Senate Coverage (MARCH

Since "Free Republic is an online gathering place for independent, grass-roots conservatism on the web. We're working to roll back decades of governmental largesse, to root out political fraud and corruption, and to champion causes which further conservatism in America.", I and others think it's a good idea to centralize what the goes on in the Senate (or House if it gets hot).

So if you see something happening on the Senate/House floor you don't have to start a new thread, you can just use this one also if you have a thread that pertains to the Senate, House, or pretty much any GOV'T agency please link your thread here.

C-SPAN what a great thing. Where you can watch or listen live to most Government happenings. (I'd like stress this on little thing about C-SPAN that I love, NO COMMERCIAL INTERRUPTIONS.)

C-SPAN 3 (most places web only) carries a variety of committee meetings live or other past programming.

A great thing about our Government is they make it really easy for the public to research what the Politicians are doing and saying (on the floor anyway).

THOMAS where you can see a RECORD of what Congress is doing each day. You can also search/read a verbatim text of what each Congressmen/women or Senator has said on the floor or submitted 'for the record.' [This is where the real juicy stuff can be found.]

(I'd like to rant for a second. Prior to Senator Frist's office running the calendar any bills and amendments talked about would be linked on the calendar the next day. Now all you get is when the Senate will meet and the bill # without a link. I'd like to see it change back.)

Yeah, this is alot but it is well worth reading..

CONGRESSIONAL BUDGET FOR THE UNITED STATES GOVERNMENT FOR FISCAL YEAR 2005--Continued -- (Senate - March 09, 2004)

Mr. BENNETT. Mr. President, under the circumstances, then, having made arrangements with Senator Reed for this time, I will proceed and suggest to the Senator from Kentucky he respond when we finish.

The debate has been an interesting one since the beginning of the budget period. There has been a great deal said about the economy and a great deal said about the state of the economy. Much that has been said, in my opinion, has more to do with the fact this is an election year than it does with the situation facing the economy.

In response to the requirement of the act creating the congressional budget process that says the Joint Economic Committee is to make a report to the Senate during the Budget Committee deliberations, I have asked for and received this time for myself and Senator Reed to address the Senate.

I do not wish to address the specifics of the budget resolution because I think it is more important we lay down the background of the economy and what is really happening in the economy. I will do my best to keep it out of the realm of politics, keep it out of the realm of the rhetoric of this election, and stay as close as I can to statistics and facts so we can understand exactly what is happening in the economy and where the economy is headed. The basis and sources I have used in this situation have in every case been from outside groups. This is not the Republican Policy Committee or any other partisan group that has come up with these statistics. I will share them with the Senate tonight in the hope it will help the Senate and anyone who is watching understand exactly where the economy is.

We begin, if we can, by reviewing exactly what happened with respect to the recession and the recovery. There has been a lot of rhetoric about this. I have heard on the Senate floor this is the worst recession in 50 years, the worst economy we have ever had.

On this chart, we go back to the year 2000 and through the year 2003. The first quarter of 2004 is not in yet, so this goes back to the beginning of the softening of the economy through the recession and the recovery.

These bars are by quarters. The first quarter of 2000 was a very weak quarter. This is measuring the growth of the economy in terms of the gross domestic product, the GDP. These data come from the government agency that tracks economic performance. These data are always available only after the fact. It is almost

impossible to be sure of the data at the time it is happening, but after the fact the Bureau of Economic Analysis goes back and reconstructs what happens and makes whatever changes have to be made in order to make sure the data are correct. This is their current reading of what has happened in the last 4 years.

In 2000, in the first quarter, very weak quarter, only 1 percent growth; second quarter, very high. Some will say that is because of weather. Very often, there is bad weather in the first quarter which causes sales to go down. They are delayed. They show up in the second quarter. But in the third quarter, we spilt into negative territory; that is, instead of expanding, the gross domestic product contracted one-half of 1 percent.

The definition, according to many observers, of a recession is two successive quarters of contraction, and we did not have that. We came up with a relatively weak fourth quarter in 2000.

I will point out in that period of time there were those who were suggesting the economy was in fact weakening. They were attacked as having made partisan political statements trying to talk the economy down for political purposes. We now know in fact they were correct, the economy was in fact weakening. In the first quarter of 2001, once again, the economy contracted rather than expanded. Then in the second quarter, it contracted even more.

The common definition of a recession was therefore met with two successive quarters of contraction, and then you have a third quarter where the economy contracted 1.3 percent.

This, of course, was the quarter in which September 11 occurred.

