Gwen Ifill discusses the House's stimulation plan with two senior members of the Tax-Writing Ways and Means Committee: Jim McCrery (R-La.) and Robert Matsui (D-Calif.).
GWEN IFILL: I'm joined by two senior members of the Tax-Writing Ways and Means Committee. Republican Jim McCrery of Louisiana and Democrat Robert Matsui of California. Congressman McCrery, I'll begin with you since your side won the day today. What would this bill as passed do to stimulate the economy?
REP. JIM McCRERY: Well, Gwen, we believe that this recession that we're in is an investment recession, not a consumer recession. And to get economic growth going again, we've got to get companies and people to invest in our economy. The package that we passed on the House floor today will do that.
GWEN IFILL: Same question to you, congressman Matsui, what would this bill do to stimulate the economy?
REP. ROBERT MATSUI: I think it does nothing to stimulate the economy, Gwen. Essentially our problem in the economy is that we need more consumer confidence in the economy. Obviously what happened on September 11 has dampened confidence. But before that we even saw it. And so what you need to do is put money into individuals' pockets. You don't need to give corporations these big tax cuts. In fact, the problem right now is that corporations are under utilized; they're not over- utilized. So they're not going to be to use much of the money they have except perhaps giving dividends to their shareholders, but they're not going to put it back in the economy in a way that is efficient. This is a fundamental issue that we have here that's a difference. We think we need to put money in the hands of consumers so they'll spend the money to revive the economy.
GWEN IFILL: But if you help employers, aren't you helping employees?
REP. ROBERT MATSUI: I think it depends. Some might suggest that. I know on the floor today Republicans were saying that, but not if they decide they want to keep the money offshore, for example, earnings offshore, and not invest it in the United States but invest it in foreign countries. That doesn't help U.S. employees. And if you put money into IBM, for example, $1.4 billion worth of tax cuts next year under their bill, if that goes to dividends -- that doesn't help employees. So their comment that this will actually create more jobs or save jobs is not necessarily correct. It depends.
GWEN IFILL: Your response?
REP. JIM McCRERY: Well, my response is that cash flow makes a difference in a corporation. One reason that you're seeing headlines of layoffs around the country, which depresses consumer confidence, is that corporations are not profitable or their profits have been cut to razor thin margins. So if you increase their cash flow, which this bill will do, you increase their ability to retain their current employees and hire back some of those employees that have been laid off. That's the way to get the economy going again, give people jobs so they'll have money to spend, not just give them money from the government.
GWEN IFILL: How does, for instance, your action today on the alternative minimum tax affect the economy, how does it stimulate the economy, how does it affect individuals?
REP. JIM McCRERY: We do two things: We repeal the alternative minimum tax, which is a perverse part of the tax code, which punishes companies during bad times. In bad times when profits are low, they have to pay high taxes because of the alternative minimum tax. We did another thing with the alternative minimum tax. We allowed corporations to get an immediate refund of their built-up credits -- which is their money, it's not the government's money, it's credits due those corporations. Instead of making them get those credits back over five or ten years, they'll get them back immediately next year, which will put cash into the economy.
GWEN IFILL: And also another key issue was deferrals and overseas profits in those companies. How does that help?
REP. JIM McCRERY: It helps by stabilizing American corporations. It helps by keeping American corporations based here in the United States. Since 1998, Gwen, in the financial services industry, which is what Bob is talking about, there have been 40 mergers, 40 -- 32 of those have been foreign companies taking over American companies. Part of the reason for that is the disparate tax treatment between the United States tax policy and foreign tax policy. That particular part of the bill, which by the way my friend Bob Matsui co-sponsored, would fix that problem.
GWEN IFILL: Which would you have preferred to see happen? What kind of bill do you want to see passed?
REP. ROBERT MATSUI: I think the bill the Democrats had was the right bill to pass. We wanted to put more money for unemployment benefits. Right now all of the unemployed people in America, only 40 per cent receive unemployment benefits, so we had an extended unemployment program. We also provided more health care insurance and a subsidy for many people that don't have coverage now. Right now health insurance for an average family of four is about $8,000 a year. You're laid off, you're going to be uncovered. And we provided that for them, so we gave them what we hope under our bill job security and we wanted to provide money for them so they would spend it. One of the reasons the corporations aren't making a profit right now is mainly because people aren't buying, so you got to get the consumer out there with confidence buying again, and you're not do it just by giving these companies tax breaks that go back and retroactively apply the repeal - 15 years - 1986 -- it makes no sense to do that.
