[Congressional Record Volume 150, Number 93 (Thursday, July 8, 2004)]
[Senate]
[Pages S7776-S7778]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
THE ECONOMY
Mr. BENNETT. Madam President, one of the things that has struck me
since I have been in the Senate is that during debate in the Senate,
particularly during morning business, Senators seem to have no sense of
history. They seem to create a crisis out of the moment and have no
sense of placing their statements in any kind of historic context. This
is an opportunity for missing what really is happening. If you do not
place something in its context, you do not understand it properly. For
that reason, I have decided to talk a little bit about the debates that
have been going on with respect to the economy, where the economy is,
where the economy is going.
Let me take listeners back to the election of 1992. I have particular
focus there because that is the election in which I was first chosen to
come to the Senate. During that election, there was a lot of
conversation about the economy. We were in a recession, everybody said.
We are in a terrible slowdown, everybody said. In fact, as we now know,
looking at it in historic context, things were on the rise. There had,
in fact, been a recession, but we were in recovery during the election
of 1992. It just did not feel like a recovery.
That is one of the historic lessons we should all learn. The sense of
where we are is almost always lagging events. That is, we have a feel
that we are in a recession when, in fact, we are in a recovery. On the
flip side of that, we can have a feel that we are in a recovery when we
are, in fact, in a recession. It is because things take a little while
to sink into the consciousness even though they are going on in
reality.
In 1992, then-Governor Clinton and I, running, obviously, for
different offices, both were faced with an electorate that felt the
economy was in trouble. We both talked about what we needed to do to
get the economy out of trouble. Then, when the normal course of the
business cycle brought the economy back, the temptation on the part of
all politicians was to take credit for that, as if the recovery that
was taking place in 1993 and 1994 occurred solely because we had been
elected. That is very satisfying for a politician to want to do. It
does not happen to be intellectually accurate, but it is something
everybody does.
As I say, I was elected in 1992. In 1993, I joined the Banking
Committee. As a member of the Banking Committee, I had the occasion to
listen to the Chairman of the Federal Reserve Board when he came before
the Banking Committee to make his report on the state of the economy. I
remember very clearly because the Chairman of the Federal Reserve
Board, Alan Greenspan, had been appointed by a Republican President and
was viewed as a Republican
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holdover, some of the Democratic members of the Banking Committee were
very critical of him at the time. They said: If this is a recovery--
voices dripping with sarcasm--where are the jobs? I remember charts
being held up in the Banking Committee to confront Alan Greenspan to
say, if it is a recovery at all, it is a jobless recovery. Where are
the jobs? Greenspan was subjected to heavy criticism from Democratic
members of the Banking Committee because somehow it must be his fault
that there was a jobless recovery.
Looking back, again in the context of history, we know that the
creation of jobs is always what the economists call a lagging
indicator. That is, a recovery starts; it takes hold; the jobs that had
been lost in a recession are always the last thing to come back in a
recovery.
The jobs started to come back in 1994, in 1995. The Clinton
administration took credit for that: We did it; the only reason the
jobs came back is because Bill Clinton was elected President in 1992.
The Republicans had an answer to that: No, we did it; the only reason
the jobs came back is because Newt Gingrich became Speaker in 1995. In
fact, of course, the business cycle was well entrenched, the recovery
was underway, and the jobs came back, probably without regard to who
was President or who was Speaker. It was part of the standard business
cycle.
Then we got into that period of boom, and everybody was excited that
the boom was going to go on forever. I remember asking Alan Greenspan
in one of his other appearances before the Banking Committee, as we
were talking about the continual rise in the economy: Mr. Chairman,
have we repealed the business cycle? Is the business cycle over, and we
are never going to have another recession?
Chairman Greenspan smiled that wry smile of his and said: No,
Senator, we have not repealed the business cycle, and there will be a
correction, a recession--call it what you will--at some point in the
future. We cannot predict when and we cannot predict how deep, but it
will be there.
The point of this in political terms is that President Clinton and
the Congress that was elected with him in 1992 inherited a strong
recovery tide in the economy. However much we took credit for it
ourselves, we really had little or nothing to do with it.
Now, let's go ahead 8 years to the election of 2000. In the election
of 2000, it felt as if the economy was still enormously strong.
