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“THE ECONOMY” mentioning the U.S. Dept. of Commerce was published in the Senate section on pages S10890-S10892 on Aug. 1, 2003.
The publication is reproduced in full below:
THE ECONOMY
Mr. REED. Mr. President, I would like to take a moment to speak about the economy, an issue that is of increasing concern to so many families across the country. Measured in terms of employment alone, this has been a very difficult and demanding time for Americans across the Nation. At the President's urging, Congress has passed three major tax cuts in what is becoming an annual ritual. I call it a ritual, because it is based on an ideological belief that tax cuts are a one-size-fits-
all fix to all of our Nation's economic woes.
Regardless of the specifics of our economic situation, regardless of the growing number of unemployed Americans, and regardless of our record budget deficits, the Administration has pushed on with its misguided, one-track approach.
Mr. President, I do not think anyone would invest a dollar in a project if they only expected to receive 10 cents back. But that is essentially what has happened under the trickle-down economic approach of the Administration. A March 2003 report by the Democratic staff of the Joint Economic Committee estimated that in the best case scenario, the first year return of the 2003 tax cuts would be less than 10 cents on the dollar.
What this means is the American people massively overpaid, committing ourselves to transferring hundreds of billions of dollars to the Nation's wealthiest individuals for a pittance of economic stimulus.
We have all become extremely anxious and hopeful to hear anything positive about the economy. At first blush, the recent data coming from the Department of Commerce offers a suggestion of hope. But after considering the reports at longer length, and in the context of all the participants in our economy, I am convinced the reports about our gross domestic product are something of a letdown.
As Senator Conrad has stated, 70 percent of the growth in this quarter's GDP estimate is caused by increased defense spending, without which the economy would have grown at less than 1 percent. This 1 percent growth would be the slowest economic growth of any administration in half a century. So what we are seeing is one of those issues in which one sector, for obvious reasons--because of our buildup in Iraq and our subsequent operations there--is generating a disproportionate share. One can ask the question fairly, how long can that continue?
The National Bureau of Economic Research announced last month that the recession ended 20 months ago. But this announcement simply confirms what many have long suspected--that we are in the midst of a
``jobless recovery.'' The economy is in as much trouble as it was in the early 1990s, if not worse. More than 3.2 million private sector jobs have been lost during this Administration, with 1.2 million jobs lost even after the so-called end of the recession 20 months ago. And 6.2 percent of the civilian labor force was unemployed, which is down slightly from the previous numbers of 6.4 percent. But the July decline is instructive because it doesn't represent a growth in jobs, it represents the fact that there is a drop in the number of people looking for jobs. The way we measure unemployment is by looking up the number of people actively pursuing employment, that is the basis of the calculation. What we are seeing is people giving up hope, becoming disheartened, understanding that it is hard to find jobs and therefore dropping out of the search for jobs.
Indeed, if you look at the ratio of employment to population, total number of people working versus the population of the U.S., we have seen that ratio decline. Nine million workers were unemployed in July across the country.
But for the current President Bush, this is not his father's jobless recovery. By this period in the 1991 economic recovery, private nonfarm payrolls were rising again. Not only are private sector jobs failing to rise again, they are continuing to fall at an even faster rate. Corporate layoffs are continuing. For Americans who have suffered the most from the recession, this is not an economic recovery because there are simply no jobs.
In my State, we received notice that a major department store is closing, a flagship store in one of our prominent malls, Lord & Taylor, which will lay off workers. We are seeing other retail operations close. For the families of Rhode Island and the Nation, the news they are getting is of more job losses.
Persistent unemployment is only one piece of evidence that passing tax cuts does not fix the Nation's economy. The next place to look is the budget.
This week, for the first time, President Bush acknowledged the role the tax cuts played in mortgaging our Nation's economic future by turning budget surpluses into record budget deficits. In the Rose Garden, the President said: ``And so part of the deficit, no question, was caused by taxes; about 25 percent of the deficit.'' That is according to the President. But according to economists, these figures are conservative at best.
The administration's Midsession Review reveals that the budget deficit for fiscal year 2003 is expected to be an astonishing $455 billion. This is the largest budget deficit in our history. This deficit is placed into stark relief by the Bush administration's forecast upon coming into office of a $334 billion surplus for 2003. So in just 2 years, we have seen a swing of more than three-quarters of a trillion dollars and that is just for this fiscal year.
The causes of the deficit are plain to see if you look at what is happening to revenues as a share of GDP--they have gone into a freefall. According to the Midsession Review, revenues in 2003 will equal 16.3 percent of gross domestic product, the lowest level relative to the size of the economy since 1959. The administration would like the public to believe this is some sort of natural decline due to recession and war. But we have been in recession before and we have seen war before, without getting into such a low level of revenue.
In fact, we can look at where revenues relative to GDP were in 1990 and 1991 and see that for President Bush, this is not his father's tax policy either. The truth is the administration's tax cuts actually account for 36 percent of the $7.6 trillion reversal in what was the 10-year budget outlook for fiscal years 2002-2011.