We have the three successive quarters of contraction. There are some who say this quarter, the fourth quarter of 2000, will be revised to show contraction rather than expansion as the data are further reviewed. As of now, these are the data the Bureau of Economic Analysis has given us.

The fourth quarter of 2001 was positive, up 2 percent. Not robust growth, but at least positive. By definition, that is the beginning of the recovery. The first quarter of 2002 was strong and then we went back to anemic growth and kept that pretty much through 2002.

In 2003, the growth starts to pick up and becomes very robust. The entire year showed growth of 4.3 percent which, by historic terms, is higher than the average growth of all of the years of the 1990s. If we can sustain 4.3 percent growth, we can be very happy indeed. We can see the economy is starting to recover, the recovery is getting traction and it is getting hold in 2003.

Let's go back over the same time period and look at some of the spending patterns that came through the same situation. In green, the bars are the same quarters on the previous chart and they show consumer spending. A very unusual thing happened during this period of recession and recovery. Consumer spending remained positive in every single quarter. It got a little weak in the first quarter of 2001, but it remained positive, above the line, in every single quarter. That has never happened before. In recessions consumer spending goes negative, but in this one the consumers had enough confidence they stayed positive all the way through. That is one of the things that kept this recession from being deeper and more long lasting than it might otherwise have been.

[Page: S2425] GPO's PDF

The blue bars, however, show a very different story and give us the reasons why this recession occurred. The blue bars are business investment. Business investment in the first and second quarters of 2000 was very strong. A weak third quarter followed, and a very weak fourth quarter, and into negative territory we fell in the first quarter of 2001, staying there for one, two, three, four, five, six, seven, eight, nine successive quarters, with business investment down. It is not until we get to the second quarter of 2003 that business investment becomes positive again and very strong.

This was an investment recession. It was not a consumer recession. It was an investment recession, as businesses felt they were overextended and cut back on their investment. After nine quarters--a long period of time--business investment finally began to be robust again. This again is from the Bureau of Economic Analysis. When this starts to happen, we assume we will start to get jobs because business investment has the biggest impact on jobs, not consumer spending.

From the Department of Labor we have statistics on jobless claims. This shaded period on the chart is the

period of the recession--that is, the three quarters when there was negative gross domestic production growth. The jobless claims heading into the recessionary period are going up. They reach their peak during the recessionary period. Then when the recession ends and the recovery takes place, the jobless claims start coming down somewhat, until you get that strong business investment that we saw on the previous chart. Then the jobless claims start coming down much more dramatically, indicating the jobs are on their way back.

We have heard a lot about manufacturing. The Institute for Supply Management provides a composite index on manufacturing activity. In 1999, manufacturing was up. And manufacturing follows the same pattern. It starts down in the second half of 2000 and comes down during the recession and stays down for longer than the recession itself. It is down in negative territory below this line, through all of 2001, gets up a little bit in 2002 but comes back down and again down, finally.

When business investment starts up in 2003, the manufacturing activity comes up strongly. So it goes down, stays down, but when the business investment comes back, the manufacturing activity comes back very strongly.

What about jobs, then? Where are the jobs? If this activity is coming back, why aren't we seeing the jobs? If there is investment activity, why aren't we seeing the jobs? What we are seeing is something we have not seen before, and that is the surveys done by the Bureau of Labor Statistics as to jobs--and there are two of them, one known as the establishment survey or payroll survey and one known as the household survey--have diverged in ways they have never diverged before in history.

Before, they pretty well track each other. The difference is the payroll survey or establishment survey gets its sample entirely from firms and other employers, whereas the household survey does its sample by checking households to see who has jobs and who does not. The household survey picks up agricultural jobs. The household survey picks up self-employed and, to the degree they impact the statistics, the household survey would pick up illegal aliens who for one reason or another do not show up on the payroll survey.

Everyone says the payroll survey is the more reliable. I will stipulate that everyone says that, but I ask this same ``everyone,'' if that is the case, how can you explain the sudden discrepancy between the two, a discrepancy that has come in this recession and this recovery? The discrepancy is not minor. If you take the entire period we are talking about, the payroll survey shows a loss of 2.3 million jobs while the household survey shows a gain of 614,000. That is a discrepancy of three million jobs.

I don't have the answer as to what is causing that discrepancy. We have tried to do studies in the JEC staff to get the answer. I have asked the Commissioner of the Bureau of Labor Statistics if she will do some studies to find the answer. I have discussed this with

Chairman Greenspan, and he says the Federal Reserve people are concerned about this and are trying to find the answer.