Remember, I discussed our feelings of how things are going usually lag
reality. In fact, we now know that the economy started to slow down in
2000. We now know that gross domestic production growth, which is the
main measure of recessions and recoveries, was dropping sharply in the
last two quarters of 2000, but it did not feel like it. The layoffs had
not started yet because businesses were hoping this was temporary.
Employment was still up, and we talked about this enormously strong
economy we were having.
Looking back on it now, we know that the President who was elected in
2000 inherited a slowing economy headed toward recession, in contrast
to the President who was elected in 1992, who inherited a strong
recovery headed toward a period of great growth. Naturally, in the
political world, that President was blamed for that slowdown. It all
happened on his watch, so it was all his fault.
Interestingly enough, I recall that in the election of 2000, there
was one candidate who spoke of the coming slowdown, and he was attacked
for trying to talk down the economy for political purposes. That was
Governor George W. Bush of Texas, holder of a Harvard MBA, who could
see the signs that this slowdown was coming and talked about it during
the campaign, only to be attacked by his political opponents for his
pessimism.
But he inherited a slowing economy, a slowdown that started in 2000.
The GDP went negative in the first quarter of 2001 and hit its worst
point in the third quarter of 2001, simultaneous with September 11 and
the hit that gave to the economy.
So we did have a recession. It was advertised and forecast by the
economic information that preceded it, and the President and the
Congress have been struggling with that recession and the recovery that
has followed ever since.
It is interesting to me that even though that recession was shorter
and shallower than the recession that had occurred 8 or 9 years before,
the rhetoric on the Senate floor referred to it as ``the worst economy
in 50 years.'' We were told this President was ``the worst President
since Herbert Hoover.'' No sense of history, no understanding of the
reality, no connection with the real data--but that kind of rhetoric
has been used on the floor of the Senate.
It is also interesting that the same attack that was made when Bill
Clinton was a fresh President was made again with respect to this
recovery: Where are the jobs? The same questions I heard thrown at Alan
Greenspan by the Democrats on the Banking Committee have now been
thrown not at Alan Greenspan but at George W. Bush: Where are the jobs?
Once again, economic history shows that jobs are the lagging indicator,
that jobs come at the end of the turnaround and not in the middle of
it. And now, exactly on time where economic history would indicate, the
jobs have started to appear.
All of a sudden, the argument that this is a jobless recovery no
longer holds any water. We have increased jobs for 10 consecutive
months. In the months of March, April, and May, we added more jobs to
the economy than were lost in the 3 months following 9/11. We had the
disaster of 9/11 and 3 months of a loss of jobs. As the airline
industry went into the tank, the hospitality industry and others were
shattered by the 9/11 situation. We lost a tremendous number of jobs.
In March, April, and May of 2004, we added more jobs than were lost in
that corresponding 3-month period following 9/11.
So now we do not hear about the jobless recovery any more. Now the
rhetoric has shifted to ``the middle-class squeeze.'' I heard one
Senator on the Senate floor stand here and say: Property taxes in my
State have gone up so high the middle class cannot handle it--to which
I want to say, you mean George W. Bush is responsible for the fact that
property values in your State have gone up, and your State legislature
has responded to that by reassessing property and raising property
taxes in your State? That is the President's fault?
Well, in today's political atmosphere, of course, it is the
President's fault. Anything that happens is the President's fault.
The point I want to make is, in historic terms, just as President
Clinton inherited an economy that was on the rise because of forces
that were in place prior to his election, just as President Bush
inherited an economy where the forces were on the decline prior to his
election, the next President, the one who will be inaugurated on
January 20, 2005--whoever he may be--will inherit an economy that is
strongly on the rise where all of the economic indicators are up and
where the groundwork for a significant period of growth and prosperity
has already been laid. Whoever that President is will take credit for
that growth, even though the groundwork for it has been laid prior to
his inauguration.
Now, I will say that if that President is George W. Bush, he might be
entitled to some of that credit. But the fact is, the combination of
the actions in monetary policy by the Federal Reserve Board and in
fiscal policy by the Congress of the United States has been responsible
for creating the atmosphere of economic growth and strength the next
President and the next administration will preside over.
I repeat what I say here often: We politicians need to have a greater
sense of humility and reality and understand we do not control whether
the economy is good or bad. If we could control that, the economy would
constantly be good. What politician of either party would deliberately
preside over policies that make the economy go bad and the voters get
mad? If it were up to the Congress to say, ``Do this, and the economy
will be good'' or ``Do that, and the economy will be bad,'' every
Congress, regardless of ideological stripe, would always say, ``Let's
do what makes the economy good.''
