. And so we are going to go to a markup next Tuesday...
GRASSLEY: That will probably be partisan and there's no way a Democratic partisan package can get through the Senate any more than a Republican partisan package can get through the Senate
NOVAK: Senator -- Senator Dick Durbin, what we are talking about now, of course, is not -- I think you can be -- we can all be honest with each other. You are not talking about stimulus package. That's just -- what's underneath that is your real desire for a redistribution of income and big government. You can agree with that, can't you?
SEN. DICK DURBIN (D), ILLINOIS: Bob, you know, your opening on this show suggested a decline in consumer spending. But when I meet with business leaders and labor leaders in Chicago, they all agree that's the problem: overcapacity, not enough consumer confidence, not enough consumer spending.
They say if you are going to help the consumers, get the money to them quickly. Do it in a fashion where the people who need the money receive it in a fashion as quickly as they can before the holidays, and don't do anything that will jeopardize the long-term economic situation.
I'm afraid that the Republican bill that came out of the House and the one suggested by my friend Senator Grassley just doesn't meet that test. If we are going to take the payroll taxes of American workers that are going into the Social Security trust fund and put them into an economic stimulus package, why -- under Senator Grassley's bill -- would we give 44 percent of the tax cuts to people in the highest one percent of American wage earners? That just isn't fair. It isn't fair to the workers who are paying these payroll taxes and it won't stimulate the economy.
GRASSLEY: I can answer that -- I can answer that question. He asked a very good question. 80 percent of the -- of the tax benefits that go in our tax bill to individuals will go to small business, and the reason for doing that is because small business creates 70, 80 percent of the jobs in America. So what we have got to do to help this economy is not worry about helping just unemployed -- as much as we have to do that in this bill -- but what the unemployed need is a good-paying job. NOVAK: Senator -- Senator Durbin, I want you to answer Senator Grassley's comment that the -- that you are one of the inner circle Democratic leaders there, you and Tom Daschle run the show and the new majority. I want you to respond to what he said, that they won't let him negotiate with Senator Baucus, the Democratic chairman of the Finance Committee, and the fact that you cannot get a straight Democratic bill passed in the Senate.
DURBIN: The -- Chuck Grassley is correct. You can't get a bill that is strictly Democratic or strictly Republican through the Senate that will require 60 votes. And there's going to be negotiation and bargaining, there's no doubt about it.
But what Senator Grassley failed to mention to you is that there is a $25 billion tax break in this bill for the largest corporations in America. 16 corporations, over $7 billion in tax cuts. Those are not small businesses, those are major corporations. How can you take money out of the Social Security trust fund and send it to the largest corporations in America?
PRESS: Senator? Senator, I'm going to have to interrupt you only because we have a microphone problem. It's apparent with both your microphone and the microphone of Senator Grassley. Let's take a quick break. We'll fix those problems and we will be back to debate the stimulus package being taken up now by the United States Senate. We will be right back.
(BEGIN VIDEO CLIP)
SEN. TOM DASCHLE (D-SD), MAJORITY LEADER: It would be a very, very sad commentary on the priorities of this administration, were they to say that giving out a handout, a new tax cut to a big corporation is more important than the security of 280 million Americans.
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PRESS: OK. The mikes are fixed. So welcome back to CROSSFIRE and a good old-fashioned political debate over what's the best way to stimulate the economy, which badly needs it. A debate that's breaking down in the Senate along party lines. "The answer is more tax cuts," says Republican Senator Charles Grassley of Iowa. "Not so, the answer is more help for workers hardest hit by the recession," says Democrat Dick Durbin of Illinois.
Senator Grassley, the heart of your bill -- or one of the main components of your bill -- is to repeal something called the corporate alternative minimum tax, which was passed back in 1986 when, it seems to me, that Congress wisely said that no matter how clever their tax lawyers are, corporations at least have to pay some tax every year. Now, why is it suddenly a good idea to get rid of that tax?
GRASSLEY: Well, first of all, before I answer your question, there is one thing about this debate on tax cuts that there's no dispute about, until -- unless Senator Durbin has got some problems with it, because there's bipartisan agreement to accelerated depreciation, bipartisan agreement to giving tax rebates to low-income people and also a bipartisan agreement on expensing.
