[Congressional Record Volume 150, Number 93 (Thursday, July 8, 2004)]
[Pages S7776-S7778]
From the Congressional Record Online through the Government Publishing 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 
  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

[[Page S7777]]

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 
  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 
  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 

  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

[[Page S7778]]

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.