So maybe it is time to visit just a little bit about what causes the
business cycle. It is not elections. Recessions are caused by one of
two general categories of events. One which we cannot control is
outside shocks, such as 9/11, such as the oil shock that set off the
recession in the 1970s. Recessions are
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caused by shocks that are outside our control.
Or the second general category: They are caused by a series of
mistakes, mistakes that business men and women make. They make
decisions about purchasing stock and then discover they have too much
inventory. They make decisions about going into a market and discover
that the market will not work, and they have to lay people off. They
make decisions about the future of their product and then discover the
product will not sell, so they have to cut back.
When the number of decisions that are wrong exceeds the number of
decisions that are right, in an $11 trillion economy, you get a
recession. The recession is the way those mistakes are paid for. The
recession is the way the impact of those mistakes are corrected.
Perhaps the most dramatic one I can think of was the recession of
1958 where the automobile industry collectively made a series of major
mistakes. They assumed the boom they had in previous years--1955 model
year, 1956 model year, 1957 model year--was going to go forward, and
then suddenly they discovered they had huge amounts of inventory on
their hands, as people did not buy cars at the same level they had
projected. As a consequence, the automobile industry started to shut
down until the inventory got sold off. That meant the steel industry,
the aluminum industry, the glass industry, the rubber industry, all had
to shut down because they were not building cars, and we had one of the
most difficult recessions we have had in the postwar period in 1958.
The recession was the way you corrected those mistakes. It did not have
anything to do with who was elected President or who was elected to the
Congress; it was caused by a series of bad business decisions on the
part of people in the automobile industry.
Look at the recession we have just gone through. What did it come on
the heels of? Yes, 9/11 was there. Yes, there were some outside shocks.
But it came after what we called the dot-com bubble. A lot of jobs were
created in companies that were not earning anything. They had no income
other than selling stock on the stock market. People got caught up in
the froth of the dot-com bubble: This is going to be a great future; we
are going to buy the stock, and we are going to get rich.
Somewhere along the line somebody said: But where are the earnings?
When it dawned on people these companies with these brilliant
projections and plans had no earnings, shareholders decided they did
not want to hold those stocks anymore. The dot-com bubble burst. The
stock market collapsed, and we were on our way toward a correction or,
if you will, recession. It had nothing to do with who got elected.
But this point I want to make: Maybe we in government can't create
economic growth. Maybe it doesn't matter who gets elected in terms of
economic power. But we can certainly do dumb things that can hurt it.
The Federal Government can't create jobs, but the Federal Government
can mess up the economy in such a way that jobs are destroyed.
How do we do it? One of the ways that we disrupt the economy, and we
do it regularly, is by our tax policy. We can create an atmosphere
where it is easier for the economy to grow, or we can create an
atmosphere where there are penalties in the form of taxes when the
economy grows.
I have told this story before about my own experience founding a
company and making it grow in what some have called the decade of
greed. When Ronald Reagan was President and the Congress created a
situation where the top marginal tax rate was 28 percent, oh, what a
tremendous windfall for the rich to have the top marginal tax rate at
28 percent. What they don't realize, those who talk about how terrible
this was, is that the enormous economic growth we had in the 1980s, and
indeed on into the 1990s, in my view, was spurred by the fact that a
company like ours, starting with four employees and growing ultimately
to 4,000, was able to finance that growth because we were able to keep
72 cents out of every dollar we earned.
When the Clinton administration came in, and the Congress responded
to his call, the top marginal tax rate went effectively to over 40
percent, which meant a starting business was able to keep only 60 cents
out of every dollar that it earned and had to go someplace else to
finance its growth rather than from internal funds.
I have made these points before. I have learned in the Senate there
is no such thing as repetition because on the other side of the aisle
we get the repetition day after day about how terrible the economy is.
I say again, in conclusion, the next President, whoever he is, will
preside over a strong and robust economy. The groundwork for that
reality has been laid during the last 4 years. Whoever takes credit for
it in the next 4 years will be taking credit for work that was done
prior to his taking office.
I yield the floor.
The PRESIDING OFFICER. The Senator from Wyoming.
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