Sen. Judd Gregg of New Hampshire Analyzes The Government Rescue Plan
Tuesday, April 21, 2009SUSIE GHARIB: One idea Treasury Secretary Geithner is considering to bolster banks is converting the preferred stock the Federal government got for its bailout money into common stock. That would give taxpayers a share in any gains once the banks recover. But it also carries the risk of a greater hit to the Federal budget. Today, Washington bureau chief Darren Gersh spoke with New Hampshire's Judd Gregg, a key Republican spokesman on the budget. Darren asked the senator whether exchanging loans for stock is a good idea.
SEN. JUDD GREGG, (R) NEW HAMPSHIRE: I don't think it's the right thing to do for a couple of reasons. First off, taxpayers (INAUDIBLE) money now. The preferred investment -- and most people didn't appreciate this and still don't but the TARP was an investment in an asset and the assets that we bought with TARP money were preferred stock in these various banking institutions which have a yield of five to eight percent which is significantly higher than you can get for money today if you simply put it in like a CD or in your savings account. So the government's doing very, very well on this investment and then I just don't see that it's necessary. And I think it's a slippery slope to government control because once you become a stock, you have voting rights and once you have voting rights, you can control management and then you got the government making management decisions which is a very bad idea.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: One management decision that you have to make is what to do on the deficit. I'm just wondering, what is the appropriate level of the deficit right now because there's a debate about whether or not you try to balance it sooner because we're going to hit the entitlement problem in a couple years or if you wait until the economy's fully recovered before you start trying to take any money out, that that was the mistake that's been made in the past here. You tried to balance the budget too soon. What's the right thing to do?
GREGG: Nobody's talking about balancing the budget anymore.
GERSH: Or getting closer.
GREGG: And nobody's talking about getting closer any more. The issue is pretty simple. It's a bifurcated issue. In the short run the government has to spend a lot of money because we're the lender of last resort, in fact the Fed is basically the primary lender in the market today. We're the source of liquidity and the government is trying to get the economy moving and in order to do that, we had to put a lot of money into the economy to try to stabilize the financial institutions through the stimulus bill which I didn't support the concept but not the specifics. It was a very poorly drafted bill. It's two and three years out that we have a very serious problem which is not addressed by the president's budget and in fact is significantly aggravated by the president's budget. We should start seeing the deficit numbers start to go down or at least start to stabilize. Instead, just the opposite happened. Under the president's budget, he's projecting not only trillion dollar deficits this year and next year. On average for the next 10 years, he's projecting a trillion dollar deficit every year. And you ask where is the break point? Where is the problem? Well, to try to put this in perspective, if we were to try to get in the European Union today, in other words as a nation trying to apply into the European Union, we could not get in because our debt as a percentage of our gross national product would be too high and our deficit as a percentage of our gross national product would be too high.
GERSH: What about the argument the administration makes which is you need to make these investments. You need to solve these long-term problems we've had. For example, health care. That's an issue that's going to come up in the next couple months. Is there any way that you could support moving forward on that because in this recession, a lot of people are losing their health care and it seems like this is a more pressing issue than ever and some people can't wait two or three years to address it.
GREGG: There's a philosophical issue here. The president in a very forthright way and I admire the fact that he's been forthright. In fact the budget he sent up here was a heck of a lot better than what my Senate colleagues did. They only spent too much, borrowed too much, taxed too much and hid too much, He at least just spent too much, borrowed too much and taxed too much. But he said very openly that he believes that by growing the government significantly and he's talking about significantly growing the government, taking it from 20 percent of GDP up to 24, 25, 26 percent of GDP which is a massive expansion in the size of this government,, that by growing the government significantly, you create prosperity. My view is this. You cannot have prosperity if you have a government you can afford.
GERSH: The president sent up a budget and he did set up ways to pay for it.
GREGG: No he didn't.
GERSH: He had climate change taxes. He had the higher taxes on deductibles and
GREGG: (INAUDIBLE)
GERSH: But it seems like Congress every time they looked at the way he wanted to pay for things pr the portion of it, which is a large portion, Congress said no and I'm just wondering, it seems like we're still stuck in this area where Republicans still don't want to face tax increases. Democrats still don't want to spend it. It doesn't seem like the budget debate has moved at all. Are we in this kind of gridlock situation where people don't want to accept what needs to be done?
GREGG: I would have to change that aggressively because we're in a very different situation/ We're in a situation where a president has taken office with a Congress that supports him who has essentially said I am going to significantly grow, move this government to the left, grow this government dramatically and I'm not going to pay for it and basically it's heading us on an unsustainable path, unsustainable path where basically you create a deficit rate which is too high for the next generation to pay up.
GERSH: Senator Gregg, thank you for your time. Appreciate it.
GREGG: Thank you for having me on.
