Senate Budget Committee Critiques President's Budget Proposal

In a heated exchange, the Senate Budget Committee heard testimony from OMB director Jim Nussle regarding President Bush’s FY2009 Budget Proposal. Chariman Kent Conrad (D-ND) opened the hearing with a poster reading “the debt is the threat” and continued this theme, saying the “debt is going up like a scalded cat,” described the three D’s of President Bush’s legacy as “debt, deficit, and decline,” and called the budget “a debt bomb on the next president.” He made sure to emphasize the difference between the deficit, which is the year-to-year difference between spending and revenue, and the debt, which includes all money owed to Social Security and other lenders.

The consensus was apparent that this budget is unrealistic on a number of levels. A number of social programs would face spending cuts of up to 100%, the DOD would receive less than half of the $193 billion it spent this year in Iraq and Afghanistan.

While each side of the aisle presented different complaints, they were united in opposition to the projected economic outlook if this plan is put into action. The $9 trillion debt is expected to reach $10 trillion; if the stimulus package is enacted, the 2008 deficit is expected to reach $400 billion. Ranking member Judd Gregg (R-NH) criticized the Democrats regarding Pay-Go rules and SCHIP, but gave Nussle the same treatment, criticizing the long-run usefulness of this plan.

Chairman Conrad and Senator Bernard Sanders (I-VT) were some of the most vocal and aggressive when demanding justifications for unrealistically low war spending estimates ($70 billion for 2009) and severe cuts to social programs like LIHEAP which helps low-income families heat their homes. Nussle responded with a question, asking when Congress would pay the war bills for this year.

Medicare and Medicaid was also a topic of long discussion. Nussle claimed the budget aims to limit uncontrolled growth in spending in these areas. The Committee discussed the need for reform in these areas, rather than simple spending cuts.

Senator Lautenberg (D-NJ) focused on the cuts that Amtrak would receive under the President’s plan, remarking on traffic problems across the country.

Senator Menedez (D-NJ) seemed to sum it all up when he declared the proposal “dead on arrival.”

Joint Economic Committee listens to testimony from Bureau of Labor Statistics Commissioner regarding the employment situation

The Joint Economic Committee met today to discuss the employment situation for January 2008. Committee Chairman Senator Charles Schumer (D-NY) began by giving an overview of the current economic situation. Schumer said that 7.6 million people are out of work in the U.S. and that the figure is about double for African Americans. He said that the current economic downturn began last year with the housing sub prime mortgage crisis and quickly spread causing lower consumer spending, and is now afflicting the job market. He also advocated for a stimulus plan to be enacted immediately.

Committee member Congressman Elijah E. Cummings (D-MD) spoke next criticizing the Bush administration's tax cuts for contributing to job loss. He also criticized the current economic stimulus package for not going far enough. He said that he wants to see the administration approve unemployment insurance, a program that Schumer said is a proven form of economic stimulus.

The only panelist to give a statement was Keith Hall, the Commissioner of the Bureau of Labor Statistics. He presented figures released today by the Bureau today showing small, but widespread declines in unemployment. According to him, construction was one of the hardest hit industries saying that 284,000 construction jobs had been lost since September 2006. He also said that 269,000 manufacturing jobs had been lost in the last 12 months. He answered the committees questions in vague terms repeatedly saying that he does not want to speculate about the future outlook for jobs. He refrained from issuing criticism of the administration's economic policy and offered no suggestions to ameliorate job growth.

Presidential Economic Advisors speak at the New America Foundation

Ellen Ratner reported from the New America Foundation where advisors to the various presidential campaigns spoke on the state of the economy. Advisors to John Edwards, Barack Obama, Hillary Clinton, and John McCain spoke about their candidates and economic stimulus. 

Leo Hindery, the managing director of InterMedia Partners L.P., is the senior economic advisor to John Edwards. Hindery said that the United States can't educate or invest our way our of the current economic crisis. He cautioned that trade must be looked at as a fairness issue. Hindery said that a long-term plan for economic growth shouldn't be called a stimulus. He addressed several of the  problems he sees with the current discussion on the economy. He said that the Federal Reserve is not the entity that should be developing legislation and pointed out that this is not a sub-prime mortgage problem. He said that we have a "pervasive consumer debt problem" and noted the $7 trillion in consumer debt and without war accounting accounting the federal debt has been raised by $4 trillion. 

Austan Goolsbee is a senior economic advisor for Barack Obama. Goolsbee gave an overall economic assessment. He said that we have inadequate health insurance and that college has become less affordable and that the bottom 75 percent of earners have not seen income growth. He also mentioned the personal savings rate as problematic. Goolsbee said that Barack Obama has an iPod version of the government: easy to use. He spoke about the $200-$400 billion in mortgage losses and cautioned that bailing out financial institutions should be a last resort. On the Federal Reserve Goolsbee observed that the Fed is in a tight spot and that if we cut interest rates the value of the dollar goes down and a weak dollar is not good for the U.S. economy overall. The economic advisor to Obama also looked to history sighting that typically recessions have lasted 11 months since World War II. His suggestion for an immediate solution is to distribute rebates from payroll and put it into social security payments. He said that a solution "must be right now" without applications to fill out and speed the money out the door.  