GWEN IFILL: Every cost estimate I've seen has said this will cost about $100 billion. The President was asking for a 60 to 75 billion-dollar package. Are we talking about an inevitable return to deficit spending?
REP. ROBERT MATSUI: If I could just answer that, there's no question about it. One of the reasons long-term interest rates haven't gone down - I think that's a structural problem in the economy -- is because there's a fear by the bond market that in fact we're going to go into deficit spending again. This bill is not $100 billion over a ten-year period, it's $159 billion. Only the first two years is it $100 billion.
GWEN IFILL: Congressman McCrery.
REP. JIM McCRERY: First of all, long-term rates are down. Mortgage rates are at their lowest level in quite some time. So we think mortgage rates are okay. Long-term rates are going to be okay. $159 billion over ten years is a drop in the bucket for this economy, for this size economy. So it's not going to hurt long-term interest rates. As far as the question of the unemployed and health care, which Bob mentioned, the Republican bill contains $12 billion for increased unemployment benefits and health care. But we provide much more flexibility in our bill than do the Democrats.
GWEN IFILL: Why not temporary tax cuts if the whole point is to jump start the economy, rather than the permanent ones that this bill contains?
REP. JIM McCRERY: Some of the tax cuts in the republican bill are temporary: The increased depreciation, the expensing for capital purchases, and some of permanent. We thought that to have the appropriate stimulative effect, some of the provisions needed to be permanent, such as the sub- part F extension, such as the repeal of the corporate minimum tax. So it's a mixture of temporary and permanent putting together the best policy we thought for stimulating the economy in the short term, and keeping the economy growing in the long term.
GWEN IFILL: Let me ask you both to respond to something that Secretary of the Treasury Paul O'Neil said last week in which he characterized everything that was going on on the Hill, but specifically in the House on this bill, as a little bit of show business, was the way he described it -- basically suggesting that it all heat and no light. What do you think, Congressman?
REP. JIM McCRERY: I don't think that's what he was suggesting. There's always a little show business in the House and the Senate, in politics generally. And so I don't think the secretary was wrong in that. But I don't think implicit in his comment was that there was all show and light in this package. In fact, the administration, including Secretary O'Neil, today issued a statement of support for the bill to pass the House today.
GWEN IFILL: Is their understanding that the Senate going to change it or do you have any idea what the Senate else up to on this?
REP. ROBERT MATSUI: I hope the Senate comes up with a good stimulus bill because we do need to put money back into consumers pockets and I frankly don't think this bill is credible, the one that passed the House today. Hopefully the Senate will look at it and say you'll have to start over again, because you make permanent tax cuts, the $50 billion worth of permanent tax cuts, the two we were basically talking about, and they have no basis of relevance in terms of stimulating this economy. I think this bill, if it became law, would have no impact except a negative impact on the long- term structural problems of our economy today because of the long-term interest rates. Right now the long-term rates are the historical high, the differential between them. As a result of that, that means there's a lack of confidence in the future.
GWEN IFILL: I was struck listening to the floor debate, and even in Kwame's piece earlier, the sharpness of the debate on the floor between the Democrats and Republicans. Charlie Rangel said at some point that the myth of bipartisanship had been shattered. Is that so?
REP. JIM McCRERY: Well, there's always a certain amount of partisanship when you have two major parties. And I don't think that is necessarily bad. I think in terms of our addressing the war against terrorism, there's been a lot of bipartisanship, and necessarily so and rightfully so. But when it comes to basic philosophical issues of tax policy, of economic policy, you're going to have differences between Democrats and Republicans. That's why we have two major political parties. So I don't think there's anything wrong with expressing those differences. Sometimes we get carried away in expressing those differences, but it's appropriate that we have differences and it's appropriate that we express those differences.
REP. ROBERT MATSUI: We're not Democrats and Republicans when it comes to fighting the war against terrorism and the war in Afghanistan. Hopefully we'll be able to work on the airport safety issue on a more bipartisan fashion than we have been.
GWEN IFILL: Any sign that's going to happen?
REP. ROBERT MATSUI: I hope maybe next week, we're talking about trying to bring up a bill. But we're going to work on it in the next four or five days before it comes up. But that's more difficult. But when it comes to issues like economic policy, I think we both agree we have differences, and we should debate them. I think the American public is entitled to a vigorous debate when we have differences like these, because obviously ultimately they're going to make choices.
GWEN IFILL: Thanks for being part of the debate here tonight.