Now your question on alternative minimum tax is directly related to how it impacts. It impacts corporations that are already low in income, hit with the alternative minimum tax. So what you are doing in a time of recession -- when -- when corporations don't have any income, then you are taking further income away from them. And what you want to do is at a time of recession, you want to put more money into the economy, not take money out of the economy.
PRESS: Come on, Senator. That's a myth, you know that. There are no strings attached to this. There's no requirement that they invest this money that they are going to get. They could use it all for executive bonuses. I mean, Fred Wertheimer, the head of Democrat -- Democracy 21, called this the "War Profiteering Act of 2001." That's exactly what it is, isn't it?
GRASSLEY: Well, then, if that doesn't satisfy you, let me say this: we are doing -- we will end up doing for the corporate alternative minimum tax the same thing that we did with the alternative minimum tax for individuals in the tax bill the president signed in June. Senator Baucus and I worked it out so that there would be a hold harmless so you don't give people a tax benefit on one end and take it away from the other. Now where is the economic stimulus if we were to do that?
NOVAK: Senator -- Senator Durbin, I would like to get to this question of whether when we get into a recession -- and we are in a recession -- the best way to function is to spend a lot of money on public works, infrastructure, or to give tax cuts. I would like to -- I would like you to listen -- listen -- to some words of wisdom from one of your colleagues
(BEGIN VIDEO CLIP)
SEN. TRENT LOTT (R-MS), MINORITY LEADER: We need growth in the economy, we need it quick. We don't need an infrastructure jobs program that will begin to create and produce jobs in six months or a year or two years.
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NOVAK: Now isn't -- isn't -- you are sophisticated enough to know, sir, I'm sure, that Japan has just about paved over that country with public works for last ten years it has been unable to get out of a continual recession. It's known all over the world that public works won't stop recessions. Why don't the Democrats understand that?
DURBIN: I think, Bob, that you -- I hope will you concede the fact that investment in America's infrastructure, particularly at this time when we're trying to protect and defend America against terrorism and bioterrorism, is hardly a waste of money.
What's been suggested on the Democratic side, for example, is to put some money and investment in our effort against bioterrorism. Allow me to draw this parallel. President Bush has said, let's give $300 million to state and local public health agencies to fight bioterrorism. $300 million.
Under the Grassley and Republican bills for economic stimulus, more than four times that amount -- $1.4 billion in tax cuts -- is being given to one corporation, IBM. Now, you have got to put it in perspective.
NOVAK: Wait a minute, Senator.
DURBIN: If we want America to be safe from bioterrorism, it means investing in infrastructure, making certain that law enforcement and public have the money they need to defend this country.
NOVAK: Now that was a -- you are talking about the retroactive aspect of that bill, where they went back and gave a -- certain corporations got an advance -- the retroactive aspect is out of the Grassley bill. Why do you bring up those red herrings?
DURBIN: That particular provision is in the bill that came out of the House of Representatives.
NOVAK: Yes, but it's not in the Grassley bill, is it?
DURBIN: Frankly what we are dealing with here is really an uncertain script from the Republican side.
NOVAK: Well, wait a minute. Let's be fair.
DURBIN: Let me just give you -- let me give you one example: Secretary of Treasury Paul O'Neill called the House Republican version of stimulus "show business."
DURBIN: Show business, Bob. You are familiar with show business.
NOVAK: Senator, I -- why do you do -- see, that's what bothers me about politicians, because -- why don't you play on a fair field? You're dealing with your -- the man's bill who is sitting next to you, Chuck Grassley's bill, which is supported by the administration -- not the House bill. So why do you bring up the stuff that has no chance of getting anywhere in the Senate?
DURBIN: Let me just tell you, Bob, it is painful for to you to acknowledge the fact that if we're going to do what is necessary to get this economy moving again, we should be giving the hard-earned dollars in the Social Security trust fund back to the people paying payroll taxes.
NOVAK: Wait a minute.