This is not even taking into account the administration's soaking up of Social Security surpluses, thereby reneging on a campaign promise not to raid Social Security. Moreover, the tax cuts take away resources necessary to ensure both Social Security and Medicare long-term solvency.
We need to save for the retirement of the baby boomers, and we are now less than a decade away from that wave of retirement. We don't have time to ``grow out'' of the deficits as we might once have back in the 1980s. That makes these efforts even more pernicious to the economy.
The administration has leveled the claim that the deficits would only be temporary. The first chart appearing in the Administration's Midsession Review shows that deficits as a share of GDP will be cut by more than half by 2006. As Senator Conrad has pointed out, cutting a deficit in half after you have quadrupled or tripled it isn't exactly impressive management. Yet, I don't believe this Administration will even accomplish that reduction of the deficit. The deficits in the latter half of their 6-year window are not going to be as small as they claim they will be.
There are many reasons why we should be skeptical of the administration's predictions of much smaller deficits in the future years. First, the budget projections don't include lots of things that will surely increase the deficit; for example, the continuing costs of the Iraqi occupation--estimated today at $4 billion a month--and the continuing cost of military operations in Afghanistan, estimated today at $1 billion a month.
Secondly, the administration's tax cuts are unlikely to boost GDP--
and tax revenue relative to GDP--as much as the administration thinks. Their forecast for the years 2005 through 2008 is simply too optimistic. The Midsession Review shows an increase in revenue relative to GDP of more than 2 percentage points in just 3 years, 2004 through 2007. But this sharp increase is unprecedented. It didn't even happen during the ``revenue surprises'' of the 1990s when revenues seemed to explode.
Such dramatic growth in revenues is much less likely now, because the administration's tax cuts have reduced the mechanisms that were the main drivers of the 1990s revenue surprises--capital gains taxes and the progressivity of the individual income tax system.
Then there is the other administration response to the deficit issue--that it simply doesn't matter.
Federal Chairman Allan Greenspan repeatedly has emphasized that higher deficits do, in fact, lead to higher interest rates. As the Fed's monetary report to Congress stated, deficits have already led to a downswing in national saving, and ``if not reversed over the longer haul, such low levels of national saving could eventually impinge on the formation of private capital that contributed to the improved productivity performance of the past half-decade.'' At last month's Banking Committee hearing, Chairman Greenspan clearly stated that he would oppose the continuation of large deficits in the face of full employment. Yet the administration's own overly-optimistic forecast shows deficits persisting after the economy is back to full employment and robust economic growth.
By choosing tax cuts over less costly and more immediate stimulus for the past several years, the President has allowed the manufacturing sector, a hallmark of our country's economy, to fall into a spiraling decline. This neglect for a vital sector of the economy has especially hurt the Northeast and the Midwest.
Just this week, the Wall Street Journal stated:
While hundreds of factories close in any given year, something historic and fundamentally different is occurring now . . . Most of these basic and low skilled factory jobs aren't liable to come back when the economy recovers or when excess capacity around the world dissolves.
The manufacturing industry cut 56,000 more jobs in June alone, the 35th consecutive monthly decline. From manufacturing to information technology, midcareer workers have been especially hard hit, and with many of these jobs lost forever to other countries, there is even more reason to act fairly and pass additional assistance for the long-term unemployed and to provide them with new skills through job retraining programs when you consider the record of job loss.
We should not limit unemployment and job retraining assistance to those laid off from manufacturing jobs, however. With so many Americans out of work for far too long and the persistence of job losses, there is an incredibly pressing need to extend benefits to those workers who have exhausted all of their unemployment benefits and yet still found no work. It is not their fault that jobs are not being created for them to fill.
Finally, there is no question that state fiscal crises are also restraining the economic recovery. These crises are predicated in no small part on insufficient Federal grant-in-aid to the States, along with decreased state tax revenues that are tied to reduced Federal tax rates.
Indeed, what we have here is a push-and-pull phenomenon. As the administration claims they are cutting taxes to stimulate the economy, State and localities are forced to raise taxes and cut expenses under their rules and their budgets, thus creating a situation in which our effect is counteracted by their necessary actions.
The official labeling of an ``economic recovery'' by the National Bureau of Economic Research sadly does not mean an end to the economic suffering that too many Americans feel. I think we should all be deeply concerned about the state of our economy--the persistent unemployment, and the huge budget deficits that are only likely to grow worse as the administration continues to push its tax-cutting agenda. Contrary to the administration's claims that its tax-cutting agenda is necessary to get the economic growth to bring surpluses back, those tax cuts will reduce our economic capacity for many, many years to come. We have already seen clear evidence of that, even in the administration's own estimates.
Just this week, a trio of Cabinet Secretaries has been traveling across the country on a so-called Jobs and Growth Tour Bus. But there have been no jobs, very limited growth.
And this tour is less of a victory lap than a further underscoring of the serious economic issues that face American families.
It appears that for some, the problem of working families struggling to get by merely serves as an excuse to pass massive, ineffective, irresponsible, and untargeted tax cuts. We must stay focused and pass measures that make sense and will put our economy on the right course both now and into the future.
I yield the floor.
The PRESIDING OFFICER. The Senator from Virginia.
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