Kevin Hassett is a senior advisor to John McCain and the Director of Economic Policy studies at the American Enterprise Institute. His statements on the state of the economy began with the observation that the U.S. government is $50 to $60 trillion dollars short of obligations like social security. He said that the minute the markets start to think that the U.S. doesn't have it's house in order the situation could get worse. Hassett said that John McCain wants to restore the comprehensiveness of corporations. His other suggestions were to have compromise legislation immediately and make business measures in that legislation retroactive. He cautioned that to put forth a stimulus package and later raise taxes would "not be a good idea."  He said that in the long history of stimulus packages they don't work expect for the last one when the government mailed money to people and it was associated with permanent tax cuts. He said that McCain believes in getting government out of the way and letting infrastructure happen without lots of regulation. 

Gary Gensler is a senior advisor to Hillary Clinton and a former Under Secretary of the Treasury for Domestic Finance and the former Assistant Secretary of Treasury for Financial Markets. He spoke about health care costs as well saying that they are up while the American middle class has lost up to $2 million in foreclosure filings. He said that the Clinton campaign is focused on housing, energy and jobs. In terms of the economic stimulus he said that it is critical that the government act fast and put out a $110 billion package. Clinton outlines such a plan as $40 billion in tax rebates, $30 billion in energy costs, $10 billion in unemployment insurance, $30 billion in housing via state authorities. He said that if you raise taxes of those making $250,000 a year or higher than you still have a great economy. He spoke about the difference between a stimulus package that gets spent and a money that gets put toward paying down debt. $40 billion in immediate energy costs is something the states could do right now, he said. He also mentioned that housing money would take a bit longer to have an effect. 

President George W. Bush speaks about the economy

President Bush laid out his principles for framing an economic stimulus package today from the Roosevelt room in the White House. “Our economy has a solid foundation, but there are areas of concern,” he said. His speech outlined some broader principles for economic growth legislation, but did not mention specific components beyond tax relief.

The president pointed out that both consumer spending and jobs are growing but at a very slow rate. He also acknowledged that other sectors like housing are declining.

He said that his advisors and other outside experts expect slow growth, but “there is a risk of a downturn.” The White House has been careful not to use the word “recession” often when speaking about the economic situation.

Among his principles Bush noted that the economic stimulus package must be large enough to affect an economy as large as the U.S. He recommended tax relief amounting to about 1 percent of the Gross Domestic Product, or about $145 billion in relief. Bush called for "broad based tax relief" targeted to business and consumer spending. He cautioned against new taxes and spending project, which are being discussed by congressional Democrats.

Tax incentives for businesses must encourage businesses “to make major investments in their enterprises this year,” Bush said.

He also called for “direct and rapid income tax relief” in the form of tax rebates to the American people. He noted that taxpayers can spend this check any way they want, giving examples of paying bills and fueling up. He said that this infusion of cash into the hands of consumers should increase spending.

The president called on Congress to resolve two versions of legislation regarding the Federal Housing Administration and get that bill to his desk as quickly as possible.

Bush said that his phone call with Treasury Secretary Paulson and congressional leadership yesterday was encouraging and led him to believe that economic stimulus could be passed quickly with bipartisan support. He was quick to point out that while the administration has taken the subject of his tax cuts off the table for the discussion of a short term solution, the most pressing economic priority after a stimulus packaged is passed is making his those cuts permanent.

The president defended the market system while acknowledging that there are times when “swift and temporary actions” can insure that inevitable market adjustments do not become long-term down turns. Bush called a growth package “a shot in the arm to keep a fundamentally strong economy healthy.”

White House Gaggle with Deputy Press Secretary Tony Fratto

The president had his normal briefings and will meet this morning with Ambassador Richard Williamson, special envoy to Sudan. Fratto said that the White House continues to push for movement of peace keeping troops in Sudan and is firmly committed to working with the United Nations on the peace process in Sudan. Fratto said that the president was pleased with his trip to the Middle East and might give some kind of recap or briefing to that effect early next week.

This afternoon the president will have a conference call with congressional leaders about the "economic landscape." The meeting will include Speaker of the House Nancy Pelosi (D-CA), House Majority Leader Steny Hoyer (D-MD), House Minority Leader John Boehner (R-OH), Senate Majority Leader Harry Reid (D-NV), Senate Minority Leader Mitch McConnell (R-KY) and Treasury Secretary Henry Paulsen. The participants are expected to talk about economic data and the possibility of an economic stimulus package. Fratto was quick to point out that no matter what short term measures might be decided on, the White House supports making permanent the Bush tax cuts as they believe they will be beneficial in the long term. "The president does believe that in the short term some boost is necessary," Fratto said.

Fratto referred to the economic data the president has been examining for week "mixed."

"Most economists in the private sector are not predicting a recession," he said. He said that the president wants to work together with congressional leaders on what should be done about this "soft patch in the economy." He said the White House sees this as an economic slowdown in the short term, but would not elaborate on what kinds of components the administration support in a solution. Fratto said that the call was an opportunity for the president to listen to the congressional leadership and what their advisors are saying about economic conditions.

"We would like to see Congress act quickly on the housing issue," Fratto said. He pointed out several factors the White House believes to be contributing to the slowdown and mentioned the housing and mortgage problems and rising energy costs. In terms of a possible legislative solution, Fratto said that President Bush is leaving all options on the table.

On the NIE on Iran, Fratto said that the president stands by the "full scope of the NIE findings, including the fact that Iran had a weapons program."