DURBIN: The folks that are unemployed, the folks that need help with health insurance -- those are the people who will spend the money to reinvigorate this economy. That may be redistribution of wealth from your point of view. It's simple economics from my point of view.
GRASSLEY: Mr. Durbin is sure...
PRESS: Go ahead, Senator.
GRASSLEY: Sure on the fringe of his own party. Because as I said before in this program, there is no dispute on the fact that we ought to encourage investment by corporations through accelerated depreciation and the fact that we ought to have a tax rebate, the fact that we ought to have some more expensing.
GRASSLEY: Those things are a given.
PRESS: Yes, Senator, we know that. But we are not -- we are not talking about the things you agree on. This is CROSSFIRE. We are talking about the things you disagree on.
GRASSLEY: I'm saying he is disagreeing with most members of his own party...
PRESS: Well, let me mention something...
GRASSLEY: ... on this business of accelerated depreciation.
PRESS: Let me mention something else that you disagree on. There is somebody missing in your bill, as I read it, Senator. And those are all the workers who lost their jobs after what happened on September 11th. Some of them still not back at work.
And you know, in Senator Baucus's plan he has extended unemployment benefits, he's got extended health insurance for those workers. You have zero in there. Why are you just favoring the big corporations and leaving the workers -- the hardest hit -- out of your bill?
GRASSLEY: That's absolutely wrong. We are accepting an increase in unemployment compensation of 13 weeks. We are -- we are going to have money in our program for helping people pay health care costs.
NOVAK: OK. We are going to have to take a break. Another break. And when come back, we will ask Senator Grassley and Senator Durbin whether or not the Congress is going -- is using the terrorist crisis to go on a spending spree.
PRESS: President Bush says he wants an economic stimulus package. The Senate is getting ready to debate it. We are debating it tonight with two senators: first, Democrat Dick Durbin of Illinois and Republican Chuck Grassley of Iowa. Bob Novak.
NOVAK: Senator Durbin, I remember not long ago you were so worried about dipping one inch -- one iota -- into the Social Security surplus. Now because of this crisis, the Social Security surplus is gone. The whole array of surplus is gone. I am -- the number crunchers say there is a $50 billion deficit already for this year. But the worst part is that you had agreed after September 11th -- you Democrats -- with the president for a $686 billion budget for this year. I am told now it could go up to $740 billion. You are on spending spree, aren't you?
DURBIN: Well, let me tell you, Bob. We responded to our president. He came to us after September 11. He asked for $20 billion to wage the war against terrorism. We gave it to him. He asked for $20 billion to help rebuild the devastation in New York and the Pentagon. We gave it to him. He asked for money to help deal with the airlines that were facing bankruptcy. We gave it to him.
NOVAK: But you were going to -- go on.
DURBIN: Did we in fact invade the Social Security trust fund? Yes, we did.
NOVAK: But you've gone well...
DURBIN: But I think our national security is more important.
NOVAK: You have gone well beyond that, Senator Durbin. That's what I said. You are -- you are going 60 billion -- that's a lot of money -- over what you agreed. You are putting all kinds of new spending in.
DURBIN: What we are finding, Bob, is you fight the war against terrorism and bioterrorism, that you can't be stingy in protecting America. Whether we are talking about law enforcement or public health agencies to deal with the anthrax problem or other threats, America expects us to rise to the challenge. I'm prepared to do it. When it comes to this economic stimulus, I don't want to spend the Social Security trust fund on the wealthiest people in this country.
PRESS: Senator Grassley, I would like get you to respond to another idea that's been floated -- a bipartisan idea by Senator Patty Murray and by Senator Olympia Snowe and that is to declare ten days off of state sales tax, to give every state the option of saying for ten days around this holiday season, you are going to have ten days when you don't have to pay any state sales taxes, and the federal government will reimburse the states. Isn't that best tax cut you heard of?
GRASSLEY: On the demand side, if it would take place of the rebate checks, it probably would be a good exchange. But I think that we are probably going stick more to the traditional.
PRESS: No, no, Senator. The wealthiest people already got their rebate checks, and your bill gives now a rebate check to the people who never got it the first time around. But I'm talking about across the board, everybody, rich and poor, no state sales tax for ten days. Wouldn't that put a lot more money into the economy right away than your tax cuts to big corporations?