If we take the period since November of 2001--this is the recovery period, as opposed to the entire period that included the recession--in this recovery period, even while we are in recovery, the payroll survey says we have lost 718,000 jobs; the household survey says during the recovery we have added 1.895 million jobs. That is a very wide margin.

If we look at just the past six months, the period of the strongest recovery, the period when we are getting the strongest activity, the payroll survey says yes, we have finally started to add jobs. In the last 6 months, the payroll survey says 364,000 new jobs, while the household survey says 981,000. I am not saying the household survey is right and the payroll survey is wrong, I want to make clear. I am saying something is happening in the economy that has not happened before for which we do not have an accurate gauge. What is important is that our statistics be accurate so when we throw them around in a political debate, we know we are telling the truth.

It is very clear to me the payroll survey needs to be adjusted upward. How far upward, I do not know. It is probable the household survey needs to be adjusted downward. How far downward, I do not know.

Commissioner Utgoff, the head of the Bureau of Labor Statistics, has said the real number is probably somewhere in between the number shown by both surveys. But she does not know. This is one of the things we are pursuing in the Joint Economic Committee, to do what we can to get accurate data so we can make accurate analysis of what is happening in the economy.

All right. Let's look at the unemployment rate. The unemployment rate is figured on the basis of the household survey.

As shown on this chart, the shaded areas show the recession. In this case I have gone beyond the time period of the first chart. In this case we go back to the recession that occurred during the time Ronald Reagan was President, and you will see two shaded areas because Ronald Reagan suffered the double dip; that is, we went into a recession, had two quarters of negative growth or of contraction of the economy, came out, and went back in for an even longer period of time.

This is the worst recession in memory. Unemployment hit a high of 10.8 percent at that time. When it spiked up and came back down, there were a lot of people, with unemployment at that level, who said: Well, we are in good shape now. The jobs are coming back. Notice that level was about 7 percent unemployment, but it came down further as the prosperity of the late Reagan years took hold, and it was down until the next recession hit. As is always the case--it was the case, as shown on this chart here and here--it happened here. As soon as the recession hit, the unemployment went up and spiked up even during the recovery. This is the period of time when we talked about the jobless recovery. I had just come to the Senate, and I remember everybody saying: Well, if we are in recovery, where are the jobs? Unemployment spiked several quarters after the recession was over at 7.8 percent--not nearly as bad as the 10.8 percent of the previous peak, but still pretty bad.

All right. Then it started coming down slowly. We did not get down to the prerecession level for 4 years. It took 4 years for the economy to generate enough jobs to bring us down to the prerecession level of unemployment, which was just under 6 percent.

Incidentally, that is the level where we are right now, because in this recession we saw exactly the same reaction. The unemployment rate came up dramatically during the recession, just as it did here several quarters after the recovery started. The unemployment rate was still going up. It peaked a little later than this one did, but a lot lower than this one did. The unemployment rate peaked at 6.3 percent and then started coming down, and it is now down to a level which in previous recessions would be considered very good.

In the debate on the floor about the extension of unemployment insurance, we noted that extended benefits were allowed to run out at a level of unemployment that was well below the corresponding level at which such benefits expired during the Clinton administration. [Page: S2426] GPO's PDF

I share all of this information to make this point: This recession is different. It is not different because it happened on George W. Bush's watch or because it happened in a Republican-controlled Congress. As Paul Samuelson has pointed out, if Presidents knew how to create jobs, every President would have a 3.5 percent unemployment number going into his reelection. If Congress could control jobs, every Congress would see to

it in every October, as we were running for reelection, the unemployment rate would be at 3.2 percent. But unemployment is a reflection of what is happening in the economy. What this information shows us is what is happening in technology with this recession and this recovery is different from that which has happened in previous recessions.

Let me give you my personal view of what is happening here. I believe the recession we have just gone through and the recovery we are now in represent the first recession and recovery of the information age, as opposed to the previous recessions and recoveries, which were the last recessions and recoveries of the industrial age.

When I took economics, I was told recessions basically were a series of inventory buildups, and recoveries were inventory selloffs.

For example, you got excited about how well things were going in the automobile industry, and you built more cars. Suddenly, the vice president of marketing looks out on the back lot and says: Good heavens, there are 40 acres covered with Chryslers we haven't been able to sell. Send everybody home. Lay them all off until we sell off all the back acres full of cars. And after some time, suddenly he looks out the back window and says: There aren't any cars. Quick, get everybody on the phone and tell them to come back to work so we can build up again. That is the classic, vastly oversimplified definition of an industrial age recession and recovery.

