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Statement of Michael B. Enzi (R-WY)

Before the Senate Finance Committee Open Executive Session to consider an original bill entitled

“The American Recovery and Reinvestment Act”

January 27, 2009

 Growing evidence suggests that the policy response being drafted by the Democrats is fundamentally wrongheaded.  Economists across the board are beginning to doubt that this $800 billion behemoth can do anything except put our children and grandchildren further in debt.  The current recession has proven resistant to previous stimulus plans and there is no reason to expect more of the same will finally succeed.

 

I’d like to remind my colleagues of a few facts:

  •  In 2008, Congress threw billions of dollars at households in the form of rebate checks, but empirical data shows it was ineffective.  Rather than spend the rebates, most households saved the money or used it to pay down personal debt.  The first stimulus package failed.  
  •         In October, Congress showered banks with $350 billion and while the funds may have saved many banks from failure, the TARP has done little to ease credit markets and the lack of access to capital remains a chokepoint in this recession. The TARP failed.
  •   A recent CBO report concluded that less than half of the spending in the Democrats’ stimulus package would be released in 2009 or 2010.  Government simply can’t spend infrastructure funds fast enough to have any measurable impact on jobs or income in this year or next.

 I realize there is enormous pressure on the incoming administration to show strong action, but we must be careful it is not the wrong action. 

What is the right action, then? We have so little ammunition left.  The Treasury is approaching the debt limit with alarming speed, revenues are falling, deficits are climbing….every precious tax dollar should be focused on addressing the current housing and credit crisis.

I can line up a room full of economists of varying political stripes and they will all tell me the same thing – the roots of this recession lie in the housing and credit crises.  Until households and financial institutions no longer fear their own balance sheets—until they can look into their own closets and NOT see the boogeyman—Congress and the Federal Reserve can throw unlimited amounts of money into the economy with little to no effect – and in the process destroy the credit-worthiness of our federal government and the value of the US dollar.

I was reading an article the other day where Ed Pinto, the former credit officer at Fannie Mae said it would cost $800 billion to clean up the foreclosure mess.  I find it more than a little ironic that I’m staring at an $800 billion “rescue” package and yet not one dime of it would go towards foreclosures.  How can that be?

Infrastructure investment is a noble goal, but it won’t stem foreclosures.  Making work pay is laudable, but it won’t provide small businesses with the access to capital they need, and Build America Bonds won’t make banks lend.  Congress cannot keep throwing billions of dollars out of an airplane and expect it to heal our economy.

If Congress and our new president are truly concerned about keeping jobs and creating new ones, let’s not pay lip-service with this trumped up “stimulus” bill. Instead, let’s unshackle the entrepreneurial spirit that fuels our economic growth by permanently extending all of the tax cuts we passed in 2001.  Let’s ensure that American workers have the education and skills needed to fill these jobs by reauthorizing and expanding the Workforce Reinvestment Act.     

To my colleagues on this committee I say we need strong action, not wrong action and I intend to oppose this bill.