GRASSLEY: The answer is yes, from the standpoint of just putting money into the economy. But if you want to create...
PRESS: That's what it is all about.
GRASSLEY: If you want to create-- no! Accelerated depreciation is to get corporations to buy machinery to be more productive so that they create jobs, both on the end of the creating of the machinery, as well as making their company more productive.
NOVAK: Senator Durbin -- Senator Durbin, I think one of the most unique functions of what apparently the whole Congress is doing is to give tax rebates for people who don't pay income tax. But what you -- what that is going to do is it's going to produce a lot of people buying cigarettes and beer and lottery tickets. Do you really believe that is going to stimulate the economy?
DURBIN: Bob, your impression of people at low income levels is not a very good one. I think you are going to find is that these folks are going to be investing in a lot of basics for their families and for their children, beyond cigarettes and beer. I think that we ought to be helping these families. The problem with this economy is overcapacity. We need more consumption. You put dollars in the hands of consumers that will spend them. And I think that's what will start sparking some growth in this economy.
NOVAK: All right. Let me -- let me ask you something that really I think is baffling. You are -- you are proposing that part of this stimulus bill be a federal COBRA program -- that is, a program for people whose health insurance has run out and left their jobs. Can you be -- I mean, that is going to be helpful to those people. But how in the world does that stimulate the economy? That is do- gooding social welfare, isn't it?
DURBIN: I don't call it do gooding. If you have got a family trying to live on unemployment insurance with a less than a thousand dollars a month and they are facing an average health insurance bill in the private market of $600 a month, you know what is going to happen. They are going to cancel their insurance, their kids aren't going to get care they need...
NOVAK: How does this stimulate the economy?
PRESS: Bob, hold on. Hold on.
DURBIN: And they're going to show up at a hospital needing care and it's going to become a charity case paid by everyone.
PRESS: Senator Grassley, we are just about out of time. I just have one last question for you, because the essence of your bill I think is, again -- as I see it -- is the same old trickle-down theory. You give the tax cuts to the rich and the corporations and some of it is going to trickle down to the poor. Alan Greenspan says that only 18 percent of Bush's big tax cut to rich earlier this year -- which of course you championed -- ended up going into the economy. Why is it going to be any different this time around?
GRASSLEY: Well, you are -- you are arguing against the Democrat approach of giving rebate checks. Republicans accept that there needs to be something done on the demand side, because we think that there out to be a balanced tax bill. But obviously you don't think it ought to be balanced. You all think it ought to go to the demand side. Don't you think it's very good to invest something in America for the future, look to the long term, not just look for the short term?
NOVAK: We're out of -- we're out of...
GRASSLEY: And another thing. I hope you feel it's wrong like on this cobra situation, that -- that...
NOVAK: OK, we have -- we have to...
GRASSLEY: That issues would not be on the agenda -- wouldn't be there if it wasn't for the September 11th incident.
NOVAK: Senator Chuck Grassley, Senator Dick Durbin, thanks for a very interesting debate. We would like to have you both back again. And we will continue the debate on closing comments, Mr. Press and I will.
PRESS: You bet.
PRESS: Bob, you know, I think I finally figured out the difference between you and me, and that is that I believe there's a higher human motive than greed. You know, I didn't look at the World Trade Centers falling and say, "How can I make money off of that disaster, and get a bigger tax cut?"
NOVAK: Well, I -- I resent that insult. Because what I'm talking about is Democratic capitalism, which has a great religious component, it's helping others and it's not being cheap politicians trying to curry favor with the poor by throwing money away which will not stimulate the economy.
PRESS: The cheap politicians are those who keep throwing money to the rich. That's their only answer to everything. They already did it in June. Now they want to give the rich even more money, and the corporations too. It's outrageous.
NOVAK: You and Karl Marx, Bill.
PRESS: The War Profiteering Act of 2001. From the left, I'm Bill Press. Good night for CROSSFIRE.
NOVAK: From the right, I'm Robert Novak. Join us again next time for another edition of CROSSFIRE.
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