It is clear from the data I have displayed here that this recession was different. This recession was an investment recession. This recession came at a time when productivity, by virtue of the information age and the application of high technology, was higher than it has ever been. This was a recession where productivity stayed positive and in high territory all the way through the recession, and productivity has stayed high during the recovery.

In the hearing we held last Friday, I asked Commissioner Utgoff: What was productivity growth in 2003? She said: 4.4 percent. I asked: What was GDP growth in 2003? She said: 4.3 percent. In other words, productivity grew faster than GDP, even though GDP grew at a rate higher than the average of the 1990s. When productivity goes up faster than economic growth, you lose jobs.

I asked: How many jobs did we lose in 2003, again according to the payroll survey, which is the survey she uses for this kind of calculation. She said: We lost 60,000 jobs in 2003. I asked: Is that about the right number with productivity at 4.4 percent and GDP at 4.3 percent? She said: Yes, that is about the right number. If productivity is growing more than GDP, at that number you would lose about 60,000 jobs statistically.

That is the challenge we have as we look forward. We do not want to do anything in the economy to bring down productivity, because productivity is what gives us a higher standard of living, productivity is what gives us lower prices, productivity is what gives us economic

dominance in the rest of the world. Our rate of productivity is higher than any other nation's, and we clearly want to keep it that way.

The challenge is to get GDP growing faster than productivity. That is where the jobs will come from, and that is why we are having a different kind of recovery this time, because it is a different kind of recession, because it is the first recession of the information age when we are finally reaping the rewards of all the investment we have made in technology in the decades leading up to this. It is finally paying off in this very significant productivity.

That is what I believe is happening. As we do our analysis around here, I think, therefore, it is not helpful to be using industrial age assumptions dealing with the first information age recession and recovery.

A few other items, and then I am through.

We have heard a lot on this floor about the size of the deficit and how terribly big it is. In terms of nominal dollars, I will concede--absolutely, I will stipulate--it is the largest deficit in history.

Now let's look at it the way you have to look at it if you are going to understand it intelligently, which is, how big is it with respect to the size of the economy?

Going back over the same period where we have talked about previous recessions, only this time I have gone back and picked up some others, this chart goes back to the recession of 1970--again, the recession period is shaded--the recession of 1975, the double dip of the early Reagan years, the recession in the early 1990s, and now the recession we have just gone through. In every case, when you go into the recession, the deficit comes up.

In this case the deficit is not measured in absolute dollars. It is measured as a percentage of the economy. In 1970, it goes up. When you get into the recovery, it comes back down. In the next recession, the deficit goes up dramatically because this recession lasted longer and becomes a double dip. The deficit goes up tremendously because this was the most serious recession we had. Then in the recovery it comes back down. It goes up. The recovery hits us and it starts coming down. Indeed, we even get into a surplus period. And we were in a surplus but the recession hit us, and once again the same historic pattern occurred as the deficit came back up and is now coming back down.

The blue lines are history. You can see that the highest point of the deficit as a percentage of GDP was during the double dip that occurred in the early Reagan years. Then there was a pretty high point in the recession of the early 1990s, pretty close to the high point of the recession in the mid-1970s. The current point is about equivalent to the size of the deficit in the 1970s, below the deficits of the last two recessions.

The red line and the green line on the chart are the projections of where the deficit is going in the years ahead. The red line is the President's projection. The green line is CBO's projection.

I can't tell you which one of the two is right. I can tell you that both of them are wrong. Because when you try to make projections that far ahead with an $11 trillion economy, you are always going to be wrong. But I can tell you that the trend will be down.

I remember the projections when the deficit was here. This was when I came to the Senate when President Clinton went to the White House. We hoped and prayed--and we signed the balanced budget agreement in the mid-1990s--that it was going to get the deficit down to zero by 2002. We went into surplus in 2 years. We missed it. Everybody missed it. CBO missed it. OMB missed it. Everybody missed it. The economy was so strong that the deficit turned into a surplus.

Then we had the projections of surplus, and we missed it again. I hear the rhetoric on the floor: We were promised this surplus. Well, the only thing I can promise is that these lines are wrong. Even though they are CBO's best guess, they are OMB's best guess, they are wrong. Because the economy responds in different ways than the computers anticipate around here.

Let's go directly to the question of the debt. This is the real issue, because deficits in one year or one business cycle don't matter all that much. It is the accumulation of the deficits, cycle over cycle, that adds up to the national debt that matters. If you have too many of them back to back, you have real problems. If you have one that is not a problem by itself, you can deal with it.

Here is the publicly held debt as a percentage of GDP. That is the measure Chairman Greenspan urges us to use and so that is the measure we have used. People are

always a little surprised to find that the highest level of publicly held debt in our history was 1945. We paid for the Second World War with debt. It was over 100 percent of the economy. It started coming down.

Here we have the Korean war, and the debt kept coming down. It bottomed out in the mid-1970s and started to rise again. That is the period of time when we began to get some entitlement programs built into the system, the later years of Richard Nixon and Jimmy Carter. Then it starts going up again, and it goes up again and up again and up again. [Page: S2427] GPO's PDF

As we saw from the statistics in the previous chart, the deficit then fell, even becoming a surplus, and the debt comes down dramatically. Then we hit the latest recession. The debt starts up again. Once again, the blue line is historic debt to GDP. The red line is the President's projection and the green line is CBO's projection.

Once again, the only thing I know about those projections is they are wrong. It will be something different. It always is.

We can see the debt at the present time is in relatively comfortable territory. I know Senator Conrad will then start talking about, yes, but what happens out here. I agree with him, what happens out here is going to be horrendous if we don't start to fix things. But I don't think that this particular year, in a time of war, in a time of recovery, when the economy is just getting traction, that the size of the deficit--which we don't know what it will be at the end of the year; last year we missed it by $80 billion--is going to determine what is going to happen out here. I think what is going to happen out here in terms of the Social Security and Medicare problem has to do with the way we restructure Social Security and Medicare around the demographic realities rather than what we do in this particular year. I am perfectly willing to vote for this budget as it comes out in this situation.

There are other charts that I shall not burden you with. I will end with this one. We, once again, get to this question of projections. We have a projection of a surplus. No, we have a projection of a huge deficit. We always go back after the fact and the actual figures never match the projections. They are always high or low. Again, last year the fiscal year that came in $81 billion lower than the high projections we got in the middle of the year. You say: Gee, $81 billion is a huge miss.

Not necessarily. Out of an $11 trillion economy, $80 billion is within the margin of error, a phrase that all of us understand.

Here, then, is the analysis of what happened to the surplus. Yes, the blue shows that the surplus went for tax cuts. The 2001 tax cut took 18 percent of the projected surplus. The economic stimulus package that we passed in 2002 took another 1 percent. The tax cuts of 2003 took another 5 percent of the surplus. Thirty-eight percent of the surplus went for increased spending: the war on terror, rebuilding New York, handling the aftermath of 9/11, homeland security, and lack of discipline on the Senate floor for a whole series of issues.

I am a member of the Appropriations Committee. I know what happens in the conferences. I know what happens when people come in and start saying: We have to have this much more and that much more, and you have to hold the line. And the line doesn't get held and the combination is more red, if you will, than blue.

But the biggest part of the chart, the reason we missed the projection, 40 percent was the weak economy. We just missed calculating what the economy would produce because we missed the recession. We didn't see the recession coming and we didn't see how weak the recovery would be.

There are those who insist--and I happen to agree with them--that if we had not passed the tax cut, the economy would have been weaker than it was.

Just about every economist I talk to on Wall Street says: If you had not passed the tax cut, you would not have had the recovery that you have had in the financial markets.

That is not trivial because in the financial markets we have seen the recovery, if you will, in the form of between $3 trillion and $4 trillion worth of wealth. That may very well have funded the increased business investment I showed on an earlier chart. You cannot say this is a sum zero game and if the tax cuts had not occurred, then you would have had that much of the surplus left, because if the tax cut had not occurred, there would have been more weakness in the economy. I don't think it is one-to-one. I think clearly the tax cuts took more out of the economy than came back. But, over time, it may well have been one-to-one. The tax cuts happened at the right time and in the right places to produce a stronger economy and give us the recovery we need.

So, Mr. President, I conclude with this observation once again: I believe that the recession we have just gone through is the first recession of the information age; therefore, this is the first recovery of the information age. It has not behaved like any previous recession, and it has not behaved like any previous recovery. We need to understand it far more than we do--we may have to go through 2 or 3 more before we truly understand it--in order to make the right prescriptions as to what we should do. But we are in recovery. The recovery is now strong.

GDP is now growing almost as fast as productivity, and if GDP can grow faster than productivity, then jobs will come. We don't want to do anything to destroy productivity in the effort to create jobs because it is the growth of productivity that is responsible for our standard of living and for our hope for the future.

Overall, for the next 10 years, the prospects for the U.S. economy are very strong and bright. Hanging out there in the future, there is the baby boom retirement problem and the challenge that we have to deal with that in a structural fashion.

I hope this has been useful to the chair and other Members of the Senate. I appreciate the indulgence and allowing me to go through this in detail.

I yield the floor.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.